What are the differences among a fixed-price contract, a time-and-materials cont
ID: 359290 • Letter: W
Question
What are the differences among a fixed-price contract, a time-and-materials contract, and a reimbursable contract in terms of how well defined a contract needs to be relative to price, scope, and schedule prior to the commencement of any work? How much control over the project scope, price, and schedule should the contractor have under each contract type
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Explanation / Answer
1.
Fixed price contract: In this type of contract, there is a fixed price on good and services which is agreed between the buyer and the seller.
Price: Prices fixed without any changes
Scope: Saves time, lesser risk for both since it is already planned
Schedule: The contract is valid till the date which is agreed upon by the buyer and the seller
Time in materials contract: In this type of contract, the buyer and seller agrees for a actual cost plan
Price: The price keeps changing according to the economic condition
Scope: Benefits the contractor
Schedule: As and when the project happens
Reimbursable contract: The contractor is paid for all the work done plus an additional amount of fee
Price: Actual work cost + fee
Scope: Benefits the contractor
Schedule: At the completion of the project
2. Contractors control over the project :
a. Fixed price contract: Equal control for both and hence it depends upon the contractors negotiation skills
b. Time in materials contract: The contractor has more control over the project cost. He can quote amounts and gain over it, as long as he convences the buyer.
c. Reimbursable contract: Again it is in the hands of the contractor to negotiate on the price.
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