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

A contract that establishes a fixed price including profit for contract performance is classified as a Fixed Price with Award Fee Contract. This type of contract provides a base fixed price to the contractor but allows for additional fees based on performance. This incentivizes contractors to deliver high-quality outcomes and meet performance specifications, since their profit can increase beyond the base amount based on how well they execute the terms of the contract.

In this structure, the contractor bears the risk of cost overruns, as they are expected to complete the work within the agreed-upon fixed price. The award fee aspect incentivizes performance beyond the basic requirements, making this contract type useful for projects where quality and results are critical.

Other options represent different types of contract arrangements that do not fit the description of a fixed price including profit. For example, Cost-Reimbursement Contracts involve payments to the contractor for their allowable incurred costs, which can lead to situations where the total payment is not predictable and is not necessarily a fixed price. Time and Material Contracts pay a contractor based on the time spent and materials used, which does not establish a fixed price and can result in variable costs. Lastly, Indefinite Delivery Contracts are typically used for services or supplies that are provided as needed and do not set a firm price