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A purchase order for a specified item to be delivered by a specified date for a specified price is the simplest form of what type of contract?
A. Time and material
B. Fixed price or lump-sum
* Units of measure. Each unit used in measurements (such as staff hours, staff days, weeks for time measures; or meters, liters, tons, kilometers, or cubic yards for quantity measures; or lump sum in currency form) is defined for each of the resources.
Fixed-price contracts. This category of contracts involves setting a fixed total price for a defined product, service, or result to be provided. Fixed-price contracts may also incorporate financial incentives for achieving or exceeding selected project objectives, such as schedule delivery dates, cost and technical performance, or anything that can be quantified and subsequently measured. Sellers under fixed-price contracts are legally obligated to complete such contracts, with possible financial damages if they do not.
Under the fixed-price arrangement, buyers need to precisely specify the product or services being procured. Changes in scope may be accommodated, but generally with an increase in contract price.