1. A project manager for a large manufacturing company is working on a project t

Question

1.     A project manager for a large manufacturing company is working on a project that calls for a new building to be constructed to house a new clean system manufacturing process that is critical to the success of the project. Construction is not a core competency of his company. His team has the ability to create a detailed SOW with liquidated damages in the event that specific deliverables are not delivered on time. The PM is in the Plan Procurements phase of the project, and needs to select a contract type for this work. Which of the following is the best type of contract for this situation?

        a. FP (Fixed price)

        b. CPFF (Cost plus fixed fee)

        c. CPIF (Cost plus incentive fee)

        d. T&M (Time and materials)

Explanation / Answer

A. FP (Fixed Price)

Since construction is not the core competency of the company, it shall not be able to efficiently monitor the project and control the cost being incurred on it. The team can designed SOW and provide it to the contractor for a fixed price. In case of fixed price contract the company is not required to put more attention to completion of the project. The contractor is wholly responsible and the company shall not have to incur extra cost on account of delays / faults on the part of contractor.

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