Procurement Contracts for the PMP Exam
Complete guide to procurement contract types for the PMP exam — fixed price, cost reimbursable, T&M, and risk allocation.
Procurement Contract Types
Understanding contract types and risk allocation is critical for PMP procurement questions.
Contract Types Summary
| Type | Buyer Risk | Seller Risk | Best For |
|---|---|---|---|
| Firm Fixed Price (FFP) | Lowest | Highest | Clear, well-defined scope |
| Fixed Price Incentive Fee (FPIF) | Low | High | Clear scope with performance incentives |
| Fixed Price EPA (FPEPA) | Low-Medium | Medium-High | Multi-year contracts (inflation protection) |
| Cost Plus Fixed Fee (CPFF) | High | Low | Unclear scope, R&D projects |
| Cost Plus Incentive Fee (CPIF) | High | Low | Unclear scope with shared incentives |
| Cost Plus Award Fee (CPAF) | Highest | Lowest | Highly uncertain scope |
| Time & Materials (T&M) | Medium | Medium | Small, undefined work; staff augmentation |
Key PMP Exam Points
- FFP puts most risk on the seller — they absorb cost overruns
- Cost reimbursable puts most risk on the buyer — they pay actual costs plus fee
- T&M is a hybrid — has aspects of both
- The Point of Total Assumption (PTA) only applies to FPIF contracts
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