Which of these characteristics applies to Fixed Price Contracts regarding contractor cost risk?

In a Fixed Price Contract, the contractor assumes a significant portion of the cost risk. Since the price is predetermined and does not change regardless of the contractor's actual costs, if expenses exceed the agreed-upon price, it is the contractor's responsibility to absorb those additional costs. This incentivizes contractors to manage their costs effectively and efficiently, as any overruns will reduce their profit margin.

The characteristic of low cost risk associated with fixed-price contracts stems from the fact that the government or buyer has more certainty regarding financial outlays. The contractor must take on the risk of operational inefficiencies and unexpected expenses, which can drive them to innovate and optimize their processes.

In contrast to other contract types, such as Cost-Reimbursement Contracts, where the risk is shared or more heavily weighted towards the buyer, Fixed Price Contracts are intended to minimize financial exposure for the buyer.