Challenges of Fixed-Price Contracts in Agile and Traditional Projects

Getting Started

There are mainly two types of contracts: fixed price and cost-reimbursable. Fixed-price contracts are riskier for the vendor because the vendor will receive a fixed amount of money even if the actual costs are higher than anticipated. Cost-reimbursable contracts are riskier for the customer because the customer will have to reimburse all the costs incurred by the vendor, and hence, the vendor will not be motivated to control costs. In this assignment, you will discuss specific challenges of fixed-price contracts (while comparing with cost-reimbursable contracts) in both agile and traditional environments.

Upon successful completion of the course material, you will be able to:

• Compare and contrast contract types.

Resources

• PMBOK^® Guide
• Article: An Agile Twist: Fixed-Bid Pricing
• Article: The Special Challenges of Project Management under Fixed-Price Contracts

Background Information

PMBOK^® Guide recommends fixed-price contracts when scope is clear and cost-reimbursable contracts when scope is unclear. It is crucial for your organization to select an appropriate contract with the vendor in order to build and maintain a good relationship in the current as well as future projects. Wrongfully taking advantage of the vendor now will only lead to a “lose-lose” situation in the long run.

Instructions

1. In PMBOK^® Guide, read Chapter 12, “Procurement Management.”
2. Read the following articles:
   1. “An Agile Twist: Fixed-Bid Pricing (PDF)”
   2. “The Special Challenges of Project Management under Fixed-Price Contracts”
3. Navigate to the threaded discussion and respond to the following prompts:
   1. Regardless of the track chosen for your course project, discuss the issues of fixed-price contracts.
   2. Additionally, make recommendations as to how to avoid or mitigate each of those issues.

1. Your initial post should be a minimum of a page or 300 words.
2. All references and citations should be in APA format.

1. All references and citations should be in APA format.

1. 1. Review the APA Resources on https://owl.purdue.edu/owl/research_and_citation/apa_style/apa_formatting_and_style_guide/reference_list_articles_in_periodicals.html