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Business Continuity Professional Exam Prep

Category - BCP 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. Cost plus fee
  2. Cost plus fixed fee
  3. Cost plus incentive fee
  4. Time and material
  5. Fixed price with economic price adjustment
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. A good business continuity planner can help protect his or her firm against inflation by insisting on this type of provision.

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