ISA Certified Automation Professional (CAP) program

CAP logo

Certified Automation Professionals (CAPs) are responsible for the direction, design, and deployment of systems and equipment for manufacturing and control systems.

CAP question

Which of the following contract types places the PRIMARY risk with the supplier?

A. Cost plus
B. Fixed price
C. Time and material
D. Unit price

CAP Answer

The answer is B: "Fixed price".

The “supplier” for an automation project would be the system integrator. A fixed price contract places the primary risk on the system integrator, since the integrator is agreeing to complete the entire scope of the project (as defined in the contract), for the indicated “fixed price”. The owner is protected against risk from delays or rework due to integrator inefficiency, etc, as the “delivered job” cost is known at the time the contract is let.

The job cost under a fixed price contract may be higher than what would have been billed to the owner under a time and material contract. The supplier must account for their perceived risk in the proposed cost.

Reference: Trevathan, Vernon L., A Guide to the Automation Body of Knowledge, 3rd Ed., 2018