Questions On Common Types Of Contracts

Decent Essays
Contract Types There are multiple factors that influence the type(s) of contract(s) utilized/selected within a project. Some of these factors include: the level of uncertainty related to the scope of work, the amount of project risk willing to be assumed, importance of meeting schedule milestone dates, and the need for projected costs, among others (Darnall & Preston, 2013). Whatever the driving factors are in the selection process, once established, the type of contract selected can have a significant influence on the decision making process related to the trade-off of the triple constraints of cost, time, and performance (Kerzner, 2013). This paper will briefly explain five common types of contracts focusing primarily on how each type can affect project constraint trade-off.
Common Types of Contracts There are two general types of contracts: fixed price and cost reimbursable, with each main type having several variations (Darnall & Preston, 2013). The two most common variations of fixed price contracts are, firm-fixed-price and fixed-price-incentive-fee (Kerzner, 2103). For cost reimbursable contracts, the three most common variations are, the cost-plus-incentive-fee, the cost-plus-award-fee, and the cost-plus-fixed-fee (Kerzner, 2013). Each type and variation influences project trade-off decisions relative to the triple constraints of cost, time, and performance differently (Kerzner, 2013).
Firm-Fixed-Price (FFP) In a FFP contract, all costs are incorporated
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