Project Management Institute

Project contracts

a decision matrix approach

In order to respond to the growing trend of contracting out, out-sourcing, and privatizing research and development, project managers need more knowledge in the area of project contracts. This article overviews three types of contracts: Firm-Fixed Price (FFP), Cost-Plus Fixed Fee (CPFF), and incentive contracts (where R&D costs are shared between buyers and sellers). It defines each contract's characteristics and describes the role of the project manager for each type. A decision matrix is used to display each of the contract types according to the criterion of human asset specificity (referring to the magnitude of labor required), and contract impediments (referring to the requirement of continuing project integration). This is a useful tool that can be used to evaluate which contract type would be most appropriate for what particular job.
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