Manage Procurement 2 Flashcards
A routine audit of a cost reimbursable contract determines that overcharges are being made. If the contract does not specify corrective action, the buyer should do which of the following?
A. Continue to make project payments for the amounts known to have been properly billed
B. Halt all payments until the problem is corrected
C. Void the contract and start legal action to recover overpayment
D. Change the contract to require more frequent audits
Answer: A
Process - Task 11 - Manage Procurement
Of the options listed, A is the best. Ideally, the contract will have procedures in place for resolving this dispute, and you should always look to the contract first. Paying amounts known to be owed will avoid a breach on your part and is therefore the best way to proceed.
A cost plus incentive fee contract has a target cost of $280K. Actual costs are $240K. There is a 50/50 share for any cost savings. What is the total value of the contract?
A. $260K
B. $240K
C. $280K
D. $300K
Answer: A
Process - Task 11 - Manage Procurement
The $280K is the expected value of the contract. Actual cost of the contract is $240K. This means that there is $40K saved. The 50/50 share means that $20K of the savings would go to the seller. The actual cost of $240K plus the $20K saving share makes the total value of the contract worth $260K.
In a fixed price contract, which of the following holds true?
A. More risk is placed on the buyer if spending amounts increase
B. The seller agrees to perform a service or provide goods at the agreed price
C. If the amount of the contract is exceeded, the seller is not obligated to perform further unless the buyer pays more
D. The seller agrees to use his best effort to fulfill the contract within the estimated contract amount
Answer: B
Process - Task 11 - Manage Procurement
Fixed-Price contracts are a type of contract where the buyer pays the seller a set amount regardless of the seller’s costs. The seller bears all of the risk in this scenario.
You took over a customer project for your company that is 6 months in with an already signed contract with an outside vendor. You notice discrepancies in the contract terms and status reports that the scope of work and subsequent invoices paid do not match up. You realize the following was not done to cause a contract change?
A. Change requests
B. Update of Statement of work
C. Inspection of results
D. Test procedures
Answer: A
Process - Task 11 - Manage Procurement
All procurement related changes should formally be documented in writing and be approved before being implemented
You are managing a complex project which requires some very large procurement items. Your company’s head of procurement wants to meet with you to discuss the division of responsibility relative to the contract negotiations. What will you tell her about the roles you and she should be playing in this effort?
A. You will lead the negotiation and she will be there to monitor and report back to the company.
B. She will lead the negotiation and you will be present to provide support by answering questions and clarifying the scope of work and requirements.
C. You and she should handle the negotiations jointly, to secure the best deal.
D. You should handle all negotiations and report back to her as to the results.
Answer: B
Process - Task 11 - Manage Procurement
The project manager should not be the one leading contract negotiations – this is for the procurement specialists. As the PM, you should be present to advise and support the negotiations, but not to lead them.
You are managing a project that requires the use of many outside contractors. You are verifying that these contractors are performing the work as agreed, ensuring they are paid as agreed, managing necessary changes to the contracts as needed, and resolving disagreements with the contractors as they arise. All of the following are outputs of this process except for which one?
A. Closed Procurements
B. Organizational Process Asset Updates
C. Change Requests
D. Selected Sellers
Answer: D
Process - Task 11 - Manage Procurement
D. Selected Sellers is an output of Conduct Procurement this questions describes Control Procurement. Note Closed Procurements are an output of the Control Procurements Process, as well as the remaining answers B. and C.
Janice works for a government agency which has strict policies about what kind of contracts she can engage in when selecting vendors. She is interested in getting help from a well-respected specialty construction company, but her scope is somewhat unclear and may change as time goes by. She wants to remain flexible; but, due to various funding constraints she has been told that it is against policy to use a Time and Material contract type for this specific engagement. Of the following, the best type of contract to use when the total scope of the project is not fully defined is ____?
A. Target fee contract
B. Cost reimbursable contract
C. Fixed Price/ Unit price contract
D. Fixed price / Lump sum contract
Answer: B
Process - Task 11 - Manage Procurement
A cost reimbursable contract is appropriate when the scope is unclear. You may also use Time and Material in this situation, which is very appropriate, but that was not one of the answer choices.
You have just completed a project. The contract is a Cost Plus Incentive Fee contract. The target cost is $500,000 and target fee is $80,000, which makes the target price $580,000. The project was completed with $450,000 of costs incurred. The incentive split is 80/20. What is the final fee that the buyer will pay?
A. $460,000
B. $490,000
C. $540,000
D. $450,000
Answer: C
Process - Task 11 - Manage Procurement
In this scenario the project came in under the target cost, so the buyer and seller will share the savings. The savings is the target cost minus the actual cost ($500,000 - $450,000 = $50,000). The buyer and seller share the savings at a ratio of 80/20, so the buyer saves $40,000 and the seller saves $10,000. To calculate the final fee the buyer will pay to the seller you add the actual cost plus that full target fee (since the cost objectives were met), plus the seller’s share of the cost savings. Thus, the buyer will pay $450,000 + $80,000 + $10,000 = $540,000.
Bernice has a very tight cash flow window since the Education Department sponsors her project and funds on quarterly grants. There are monthly reports she must provide to regulators and she must account for spending against her cost baseline. Unfortunately, a seller’s invoice arrived four months after the product was delivered and put to use on the project. This results in which of the following?
A. An unavoidable cost variance
B. Project cash flow that changes the time-phased budget
C. Little concern since estimated actual costs can be used until the invoice is paid
D. An unavoidable schedule variance
Answer: C
Process - Task 11 - Manage Procurement
Estimated actuals can be used until the invoice, payment, and accounting catches up and the true costs are reported to the project.
You and the contract specialist just returned from a bidder conference with multiple vendors when a seller calls you about a new local compliance law that impacts the cost of the project. You know this change creates a new requirement for all vendors and you inform the vendor they will be notified of the changes through formal channels. As the PM, how should you proceed?
A. e-mail all vendors of the changes and allow them resubmit the RFP
B. Re-issue the IFB and wait for their responses
C. Renegotiate the awarded contract to adjust for cost changes
D. Inform the procurement department of the changes
Answer: D
Process - Task 11 - Manage Procurement
If you worked with a contract specialist, this implies you are in a centralized purchasing organization. In this case you would not renegotiate, send out, or receive anything from vendors. You would work with the procurement department to resolve the issue.
You are developing the procurement management plan. Your key stakeholders have expressed concern because previous, similar projects have run well over budget due to procurements. You explain to them that the contract costs are affected by the type of contract selected. Which of the following contract types bears the greatest risk for the seller?
A. FPIF
B. FFP
C. T&M
D. CPIF
Answer: B
Process - Task 11 - Manage Procurement
Firm fixed-price contracts have the highest risk to the seller and the least amount of risk to the buyer, because unless there is a scope change, the buyer will not pay more than the agreed-upon price. Thus, the seller assumes all risk of cost overruns.
You are the project manager for FixIt Construction. You just completed an extensive home remodeling project. You have employed a cost plus incentive fee contract for a piece of work your project is procuring. The contract has a target cost of $130,000, a target profit of $15,000, a target price of $145,000, a ceiling price of $159,000 and a buyer’s share ratio of 80/20. The actual cost of the project was $150,000. Based on this scenario, how much profit does the seller make?
A. $5,000
B. $15,000
C. $0
D. $9,000
Answer: D
Process - Task 11 - Manage Procurement
The planned amount to be paid to the contractor is targeted cost plus targeted profit. This equals $130,000 plus $15,000 = $145,000. However, actual cost incurred was $150,000 instead of planned cost of $130,000. Thus, the amount to be paid = Actual Cost plus targeted profit, minus 20% share of the cost increase. i.e. $150,000 + $15,000 - 20% of $20,000 = $161,000. Maximum amount to be paid cannot exceed $159,000, however, so the seller receives $159,000 and makes a profit of $9,000.
Which of the following is true with respect to the cost of managing the purchasing process?
A. Indirect costs are not considered in the make or buy analysis
B. The cost of managing the purchasing process is always borne by the Purchasing or Procurement department, and is therefore not part of the make or buy analysis
C. The cost of managing the purchasing process is a direct expense and is considered in the make or buy analysis
D. Indirect costs incurred in managing the purchasing process are considered in the make or buy analysis
Answer: D
Process - Task 11 - Manage Procurement
Indirect costs are considered in the make or buy calculations, and would include costs of managing the overall procurement process
You are defining the evaluation criteria for proposals you will receive for a particular procurement. The procurement item is readily available from a number of equally acceptable sellers. On which criterion might you focus in such a situation?
A. Seller’s management approach
B. Price offered by the seller
C. Seller’s financial capacity
D. Understanding of your need
Answer: B
Process - Task 11 - Manage Procurement
In this scenario, since the item is widely available by equally qualified sellers, price should be the key criterion in evaluating the proposals.
You are the project manager for a local event held at the community senior center. You have contracted with various vendors to set up the lighting, tents, screen projections, and various other typical event-related activities. You have been able to manage costs by paying the vendors for all relevant costs plus a fixed fee. Just two weeks prior to the event, the air conditioning unit breaks. So you contact a local company to address the emergency repair of the air conditioning unit. Which of the following contract types is characterized by the need for the vendor to repair the air conditioning unit?
A. Lump Sum Contract
B. Fixed price
C. Cost-reimbursable
D. Time and Materials
Answer: D
Process - Task 11 - Manage Procurement
Time and Material, sometimes called Time and Means, contracts are often used for staff augmentation, acquisition of experts, and any outside support when a precise statement of work cannot be quickly prescribed. In the case of this question, there is a need for specialized skills within a short amount of time when a precise statement of work cannot be quickly prescribed.
You must engage an IT consultant for one aspect of your project work. The scope of work is difficult to define, and you are not really sure how long it will take or how complex it will be. Which of the following contract types should you employ?
A. Cost-reimbursable
B. Time and Materials
C. Firm Fixed Price
D. Cost Plus Award Fee
Answer: B
Process - Task 11 - Manage Procurement
Time and Materials, also called Time and Means, contracts should be used when neither party has a good sense of how long the work will take or how difficult it will be to accomplish. You should include a “not to exceed” clause which fixes a maximum price, however, to guard against runaway costs.
You are managing a project to purchase state-of-the-art technology. You have just completed your market research and solicited proposals from prospective sellers. All of the following are outputs of Plan Procurement Management except which?
A. Bid Documents
B. Procurement statement of work
C. Procurement Strategy
D. Negotiation points
Answer: D
Process - Task 11 - Manage Procurement
Negotiation points, a made-up term, are not an output of this process.
You are the project manager for a large international cosmetics company. You are currently managing a project to produce a new mascara guaranteed not to run or fade. Some of the innovative technology is the intellectual property of the inventor so you need to have some contracts in place. The tools and techniques of Plan Procurement Management include which of the following?
A. Scope statement, Product description, Procurement resources, and market conditions
B. Make-or-buy analysis, expert judgment, market research, and meetings
C. Make-or-buy analysis, expert judgment, contract type selection, market conditions
D. Scope statement, Correspondence, contract file, contract
Answer: B
Process - Task 11 - Manage Procurement
Make-or-buy analysis, expert judgment, market research, and meetings are the tools and techniques of the Plan Procurement Management process.
You are the project manager for a shoe company introducing a new shoe line. You will outsource the production of this shoe to a foreign vendor. Your legal department has recommended you use a contract that reimburses the seller’s allowable costs and builds in a bonus based on the vendor achieving the established performance criteria. Which of the following contract types will you use?
A. FPIF
B. CPIF
C. FFP
D. CPFF
Answer: B
Process - Task 11 - Manage Procurement
The cost plus incentive fee contract reimburses the seller for the seller’s allowable costs and includes an incentive or bonus for exceeding the performance criteria laid out in the contract.
A contract is being performed on a fixed-price basis. As with any contract, there are inherent risks in this kind of contract, so as the project manager, you want to be particularly diligent as you monitor how the contract is carried out. Which of the following should the project manager be most concerned with when administering the contract?
A. Ensuring that changes in pricing based on changes to the scope are reasonable and supported
B. Verification of seller’s costs
C. Supervision of seller’s work
D. Skills of resources assigned by seller
Answer: A
Process - Task 11 - Manage Procurement
A fixed-price contract is used for a clearly-defined scope of work being performed at a fixed cost. The seller carries the cost risks, while the buyer carries the scope risks. Therefore, the project team must confirm that any changes in the scope are met with a justified change in the pricing. In a fixed-price contract, the seller’s internal costs are not of concern to the buyer. While supervision of the work would manifest through seller performance metrics or status tracking, if work is not completed on time or to quality levels, there is no new contract specific cost to the buyer for rework and fixes. Finally, the seller is measured by the quality of deliverables against the schedule baseline because the buyer rarely has control over vendor resource skills.
What contracting technique is used to provide flexible solutions based on multiple documents such as a master agreement (fixed price items) and service agreement (service rates, product descriptions)?
A. Team augmentation
B. Dynamic scope option
C. Not-to-exceed time and materials
D. Multi-tiered structure
Answer: D
Process - Task 11 - Manage Procurement
Option D is correct. While each option is a contracting technique, only multi-tiered structure focuses on having a flexible solution to quickly react to changing circumstances during the project. This includes leveraging multiple documents for pricing. These documents can include a master agreement and a service agreement. See page 77 of the Agile Practice Guide for more details.
Which of these guidelines for closing a procurement is incorrect?
A. Ensure there are no outstanding claims.
B. Ensure that all contractually required products, services and/or outcomes have been provided by the seller.
C. Address any outstanding invoices or payments.
D. You provide your firm as a reference for future potential buyers that may do business with the seller.
Answer: D
Process - Task 11 - Manage Procurement
The complete guidelines include the following: - Ensure that all required products or services were provided by the seller. - Make sure that any buyer-furnished property or information was returned to the buyer. - Settle any outstanding contracting issues. Are there any claims or investigations pending on this contract? - Conduct a procurement audit to identify successes and failures of the procurement process and to evaluate the performance of the seller. - Address any outstanding invoices and payments. - Archive the complete contract file with the project archives. - Provide the seller with formal written notice that the contract has been completed. - Communicate that all procurements are closed and update OPA documents as needed.
During which process does the project management team determine whether or not any project work can be outsourced?
A. Collect Requirements
B. Conduct Procurements
C. Identify Risk
D. Plan Procurement Management
Answer: D
Process - Task 11 - Manage Procurement
Make-or-buy analysis is a tool and technique of Plan Procurement Management, and the Make-or-Buy Decisions are an output. Here you are selecting which work items you can perform yourself and what needs to be outsourced/purchased. This is a good time to consult the lessons learned from past projects, to get a better sense of what should be made in-house vs. what should be purchased.
There are concerns about the cost risk of adding an external supplier at the mid-point of a project. Still, several team members have been transferred to another project, and the project manager requires resource support from an external supplier. The project manager needs to work with the procurement team to establish specifications and type of contract to be used. What should be done?
A. Suggest a fixed price incentive fee (FPIF) contract.
B. Recommend a time and material (TM) contract.
C. Suggest a cost plus incentive fee (CPIF) contract.
D. Recommend a firm fixed price (FFP) contract.
Answer: A
Process - Task 11 - Manage Procurement
A Fixed Price Incentive Fee Contract (FPIF) is a type of contract where the buyer pays the seller a set amount (as defined by the contract), and the seller can earn an additional amount if the seller meets defined performance criteria. FPIF contracts are the most risk averse. PMBOK Guide Sixth Edition (2017) PMI/PMI/12.1/472
You are running an adaptive project on contract with a governmental department. It appears you will be able to complete the project much earlier than the contracted deadline. What contract option will allow the buyer to reward the seller with an increased hourly rate if the delivery is earlier than the contracted deadline?
A. MSA or Master Services Agreement
B. FFP
C. Graduated time and materials
D. Request for Information
Answer: C
Process - Task 11 - Manage Procurement
Graduated time and materials is the most correct answer. If you answered A, you were close, but that is only correct sometimes, not all the time. An RFI is used to gather information from the market to measure both market interest in the work and to clarify the buyer’s procurement documents that may follow. Contracting is discussed in the Agile Practice Guide on pg. 78.
Customers impose the most formal EVM data requirements on which of the following?
A. Target fee contracts
B. Cost reimbursable contract
C. Fixed price/unit price contracts
D. Fixed price/lump sum contracts
Answer: B
Process - Task 11 - Manage Procurement
In cost reimbursable contracts, the customer often has to pay for any allowable costs. Therefore, the EVM data requirements are usually very formal (as with federal government contracts).
You are the project manager for a large plumbing company. You are currently managing multiple projects for many customers. Due to the high volume of work you have been forced to get additional contract plumbers. The tools and techniques of Conduct Procurements include all of the following except:
A. Bidder Conferences
B. Make or Buy analysis
C. Advertisement
D. Interpersonal and team skills
Answer: B
Process - Task 11 - Manage Procurement
Make or Buy analysis is a tool and technique of the Plan Procurement Management process (which comes before Conduct Procurements).
You are the project manager of a large project, and have determined that many of the necessary work items should be out-sourced, since your team doesn’t really possess all the technical skills needed to achieve the work, and you therefore believe it would be cheaper, less risky and more efficient to hire these things out. Your stakeholders are generally averse to out-sourcing, because in the past there have been major cost overruns with vendors and they don’t want that to happen again here. Which type of contracts will you want to utilize with the sellers you choose?
A. Cost Plus Percentage of Costs
B. Cost Plus Fixed Fee
C. Time and Materials
D. Firm Fixed Price
Answer: D
Process - Task 11 - Manage Procurement
Firm Fixed Price contracts state a flat rate to be paid, and the seller therefore assumes the risk of any cost overruns. Absent a change in the scope of work, the seller cannot recover more than the stated price so this contract type provides maximum security to the buyer and imposes all risk to the seller (which is what the stakeholders will want in this scenario).
In a multi-year global project, one of the sellers had failed to meet contractual objectives. Which of the following may specify procedures for closing out a particular procurement?
A. Procurement management plan
B. Request for Proposal
C. Contract terms and conditions
D. Source selection methods
Answer: C
Process - Task 11 - Manage Procurement
Contract terms and conditions will often prescribe procedures for closing out a particular procurement and should therefore be consulted during closure.
A contractor has sent an email request for urgent payment of their last installment on a project that is going through a long execution stage with multiple contractors. How should the project manager respond to this contractor’s request?
A. Negotiate payment terms through a meeting with procurement and the contractor.
B. Authorize the payment by notifying accounts payable and follow up to ensure it was made.
C. Act according to the agreed upon commitments in the procurement management plan.
D. Authorize payment only after reviewing forecast spend versus actual spend to see if the actual status allows it.
Answer: C
Process - Task 11 - Manage Procurement
Even an inexperienced project manager should understand that terms and conditions should be agreed before engaging a contractor to actually do project work. The procurement plan holds all data regarding contracts and is the single source to guide payment activities. PMBOK Guide Sixth Edition (2017), 4, Project Integration Management / 4.7.1 Close Projects or Phase: Inputs, pp124-125. The Agile Practice Guide (2017), 6 Organizational Considerations For Project Agility / 6.3 Procurement and Contracts p77
You are managing a project to install 6 new robots in a manufacturing facility. Your primary vendor has just completed its work and you also just received an invoice for its last deliverable. Which of the following tools would be the most helpful to you?
A. Claims administration
B. Records management systems
C. Prequalified seller list
D. Inspection
nswer: D
Process - Task 11 - Manage Procurement
The question is telling you that your vendor just sent you a bill, thus you need to pay the vendor. You should inspect the deliverables against the Procurement metrics before you above of the final payment therefore, the most helpful procurement tool Inspections.
You are the project manager for a large technology company and working on an innovative technology solution. Your organization is holding a bidders conference to discuss the project with prospective sellers, and a trusted seller you have worked with many times in the past has asked if they can meet with the project manager the day before the conference to cover some sensitive questions they do not wish to ask in front of others sellers. Should your organization meet with the seller?
A. Yes, the more that prospective sellers know about the project, the better.
B. Yes, they are your primary seller, and past history should be factored in.
C. No, prospective sellers should be kept on equal footing.
D. No, that would represent an illegal activity.
Answer: C
Process - Task 11 - Manage Procurement
If you are involved in a formal procurement, you should make every effort to keep sellers on equal footing. If one seller is provided with an advantage, it negates much of the value of the procurement process.
You are putting together a plan to handle procurements on your project. Your organization typically prefers to do as much work as possible in-house, in part because procurements on some past projects ran well over budget and the stakeholders are especially cost conscious. Your schedule will not allow you to perform all of the necessary work in house, however. Generally speaking, which of the following contract types should you use?
A. Firm Fixed Price (FFP)
B. Fixed Price with Economic Price Adjustment (FP-EPA)
C. Cost plus fixed fee (CPFF)
D. Time and Material (T&M)
Answer: A
Process - Task 11 - Manage Procurement
The seller has the most risk under a Firm Fixed price (FFP) contract. In this type of contract the seller is required to do all of the work for a set price. Regardless of what happens with materials costs, delays, etc., the seller must complete the work for the fixed price in the contract. This is appropriate here because the stakeholders will not want to accept the cost risk associated with other types of contracts, and this gives them security in knowing exactly what they will spend.
You are the project manager for a seller who has been selected to construct an industrial kitchen for a large food service company. Before the contract negotiations, the buyer confides in you that design is not finalized, and they want you to begin work with incomplete specifications. What type of contract should you ask for in negotiations?
A. Fixed price
B. Cost plus incentive fee
C. Time and materials
D. Cost plus fixed fee
Answer: C
Process - Task 11 - Manage Procurement
The correct answer is choice C. The major clue here is that the scope of work is not completely defined and they want you to begin work anyway. In that case, the project is at a higher risk, and a time and materials contract shifts much of that risk back to the buyer.
You are in charge of the PMO at a consulting services company. You are creating a lunch-and-learn training session on Procurement, and it will include a section on contract negotiations. You want to make sure your junior project managers understand contract negotiations and the role that they play. For your content, what is the most important thing to focus on in contract negotiations?
A. To negotiate the best price possible for your project.
B. To maintain the integrity of the scope.
C. To negotiate a deal that both parties are comfortable with.
D. To make sure legal counsel or the contract administrator has approved your negotiating points.
Answer: C
Process - Task 11 - Manage Procurement
The correct answer according to the PMBOK Guide is C. The most important thing to focus on is to create a deal that everyone feels good about. Choice A sounds like a good choice, but the best possible price might not be fair to your seller, and that could create a bad scenario for the project in the future. Choice B is important, but that is not the primary focus of negotiations. Choice D may or may not be necessary, depending on the situation.
You are running an adaptive project and are looking to outsource a portion of the work that requires Apache Hadoop. What governing agreement can be used for the overall engagement with a vendor where the adaptive work is placed in an appendix or supplement and will allow changes to occur without impacting the overall contract?
A. MSA or Master Services Agreement
B. FFP
C. Project Charter
D. Point of Total Assumption
Answer: A
Process - Task 11 - Manage Procurement
Make sure to read and understand the 10 "Considerations for Agile" paragraphs in the PMBOK Guide. See p. 465.
You received an invoice from your contractor and the price is higher than originally discussed as part of a cost reimbursable contract. They claim its due to additional services provided at the request of your organization. You are not sure the cost is appropriate for the work provided. What is your response?
A. Request the contract
B. Request the basis of estimates
C. Request Sponsor Approval
D. Request a Triangular distribution
Answer: B
Process - Task 11 - Manage Procurement
A basis of estimates provides an itemized list of everything used to determine the cost. It will included estimates, formulas, assumptions, material, etc. This will allow you see how they came up with the price. Requesting the contract will not tell you how the price was determined, nor would a triangular distribution. Requesting Sponsor approval will not solve the problem or answer the question.
Joan orders RFID chips for her project from a new supplier who appears to have the lowest cost. After delivery of the chips, the sales rep calls Joan to thank her for the order, and tells her he will be sending her a portable grill as a thank you gift. What should Joan do?
A. Accept the gift. It did not influence her decision to purchase the chips.
B. Refuse the gift to avoid the appearance of impropriety.
C. Report the chips manufacturer to the Better Business Bureau.
D. Ensure the gift becomes a company asset and not a personal asset.
Answer: B
Process - Task 11 - Manage Procurement
Although Answers A and D might be tempting, the appearance of impropriety is important, and should be avoided. Answer C is not necessary unless the chip manufacturer has done something illegal.
Your organization is hosting a bidder’s conference and you know that one of the vendors bidding for the contract is a company owned by one of your relatives. However, you are not particularly close to this relative and only meet with him once or twice a year. What would be your best approach in this situation?
A. Disclose to Senior Management this potential Conflict of Interest, but since you are the project manager you still get to decide who should get the contract
B. Since you are not close to this relative then you should be able to make an unbiased decision, therefore you do not need to disclose any details or remove yourself.
C. Disclose to Senior Management this potential Conflict of Interest, and remove yourself completely from any decision making in this bidders conference
D. Since you are not close to this relative you do not need to disclose this relationship, however you should decide not to choose his company for the bid.
Answer: C
Process - Task 11 - Manage Procurement
The best option is answer choice C. The most ethical approach is to remove yourself entirely from the decision making process. Even though you may not be close to this relative, other vendors may not see it that way and may believe there is bias on your part. It is always ethical to remove yourself from any potential conflicts of interest. Option A is partially correct. You should disclose your conflict of interest, but you would also want to remove yourself from making the decision.
You are managing a project and must seek outside help in completing part of the work. You are therefore preparing a Request for Proposal setting out the scope of the work you wish to hire out. Which PMBOK process are you performing?
A. Plan Procurement Management
B. Conduct Procurements
C. Control Procurements
D. Close Project
Answer: A
Process - Task 11 - Manage Procurement
Plan Procurement Management results in bid documents (such as an RFP, RFQ, RFI, etc.) and the procurement strategy. Conduct Procurements involves the selection of the seller and contract award. Control Procurements involves overseeing the contractual relationship, while Close Project or Phase involves administrative closure of the project work.
Your project just completed, and one of your vendors has sent you tickets for a football game to thank you for your business. What is the best way to respond?
A. Thank the subcontractor, but do not give him preference in the next RFP
B. Thank the subcontractor, but politely refuse the gift
C. Ask for tickets for the entire team, so that it is fair to everyone
D. Report the subcontractor to PMI
Answer: B
Process - Task 11 - Manage Procurement
The PMI Code of Professional Conduct would likely preclude acceptance of this type of gift, as it could be considered an impermissible benefit designed to bring about further business for the vendor. If confronted with such questions on the exam, it is best to employ a strict approach and not accept such benefits, even if it is arguably permissible.
You are the project manager for a hydroelectric facility. You are currently managing a project to expand the existing facility. You have some special work that requires a single source vendor. What are the tools and techniques of the Control Procurements process?
A. Contract change control system, payment system, and payment requests
B. Contract change control system, contract negotiations, and payment system
C. Contract change control system, procurement negotiations, contract changes, records management systems
D. Claims administration, data analysis, inspection and audit
Answer: D
Process - Task 11 - Manage Procurement
These are the tools and techniques of the Control Procurements process
You are a project manager in a construction company. You have outsourced some critical construction activities and are working with your procurement department on establishing contract and procurement agreements. During what part of the procurement process do contract negotiations occur?
A. Control Procurements
B. Close Procurements
C. Plan Procurement Management
D. Conduct Procurements
Answer: D
Process - Task 11 - Manage Procurement
Contract negotiations occur during contract procurements. Contract negotiations are performed under the tool and technique of procurement negotiations, which is also a tool and technique of close procurements. However, in closing procurements you are not performing contract negotiations, but rather negotiating a final and equitable settlement of all claims.
You are a contractor and you are bidding on a long term construction project. The project will last several years. Which type of contract arrangement is specifically designed to give you relief for inflation of material/labor cost increases over long periods of time?
A. Cost Plus Incentive of Cost
B. Cost Plus Economic Price Adjustment
C. Time and Materials
D. Firm Fixed Price with Economic Price Adjustment
Answer: D
Process - Task 11 - Manage Procurement
A FP-EPA contract type is used whenever the seller’s performance period spans a considerable period of years, and is often used in long-term relationships to account for inflation costs.
Procurement documents seek responsive information from which party?
A. Seller
B. Procurements Director
C. Buyer
D. Sponsor
Answer: A
Process - Task 11 - Manage Procurement
The purpose of procurement documents is to get information from the seller as to how the requirements of the project can be met, and on what terms.
Your project management team is analyzing new technologies and examining vendor capabilities to assess whether a product or service can be acquired. Which of the following is being performed?
A. Buyer assessment
B. Expert judgment
C. Make-or-buy analysis
D. Market research
Answer: D
Process - Task 11 - Manage Procurement
Market research involves examining industry and vendor capabilities to determine if the desired product or service is available in the marketplace. It is a tool and technique of Plan Procurement Management.
You have a contract with a construction vendor that has a force majeure clause in it. Under which of the following circumstances would the clause not take effect?
A. A category 5 hurricane making landfall
B. Mass rioting breaks out
C. Act of terrorism
D. Poor economic conditions
Answer: D
Process - Task 11 - Manage Procurement
Force majeure is a common clause in contracts that essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a war, strike, riot, crime, or an event described by the legal term ‘Act of God’ (such as flooding, earthquake, or volcanic eruption), prevents one or both parties from fulfilling their obligations under the contract.
You are managing the renovation of a large office building. You have negotiated a cost plus fixed fee contract with the seller. However, the contract price has increased by 20% six months into the project. What could be the potential cause of this price increase?
A. It cannot change.
B. It can change upon project scope change.
C. It can only be increased by 10% if there is an unexpected cost overrun.
D. It can be decreased under certain circumstances.
Answer: B
Process - Task 11 - Manage Procurement
In Cost Plus Fixed Fee Contracts, the seller is reimbursed for all allowable costs for performing the work and receives a fixed fee payment. The fee amounts do not change unless the project scope changes.
You are the project manager at a textile company. You have completed most of the project and the customer appears to be pleased with the deliverables. You are in the process of finishing your procurement contracts. While closing out project contracts, which of the following documents do you not need to review?
A. The contract itself
B. Audit
C. Invoice records
D. Payment records
Answer: B
Process - Task 11 - Manage Procurement
Audits are not documents themselves, but rather they are reviews of the entire procurements process, from start to finish (from which lessons learned documents will derive).
A project manager has engaged in multiple procurements. He wants to make sure each of these various agreements are managed properly to ensure project success. Procurement contracts should be administered by which of the following parties?
A. Buyer
B. Seller
C. Procurements Director
D. Buyer and seller
Answer: D
Process - Task 11 - Manage Procurement
Both the buyer and seller should administer the contract to make certain that the obligations of the contract are being met by both parties.
Your project is 6 months into a 14 month pharmaceutical research and development effort. You want to make sure you are properly conducting all relevant processes at this point in your project, and are double-checking your approach so you are leveraging risk monitoring and other project management elements in the right place. Risk monitoring, control quality and performance reporting are all used in which of the following processes?
A. Define Scope
B. Control Procurements
C. Manage Stakeholders Engagement
D. Perform Stakeholder Analysis
Answer: B
Process - Task 11 - Manage Procurement
When administering a procurement, you must monitor things like risk issues and control quality. You must also report on the same.
Deborah is working with a new vendor on some procurement items. Unfortunately, the quality of the vendor work does not meet the project requirements and it does not appear the vendor will be able to improve the quality. Which of the following processes should Deborah use to manage the early termination of the vendor contract?
A. Control Procurements
B. Conduct Procurements
C. Close Contracts
D. Close Project or Phase
Answer: A
Process - Task 11 - Manage Procurement
The early termination of a procurement contract should be managed during the Control Procurements process, and may be done for cause or convenience. However, before terminating the contract, the termination clauses must be considered. There is no Close Contracts process.
