Which type of contract maintains fixed prices regardless of the contractor’s cost?

The correct choice is fixed price contracts. Fixed price contracts are structured to maintain a set price agreed upon at the beginning of the contract. This means that the contractor takes on the risk of managing costs and must deliver the agreed-upon services or products for the fixed price, regardless of any changes in their actual costs incurred during the contract term.

This type of contract provides clear budget expectations for the buyer and incentivizes the contractor to manage their resources efficiently, as they will not be reimbursed for costs that exceed the agreed-upon fixed price. As a result, they must be strategic in their planning, execution, and resource allocation.

Understanding this contract structure is essential in the context of financial management, especially for organizations that need to maintain cost control and financial predictability in their projects.