What is a key disadvantage of Negotiated Price Contracts?

A key disadvantage of Negotiated Price Contracts is that they can lead to potential abuse. This occurs because the negotiation process allows for flexibility in pricing, which sometimes creates opportunities for one party to take advantage of the other. For example, a contractor may inflate costs or add unnecessary expenses since the pricing is not strictly dictated by competitive bidding. This potential for abuse can undermine trust and accountability in the contract relationship, making it crucial for both parties to have a clear understanding of costs and expectations.

In contrast, other options do not align with the inherent characteristics of negotiated contracts. They may imply a lack of complexity, legal implications, or focus exclusively on price, none of which fully encapsulate the essence of negotiated price contracts and their potential pitfalls.