Which type of procurement contract is most suitable for projects where the cost cannot be estimated accurately?

The most suitable type of procurement contract for projects where the costs cannot be estimated accurately is the cost-reimbursement contract. This type of contract allows the contractor to be reimbursed for their allowable costs incurred while performing the contract. Additionally, a fee representing the contractor's profit can also be included. This arrangement is particularly beneficial when the scope of the project is uncertain or when the work involves significant risks or complexities that make it difficult to project total costs at the outset.

Cost-reimbursement contracts provide flexibility, as they accommodate changes in project scope or unexpected expenses more readily than fixed-price arrangements. This is important in situations where detailed cost estimation is challenging, ensuring that contractors are incentivized to perform while still receiving fair compensation for efforts that may exceed initial estimates due to unforeseen factors.

In contrast, fixed-price contracts are more rigid and require a precise estimation of costs upfront, which is not feasible when there's uncertainty about the project's requirements. Time-and-materials contracts can also introduce unpredictability in project costs and are typically used when the scope of work is not well-defined but still allows for some cost control. Indefinite-delivery contracts focus on securing supplies and services on an as-needed basis rather than addressing project costs, making them less suitable where accurate cost estimation is critical