1. i-Tele is a Saudi telecom company that is negotiating several contact options before signing one with Safe Home technical company who will be the main router supplier for their projects. One of i-Tele project managers asked you to advise them by providing a detailed answer to the following scenarios to help her make the best procurement decision.

  1. Scenario 1-a cost-plus-incentive fee contract: The contract has a target profit of SR 70,000, a target cost of SR 300’000, a target fee of SR 40’000. Also, it has a shared ratio of 80/20, a max fee of SR 60’000, and a min fee of SR10’000. If i-Tele’s actual costs are SR 380’000, how much fee will SafeHome have to pay?

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  2. Scenario 2- a fixed-price-incentive-fee contract: The contract has a target cost of SR 200’000, a target profit of SR 30’000, and a target price of SR 230’000. The i-Tele also has negotiated a ceiling price of SR 270’000 and a share ratio of 70/30. If SafeHome completes the contract with actual costs of SR 170’000, how much profit will i-Tele pay the SafeHome?

  3. Scenario 3- a cost-plus-fixed-fee contract: the contract value is SR 110’000, consisting of: SR 100’000 of estimated costs with a fixed fee of 10%. If SafeHome completes the work but only incurs SR 80’000 in actual cost. What is the total cost to the project?


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