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.