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Which of the following contracts has the MOST risk for the buyer?

A. Cost plus fixed fee (CPFF)

B. Cost plus percentage of costs (CPPC)

C. Time and Materials (T&M)

D. Fixed price (FP)

Procurement ERP Project Management Contracts
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Question added by Muhammad Farooq , QA-QC MANAGER , AL Bawani contracting co.
Date Posted: 2016/07/23
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Imran Ahmed
by Imran Ahmed , Manager-Planning & Delay Analyst , Nesma United Industries (NUI) Saudi Arabia

Option-B Cost plus percentage of costs (CPPC)

 

Piotr Teteruk
by Piotr Teteruk , IT Project Manager Roche , Roche

Risk is high for the Buyer while low for the Seller in all CP Type of Contracts.Cost Plus Fixed Fee (CPFF)Buyer does not know how much payment will be made to the Seller. Buyer has unlimited liability in a pure CP Type of Contracts. Hence Buyer has very high Cost Uncertainty.The Buyer will reimburse all the costs to the Seller in pure CP Type of Contracts. In addition the Buyer will also give agreed Fees to the Seller. The Seller will always make profit in a pure CP Type of Contracts. Seller has low Profit Uncertainty.

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