Certified Associate in Project Management (CAPM) — Question 432

A firm contracted an event management company to conduct the annual sales day event. The agreement states that the event management company will charge the firm for the actuals and receive 8% of the total cost. What type of contract is this?

Answer options

• A. Time and material (T&M)
• B. Fixed price incentive fee (FPIF)
• C. Cost plus fixed fee (CPFF)
• D. Cost plus award fee (CPAF)

Correct answer: C

Explanation

The correct answer is C, Cost plus fixed fee (CPFF), because the firm agrees to pay the actual costs incurred plus a fixed percentage. The other options do not accurately reflect this arrangement, as T&M involves billing for time and materials without a fixed fee, FPIF typically includes incentives based on performance, and CPAF involves bonuses based on performance metrics.