Question

You are considering a vendor to help with a project. You are confident about how much work and time is needed, but you want the vendor to accept the risk. Which type of contract would you likely use ________.

1) Fixed Price Contract
2) Time and Materials Contract
3)ost Plus Contract
4) Unit Price Contract

Answer 1

In scenarios where the scope of work and time are well-defined and the buyer wishes to shift risk to the vendor, a Fixed Price Contract is the appropriate choice.

Step-by-step explanation:

If you are confident about how much work and time is needed for a project and want the vendor to accept the risk, the type of contract you would likely use is a Fixed Price Contract. This type of contract sets a fixed total price for a defined scope of work. The vendor is at risk for the cost overrun, which motivates the vendor to control costs and perform efficiently. The Time and Materials Contract and the Cost Plus Contract place more risk on the project owner because they allow the cost to fluctuate based on time spent and materials used. A Unit Price Contract would be used when the work to be performed can be broken down into units, but does not typically shift the risk to the vendor.