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Contract Pricing Agreements

Discuss the three categories of contract pricing arrangements. Briefly describe the various types of contracts in each category.

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The three types of contract pricing arrangements are fixed price, cost reimbursement, and special situation contracts.

A fixed price contract includes a firm fixed price contract, which has a fixed price that cannot be altered. A contract to purchase a new car is an example of a fixed price contract. A fixed price with economic price adjustment contract makes provisions for adjustments due to events that take place in the economy that are outside of the person's control. A fixed price incentive contract bases the final fixed price on an incentive and adjusts the total profit based on a formula of how much was or can be saved during the project. This fixes a price to the contract but bases the fixed price on additional ...

Solution Summary

This solution discusses the three categories of contract pricing arrangements and describes the various types of contracts in each category.

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