The agreement between the organization and outside provider or contractors of services, materials is legal contract. To limit misunderstanding and make them enforceable, contracts is usually written document that describe the obligation of both parties. Because legal agreement always create a risk for the parent organization and procurement activities are often guided by policies the procedures of the parent organization. On smaller , lesser complex project, the project management have contract development and execution plan which is typically managed through the parent company or by part time person assigned to the project. On larger , more complex project, procurement team can consist of work team within the procurement function with special experts on contracting experience in procurement. The contracting plan defines the relationship between the project and the contractors such as suppliers, vendors and partners and also defines the processes for making or changes in the agreement to accommodates to changes that will occurs in the project agreement with the project clients. The followings are some factor to be considered when selecting contact agreement. The Uncertainty of the scope of the work needed. The party assuming the risk of unexpected cost increase. The important of meeting the scheduled milestone dates. The need for predicable project costs. The contract selection is based on uncertainty of scope, assignment of risk , need predicable cost and the important of meeting milestone dates. Total fixed cost is single price where the scope is well defined. A fixed cost with incentive contract offer a reward for finishing early or under budget or penalty for being late. If the service provider is responsible for all the cost including profits and loses into the agreed plan. Its is fixed total cost contracts. The contractors assumed the risk is unexpected increased in prices of labor and materials and in the quality of time and materials needed. A fixed price contract is legal agreement between the project organization and contractors to provide service or goods to the project at an agreed on prices detailing the quality of the goods and services with adjustment allow for increase in the cost and materials or changes in current values . Fixed price contract required the availability of at least two or more suppliers that have qualification and performance histories with clear scope of work and information. Fixed price contract with prices adjustment is used for unusually long project that span the years and this type of contract is inflation rate is adjusted price and values of local currency affect the cost of local labor and materials due to the high inflation and the client assume the risk due to inflation. The volatility of certain commodities can also be accounted in price adjustment contract, for example the price of the oil changes affect the cost of the project. A fixed unit price contract set a price unit but the exact number of units is not known. In a cost reimbursable contract, the project pay for the costs. A cost plus fixed fee contract assures the contractors of a known fee. A cost plus percentage fee ,calculates as a fee percentage of the cost . A cost plus the incentive fee sets goals for the contractors to achieve what would result in bonus. A cost plus award fee is similar but the goals are objectives. Time and materials contracts pays for cost and hourly rate for the contractor's time.