Which contract type combines a fixed price with a defined level of effort?

• A. Fixed price level of effort
• B. Time and materials
• C. Cost-plus with incentive
• D. Fixed price with defined scope

Answer: (A)

The idea being tested is a contract that fixes the total price for a defined level of effort. In this setup, you pay one agreed-upon price in exchange for the contractor committing to a specific amount of work hours or effort, rather than tying the price to delivered results alone or to actual incurred costs. This gives price certainty for the buyer while ensuring the contractor is obligated to provide a known level of effort. If more work is needed beyond that defined effort, changes to price or scope are typically required; if less effort is needed, the contract doesn’t automatically shift price unless the agreement allows a reduction.

This differs from time and materials, where the cost depends on actual hours worked and materials used, which can lead to cost variability. It also differs from cost-plus with incentive, where the price depends on costs plus a target fee and potential incentives, often lacking a fixed total price. And it differs from a fixed price for defined deliverables (defined scope), which fixes payment to outputs rather than to a specific amount of effort.