Contract Risk
Assume that your company has to design, develop, and construct the next generation of weather satellites. Although weather satellites have been built and launched in the past, this new satellite will use advanced technology that has not yet been proven. The customer insists on negotiating a fixed price contract, but your company would like to have a cost plus contract.
• What are the positive and negative risks involved in each type of contract for your company?
• What are the positive and negative risks involved in each type of contract for the customer?
• Which contract would be the best option and why?