I have doubt in a question from Oliver's 100 question series: Could you please help clarify following question?
A prime contractor in a customer project under CPFF contract has run into unexpected technical problems through no fault of their own. Fixing these problems will require a lot of additional work to be done.
The company made a decision to book more staff and equipment from their subcontractors in order to increase productivity and adhere to the agreed timeline. The overhead work for the project is reimbursed by the customer with the fixed fee and will remain unchanged. The customer agreed to this decision.
What will most likely happen?
1. The contractor‘s indirect costs will increase and the customer‘s payment for them will increase, too.
2. The contractor‘s indirect costs will increase, but the customer‘s payment for them will not increase.
3. The contractor‘s indirect costs will not increase, but the customer‘s payment for them will.
4. Both the contractor's indirect costs and the customer‘s payment for them will not increase.
As per Oliver , the right answer is 4 but I am not sure why. Can you please help?
Thanks,
Vivek
