True or False: A cost reimbursement contract places maximum risk and responsibility on the contractor.

A cost reimbursement contract typically places more risk on the contracting entity rather than on the contractor. In such contracts, the contractor is paid for all allowable costs incurred during the performance of the contract, and usually, an additional amount for profit. This arrangement helps mitigate the financial risk that a contractor might face, as they are compensated for their expenses without the burden of cost overruns adversely affecting their profitability.

Because the contractor is reimbursed for their costs, they are not burdened with the maximum risk associated with project performance, as they would be in a fixed-price contract where the contractor must absorb any increases in costs beyond the agreed price. This structure allows contractors to focus on quality and timely delivery without the threat of financial loss due to unforeseen project costs.

In general, the level of risk should be clearly defined within the contract. However, cost reimbursement contracts inherently spread the financial risk primarily to the government or the contracting agency, aligning with the idea that they typically do not place maximum risk on the contractor.