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both the buyer and the seller. This type of contract is the riskiest for the seller. If

problems arise during the course of the project and it takes longer to complete a task
than anticipated or the goods they were to supply can’t be obtained in a timely manner,
the seller bears the burden of paying the additional wages needed to complete the task
or paying the penalty for not delivering the goods on time.

Cost-Reimbursable Contract A cost-reimbursable contract reimburses the seller
for all the allowable costs associated with producing the goods or services outlined in
the contract. This type of contract is riskiest for the buyer because the total costs are

unknown until the project is completed. The advantage in this type of contract is that
the buyer can easily change scope.

Time and Materials Contract A time and materials contract is a cross between
fixed-price and cost-reimbursable contracts. The buyer and the seller agree on a unit
rate, such as the hourly rate for a programmer, but the total cost is unknown and will
depend on the amount of time spent to produce the product or service. This type of

contract is often used for staff augmentation, where contract workers are brought on to
perform specific tasks on the project.

Partner and Vendor-centric Documents

Organizations may use other types of documents to manage partner relationships or
vendor relationships in addition to the documents mentioned earlier. Let’s take a brief
look at each.

Nondisclosure Agreement Nondisclosure agreements (NDA) are used when
organizations engage the services of an outside entity and want to assure that sensitive
or trade secret information is not shared outside the organization. An NDA assures
that what’s discussed, discovered, or developed is kept within the organization.

Cease-and-Desist Letter A cease-and-desist letter informs the other party to stop
(cease) doing the activity they’re doing and not do it again (desist). A cease-and-desist
letter might be sent to someone who is violating copyright laws as an example.

Letter of Intent A letter of intent outlines the intent or actions of both parties before

entering into a contract or other mutually binding agreement. It’s a negotiable
document and can be thought of as an agreement to agree on the terms and conditions.

Memorandum of Understanding (MOU) A memorandum of understanding
(MOU) is an agreement that may outline specific performance criteria or other actions
between two or more parties. An MOU is used when a legal agreement can’t be created
between the parties. For example, two or more government agencies may have an
MOU that describes the actions, services, or performance criteria between them.

Government agencies cannot hold one another accountable legally as you could with a
vendor who is not performing per the terms of a contract. Nonperformance by either
party under a contract is enforceable in court. An MOU is not legally enforceable.

Service Level Agreement (SLA) A service level agreement (SLA) defines service

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