Procurement Management Report: Contract Types and Applications

This report delves into the intricacies of project procurement management, focusing on the different types of contracts used within projects, including fixed-price, cost-reimbursable, and time and material contracts. The report explores the application of these contracts across various industries such as software, construction, and government sectors, highlighting the specific requirements and considerations for each. It also touches upon the process of developing a Request for Proposal (RFP), evaluating proposals, and monitoring and controlling procurement contracts. The analysis includes detailed explanations of contract variations, emphasizing how each type aligns with project objectives and financial incentives. The report provides insights into how contract types are tailored to industry-specific needs, offering a comprehensive overview of procurement practices.

Running Head: PROCUREMENT MANAGEMENT
Project procurement management
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Types of Contracts and application:
There are three types of contracts that are incorporated in projects and those are fixed price, cost-
reimbursable and Time and Material Contract (Eriksson, 2013).
 Fixed price Contract- This can be applied to a project for exceeding or achieving
objectives of financial incentives. The further divisions of this contract are FFP, FPIF and
FP-EPA, the FFP is applied on projects when the cost of the project varies with its scope.
FPIF is applied when performance flexibility is allowed and excessive cost is borne by
the seller. FP-EPA is applied in a long time relationship of seller and buyer.
 Cost- reimbursable Contract- This contract is applied on project when the final cost is not
fixed and the seller gets reimbursed of all the actual cost after the completion of the
project. This contract is further divided into CPFF, CPIF and CPAF. CPFF is applied to
get the reimbursement of allowable costs. CPIF and CPAF are applied similar to CPFF
except, CPIF have incentive on achieving the objectives and CPAF with fee
reimbursement.
 Time and Material Contract- This is applied to projects when statement of work is not
clear and flexibility can happen during the project. It is a combination of fixed-price and
cost- reimbursable Contract.
Variation in contract in different industry
In the software industry the contracts includes the full requirements of the developing
projects’ performance and functionalities they contract type can be Cost- reimbursable Contract
(Schermann et al., 2016). In construction industry the development in the project such as
renovation, decommissioning, construction of new building are included in the Time and

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Material contract. In government sector the requirements are documented and generally fixed-
price Contract is obtained.

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Reference
Eriksson, P. E. (2013). Exploration and exploitation in project-based organizations: Development
and diffusion of knowledge at different organizational levels in construction companies.
International journal of project management, 31(3), 333-341.
Schermann, M., Dongus, K., Yetton, P., & Krcmar, H. (2016). The role of transaction cost
economics in information technology outsourcing research: a meta-analysis of the choice of
contract type. The Journal of Strategic Information Systems, 25(1), 32-48.