- are detailed descriptions that define the requirements of a service or a product.
- can be in the form of words, pictures or diagrams.
Tuesday, December 29, 2009
Friday, December 18, 2009
Wednesday, December 16, 2009
Disadvantages of Fixed Price Contract include:
- Seller may under-price the work and try to make up profits on change orders
- Seller may not complete some of the contract statement of work if they begin losing money
- More work for buyer to write the contract statement of work
- Can be more expensive than Cost Reimbursable Contract if the contract statement of work is incomplete
- Seller will need to add to the price for their increase of risk
Advantages of Fixed Price Contract includes:
- Less work for buyer to manage
- Seller has a strong incentive to control costs
- Companies have experience with tis type of contract
- Buyer knows the total price at project starts
Sunday, December 13, 2009
Disadvantages of Time & Material Contract include:
- Profit is in every billed
- Seller has no incentive to control costs
- Appropriate only for small projects
- Requires the most day to day oversight from the buyer
Thursday, December 10, 2009
Disadvantages of Cost Reimbursable Contract include:
- Require auditing seller's invoices
- Require more work for the buyer to manage
- Seller has only a moderate incentive to control costs
- Total price is unknown
The Advantages on Cost Reimbursable Contract are:
- Simpler contract statement of work
- usually requires less work to work the scope that fixed price
- Generally lower cost than fixed price because the seller does not have add as much for risk.
Wednesday, December 9, 2009
Tuesday, December 8, 2009
What is a Fixed Price Incentive Contract:
- Contract such that all allowable cost is paid and final price is based on total final cost relative to total target cost.
- Final price subject to a ceiling price which is negotiated at the outset.
Sunday, December 6, 2009
An Incentive Contract is such that the fee is structured on the basis of the contractor meeting targets int he performance of the contract.
- motivate contractor efforts that might not otherwise be emphasized
- discourage contractor inefficiency and waste
Saturday, December 5, 2009
That is a component of US FAR 16.4 related to Fixed-Price Incentive Fee Contracts.
- It covers a variety of incentive contracts, presented here only to provide perspective.
- Notes: US Federal Acquisition Regulation (FAR) 16.4
What is Fixed Price?
- It is also called Lump Sum, Firm Fixed Price
- Is one price that is agreed upon for all the work.
- Has least cost risk for buyer if he has a completely defined scope.
- Is most appropriate when the buyer can completely describe the contract statement of work
Suggested Study Materials
- PMP-Preparation Recommended Books
- PMP Exam Prep, Fifth Edition: Rita's Course in a Book for Passing the PMP Exam
- A Guide to the Project Management Body of Knowledge, Third Edition (PMBOK Guides)
- The PMP Exam: How to Pass On Your First Try (Test Prep series)