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Considerations for Contract Types (1. Component Market Uncertainty (Low…
Considerations for Contract Types
1. Component Market Uncertainty
Low
Fixed-price contract
High
Cost-Based Contract
2. Time period agreements
Short-term
Fixed-priced
Long-term ( beyond 1 year duration)
Cost-based
3. Trust level
Low
Fixed-Price
High
Cost-based
4. Process / Technology Uncertainty
Low
Fixed-Priced
High
Cost-Based
with continuous improvement effort made by suppliers, incentive-type contract beneficial to both contracting parties
5. Supplier's ability to Impact Costs
Low
Fixed-price
High
Cost-based
6. Total dollar value of Purchase
Low
Fixed-price
High
Cost-based