What type of payment methodology is used under a fixed price contract?

In a fixed price contract, the payment methodology is based on a predetermined total price for a clearly defined product or service. This means that the contractor agrees to deliver specified deliverables at an agreed-upon price, regardless of the actual costs incurred during the execution of the project.

This structure provides budget certainty for the buyer, as they know the total amount that will be paid for the work, which can also incentivize the contractor to control costs and complete the project efficiently. Because the payment is fixed, the contractor bears the risk of any expense overruns, making it critical for them to accurately assess costs and resources needed to fulfill the contract requirements.

In contrast, the other options suggest payment structures that are not consistent with fixed price contracts: varying payments based on costs, reimbursements for incurred expenses, or contingent payments tied to project completion percentages indicate a different contractual approach more aligned with cost-reimbursement or time and materials contracts.