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Question 187 - PK0-005 discussion

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Which of the following contract types in project procurement has the highest risk for the buyer?

A.
Time and material
Answers
A.
Time and material
B.
Cost-plus
Answers
B.
Cost-plus
C.
Fixed-price
Answers
C.
Fixed-price
D.
Unit price
Answers
D.
Unit price
Suggested answer: B

Explanation:

A cost-plus contract is a type of contract where the buyer agrees to reimburse the seller for the actual costs of the work plus a fee, which can be fixed, percentage, incentive, or award based. This type of contract has the highest risk for the buyer because the buyer has no control over the cost or quantity of the work and the seller has little incentive to control the costs or complete the work efficiently. The seller may inflate the costs or prolong the work to increase the fee. The buyer may end up paying much more than the estimated budget or the market value of the work. Reference = CompTIA Project+ PK0-005 Certification Study Guide, Chapter 9: Project Procurement Management; CompTIA Project+ Certification Exam Objectives, Domain 3: Project Execution, Objective 3.3: Execute procurement activities.

asked 02/10/2024
Tshimangadzo Mbulawa
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