Fixed price contract

Detailed (Quotation) estimates, accuracy 5-10 per cent, which are used for project cost control and estimates for fixed price contracts. These are based on the completed (or near complete) process design, firm quotations for equipment, and a detailed breakdown and estimation of the construction cost. 

Because of the wide availability of chlor-alkali technology, it was decided to tender for fixed-price contracts for engineering, procurement and construction of the two chlor-alkali plants. The other areas - namely Outside Battery Limits for both plants and the chlor-paraffin plant in Melbourne - were managed by Orica under separate contracts. The chlor-paraffin plant process design (batch chlorination of paraffin oil and wax) was carried out in-house by Orica. 

Because the scope of work for JACADS closure is too uncertain to permit fixed-price competition, contracts for services under a cost-reimbursable contract with an award fee will be used (Bushman, 2000). The entire process of chemical demilitarization has been a novel experience, both for the Army and its contractors. Consequently, a fixed-price contract for the first closure of a disposal facility was not practical. Fixed-price contracting for JACADS closure... 

Long-term fixed-price contracts are not considered workable due to the volatility in the market and the uncertainty regarding future natural gas prices. The normal longterm contract simply guarantees continuity of... 

The shift from the highly structured gas world of government-backed bilateral, fixed-price contracts to a new world of private, market-related contracts raises questions about national security of supply. Private sector participants have different interests from countries they cannot be expected to consider automatically the energy security concerns of client nations as they are driven mainly by commercial considerations. 

The South Texas Project of two ABWRs, each of 1,200 MW, is promoted by an independent producer the NRG company. NRG has been the first unregulated company to apply for a joint construction and operation license (COL in September 2007. The project financing arrangement of the STP is made possible by different federal guarantees, which aim to alleviate the construction and regulatory risks, and also by a series of PPAs with creditworthy parties. Indeed the project will be backed by long-term fixed-price contracts with municipalities and historic suppliers. 

Figure 12.22 Effect of fixed price contracts on gas commercialization in Asia...

Fixed price contract- A contract with a set price for the work. See Time and Materials Contract. 

Because the construction manager is retained on a fee basis, he does not warrant or guarantee results, and may have little incentive to keep the cost down. In contrast to a fixed price contract with a GC, here the owner must assume ultimate liability for the final cost of the project no matter what the circumstances. 

Once a price has been determined for a fixed price contract, the same factors as above may cause the company to adjust its price. However, because of the risks involved, the company should be very much more cautious about price cutting many prestigious software companies have suffered severe financial damage as a result of undertaking fixed price contracts at too low a price and, in some cases, this has resulted in the total collapse of the company. 

Delay payments and payments for variations to the original requirements are, perhaps, the commonest cause of contractual disputes, not only in software engineering but in most other contracting industries—the constraction industry is a notorious example. One reason for this is that competitive bidding for fixed price contracts often means that the profit margin on the original contract is very low so that companies seek to make their profit on these additional payments. 

It should be realized that the cost of delays on fixed price contracts is very high, regardless of penalty payments. Every delay eats into the supplier s profit margin. As a result, suppliers are strongly motivated to produce the software on time and delay is usually the result of genuine technical difficulties (or incompetence ) rather than lack of motivation. 

Acceptance procedures are a critical part of any fixed price contract for they provide the criteria by which successful completion of the contract is judged. The essence of the acceptance procedure is that the client should provide a fixed set of acceptance tests and expected results and that successful performance of these tests shall constitute acceptance of the system. The tests must be provided at or before the start of the acceptance procedure within reason, there may be as many tests as the client wishes but extra tests cannot be added once the test set has been handed over. The purpose of this restriction is to ensure that the acceptance procedure can be completed in reasonable time. 

Contract hire agreements are very much simpler than fixed price contracts because the supplier s involvement and responsibility are so much less. Issues such as delay payments, acceptance tests and many others simply do not arise however, as mentioned earlier, ownership of intellectual property rights generated in the course of the work must... 

The use of consultants is now widespread both in private industry and in public bodies. Consultants are typically used to assess some aspect of an organization and to make proposals for improvements. The end product of a consultancy project is therefore usually a report or other document. Consultancy projects are usually undertaken for a fixed price but the form of contract is very much simpler than the fixed price contracts so far described. 

In a service level agreement (SLA) all three words carry equal importance. The document should define what services are to be delivered and the levels of performance expected. It is also an agreement between the customer and the supplier and not a unilateral declaration. For simple functions like catering fixed price contracts by SLAs are easy to implement. However, they are highly limiting and inappropriate for strategic parmerships. The agreements (also known as joint service partnerships) should include ... 

Supply contracts Fixed price contract Risk sharing contracts... 

In a fixed-price contract, price is determined through a bidding process (reverse auction). The supplier bids a fixed price but must satisfy the buyer s stipulated specifications in the RFQ. As the supplier bears all the risk of cost escalation, s/he is... 

As explained earlier, the relief supplies are procured for two buckets prepositioned inventory, and real time deliveries. Procurement can therefore be structured in the way discussed with respect to the Griffin Manufacturing case, discussed in Chap. 6. The supplies for prepositioned inventory can be procured in a proactive mode - a long-term contract with low-cost suppliers and ample delivery lead time. Such contracts are usually of the fixed-price type, where price is determined through a bidding process (reverse auction). The supplier bids a fixed price but must satisfy buyer stipulated specifications on the RFQ. The supplier bears all risk associated with cost escalation, but he/she prices his product appropriately to cover his production risk. Clearly, a fixed-price contract is easy to implement and inexpensive to monitor. 

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