Ex 22.6 Fixed price contracts, where the contractor bids a fixed price to complete a system development, may be used to move project risk from client to contractor. If anything goes wrong, the contractor has to pay. Suggest how the use of such contracts may increase the likelihood that product risks will arise.
The use of fixed priced contracts may increase the likelihood of product risks because the contractor will have a limited amount of funds for the project. This may make the contractor not hire all the people that are necessary to complete certain projects. Also the contractors might tend to take more shortcuts to get he project finished on time cause functionality issues later on. They will also be less likely to include documentation and this will make it harder for modifications to be done by the company once the project has been completed.