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Contract Type

Posted: Thu Oct 26, 2017 2:03 am
by komal
A commercial real-estate developer contracts with a construction firm to build one of the buildings for the actual cost of providing the materials and services plus a fixed fee for profit. What type of contract is this?

Time and materials
Cost-reimbursable
Fixed price
Independent vendor

According to me Correct should be Time and Material but correct is Cost-reimbursable.Please suggest how?

Re: Contract Type

Posted: Thu Oct 26, 2017 2:27 pm
by pmpannu
A cost-reimbursable contract provides the project flexibility to redirect a seller whenever the scope of
work cannot be precisely defined at the start and needs to be altered, or when high risks may exist in
the effort plus a fixed fee..In the give question it is said the contract is for building a house ( where the scope is eventually created ) where as in time and Material is for the staff augmentation, acquisition of experts, and any outside support when a precise statement
of work cannot be quickly prescribed. These types of contracts resemble cost-reimbursable contracts in
that they can be left open ended and may be subject to a cost increase for the buyer. The full value of
the agreement and the exact quantity of items to be delivered may not be defined by the buyer at the
time of the contract award so the answer is Cost Reimbursable contract. refer Pg 362/363.