Which of the following types of contract tends to give both the buyer and seller some flexibility in that it allows for deviation from performance?
Which of the following types of contract tends to give both the buyer and seller some flexibility in that it allows for deviation from performance?
A fixed-price contract with incentives includes additional performance-based incentives or bonuses for meeting or exceeding certain performance criteria. These incentives can provide flexibility by motivating the seller to perform beyond the minimum requirements specified in the contract, thereby potentially exceeding expectations and providing additional value to the buyer. This structure allows both the buyer and the seller some flexibility because it encourages better performance and provides potential financial rewards for deviations from the minimum performance standards.
B is correct
B: In a fixed-price contract with incentives, the contract includes additional performance-based incentives or bonuses for meeting or exceeding certain performance criteria. These incentives can provide flexibility by motivating the seller to perform beyond the minimum requirements specified in the contract, thus potentially exceeding expectations and providing additional value to the buyer. Therefore, option B can indeed provide both the buyer and seller with some flexibility, allowing for deviation from performance.
A fixed-price contract with an award fee includes provisions for a base fee and an additional award fee. The award fee is based on the buyer's evaluation of the seller's performance, typically in terms of meeting certain subjective performance criteria.
Fixed Price Incentive Fee Contracts (FPIF) gives the buyer and seller some flexibility in that it allows for deviation from performance, with financial incentives tied to achieving agreed upon metrics. B is correct.
C is more reasonable.