Certified Professional Contract Manager (CPCM) 2025 – 400 Free Practice Questions to Pass the Exam

The choice of fixed price redeterminable prospective is the correct answer because it specifically caters to scenarios where the contract price can be established firmly for a particular period, but allows for reviews and adjustments in pricing based on predefined criteria after that period. This contract type is beneficial for projects where there is uncertainty in costs, but a fixed price is still desirable to ensure budget limits.

The key feature is the "redeterminable" aspect, which indicates that after the initial set price period, the price may be reevaluated and adjusted based on agreed-upon metrics or performance, unlike other fixed-price contracts that may not allow for post-award price changes. This flexibility can help manage risks associated with cost fluctuations over the life of the contract.

Alternative choices do not possess the same characteristics. For example, a firm fixed price level of effort would imply a fixed payment for a designated effort, often used when the output is uncertain but would not allow for price modifications after the contract is initiated. Fixed price incentive contracts are designed to provide profit incentives for the contractor based on performance but do not allow for price redeterminations. Lastly, a fixed price redeterminable retroactive contract would likely reference prior performance for adjusting prices, which is not aligned with the question's