Certified Professional Contract Manager (CPCM) Practice Exam 2025 - Free CPCM Practice Questions and Study Guide

In the context of contract management, a fixed price contract with economic price adjustments is designed to accommodate fluctuations in market conditions, such as changes in costs for materials or labor. This type of contract provides a mechanism for the contractor to adjust the price based on established economic indicators or benchmarks, ensuring that both parties are protected from the risks associated with significant price increases that could affect the contractor's ability to deliver the contracted goods or services.

This contract structure is particularly useful in scenarios where long-term contracts could be impacted by inflation or other economic factors. By allowing for these adjustments, it provides both the contractor with the flexibility needed to manage costs and the buyer the assurance that the contract price remains fair and reasonable over time.

In contrast, the other types of fixed price contracts do not include such provisions for market adjustments. For instance, a firm fixed price contract establishes a set price that does not change regardless of cost fluctuations. Similarly, a fixed price redeterminable contract might allow for renegotiation at certain milestones but does not inherently account for economic variability over the contract's duration, and a fixed price incentive contract focuses on performance incentives rather than adjustments for economic changes.