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AutoQuiz: What Type of Contract Places Primary Risk with a Supplier?

The post AutoQuiz: What Type of Contract Places Primary Risk with a Supplier? first appeared on the ISA Interchange blog site.

AutoQuiz is edited by Joel Don, ISA’s social media community manager.

Today’s automation industry quiz question comes from the ISA Certified Automation Professional certification program. ISA CAP certification provides a non-biased, third-party, objective assessment and confirmation of an automation professional’s skills. The CAP exam is focused on direction, definition, design, development/application, deployment, documentation, and support of systems, software, and equipment used in control systems, manufacturing information systems, systems integration, and operational consulting. Click this link for information about the CAP program. The following question comes from the CAP study guide, Performance Domain II, Definition: Identify customer requirements and complete high-level analysis of the best way to meet those requirements.

 

Which of the following contract types places the PRIMARY risk with the supplier?

a) cost plus
b) fixed price
c) time and material
d) unit price
e) none of the above

   

<span class="collapseomatic " id="id5091" tabindex="0" title="Click Here to Reveal the Answer” >Click Here to Reveal the Answer

In cost plus, time and material, and unit-price contracts, the supplier and customer agree on the margin-not the total cost of the project.

The correct answer is B, fixed price. The supplier estimates a fixed-price contract, and the customer accepts it and agrees to it before the project begins. Any overruns are the responsibility of the supplier.

Reference: Donald A. Coggan, editor; Fundamentals of Industrial Control, 2nd Edition; ISA Press.

Source: ISA News