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Fixed Price contract (FP ) is the more risk for seller .In which we cannot manipulate our rate through out the project ,Which is risky due to fluctuation of material prices in the market
Fixed price (FP) contract type has the most risk for the seller. The reason being, the buyer knows what payment has to be made. However, the seller does not know actual cost. The actual cost may exceed the budgeted cost up during execution of contract
On the other hand, the cost plus (CP) contract type has the least risk for the seller since he knows what will be the cost. At the same time, the risk increases for the buyer becasue he does not know what payment has to be made.
A hybrid type of contract is T & M (time and material) type which combines both the features of FP and CP type and uses the mutually agreed billing rate based on time and materials consumed and signifies balanced risk for both buyer and seller
Option-C FP (Fixed Price Contract)
Fixed Priced is the riskiest sort of contract for seller because of one price for whole contract. If some works which were not mentioned in the Bills of Quantities (quotation) but actually are mentioned in contract documents, those are to be done within the same fixed price. Such contracts are also known as Lump Sum Contract.
cost plus fixed fee contract and cost plus incerntive contract these two contracts may be risk to your comapny.
