3 Types of Contracts in Project Management | PMP |

3 Types of Contracts in Project Management | PMP | #shorts

In PMP, contracts are broadly classified into three main types. Here's the list of contract types:

1. Fixed-Price Contracts (FP).

Firm Fixed Price (FFP): The price is set and will not change unless the scope of work changes.

Fixed Price Incentive Fee (FPIF): The seller receives an incentive for meeting or exceeding certain performance criteria, such as completing under budget or ahead of schedule.

Fixed Price with Economic Price Adjustment (FP-EPA): Allows for adjustments to the contract price due to changes in specific economic conditions, like inflation or cost increases for specific commodities.

2. Cost-Reimbursable Contracts (CR)

Cost Plus Fixed Fee (CPFF): The seller is reimbursed for allowable costs and also receives a fixed fee payment, typically a percentage of the initial estimated project costs.

Cost Plus Incentive Fee (CPIF): The seller is reimbursed for allowable costs and receives an incentive for meeting specific performance criteria.

Cost Plus Award Fee (CPAF): The seller is reimbursed for allowable costs and is given an additional award amount based on performance. The award amount is subjective and determined by the buyer.

3. Time and Materials Contracts (T&M)

This is a hybrid type of contractual arrangement. The buyer agrees to pay the seller based on the time spent by the seller's employees and for materials used in the project. It's often used for smaller scopes, or when the duration and scope are uncertain.