Certified Associate in Project Management (CAPM) — Question 369

Which contract type is least desirable to a vendor?

Answer options

• A. Fixed price with economic price adjustment (FPEPA)
• B. Firm fixed price (FFP)
• C. Cost plus fixed fee (CPFF)
• D. Cost plus award fee (CPAF)

Correct answer: B

Explanation

The Firm Fixed Price (FFP) contract is least desirable for a vendor because it places all the financial risk on the vendor, requiring them to complete the project within the fixed price regardless of any unforeseen costs. In contrast, the other options such as CPFF and CPAF allow for cost reimbursements or incentives, making them more favorable for vendors who may face variable expenses.