Question

If you want to give a vendor an incentive to complete work early, which type of contract would you use?Select an answer:a. fixed priceb. time and materialsc. retainerd. cost plus

Answer 1

Answer:

The correct answer is letter "A": fixed price.

Explanation:

A fixed price incentive is a type of price that is set based on a reward that will be given only in the case the good or service traded results to be better than expected. It is normally applied when the good or service is delivered to the consumer before so the consumer has the product for extra time with no additional cost.

Answer 2

Answer:

a. fixed price

Explanation:

a. fixed price contract:

The vendor will be paid a fixed payment regardless his time spending. Thus the vendor will try to complete work as soon as possible, then he can receive his payment/ incentive for completed work.

b. time and materials contract:

The vendor will be paid based on time spent and material used. This contracts are normally used in construction.

c. retainer contract:

The vendor will be paid in advance for professional work to be specified later.

d. cost plus contract:

The vendor will be paid for all of its expenses, plus additional margin for its profit.