Which pair of statements is best?
A)Cost-plus contracts are prone to budget overruns while turnkey contracts are typically underbid by the contractor.
B)Cost-plus contracts are prone to a budget surplus while turnkey contracts are typically underbid by the contractor.
C)Cost-plus contracts are prone to a budget surplus while turnkey contracts are typically overbid by the contractor.
D)Cost-plus contracts are prone to budget overruns while turnkey contracts are typically overbid by the contractor.

Question

Quizplus · Accepted Answer

Cost-plus contracts are prone to budget overruns because the contractor has no incentive to control costs since they are reimbursed for their expenses plus a percentage of profit on top. On the other hand, turnkey contracts are typically overbid by the contractor to ensure they don't incur unexpected costs, and therefore, they factor in a contingency amount into their bid.

Which Pair of Statements Is Best