Contract Contracts Or Lump -sum Contracts

1224 Words May 18th, 2016 5 Pages
Contract is a major part in procurement management. Types of contract required for all the relevant elements related to the project:
• Fixed - price contracts or lump -sum contracts:
Certain amount is agreed for the goods or service being sold. The buyer and the seller agree on a well defined to be delivered material for a specific price and time. The contract can include some incentives fee for meeting or exceeding the project objectives. While purchasing the high cost machinery items like loader, lifter etc for the production of the product of our venture a contract was done in a fixed- price with Jason Manufacture and Suppliers Company. He supplied the heavy machinery items in time and did provide better equipments within the contracted amount. The venture was happy so he as incentive fee and promised to give him more contracts in the mere future.

• Cost- Reimbursement Contracts:
Payment is done to the seller for direct or indirect actual cost. This type of contract is done when the scope of the project is not clear. The risk is absorbed by the buyer as the final cost is uncertain. If problem arises during the execution of the project, the buyer has to spend more money than he had estimated. While ordering the machines like computers, wires, CCTV, stationary items, furniture 's from the Lone distributers and suppliers, the exact amount and the exact quantity were not estimated. We did a contract. Certain quantities were ordered at first. Later we had to pay more money…

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