BOMI Facilities Management (FM) Fundamentals Practice Exam

The main idea here is how different contract types shift financial risk between the contractor and the client. A fixed price for a fixed level of effort locks in both the amount of work and the price up front. That creates a clear boundary: the contractor knows exactly what they will be paid for a defined scope, and any changes to that scope would need a formal change order with a new price. With the scope and price set, the contractor can budget, schedule, and manage costs to stay within that defined boundary, so there’s less uncertainty about revenue and profit. That predictability makes this arrangement the least risky option for the contractor among the choices.

In contrast, time and materials ties payment to actual hours and materials used, which can grow with scope changes and inefficiencies, increasing exposure if the project drifts. Cost-plus reimburses actual costs plus a fee, which minimizes the contractor’s exposure to cost overruns but transfers more cost risk to the client and can reduce the contractor’s incentive to control costs. Target price with incentives shares risk and rewards performance, but the arrangement adds complexity and potential disputes if targets aren’t met or if there’s ambiguous cost sharing.