When buying highly technical, few-of-a-kind products such as hydroelectric power plants, governments have found that general contractors are reluctant to specify a formal, fixed price for the procurement. Therefore, these contractors use __________ to compensate them for any cost overruns.

Question

Quizplus · Accepted Answer

Cost-plus-fixed-fee pricing allows the contractor to cover their costs and also earn a fixed fee, which alleviates the risk of cost overruns. This pricing model provides an incentive for the contractor to manage costs effectively while still ensuring a profit.

When Buying Highly Technical, Few-Of-A-Kind Products Such as Hydroelectric Power