Which of the following is always an advantage of using fixed price arrangement in a contract for buying organisation?

Which of the following is always an advantage of using fixed price arrangement in a contract for buying organisation?
A . Buyer can allocate budget with certainty
B. Buyer can harness falling market price
C. Supplier always receives a fixed margin
D. Suitable for contracts that last 5 years or more

View Answer

Answer: A

Explanation:

Advantages of using fixed pricing arrangement are as below:

– Budget/income certainty – prices are fixed up front and should not change

– The impact of changes to the supplier’s cost base is not fed through to the purchaser. If costs diminish, the supplier will benefit from this, and if costs rise, the purchaser will benefit

Reference: CIPS study guide page 172-176

LO 3, AC 3.3