Under normal conditions,which of these contract types poses the greatest risk to the buyer?
A) Firm-Fixed-Price (FFP)
B) Fixed-Price-Incentive-Firm (FPIF)
C) Cost-Plus-Fixed-Fee (CPFF)
D) Time and Material (T&M)

Question

Under normal conditions,which of these contract types poses the greatest risk to the buyer?​ 
A) Firm-Fixed-Price (FFP) 
B) Fixed-Price-Incentive-Firm (FPIF) 
C) Cost-Plus-Fixed-Fee (CPFF) 
D) Time and Material (T&M)

Quizplus · Accepted Answer

Cost-Plus-Fixed-Fee (CPFF) contracts have the potential to pose the greatest risk to the buyer because the final cost to the buyer is unknown and can exceed the initial estimate. In a CPFF contract, the buyer pays the seller for all allowable costs incurred, as well as a fixed fee. This incentivizes the seller to increase the cost of the project to earn a higher fee, potentially resulting in the buyer paying more than the project is worth.

Under Normal Conditions,which of These Contract Types Poses the Greatest