Question

In: Operations Management

28. In a fixed price contract, the fee or profit is: A. Unknown B. Part of...

28. In a fixed price contract, the fee or profit is:
A. Unknown
B. Part of the negotiation involved in paying every invoice
C. Applied as line item to every invoice
D. Determined with the other party at the end of the project

29. All of the following are generally part of the contract documents except.
1. Proposal
2. Scope of work
3. Terms and conditions
4. Negotiation process

Solutions

Expert Solution

A fixed-price contract is a type of contract where the payment amount does not depend on resources used or time expended. This is opposed to a cost-plus contract, which is intended to cover the costs with additional profit made. A fixed price contract places minimum administrative burden on the contracting parties, but subjects the contractor to the maximum risk arising from full responsibility for all cost escalations.

Therefore, profit in a fixed price contract is variable / unpredictable because the various costs and associated risks cannot be predicted in advance. Hence the profit is unknown

IN A FIXED PRICE CONTRACT, THE FEE OR PROFIT IS : a ) UNKNOWN

A contract document is prepared after conclusion of negotiation and is indeed a result of negotiation. Since the contract document is generated after conclusion of negotiation, it does not mention about the negotiation process. Rather , it highlights outcome of negotiations namely Proposal , scope of work and terms of negotiation.

ALL OF THE FOLLOWING ARE GENERALLY PART OF THE CONTRACT DOCUMENT EXCEPT : 4 ) NEGOTIATION PROCESS

keosha answered 5 months ago
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