Question: When deciding on a contract structure, what are the advantages and disadvantages of a Cost Plus contract when compared to a Fixed Price contract? Consider:

When deciding on a contract structure, what are the advantages and disadvantages of aCost Pluscontract when compared to aFixed Pricecontract?

Consider:

  • Types of risks
  • Incentives to each party
  • Strategic intent
  • Transaction risks
  • Which is more expensive?

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