fixed price contract question

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coolpmp69
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fixed price contract question

Postby coolpmp69 Mon Mar 09, 2015 5:02 pm

The sponsor and the project manager are discussing what type of contract the project manager plans to use on the project. The buyer points out that the performing organization spent a lot of money hiring a design team to come up with the design. The project manager is interested in seeing that the risk for the buyer be as small as possible. An advantage of a fixed price contract for the buyer is:
a There is no risk at all.
b Risk is shared by all parties
c Cost Risk is Lower
d Cost Risk is Higher


As the question is pointing from buyer's perspective, fixed price contract pose no risk to buyer so I picked A but the correct answer is option C..why?
manishpn
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Re: fixed price contract question

Postby manishpn Mon Mar 09, 2015 9:11 pm

FP contract usually is used when buyer wants to transfer the risk. no Contract gaurentees zero risk. If risk needs to be shared FP is not a the way to go, as usually buyer would want to share risk in case of positive risk.

Right answer is C
Br,
Manish P
PMP, PMI - ACP, SAFe Agilist
http://www.izenbridge.com/blog/7-effect ... ification/

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