price firm

A fixed-price contract is a type of contract where the payment amount does not depend on resources used or time expended. This is opposed to a cost-plus contract, which is intended to cover the costs with additional profit made. Such a scheme is often used by military and government contractors to put the risk on the side of the vendor, and control costs. However, historically when such contracts are used for innovative new projects with untested or undeveloped technologies, such as new military transports or stealth attack planes, it can and often results in a failure if costs greatly exceed the ability of the contractor to absorb unforeseen cost overruns.
Fixed prices can require more time, in advance, for sellers to determine the price of each item. However, the fixed-price items can each be purchased faster, but bargaining could set the price for an entire set of items being purchased, reducing the time for such bulk purchases treated as a whole batch. Also, fixed-price items can help in pre-determining the value of the entire inventory, such as for insurance estimates.
However, such contracts continue to be popular despite a history of failed or troubled projects, although they tend to work when costs are well known in advance. Some laws have been written which mandate a preference for fixed-price contracts, however, many maintain that such contracts are actually the most expensive, especially when the risks or costs are unknown.

View More On Wikipedia.org