Question

Describe Different contract pricing types and give one summary or one paragraph

Answer 1

The following are the different types of contract pricing types:

cost plus fixed fee contract:

1. Under this contract the contractor is reimbursed for cost incurred and adds a fixed fee.
2. Fixed fee is negotiated by the contractor when he enters into contract with the customer.
3. Fixed fee is fixed either as a fixed amount or as a percentage of cost incurred.

cost plus incentive:

1. Under this contract the contractor is reimbursed for cost incurred and adds a negotiated fee.
2. The fee is determined by taking into account the amount of cost incurred by the contractor
3. This encourages the contractor to keep the cost low.

Cost reimbursement:

1. Reimburses the contractor the amount of cost incurred by him.
2. It also provide little incentive to control costs

Fixed price contract:

1. Contract price is negotiated by the contractor at the inception of the contract
2. The contract price once fixed cannot be increased by the contractor .
3. The risk of increase of contract cost is borne by the contractor.
4. This type of contract reduces the administrative burden to the customer.

Fixed price contract with escalation:

1. It is a fixed price contract which also provides for price escalation based on specified contingencies such as economic price adjustments.

Fixed price incentive:

1. A fixed-price contract that provides for adjusting profit and establishing the final contract price by application of a formula based on the total target cost.