Project Procurement Management

Question 1

Fixed Price (Lump Sum)

Answer 1

The buyer pays one flat price (lump sum); seller takes the risk; best when the scope is well defined

Question 2

Firm Fixed Price (FFP)

Answer 2

When the price is fixed and cannot be changed

Question 3

Fixed Price Incentive Fee (FPIF)

Answer 3

Fixed price includes an additional fee for meeting a target set forth in a contract

Question 4

Fixed Price Economic Adjustment (FPFA)

Answer 4

Contract used to adjust the fixed cost over the life of contract because of the economic conditions; usually cover a long period of time

Question 5

Cost reimbursable

Answer 5

When the buyer pays for the work expenses and then pays the seller a fee for his profit; buyer takes the risk; best when scope is not well defined

Question 6

Cost Plus Fixed Fee (CPFF)

Answer 6

Contract when the buyer pays the work expense and then a fixed fee to the seller for profit

Question 7

Cost Plus Incentive Fee (CPIF)

Answer 7

Contract when the buyer pays the work expense and an additional fee, it a target is met, such as, finishing two weeks earlier

Question 8

Time and Material

Answer 8

Contract when the buyer pays for both labor and material; buyer takes the risk; use it when the scope is high level