Project Management Professional (PMP) Exam Practice – Question1647
Which of the following types of contracts has the least risk to the seller?
A. Firm-fixed-price B. Cost-plus-fixed-fee C. Cost-plus-award-fee D. Fixed-price-incentive fee
Correct Answer: B
Explanation:
Explanation:
On a firm-fixed-price contract, the seller absorbs 100 percent of the risks; while on a cost-type contract, the buyer carries the most risk. Cost-plus-fixed-fee contracts have less risk to sellers than cost-plus-award-fee or cost-plus-incentive-fee contracts because
the fee is fixed based on costs, so the seller is guaranteed a certain level of profit.