Which of the following contract types is most appropriate when costs are NOT well known and the buyer absorbs all of the cost risk?
A) Firm-Fixed-Price (FFP)
B) Fixed-Price-Incentive-Firm (FPIF)
C) Cost-Plus-Fixed-Fee (CPFF)
D) Time and Material (T&M)

Question

Quizplus · Accepted Answer

Cost-Plus-Fixed-Fee (CPFF) is most appropriate when costs are not well known, as it allows for the buyer to absorb all of the cost risk. The fixed fee provides an incentive for the seller to control costs, while still allowing for flexibility in the event that costs exceed initial estimates. This type of contract is also suitable when technical requirements are uncertain or evolving, as it offers the opportunity for the seller to work closely with the buyer to meet these requirements.

Which of the Following Contract Types Is Most Appropriate When