Project Contracts & Procurement
Choose a project with a relatively simple description (building a LAN, designing a web page, inventing a new communication device, etc.). Which type of contract structure (Fixed total price, Fixed unit price, Fixed price with incentive, Fixed fee with price adjustment) and what procurement documents (Request for Proposal, Invitation for Bid, Request for Quotation/Proposal) would you recommend for this project and why?
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• Choose a project with a relatively simple description,
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• Identify which contract structure you recommend (Fixed total price Fixed unit price Fixed price with incentive or Fixed fee with price adjustment),
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• Explain why this contract type is appropriate,
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• Identify which procurement document you would recommend (RFP IFB RFQ/RFP),
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• Provide a rationale for this procurement document choice,
Comprehensive General Answer
Selected Simple Project
Building a Small Business LAN
Example: Setting up a local area network for a small office with 25 employees, including switches, cabling, Wi-Fi access points, and configuration.
Recommended Contract Structure: Fixed Total Price Contract
Why This Is Best:
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The scope is well-defined (number of devices, area to be wired, performance requirements)
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The requirements are unlikely to change
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The buyer limits risk because cost overruns fall on the vendor
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Encourages the contractor to finish efficiently and within budget
Benefit: Predictable costs and simpler contract management.
Why Other Contract Types Are Less Ideal
| Contract Type | Why Not Ideal for This Project |
|---|---|
| Fixed Unit Price | Good only if quantities unknown — here they are predefined |
| Fixed Price with Incentive | Adds unnecessary administrative complexity |
| Fixed Fee with Price Adjustment | Better for high-risk or volatile cost environments (not applicable here) |
A LAN build has low risk and clear cost visibility, so a standard fixed price is the simplest, most effective approach.
Recommended Procurement Document: Invitation for Bid (IFB)
IFB Rationale:
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Specifications and performance requirements are clear
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Primary selection factor is price
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Allows comparison of multiple bidders on identical requirements
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Encourages competitive pricing while keeping quality standards
When You Might Use Other Documents
| Procurement Document | Use Case |
|---|---|
| RFP (Request for Proposal) | If requiring vendor innovation, multiple solution options |
| RFQ | If requesting pricing only for commodity items (e.g., just switches/wire) |
Since building a LAN requires both services and equipment, and performance standards can be precisely defined, an IFB supports objective comparison while still ensuring the vendor meets technical expectations.
Final Summary
| Project | Building a Local Area Network (LAN) |
|---|---|
| Contract Structure | Fixed Total Price |
| Why | Low uncertainty, clear deliverables, predictable cost, reduced buyer risk |
| Procurement Document | Invitation for Bid (IFB) |
| Why | Requirements well-defined, lowest-price qualified vendor can be selected |
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