Question

You own a company that designs and installs data back-up systems. You are proud of your staff who are quite adept at delivering high quality services quicker than most of the competition. You are negotiating with a business on selling your services, and they have asked you to choose a pricing contract. Which pricing contract would you opt for and why?

Answer 1

There are different pricing contracts available for my company to negotiate with the business. Like, Time and Materials, Cost reimbursement, Cost plus fixed fee, Cost plus award fee, Firm Fixed Price, Fixed price with contract escalation, and Fixed price incentive. However, I would opt for Cost Plus Incentive Fee. This is a type of fixed-price contract in which the business would have to pay additional financial incentives to the contractors if they can keep the project cost down. It can also offer incentives to the seller if they can meet the criteria set forth at the start of the contract.

The reason I would opt for such a contract since these kinds of contracts are designed into a certain fixed-price contract to provide special incentives to keep the cost of a project under a certain threshold. Since my company designs and install data back-up systems and my staff is adept at delivering high-quality services quicker than my competition, I would be able to keep the project cost as low as possible and would be able to earn incentives for my company based on the above-mentioned contract. This would be a win-win situation for both the buyer and me wherein the buyer gets the services at a lower cost and I earn greater profits.