Which procurement contract type provides the seller with the least financial risk?

Question

Project Management (PMP) — Medium

Which procurement contract type provides the seller with the least financial risk?

Accepted Answer

The Cost Plus Fixed Fee (CPFF) contract type provides the seller with the least financial risk because it reimburses actual costs and adds a fixed fee. This shifts the cost risk to the buyer. In contrast, Firm Fixed Price and Fixed Price Incentive Fee contracts expose sellers to cost overruns. Time and Material contracts also pose risks due to uncertainty.