$2\mathrm{.}2$ Lab

Due Jan $17$ by $11$:$59$pm Points $49$ Submitting a text entry box, a website url, a media recording, or a file upload Attempts $0$ Allowed Attempts $2$ Available Jan $8$ at $12$am $-$ Feb $1$ at $11$:$59$pm

Contract Choice Dilemma

In this activity, you will step into the role of a project manager facing a pivotal decision: choosing between a Lump Sum Fixed Price Contract and a Complete Reimbursable Contract for a major infrastructure project. Your choice will significantly impact project success, including financial management and risk allocation.

Instructions

Read and analyze the following scenario:

Scenario:

Imagine you are a project manager at a construction company tasked with overseeing a major infrastructure project for a government client. The project involves the construction of a new highway interchange, a complex and extensive undertaking.

Your team is faced with a critical decision regarding the contract structure for this project.

You have two options on the table: A Lump Sum Fixed Price Contract and a Complete Reimbursable Contract.

Lump Sum Fixed Price Contract: Under this option, the contractor agrees to complete the project for a predetermined fixed price. Any cost overruns are the responsibility of the contractor, offering cost certainty to the client.

Complete Reimbursable Contract: In contrast, this option allows the client to reimburse the contractor for all project costs, including materials, labor, and overhead. The client carries the risk of cost overruns but maintains more control over project changes and scope adjustments.

Your task is to evaluate these two contract types and recommend the most suitable approach for this specific project. Think and analyze the following questions to best answer the task:

What specific project characteristics should we consider when choosing a contract type?

How do the two types of contract address costs potentially exceeding initial estimates? What are the implications for the client?

In terms of control, how much decision$-$making power does the client have under each contract type, particularly regarding project changes and adjustments?

Consider the client's risk tolerance. How does it factor into choosing a type of contract?

What potential changes or uncertainties could impact the project's scope. How do the two contract types accommodate these changes?

Based on your analysis, which contract type do you recommend for this specific project. What are the main reasons behind your recommendation?