CIPS Level 3 Practice Questions - CIPS Level 3 Advanced Certificate In Procurement And Supply Operations Exam

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Under a cost-plus pricing arrangement, a buyer agrees to reimburse the supplier's verified costs plus a fixed percentage margin. What is the main risk to the buyer under this arrangement?

The supplier may inflate costs because they have little incentive to control expenditure The buyer must provide the supplier with its own internal cost data The fixed percentage margin automatically adjusts for currency fluctuations The supplier cannot be asked to reduce its prices during the contract period

Correct Answer:

The supplier may inflate costs because they have little incentive to control expenditure

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