Project Management Styles
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Please explain what are the fundamental differences between fixed-price and cost-plus contracts? Plus, how does affect what kinds of projects you would recommend for a fixed-price contract or cost-plus contract?
Can teams be used for both fixed-price and cost-plus contracts? Is there a difference in how teams work based on the contract being fixed-price or cost-plus contracts?
How can a project manager influence customer expectations and perceptions?
Nothing too complex please...
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Solution Summary
This solution explains what the fundamental differences are between fixed-price and cost-plus contracts.
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Fixed Price Contract: This is the type of contract where the contractor or the vendor is paid a fixed amount of money for completing the contract. Under this contract, all risk towards price increase is borne by the contractor. Also all rewards of a better performance accrue to the vendor. For example, if vendor agreed to develop an application for $10,000 then the vendor is paid only a sum of $10,000 for developing that application. If the cost of developing the application is $11,000, the vendor will make a loss of $1000. On the other hand, if vendor is able to develop the application to the satisfaction of client at the cost of $5000, all the profits of $5000 will be taken by vendor only. Thus, fixed price projects are high-risk high gain contracts where the productivity benefits are enjoyed by the vendor and productivity losses are borne by the vendor.
Cost Plus contract: In this type of contract the vendor is paid based on cost incurred by the vendor plus an agreed profit percentage. The ...
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