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? ISEB ISEB-PM1 Exam

Question

Options

• ACost-reimbursable
• BTime and material
• CFixed price or lump-sum
• DCost-plus-fixed-fee

• A
  3% (1)
• B
  16% (5)
• C
  75% (24)
• D
  6% (2)

Explanation

Fixed price (lump-sum) contracts are defined by three locked-in terms: a specific item/scope, a specific delivery date, and a specific price - exactly what a purchase order captures. Once signed, the seller bears all cost risk; the buyer knows exactly what they'll pay.

• A (Cost-reimbursable) is wrong because the buyer pays actual costs plus a fee, meaning the final price is unknown upfront - the opposite of a locked price.
• B (Time and material) is wrong because billing is based on hours worked and materials used, not a fixed total - still variable.
• D (Cost-plus-fixed-fee) is wrong because while the fee is fixed, the underlying costs are reimbursed as incurred, so total payment floats with actual expenses.

Memory tip: Think of a purchase order at a store - you see the price tag, agree to it, and pay exactly that. "Fixed" = the price is fixed before work begins, just like a price tag.

No community discussion yet for this question.