Price, Fixed

Fixed price can have a variety of meanings in contracting and procurement, depending upon the context. In contracting, when a bidder is invited to tender a price, which cannot be subsequently varied unless by mutual agreement, when the scope or other terms change this becomes a fixed price contract. Contractors may include contingencies if there are uncertain elements in the contract, but the client has confidence that the final price is known at the outset. In procurement, when negotiating an agreement with an extended term, the parties have a choice to fix the price for the duration of the agreement, or to agree some form of price-variation mechanism. The parties may choose a fixed price when inflation is relatively low and the supplier can anticipate what their cost will be without including unnecessarily large contingencies. See also Cost Plus and Lump Sum.