Contract Types

A contract is a compulsory agreement between two or more parties and is used to acquire products or services from outside the organization. Typically, money is exchanged for the goods or services. Contracts are enforceable by law and require an offer and an acceptance.

There are different types of contracts for different purposes. The PMBOK® Guide divides contracts into three categories:

■ Fixed price or lump sum

■ Cost reimbursable

Within the fixed-price and cost-reimbursable categories are different types of contracts. You'll look at each in the following sections. Keep in mind that several factors will impact the type of contract you should use. The product requirements (or service criteria) might drive the contract type. The market conditions might drive availability and price—remember back in the dot-com era when trying to hire anyone with programming skills was next to impossible? And the amount of risk—for the seller, the buyer, and the project itself—will help determine contract type.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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