Fixed-Price Contract
A contract with a set total price for a defined scope, placing cost risk on the seller.
A fixed-price contract sets a single agreed price for a clearly defined scope, transferring cost risk almost entirely to the seller. Because the seller absorbs overruns, thorough scope definition before signing is essential; ambiguous requirements shift the risk dynamic and breed disputes or change-order battles. Three variants appear on the exam: Firm Fixed Price (FFP), Fixed Price Incentive Fee (FPIF), and Fixed Price with Economic Price Adjustment (FPEPA). The key distinction: FPIF still places primary risk on the seller while offering a shared savings incentive, whereas cost-reimbursable contracts shift risk toward the buyer.
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