22.6 > Fixed-price contracts, where the contractor bids a fixed price to complete a system development, may be used to move project risk from client to contractor. If anything goes wrong, the contractor has to pay. Suggest how the use of such contracts may increase the likelihood that product risks will arise.
Fixed-price contracts are attractive to potential software development clients because it guarantees them a predetermined budget and also allows for all the risk to be taken up by the contractor. Fixed-price contracts mean that the contractor takes on any extra costs that could incur because of changes in requirements or technology that affect the timeline for the project's completion. While this may be a benefit for the customer, who will have more power to change their mind and project requirements, it is much more likely that product risks will arise because of bad communication, changes in plans, and off-schedule development. And all of these problems will be up to the contractor to take care of, which does not seem like a smart business plan.
The Daitan Group is a software development company and they have a really nice explanation of what a fixed-price contract is and why it is not a practice that they use. They discuss in their blog that they prefer to use Agile development because it "is about recognizing the reality that both market requirements and engineering estimates will change over the life of a project". This system of working incrementally and making payments for steps in the development process benefit both customer and contractor.