Certified Texas Contract Manager Practice Exam

What must be established for price adjustments in a contract?

1. A set maximum amount the contractor can increase the price

2. A competitive bidding process

3. A discount for timely payments

4. A defined service level agreement

The correct answer is: A set maximum amount the contractor can increase the price

In a contract, establishing a set maximum amount that the contractor can increase the price serves as a safeguard for both parties involved. This maximum limit creates clarity and predictability regarding costs, enabling the contracting authority to budget accordingly and protecting against unforeseen price hikes that could affect the project's overall financial viability. By defining this cap, contractors are also incentivized to manage their costs effectively while ensuring that any price increase is justified and within a predetermined range. While a competitive bidding process is important for selecting contractors, it does not specifically relate to the mechanism of price adjustments after the contract has been awarded. Likewise, discounts for timely payments and service level agreements play significant roles in contractual negotiations and performance standards but do not directly address the criteria for adjusting prices once a contract is in force.