You are the project manager in an engineering project for production equipment. For the project, you must subcontract software development of a complicated control solution.

The software will be used to control machinery, which your project team is currently designing, so the requirements on the software are still unclear. However, following standing operational procedures, the procurement department requires that subcontractors submit offers based on a lump$-$sum contract. The vendors already submitted bids which seem rather low to you.

Which of the following statements is true for this situation?

It will be the contractors' problem if their bid is too low. It is best to not discuss your concerns with them at this point in time.

Fixed price contracts are indeed beneficial in this situation as they place the risk of changing scope on the contractor.

You may possibly prefer contracts using variable models such as time$-$and$-$material or fixed$-$price increments, but the SOP always takes precedence.

In a fixed pice contract, your organization will have to assume any additional costs for unexpected changes that may become necessary.