According to the PMBOKGuide, specifically within Project Procurement Management, the selection of the contract type is the primary mechanism for determining how risk is allocated between the buyer and the seller.
* Contract Type and Risk Allocation: Different contract types place different levels of risk on either party.
* Fixed-Price Contracts (FP): The seller carries the highest risk. If the costs of production increase, the seller ' s profit decreases, as the price is set.
* Cost-Reimbursable Contracts (CR): The buyer carries the highest risk. The buyer must pay the seller for all legitimate actual costs, meaning if costs overrun, the buyer pays more.
* Time and Material Contracts (TandM): The risk is shared more evenly, though often favoring the seller for small-scale efforts. The buyer risks cost overruns on hours, while the seller risks being unable to complete the work if the buyer stops the contract.
* The Incentive Mechanism: Many contracts include incentives (like Fixed Price Incentive Fee or Cost Plus Incentive Fee) specifically designed to share the risks and rewards of performance, schedule, and cost control between both parties.
Analysis of Other Options:
* A. assumption log: This document records high-level assumptions and constraints. While it may contain information about external risks, it does not legally define the sharing of financial or performance risk between two parties.
* B. quality checklist: This is a tool used in Quality Control to verify that a set of required steps has been performed. It has no bearing on risk sharing or procurement structures.
* C. risk register: While the Risk Register identifies and analyzes risks, and may note that a risk is " transferred " via a contract, the actual determination and legal enforcement of how that risk is shared is established by the Contract Type itself.