What contract type provides a fixed fee to the contractor, regardless of costs incurred?

What contract type provides a fixed fee to the contractor, regardless of costs incurred?

• A. Schedule
• B. Cost-Plus-Fixed-Fee Contract (CPFF)
• C. System Requirements Review (SRR)
• D. Stakeholders

Answer: (B)

Understanding contract types and how payments are structured is being tested here. In a Cost-Plus-Fixed-Fee contract, the seller is reimbursed for all allowable costs incurred plus a fixed fee that does not change with the amount of costs. That means the contractor’s profit, the fixed fee, stays the same regardless of how much the project actually costs. The buyer bears most of the cost risk, while the contractor’s incentive remains to control costs only in the sense that the fixed fee is unaffected by them. The other options aren’t contract types that deliver a fixed fee independent of costs. A Schedule is a plan or timeline, not a contract form. A System Requirements Review is a project milestone, not a contract type. Stakeholders are the people involved, not a contracting arrangement.

Understanding contract types and how payments are structured is being tested here. In a Cost-Plus-Fixed-Fee contract, the seller is reimbursed for all allowable costs incurred plus a fixed fee that does not change with the amount of costs. That means the contractor’s profit, the fixed fee, stays the same regardless of how much the project actually costs. The buyer bears most of the cost risk, while the contractor’s incentive remains to control costs only in the sense that the fixed fee is unaffected by them.

The other options aren’t contract types that deliver a fixed fee independent of costs. A Schedule is a plan or timeline, not a contract form. A System Requirements Review is a project milestone, not a contract type. Stakeholders are the people involved, not a contracting arrangement.