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A cost-plus-fixed-fee contract is a cost-reimbursement contract that provides for payment to the contractor of a negotiated fee that is fixed at the inception of the contract. The fixed fee does not vary with actual cost, but may be adjusted as a result of changes in the work to be performed under the contract.
What Is a Fixed-Price Contract? Fixed-price contracts, also known as firm-price or lump-sum contracts, are agreements in which the two parties state the goods or services one party will provide and establish the price the other party will pay for them.
Normally, risk should be allocated to the party that is best able to manage it or the party best able to control or minimise the impact of the risk. And if in managing the risk also involves bearing its financial cost, there will be greater incentive to take measures to mitigate that risk.
Lump sum contracts apportion more risk to the contractor than some other forms of contract, as there are fewer mechanisms to allow them to vary their price, and they give the client some certainty about the likely cost of the works.
A cost-plus contract is an agreement to reimburse a company for expenses incurred plus a specific amount of profit, usually stated as a percentage of the contracts full price.
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People also ask

Cost reimbursable type of contract has the highest risk for the Client as the final cost is not known.
Cost Plus Contract Disadvantages For the buyer, the major disadvantage of this type of contract is the risk for paying much more than expected on materials. The contractor also has less incentive to be efficient since they will profit either way.
From Longman Business Dictionary ˈfixed ˌfee (also flat fee) [countable] a set amount paid for work or a service, that does not change with the time the work takes or the amount the service is usedQuebec doctors get a fixed fee for each medical service performed.
Fixed price contracts pros and cons Finalized cost, low financial risk. Fixed deadline. Easy-to-follow development schedule. No management needed from the client. Long planning phase. Inflexible process. Not suitable for complex projects. Miscommunication risks.
The three most common contract types include: Fixed-price contracts. Cost-plus contracts. Time and materials contracts.

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