Commercial negotiations on prices cover a range of aspects including pricing arrangements. A buyer may negotiate for a 'fixed price agreement'. Why is a fixed price agreement advantageous to the buyer?
A.
The buyer will benefit from the savings that the supplier makes from the efficient cost management of the contract
B.
The buyer will not need to monitor the supplier’s costs relating to the contract
C.
Suppliers always seek price agreements that include cost-sharing incentives
D.
Suppliers calculate prices using fixed costs which the buyer must counteract by pushing for a fixed price agreement
Afixed price agreementprovides the buyer withcost predictability. Once the price is agreed upon, the buyer is insulated from any cost increases on the supplier's side. The supplier bears the risk of fluctuating input prices, which simplifies cost control and contract administration for the buyer.
“With a fixed price arrangement, the buyer is protected from future price increases and does not need to monitor the supplier’s ongoing costs. This is particularly useful for budgeting and forecasting.”
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