Contracting Certification Practice Exam 2025 – Comprehensive All-in-One Guide to Exam Success!

The type of contract that is prohibited according to contracting regulations is the cost plus a percentage of cost system. This prohibition stems from concerns over potential misuse and lack of cost control that such contracts can enable. Under this system, the contractor is reimbursed for their costs and also receives an additional amount based on a percentage of those costs. This structure can create an incentive for contractors to inflate costs, as their profit increases with higher expenditures.

Regulatory guidelines, particularly in government contracting contexts, emphasize the need for accountability and cost-effectiveness in procurement processes. By prohibiting this type of contract, regulations aim to protect public resources and ensure that taxpayers are not responsible for inflated costs due to contractor incentives.

Meanwhile, other types of contracts such as cost plus a fixed fee, fixed price contracts, and time and materials contracts are acceptable because they allow for more controlled and predictable financial agreements, aligning contractor motives with efficient and effective project delivery.