What is a common feature of "fixed-price contracts"?

A common feature of fixed-price contracts is that the price is predetermined and unchangeable. This characteristic provides both parties with a clear understanding of the total cost from the outset, which offers financial certainty and helps in budgeting and planning for the buyer. It creates a strong incentive for the contractor to control costs and manage resources efficiently, as any cost overruns would come out of their profit margin.

In fixed-price contracts, there is no variability in payment based on the actual costs incurred since the total price is established prior to the execution of the contract. This distinguishes it from cost-reimbursement contracts, where payments are tied to actual expenses, thereby highlighting the fixed nature of the pricing in this contract type. The other options imply different frameworks that do not align with the defining aspects of fixed-price contracts.