B.Part of negotiation involved in paying every invoice
C.Applied as a line item to every invoice
D.Determined with the other party at the end of the project
Why not C is right answer ?. What is right answer ?.
B also cannot be right becos there is no negotiation at all in FP,Right sir ?.
A.Unknown > This not correct , as the profit part is already considered while negotiating the Contract.
B.Part of negotiation involved in paying every invoice > This is generally not done while paying any invoice.
C.Applied as a line item to every invoice > Line item viz. Profit after tax is not shown in every invoice.
D.Determined with the other party at the end of the project > Seems the CORRECT option.
So, fixed price contract, the fees or profit is Unknown to the buyer.
Choice D, is wrong. The other party(Seller) is the profit and fee already knows before the project starts.
Suppose the Independent estimate is available with the Procuring Organization/Buyer. Then the profit of the quoted price of Seller can be known , which eliminates the option # A.
How much money the buyer can spent approx. on this work.
Off course we know some profit he will make. But the question is asking on real profit.
That independent estimate is only for comparing to Price BId submitted by contractors
Whether the Bid is reasonable or not.
Just a moment forget about Independent estimate .
Suppose the work will take around $1000. But you don't know the how much it will take.
When you evaluating the Price Bid responses from Contractors(Sellers), you found that all of the contractors quoted the price above $2000.
What you going to do if you don't have Independent Estimates in hand.
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