Such contracts continue to be popular despite a history of failed or troubled projects, although they tend to work when costs are well known in advance.
[3] The contractor or vendor usually bears all the risk of cost increases, although guidance such as that issued by the US Department of Defense may allow for specific circumstances "where an accommodation can be reached by mutual agreement of the contracting parties, perhaps to address acute impacts on small business and other suppliers".
[3] US government procurement policy strongly favours use of fixed-price contracts,[7] although Federal Acquisition Regulations do outline when they are "suitable" and the necessary basis on which "fair and reasonable prices" can be determined.
However, historically when such contracts are used for innovative new projects with untested or undeveloped technologies (such as new military transports or stealth attack airplanes), it often results in failure if costs greatly exceed the ability of the contractor to absorb unexpected cost overruns.
[opinion] Airbus's German chief executive Tom Enders indicated that the fixed-price contract for the A400M transport aircraft was a disaster based on naivety, excessive enthusiasm and arrogance, stating, "If you had offered it to an American defence contractor like Northrop, they would have run a mile from it".
Due to its history of cost overruns, it is an example of how fixed price contracts place the risk upon the vendor, in this case Boeing.