Question

Explain the following types of contract in your own understanding
i. Time and material – T & M ii. Firm fixed price – FFP iii. Fixed Price Incentive Fee – FPIF iv. Fixed Price with Economic Price Adjustment contracts – FPEPA v. Cost Plus Fixed Fee – CPFF vi. Cost Plus Incentive Fee – CPIF   

Answer 1

1. Time and material – T & M contract - This type of contract has terms that determine the cost of project depending on the time in labour hours spent during project plus the material cost incurred. This is more suitable when the time and material cost is likely to vary or difficult to determine in advance.

2. Firm fixed price – FFP - This type of contract involves setting up of a fixed sum before start of work, which does not change, whatever be the circumstances. Such contracts are suitable for projects that have fairly high degree of certainty.

3. Fixed Price Incentive Fee – FPIF contract has a provision of incentives for better performance besides a regular fixed price. The incentives are pre determined and are based on project's completion before time or achieveing certain quality standards. This is a win win situation for both parties, as it leads to timely and good quality execution.

4.  Fixed Price with Economic Price Adjustment contracts – FPEPA - This is a type of fixed price contract that has a provision of revision of prices, which is according to a pre defined criteria, to which both parties agree. The objective is to address the uncertainties in the marketplace, and prevent a party from being undue stressed.

Note: As per policies, I can answer first 4 parts of a question. Inconvenience is regretted.