EBK INFORMATION TECHNOLOGY PROJECT MANA
9th Edition
ISBN: 9781337515856
Author: SCHWALBE
Publisher: YUZU
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Chapter 12, Problem 3DQ
Explanation of Solution
Contract:
Contract is a business and legally binding agreement between two or more organizations to carry out financial transactions in turn for exchange of goods and services...
Explanation of Solution
The different types of contracts and the advantages, disadvantages of each are explained below:
Fixed price or lump sum contract:
- In a fixed price contract, the seller and the buyer agree on a mutually agreed fixed price for the exchange of products or services. In terms of risk in this contract, the seller faces a higher risk than buyer.
- This contract can be Firm-Fixed-Price (FFP), Fixed-Price Incentive Fee (FPIF) and Fixed-Price Economic Price Adjustment (FP-EPA).
- The advantages of this contract are that it is beneficial for buyers as it minimizes their risk. Also, there is no need for adjustments, as both parties agree on a fixed price in advance.
- A major disadvantage is that there is absence of continuous communication between the parties after the contract agreement is set in place.
Cost reimbursable contract:
- Here, the contract focusses on a fixed time period and an extension of the same calls for payment reimbursement.
- The payment can be made separately as direct and indirect costs and the contract puts a lot of risk on the seller.
- Cost reimbursable projects can be classified as Cost Plus Incentive Fee (CPIF), Cost Plus Fixed Fee (CPFF), Cost Plus Award Fee (CPAF) and Cost-Plus Percentage of Cost (CPPC)...
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Check out a sample textbook solutionStudents have asked these similar questions
The board of directors of a company decides that senior management has to be rewarded in order to achieve the company's objectives. The board of directors selects whether or not to award bonuses based on growth in share value at the end of each fiscal year. Bonuses will be given in shares, which the managers can keep or sell on the open market. What are the ramifications of implementing a bonus system like this?
What is total cost of ownership (TCO)? What costs often are underestimated?
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Chapter 12 Solutions
EBK INFORMATION TECHNOLOGY PROJECT MANA
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- The board of directors of an organization determines that it is necessary to create incentives for senior management to advance the organization's aims. The board of directors determines whether to award bonuses based on growth in share value at the end of each fiscal year. Bonuses are to be paid in shares that managers may hold or sell on the open market. What are the consequences of implementing such a bonus system?arrow_forwardSearch online for samples of IT contracts. Use search phrases like “IT contract” or “sample contract.” Analyze the key features of the contract. What type of contract was used, and why? Review the language and clauses in the contract. What are some of the key clauses? List questions you have about the contract and try to get answers from someone who is familiar with contracts.arrow_forwardThe board of directors of a company determines that senior management should be rewarded in order to achieve the company's objectives. The board of directors determines whether to award bonuses based on growth in share value at the conclusion of each fiscal year. Bonuses will be given in stock, which the managers may keep or sell on the open market. What are the ramifications of instituting a rewards scheme like this?arrow_forward
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