PK0-005 Project Life Cycle Practice Question
During project execution, a vendor is hired to provide specialized services. The contract is structured so that the vendor is paid for all allowable costs plus a fixed fee. Which type of contract is this?
⚠ Common exam trap
PK0-005 often tests contract types by describing the payment structure, so candidates must distinguish 'all allowable costs plus a fixed fee' (CPFF) from T&M (hours plus materials) and fixed-price (lump sum).
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
Cost-reimbursable contract
A cost-reimbursable contract reimburses the vendor for all allowable incurred costs plus a fee representing vendor profit, which matches the scenario's description of payment for all allowable costs plus a fixed fee. This contract type is used when the scope is uncertain and the buyer bears more cost risk.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
Time and Materials (T&M) contract
Why it's wrong here
T&M bills per hour plus materials, with no reimbursement of allowable costs plus fixed fee, so it does not match the stem. It tempts when scope is undefined and effort varies, but the described arrangement is a cost-plus-fixed-fee contract, where the seller receives costs plus a set fee.
- ✗
Lump-sum contract
Why it's wrong here
A lump-sum contract fixes a single total price for defined deliverables, so the vendor absorbs cost overruns rather than being reimbursed for allowable costs plus fee. It is tempting because it suits well-defined scopes where cost certainty matters, but here the cost-reimbursable structure is the defining feature.
- ✗
Fixed-price contract
Why it's wrong here
A fixed-price contract pays one agreed sum regardless of actual costs, so it cannot reimburse all allowable costs plus a fee. It tempts when scope is well defined and risk sits with the seller; the stem instead describes cost-plus-fixed-fee, where the buyer bears cost overruns.
- ✓
Cost-reimbursable contract
Why this is correct
Cost-reimbursable contracts pay the vendor all allowable incurred costs plus a fixed fee, matching the stem exactly. The fee is fixed while costs vary, distinguishing it from fixed-price, which sets one total price regardless of actual costs.
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Written and reviewed by Johnson Ajibi, MSc IT Security
Senior Network & Security Engineer · founder of Courseiva
Last reviewed September 2026 · checked against the official CompTIA exam blueprint
This PK0-005 practice question is part of Courseiva's free CompTIA certification practice question bank. Courseiva provides original exam-style practice questions with explanations, topic-based practice, mock exams, readiness tracking, and study analytics to help learners prepare for the PK0-005 exam.