Maximum Score: 1Which of the following are recognised procurement risks when entering into a fixed...

In a fixed price contract:

The price is agreed and stays fixed, regardless of changes in actual costs (unless a separate adjustment clause exists).

Key risks:

If costs rise significantly (materials, labour, etc.), the supplier’s profit is squeezed or wiped out and the supplier may default or fail to perform → (A) is a recognised risk.

If costs fall, the supplier’s actual cost base drops but the selling price is fixed, allowing the supplier to make excess or windfall profits → (D) is another recognised risk.

The other options:

(B) Under a pure fixed price arrangement, the supplier is normally not entitled to claim for unforeseen additional costs unless expressly provided for.

(C) An inflation-linked price is not truly “fixed”; that’s a variable/indexed price mechanism.

(E) A supplier may attempt legal action in some circumstances but “will sue if he makes a loss” is not a standard, defined procurement risk in fixed price contracts.