PMP question

Submitted by munishmsh on Tue, 07/26/2011 - 09:54

Which of the following contracts has the most risk for the buyer?
a. Cost plus fixed fee(cpff)
b. Time and Material (T&M)
c. Cost plus award fee (cpaf)
d. Fixed price (FP)


Would you please explain. It should be Cost Reimburable


Regards
Msh

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General Discussion
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yashbindlish

Tue, 07/26/2011 - 15:26

Answer is: B Time and Material (T&M)

munishmsh

Tue, 07/26/2011 - 16:51

thanks....Can I have the explaination too...

bschand

Tue, 07/26/2011 - 17:28

T&M contracts - Material and human resource cost incurred to do work will be buyer's responsible. If work takes more time than planned it will be more cost for Buyer; Seller enjoys cost benefit here;


Fixed Price & its flavours contracts - Buyer and Seller accept for fixed fee to get work done; If work takes more time than planned it would not cost anything much for Buyer; Seller faces problems here.


Hope this clears your doubt.


Thanks,


Chandrasekaran

aaron

Thu, 07/28/2011 - 13:50

Answer should be A (Cost Reimbursible + Fixed Fee)

CR contracts always carry higher risk (for buyer) than T&M contracts.

CRPP carries highest risk followed by CRFF and then CRAF

 

sili18

Thu, 07/28/2011 - 21:47

I Agree with you Aaron. The Answer should be A (CPFF)