Certified Internal Auditor (CIA) Part 2: Practice of Internal Auditing — Question 92

Which of the following types of contracts would provide the least incentive for a contractor to achieve economy and efficiency?

Answer options

• A. Lump-sum contract.
• B. Cost-plus contract.
• C. Unit-price contract.
• D. Indefinite delivery contract.

Correct answer: B

Explanation

A Cost-plus contract reimburses the contractor for expenses plus an additional fee, which can diminish the incentive to minimize costs. In contrast, Lump-sum contracts and Unit-price contracts encourage efficiency since the contractor's profit is tied to managing costs effectively. Indefinite delivery contracts do not inherently affect the incentive structure like the others do.