Who avoid the risk of agreeing to the price that may not cover its actual performance costs or allow a reasonable profit?

The seller is the party that incurs costs for labor, materials, and overhead to perform the work required under a contract. The price negotiated is the seller's revenue. Therefore, the seller bears the direct financial risk that this price will be insufficient to cover its actual performance costs and generate a reasonable profit. A risk-avoiding seller would be particularly concerned with this possibility and would seek to mitigate it through careful cost estimation, negotiation strategy, and the selection of an appropriate contract type that shifts some or all of the cost risk to the buyer (e.g., a cost-reimbursement contract).

A. Risk avoiding buyer: The buyer's primary price risk is paying too much for the goods or services, not that the seller's price is too low.

B. Business professional: This term is too general. The specific role (buyer or seller) is what determines the nature of the financial risk being faced.

D. Technical personnel: Their primary focus is on the technical performance and feasibility of the work, not the commercial risk associated with pricing and profitability.

1. National Contract Management Association (NCMA). Contract Management Body of Knowledge (CMBOK), 6th ed., 2019. In Section 2.3.2, "Contract Pricing and Risk," the text explains how pricing arrangements allocate risk. It clarifies that under firm-fixed-price (FFP) arrangements, "the seller has full responsibility for the performance costs and resulting profit (or loss)," directly identifying the seller as the party at risk of costs exceeding the agreed-upon price.

2. Defense Acquisition University (DAU). Contracting Guide, Vol. 1, Chapter 4, "Contract Types." This guide details how different contract types allocate risk between the government (buyer) and the contractor (seller). It consistently illustrates that the seller assumes the maximum cost risk in fixed-price contracts, as they are obligated to perform at the agreed price regardless of their actual costs.

3. Garrett, G. A., & Rendon, R. G. Contract Management Organizational Assessment Tools. Naval Postgraduate School, 2005. In discussions of risk management (p. 28), the framework identifies the contractor's (seller's) risk as including "cost risk," which is the risk that actual costs will exceed budgeted costs, impacting profitability. This aligns with the seller's need to avoid agreeing to a price that doesn't cover costs. (Available via NPS institutional repository).