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Consulting Case Interview Practice Questions

Category - Strategy

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Ted is negotiating a 10-year contract with the U.S. government to provide educational services. The government wants a fixed price project. However, Ted is extremely concerned about the possibility of inflation given the increase in government spending. Ted should suggest what time of contract?
  1. Inflatable
  2. Floater
  3. Bonded adjustment
  4. Fixed price with economic adjustment
  5. Treasury
Explanation
Answer: e - A fixed price with economic price adjustment contract allows for fees to be adjusted based on an established index (usually of inflation).

Key Takeaway: Vendors signing multi-year contracts are crazy not to include this. Even if inflation or cost increases don’t appear to be on the horizon, it is an unnecessary risk to be exposed to. In general, this is an accepted practice to protect project profits.
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