Head First Question - help needed

Submitted by nidhitripathi on Tue, 08/09/2011 - 19:34

Hi All,


Found this question in the head first exam.



32. Which of the following contracts has the MOST risk for the buyer?


A.



Cost plus fixed fee (CPFF)

B. Time and Materials (T&M)


C. Cost plus award fee (CPAF)


D. Fixed price (FP)


Answer given is (B), however according to Rita it should be (c).


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Emmanuel

Tue, 08/09/2011 - 23:12

Yes the answer should be Cost Plus Fixed Fee because the buyer will have to pay for any additional material that is needed for the Project. As a result the burden is on the buyer.

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admin

Wed, 08/10/2011 - 04:08

What is Rita's explaination for option C ?..

nidhitripathi

Wed, 08/10/2011 - 10:07

Rita doesn't have this question as such but there is a table in Rita which mentioned the types of contracts in decreasing order or risk for the buyer according to which CPAF is above T&M.

fwdkhan1

Wed, 08/10/2011 - 10:35

 

From left to right Buyer Risks

CPPC -> CPFF ->  CPAF ->  CPIF ->  T&M ->  FPEPA ->  FPIF ->  FP

From right to left Seller Risks

 

Ref. Rita Page 437

aaron

Wed, 08/10/2011 - 17:26

Correct answer should be A (CPFF)

In CPAF the seller has some incentive to control the costs but not in CPFF.

All of the CR contracts carry more cost risk than T&M and FP (probably because CR contracts usually have large initial investments)