Procurement Flashcards
1
Q
What is the BEST tool/technique that provides expected cost of a procurement by a third party and helps identify significant variations from cost estimates prepared in-house?
Bidder conferences Screening system Buyer-conducted performance review Independent estimates
A
Independent estimates
Independent estimates provides the expected cost of a procurement by a third party. It helps identify significant variations from cost estimates prepared by the project team.
2
Q
Which of the following approaches can assist in managing ambiguity risks?
Monte Carlo analysis
Root cause analysis
Seeking expert external input
Conducting sprint retrospectives
A
Seeking expert external input
Ambiguity risks are managed by defining those areas where there is a deficit of knowledge or understanding, then filling the gap by obtaining expert external input or benchmarking against best practices.
3
Q
Three years back, your organization awarded a fixed price contract to a reputable local contractor to construct a new airport terminal in the city. A few days back, you received a change request from the contractor requesting to adjust the contract’s price. The contractor is claiming that as a result of the recent national recession, the prices of raw materials have gone up and he cannot complete the rest of the project at the contract price. Is the contactor’s request legitimate?
Yes, unless there is no Economic Price Adjustment provision in the contract.
No, the price hike due to recession must be adjusted against the contractor’s profit.
Yes, you cannot penalize the contactor for price escalations due to force majeure.
No, the price of the contract is fixed and cannot be changed.
A
Unless there is no provision for economic price adjustment due to inflation, a fixed price contract’s value cannot be changed. Usually fixed price contracts spanning over one year in duration have this provision built into the contract
4
Q
Which of the following is incorrect regarding a bidders conference?
Questions from each seller should be handled confidentially and not shared with other sellers. No bidders should receive preferential treatment, even if they are part of the company's existing list of approved suppliers. All prospective sellers should be allowed to have a common understanding of the procurement. Bidder conferences should not involve individual face-to-face meetings.
A
A key objective of a bidders conference is to ensure that all bidders have the same level of understanding of the procurements. Hence, to be totally fair, buyers must ensure that all prospective sellers hear every question from any individual prospective seller and every answer from the buyer.
5
Q
A project is contracted on a Cost-Plus-Fixed-Fee (CPFF) basis. The targeted cost is US$200,000 with a fee of US$30,000. If the project comes in at US$170,000, what would be the total cost of the contract?
US$ 200,000 US$230,000 US$170,000 US$ 195,500
A
In a cost-plus-fixed-fee (CPFF) type of contract, the seller is reimbursed for allowable costs and receives a fixed fee payment calculated as a percentage of the estimated project costs. The fixed fee does not vary with actual costs unless the project scope changes. In the current scenario, the fixed fee is us$30,000. Although the actual project comes in at us$170,000, the fixed fee remains the same. Hence, the total cost of the contract will be 170,000 + 30,000 = 200,000.
6
Q
The scope of work in a project could not be clearly defined. There was also a strong possibility that the scope would change during the course of the project. Which type of contract would suit this type of situation?
Fixed-price with economic price adjustment contract
Fixed-price contract
Cost-reimbursable contract
Fixed-price incentive contract
A
A cost-reimbursable contract gives the project flexibility to redirect a seller whenever the scope of work cannot be precisely determined at the start of the project and needs to be altered, or when high risks may exist in the effort.
7
Q
If you are working on a project with constantly changing scope, which type of contract would work best when hiring an outside vendor to complete a portion of the work?
Lump sum Cost-reimbursable Fixed price Time and material
A
Cost plus contracts are suitable when the work is evolving, likely to change, or not well defined..
8
Q
You are managing a complex submarine causeway construction project. When you started the project, the scope of work was not clear and was based on a rather high-level estimate. Now that you are in the middle of the project, more information has become available. As a result, you now need to change some of the key subcontracts on the project. Which of the following will guide you through the change process?
Project management plan’s change control procedures Supplier’s contract administrator Change control terms of the individual subcontracts Organizational process assets
A
Your project’s change control procedures are internal to your project, that is, the scope of work directly under your project’s control. Specific contract change control procedures can be found in the individual subcontracts that can be different for each subcontract.
9
Q
You are conducting the source selection analysis for an office building renovation project. One project requirement involves setting up the WiFi system once the hardware has been installed. The value of this procurement is relatively small, and you have decided that a full selection process does not make sense. With three prospective vendors listed as pre-approved sellers, what is the best course of action?
Use a firm fixed price contract
Utilize a sole source for the procurement
Establish a qualifications only selection method
Conduct a bidder conference
A
Source selection analysis is one of the tools and techniques associated with the Plan Procurement Management process and is used to determine the appropriate vendor selection method. The qualifications only selection method applies when the time and cost of a full selection process would not make sense because the value of the procurement is relatively small. The buyer establishes a short list (represented by the three preapproved sellers in this scenario) and selects the bidder with the best credibility, qualifications, experience, expertise, areas of specialization, and references. Therefore, of the available choices, establishing a qualifications only selection method to select the vendor is the best course of action.
10
Q
Large organizations typically manage a wide range of projects; from small projects to large initiatives requiring long-term commitments. Which of the following factors can be used in scaling such projects:
Team size, geographical distribution and regulatory compliance.
Team size, geographical distribution, regulatory compliance, organizational complexity and technical complexity.
Team size, geographical distribution, regulatory compliance and organizational complexity.
Team size, geographical distribution, regulatory compliance, organizational complexity, technical complexity, and funds availability.
A
In large organizations, there may be a mixture of small projects and large initiatives requiring long-term commitments to manage these programs using scaling factors such as team size, geographical distribution, regulatory compliance, organizational complexity, and technical complexity. Funds availability is a constraint applicable to all projects.
11
Q
If a project manager believes that a particular subcontract needs to be terminated, which of the following can provide guidance on the contract termination procedure?
The contract termination procedures in the organizational process assets The termination clause of the specific subcontract The change control procedures in the project management plan The contract termination procedures in the project procurements management plan
A
Each contract is unique and so are its obligations, provisions and clauses. Any contract that need to be terminated must be terminated in accordance with the termination clause of that contract. These contract termination provisions are agreed and signed off by both parties at the time of the contract award.
12
Q
As a project manager for a small university, you are currently in the process of selecting a vendor to develop a textbook and other training materials for a new course. Several vendors are interested in bidding on the contract. During a bidder conference, one of the prospective suppliers asks about ownership of the intellectual property that will be created from the project. Which project document should have this information at this stage of the project?
Procurement contract Source selection criteria Requirements documentation Seller proposals
A
The requirements documentation may include technical and nontechnical requirements that the seller is required to satisfy. Nontechnical requirements include requirements with contractual and legal implications including intellectual property rights among others. The question implies that the project manager is carrying out the Conduct Procurements process. Information on ownership of the intellectual property can be included in the requirements documentation which is an input to the Conduct Procurements process or the procurement contracts which are an output from the process. Based on the scenario described, a bidder conference takes place; therefore, it is reasonable to assume that no contracts have been awarded yet. This means that at this stage of the project, of the available options, the requirements documentation is the best place to find information on intellectual property rights.
13
Q
The Control Procurements process receives a very important input from the Direct and Manage Project Work process. Which one is it?
Procurement documents
Approved change requests
Work performance data
Agreements
A
Work performance data is provided to the control procurements process by the direct and manage project work process.
14
Q
A project is contracted on a Cost-Plus-Incentive-Fee (CPIF) basis. The contract states that if the final costs are less than expected costs, the sharing formula for cost savings is 80:20. The targeted cost is US$500,000 with a 10 percent fee. If the project comes in at US$450,000, what would be the total cost of the contract?
US$495,000 US$505,000 US$550,000 US$510,000
A
In a cost-plus-incentive-fee (CPIF) type of contract, the seller is reimbursed for allowable costs for performing the contract work and receives a predetermined fee. In some cases, if the final costs are less than the expected costs, then both the buyer and the seller benefit from the cost saving based on a pre-negotiated sharing formula. In the current situation, the predetermined fee is 10% of us$500,000 = us$50,000. Since the project came in at us$450,000, the cost saving is 500,000 450,000 = 50,000. The sharing formula is 80:20, hence the additional payout to the seller = (20/100)*50,000 = 10,000. Therefore, the total cost of the contract = 450,000 + 50,000 + 10,000 = us$510,000.
15
Q
You are carrying out a project for an external customer. Most of the project’s scope of work is outsourced and distributed among many subcontractors. What would be the role of the Direct and Manage Project Work process in this scenario?
Assure that the changes are properly approved and communicated Inspect and verify the adequacy of the seller’s product Authorize the seller’s work at the appropriate time The Direct and Manage Project Work process will become redundant in this case
A
The role of the direct and manage project work will be to authorize the seller’s work at the appropriate time. Inspection and verification of the seller’s work will be handled by the control quality process and the change management will be handled by the perform integrated change control process.
16
Q
A seller entered into a contract with a buyer. At the end of the project, the seller was reimbursed for the cost of the project but received a low fee based on certain subjective criteria that were specified in the contract. What type of contract is this likely to be?
Cost Plus Fixed Fee (CPFF) contract
Cost Plus Incentive Fee (CPIF) contract
Fixed Price Incentive Fee (FPIF) contract
Cost Plus Award Fee (CPAF) contract
A
This is likely to be a cost-plus-award-fee (CPAF) contract. In such a contract, the seller is reimbursed for all legitimate costs, but the fee is based on the satisfaction of certain broad subjective performance criteria defined in the contract. It is generally not subject to appeals.
17
Q
Which of the following may help in ensuring that certain bidders in the procurement process do not receive preferential treatment and that all prospective sellers have a clear and common understanding of the procurement?
Use of screening techniques
Use of bidder conferences
Use of expert judgment
Use of weighted criteria
A
Bidder conferences allow prospective sellers and buyers to meet prior to submission of a bid. This ensures that all prospective sellers have a clear and common understanding of the procurement. This usually prevents any bidders from receiving preferential treatment.
18
Q
You have recently joined an organization as the procurements manager. You have just received an invoice from a contractor. Some of the items from the invoice are as follows: EV of work completed to date: $50,000. AC of work completed to date: $40,000. Total costs reimbursed by the buyer to date: $35,000. If the contract between the buyer and the contractor is a CPIF contract, what is the total value payable to this contractor? (Assume that the contract allows for a 10 percent fee over net payable whenever CPI > 1).
$55,000 $5,500 $500 $44,000
A
Since this is a CPIF (cost plus incentive fee) contract, the fee is calculated as a percentage of the actual cost provided that the CPI is greater than 1. In this case CPI is greater than one (i.e. CPI = 1.25) and hence 10% fee is applicable on the total cost reimbursable. AC is $40k out of which $35k has already been reimbursed. Hence total cost reimbursable is $5k. The total payable in this case is $5k x 1.1 = $5,500.
19
Q
The costs on a project are typically classified as direct and indirect costs. The cost of electric utilities for the office is:
A specific cost
An indirect cost
A direct cost
Appraisal cost
A
The cost of electric utilities for the office would be considered as an indirect cost. Indirect costs are also known as overhead, general, or administrative costs. They are the costs allocated by the project team as a cost of doing business. Examples include salaries of management indirectly involved in the project and the cost of electric utilities.
20
Q
How does the role of a project manager change based on managing projects using a predictive development life cycle then managing projects in adaptive environments?
The role of the project manager does not change.
The role of the project manager is replaced with a scrum master in adaptive environments.
The role of the project manager changes to a facilitator in adaptive environments.
The role of the project manager changes to a facilitator in predictive environments.
A
The role of the project manager does not change bases on managing project using a predictive development life cycle or managing project in adaptive environments.
21
Q
All requested changes to a contract go through Contract Change Control Systems of both parties. The Contract Change Control system documents all requested changes for future reference. However, requested but unresolved changes might not make it up to either party’s Change Control Systems. If you are contesting a dispute, where can you find a record of such requested changes?
Approved change requests log Procurement management plan Project correspondence Project management plan
A
If a contract change request is rejected early in the process, it might not make it up to either party’s change control system and hence might not get documented as a rejected change request. You can obtain a record of such requested changes in your project’s correspondence with the customer in this case.
22
Q
A buyer and seller set the rates for junior engineers, senior engineers, architects, and other predefined roles. In what type of contract would this be applicable?
Fixed-price with economic price adjustment contract
Fixed-price incentive contract
Time and material contract
Fixed-price contract
A
In time-and-materials contracts, the buyer and seller agree on unit labor rates and the actual cost of materials. Both parties agree on specific hourly rates for such categories as junior or senior engineers.
23
Q
Andy’s project stakeholders are not happy as the project is lagging behind schedule. During the executive committee meeting, Andy requests all stakeholders to keep their calm as most of the project deliverables have been completed and only quality inspections of these deliverables is pending. He assures the stakeholders that he is planning to crash the project to meet the completion deadline. What should be the stakeholders’ biggest concern now?
Stakeholders do not know the PMBOK jargon; crashing is a valid schedule compression technique. Crashing at this stage might result in undetected errors, decreased profits, and increased post-implementation risks. Crashing at this stage might result in an exponential cost increase and more time will be required to recover that cost. Why Andy hasn’t chosen to fast-track the project instead of crashing the project.
A
Meeting project schedule objectives by rushing planned quality inspections may result in undetected errors, decreased profits, and increased post-implementation risks. The other choices are incorrect.
24
Q
You are leading a project to build an oil pipeline in a foreign country, and you are looking for local contractors to outsource some of the construction work. You are in the process of preparing the bid package for prospective sellers. Which of the following documents would you leave out of the package?
Independent cost estimates Statement of work Request for proposal Source selection criteria
A
Preparing the bid package for prospective sellers implies you are carrying out the Plan Procurement Management process. Bid documents (with the request for proposal (RFP) among them), procurement statement of work (SOW), source selection criteria, independent cost estimates are among the outputs of this process. These documents are also among the inputs to the Conduct Procurements process. However, not all of these documents are provided by the buyer to the prospective sellers. Sometimes, to benchmark procurements, the buying organization develops independent cost estimates either internally or using external resources such as a professional estimator. Buyers do not usually provide these estimates to the prospective sellers since a benchmark range may prejudice the sellers into proposing prices that do not actually work for their business model and resources. The buyer uses these benchmark estimates principally to verify if bids are reasonable, or if a large number of outliers indicate an issue with procurement processes or communications. Thus, of the choices provided, leaving the independent cost estimates out of the bid package makes the most sense and is, therefore, the best answer to the question asked.
25
While applying the logical relationships to the project activities, a project manager must be careful not to:
Select the relationship with the highest impact
Have FS relationships for the non-critical activities
Have FF relationships for the critical activities
Have closed loops relationships between activities
Multiple relationships between the same activities are not recommended, so a decision has to be made to select the relationship with the highest impact. Closed loops are also not recommended in logical relationships.
26
What is the purpose of a bidder conference?
Developing a comprehensive seller's list
Ensuring all vendors have a clear understanding of the procurement
Pre-qualifying the potential sellers
Awarding a contract to the most suitable vendor
Bidder conferences are also called contractor conferences or vendor conferences. Their purpose is to provide all vendors with an understanding of the project requirements and to give all vendors equal time to get their questions answered.
27
Many organizations favor fixed-price contracts because the buyer's risk is minimized by such contracts. However, to minimize the seller's risk, which of the following is crucial for a fixed price contract?
The buyer must precisely specify the time for completing the contract.
The buyer must precisely specify the number of resources to be used for procurement.
The buyer must precisely specify the service or product to be procured.
The buyer must precisely specify the price of the contract
In a fixed-price contract, the buyer must precisely specify the product or service to be procured. Any changes in the contract may involve additional cost to the buyer. Therefore, buyers must be careful while preparing the statement of work.
28
Which of these is not an input to the Control Procurements process?
Work performance data
Project management plan
Change requests
Agreements
Change requests are not inputs to the control procurements process. The other choices are valid inputs to this process.
29
Which of the following is not an input to the Conduct Procurements process?
Seller proposals
Procurement management plan
Cost baseline
Proposal evaluation techniques
Proposal evaluation techniques are the tools and techniques of the conduct procurement process. The other choices are the valid inputs to this process.
30
You have received a proposal for an RFP that was sent to vendors. One of the vendors has proposed doing the project for $12,500. The cost for the project is $10,000, and their profit will be $2,500. Which type of contract is most suitable if the type of work is predictable and the requirements are well-defined and not likely to change?
Cost Plus Incentive Fee
Cost Plus Percentage of Cost
Cost Plus Fixed Fee
Fixed price
Fixed-price contracts are most suitable if the type of work is predictable and the requirements are well defined and not likely to change.
31
The source selection criteria for all procurements in a project is developed during which of the following processes?
Conduct Procurements
Monitor and Control Project Work
Control Procurements
Plan Procurement Management
The source selection criteria is an output of the plan procurement management process.
32
During the Control Procurements process, a number of documents might get updated due to various reasons. Which of the following components of the project management plan is least likely to get updated during this process?
Cost baseline
Procurement management plan
Schedule baseline
Quality management plan
The procurement management plan, schedule baseline, and the cost baseline typically gets updated as result of a significant change in procurement contracts or strategy. However, the quality management plan is least likely to get updated during this process since quality requirements always need to be met by all contractors. The contractors can be allowed more money or time to complete the works but cannot be allowed to compromise the quality of the works.
33
As part of the procurement process, the procuring organization elected to have an estimate of costs prepared by an outside professional estimator. The estimator came up with an estimate of $500,000. However, the cost estimates prepared by prospective sellers were in the range of $200,000. How can this be best interpreted?
The professional estimator has inflated the estimate of costs.
Prospective sellers are trying to underbid and win the project.
The prospective sellers do not have the required skills to do the project.
The procurement statement of work was deficient and ambiguous.
When prospective bids are significantly different from the estimates prepared by a professional estimator, it likely means that the procurement statement of work (sow) was deficient or that the prospective sellers have misunderstood the procurement sow. The other choices jump to conclusions without relevant data. It is possible that some prospective sellers do not have the skills or are trying to underbid; but in this case, all of them are off by a large percentage. Hence, it points to a deficient statement of work.
34
You have recently taken over a project as the project manager. The project is midway through execution, and most of the project work has been subcontracted. You have just found out that one of the subcontractors, who was responsible for all demolitions, has been paid 50 percent of the subcontracted value, but he has delivered only 25 percent of the required works. Upon investigation, you learned that all the payments are in line with the signed contract between the two parties and the subcontractor’s work is compliant with the contract specifications. You are annoyed because this does not give you enough control over the subcontracted works. Which of the following is not an appropriate thing to do at this stage?
Discuss your concerns with appropriate stakeholders so that this mistake is not repeated
Document the story as a lesson learned
Terminate the contract unless there is a violation of the contract
Continue with the arrangement
According to the scenario the subcontractor is conforming to the contract’s requirements. However, the project manager is not happy since the contractual terms and conditions do not give him enough control over the subcontracted work. The contract should not be terminated unless there is any violation of the contract, but appropriate steps need to be taken to avoid such mistakes in the future.
35
A project is contracted on a Cost-Plus-Fixed-Fee (CPFF) basis with a fee of 10 percent of estimated costs. The estimated cost is US$50,000. If the project comes in at US$75,000 with no changes in project scope, what would be the total cost of the contract?
US$80,000
US$55,000
US$75,000
US$125,000
In the cost-plus-fixed-fee (CPFF) type of contract, the seller is reimbursed for allowable costs for performing the contract work and receives a fee calculated as an agreed-upon percentage of the costs. The costs vary depending on the actual cost. The fee is based on estimated costs unless the scope of the project changes. For the current project, the agreed-upon percentage of costs is 10%. The actual cost is us$75,000 even though the initial estimate was us$50,000. However, the fee is calculated as 10% of 50,000 = (10/100)*50,000 = 5,000. The total cost of the contract is 75,000 + 5,000 = us$80,000.
36
Crashing is an effective schedule compression technique at times when a project is struggling behind schedule. However, increasing the number of resources to twice the original number of the resources does not always cut the time by half. This is due to:
The law of diminishing returns
Fast tracking the project
Critical path analysis
Risk mitigation due to crashing the project
When one factor used to determine the effort required to produce a unit of work is increased while all other factors remain fixed, a point will eventually be reached at which additions of that one factor start to yield progressively decreased productivity. This is commonly known as the law of diminishing returns.
37
A buyer and seller are looking at getting into a long-term relationship spanning 10 years. Both parties would like to be protected from the unstable financial conditions of their country, which are beyond their control. What type of contract is appropriate for such a relationship?
Fixed Price Incentive Fee (FPIF)
Firm Fixed Price (FPP)
Fixed Price with Economic Price Adjustment Contract (FP-EPA)
Time & Material (T&M)
The fixed-price with economic price adjustment (FP-EPA) contract is used whenever the buyer-seller relationship spans across years. It is a fixed-price contract with a special provision allowing for predefined final adjustments to the contract price due to significantly changed economic conditions. It is intended to protect both the buyer and the seller from external conditions beyond their control.
38
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Unless an enterprise-wide ERP is deployed in an organization, disparate IT systems perform specialized tasks in a project. Which of the following systems typically processes supplier’s payments after obtaining all the necessary certification of satisfactory work?
Select one Mark question
Project management information system
Supply chain management system
Change control and tracking system
Accounts payable system
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Payments to the seller are typically processed by the accounts payable system of the buyer after certification of satisfactory work by an authorized person on the project team.
39
In a multi-phase project, the procurement team decided to close the procurements applicable to a particular phase of the project. What happens to unresolved claims?
Select one Mark question
Unresolved claims are usually resolved at the end of all phases of the project.
Unresolved claims may still be subject to litigation after closure.
Unresolved claims remain open for a period of one year from closure of procurements.
Unresolved claims are also closed when the procurements for that phase are closed.
Even after the procurements for a particular phase are closed, unresolved claims are still subject to litigation.
40
You are carrying out a project for an external customer. Most of the project’s scope of work is outsourced and distributed among many subcontractors. What would be the role of the Direct and Manage Project Work process in this scenario?
Select one Mark question
Inspect and verify the adequacy of the seller’s product
Assure that the changes are properly approved and communicated
Authorize the seller’s work at the appropriate time
The Direct and Manage Project Work process will become redundant in this case
The role of the direct and manage project work will be to authorize the seller’s work at the appropriate time. Inspection and verification of the seller’s work will be handled by the control quality process and the change management will be handled by the perform integrated change control process.
41
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The Conduct Procurements process receives bids or proposals and applies criteria to select one or more sellers who are both qualified and acceptable as a seller. Which of the following techniques is not a valid technique for this process?
Select one Mark question
Make-or-buy analysis
Advertising
Bidder Conference
Proposal Evaluation Techniques
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Make-or-buy analysis is not a valid technique in the conduct procurements process. The other three choices are valid techniques.
42
Organizations evaluate whether to buy products or make the items themselves. Which of the following is not a factor that influences makeor-buy decisions:
Select one Mark question
Core capabilities of the organization
Risk associated with meeting the need in a cost-effective manner
Total duration of the project
Value delivered by vendors meeting the need
A make-or-buy analysis results in a decision as to whether particular work can best be accomplished by the project team or needs to be outsourced. The total duration of the project does not (and should not) influence this analysis. The other choices are rational considerations during this analysis.
43
You manage the construction of a new airport in your home country. Since your organization does not have experience deploying the sophisticated air-traffic control system, you outsourced this to a specialist organization. PMBOK’s Procurement Management knowledge will help you successfully administer this deal; however, for the supplier of the system, all the PMBOK processes will apply since this will be a complete project for the supplying organization. Which of the following will be a common denominator between your project and the supplier projects?
Select one Mark question
Project’s scope of work
Supply agreement
Project management plan
Budget for the air-traffic control system
The common denominator should be a document that is common between the buyer and the supplier, that is the supply agreement. The rest of the choices are the project artifacts what will be different for each party since supplier’s scope of work is limited in comparison to the buyer’s scope of work
44
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You are a project manager for your company. Part of the project requires producing 10,000 widgets, which your company will outsource. The company has agreed to pay all related costs and 5 percent of the estimated project costs. What type of contract has been negotiated?
Select one Mark question
Cost-Plus-Fixed-Fee contract
Fixed-price contract
Cost-Plus-Incentive-Fee contract
Time and Material contract
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This is an example of a cost-plus-fixed-fee contract. This type of contract determines the profit element as a fixed percentage of the estimated project cost
45
Crashing is an effective schedule compression technique at times when a project is struggling behind schedule. However, increasing the number of resources to twice the original number of the resources does not always cut the time by half. This is due to:
Select one Mark question
The law of diminishing returns
Fast tracking the project
Risk mitigation due to crashing the project
Critical path analysis
When one factor used to determine the effort required to produce a unit of work is increased while all other factors remain fixed, a point will eventually be reached at which additions of that one factor start to yield progressively decreased productivity. This is commonly known as the law of diminishing returns.
46
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A number of deliverables were submitted to the buyer as part of a project. Where would the project manager find documentation on the requirements for formal deliverable acceptance and on how nonconforming deliverables can be addressed?
Select one Mark question
In the deliverable release note
In the lessons-learned document
In the agreement
In the SOW
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When projects are performed for external customers, requirements for formal deliverable acceptance and how to address non-conforming deliverables are usually defined in the project agreements.
47
A buyer and seller are looking at getting into a long-term relationship spanning 10 years. Both parties would like to be protected from the unstable financial conditions of their country, which are beyond their control. What type of contract is appropriate for such a relationship?
Select one Mark question
Fixed Price Incentive Fee (FPIF)
Firm Fixed Price (FPP)
Time & Material (T&M)
Fixed Price with Economic Price Adjustment Contract (FP-EPA)
The fixed-price with economic price adjustment (FP-EPA) contract is used whenever the buyer-seller relationship spans across years. It is a fixed-price contract with a special provision allowing for predefined final adjustments to the contract price due to significantly changed economic conditions. It is intended to protect both the buyer and the seller from external conditions beyond their control.
48
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The source selection criteria for all procurements in a project is developed during which of the following processes?
Select one Mark question
Plan Procurement Management
Conduct Procurements
Control Procurements
Monitor and Control Project Work
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The source selection criteria is an output of the plan procurement management process.
49
As part of the procurement process, the procuring organization elected to have an estimate of costs prepared by an outside professional estimator. The estimator came up with an estimate of $500,000. However, the cost estimates prepared by prospective sellers were in the range of $200,000. How can this be best interpreted?
Select one Mark question
The procurement statement of work was deficient and ambiguous.
The professional estimator has inflated the estimate of costs.
Prospective sellers are trying to underbid and win the project.
The prospective sellers do not have the required skills to do the project.
When prospective bids are significantly different from the estimates prepared by a professional estimator, it likely means that the procurement statement of work (sow) was deficient or that the prospective sellers have misunderstood the procurement sow. The other choices jump to conclusions without relevant data. It is possible that some prospective sellers do not have the skills or are trying to underbid; but in this case, all of them are off by a large percentage. Hence, it points to a deficient statement of work.
50
Which of the following statements is correct?
Select one Mark question
The buyer-seller relationship exists only between organizations internal to the acquiring organization.
The buyer-seller relationship exists only between organizations external to the acquiring organization.
The buyer-seller relationship exists at the top level on any one project, and between organizations internal to and external to the acquiring organization.
The buyer-seller relationship may exist at many levels on any one project, and between organizations internal to and external to the acquiring organization.
The buyer-seller relationship may exist at many levels on any one project, and between organizations internal to and external to the acquiring organization.
51
You have just received an invoice from your supplier that contains some uncertified items. Payments to the supplier are processed through your corporate accounts payable system only after certification of satisfactory work by the project quality control specialist. What should you do?
Select one Mark question
Ask the supplier to stop all deliveries until the matter has a resolution
Call the supplier and obtain more information
Process the supplier’s invoice since this is your liability
Seek judicial arbitration
The supplier could have sent the invoice by mistake or some other reason. The first step is to clarify the matter with the supplier. You must call the supplier and obtain more information before you take any other step.
52
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If you are working on a project with constantly changing scope, which type of contract would work best when hiring an outside vendor to complete a portion of the work?
Select one Mark question
Lump sum
Time and material
Fixed price
Cost-reimbursable
```
Cost plus contracts are suitable when the work is evolving, likely to change, or not well defined..
53
```
The costs on a project are typically classified as direct and indirect costs. The cost of electric utilities for the office is:
Select one Mark question
An indirect cost
A direct cost
A specific cost
Appraisal cost
```
The cost of electric utilities for the office would be considered as an indirect cost. Indirect costs are also known as overhead, general, or administrative costs. They are the costs allocated by the project team as a cost of doing business. Examples include salaries of management indirectly involved in the project and the cost of electric utilities.
54
```
A project is contracted on a Cost-Plus-Fixed-Fee (CPFF) basis. The targeted cost is US$200,000 with a fee of US$30,000. If the project comes in at US$170,000, what would be the total cost of the contract?
Select one Mark question
US$ 195,500
US$230,000
US$ 200,000
US$170,000
```
In a cost-plus-fixed-fee (CPFF) type of contract, the seller is reimbursed for allowable costs and receives a fixed fee payment calculated as a percentage of the estimated project costs. The fixed fee does not vary with actual costs unless the project scope changes. In the current scenario, the fixed fee is us$30,000. Although the actual project comes in at us$170,000, the fixed fee remains the same. Hence, the total cost of the contract will be 170,000 + 30,000 = 200,000
55
What similarity exists between a cost-reimbursable contract and a timeand-materials contract?
Select one Mark question
They are open-ended.
They can never grow in value.
The closure date is part of the contract.
They have fixed bonus rates.
Time-and-materials contracts resemble cost-reimbursable contracts in that both are open-ended.
56
You are building a dam for a state government. Your organization is considered a specialist in dam design and overall management of construction activities. However, your organization lacks resources to execute the earth-works involved. You have subcontracted all the project’s earth-works to a local subcontractor. The quality of the subcontractor’s work is acceptable, but the subcontractor is not conforming to your organization’s health and safety standards. You escalated this to the subcontractor’s project manager, but he turned down your request. The subcontractor’s project manager is of the view that the request is out of the contract’s scope and none of the contract provisions require him to conform to your organization’s standards. You are agitated since you believe health and safety standards are globally accepted, and the contract does not have to explicitly state them. Further, according to the state law, you cannot terminate the contract since the subcontractor has not vio
Select one Mark question
Negotiate a contact amendment with the subcontractor requiring compliance to the standards
Terminate the contract immediately since you will not compromise health and safety standards
Withhold the subcontractor’s payments to force compliance
Go for judicial arbitration as stated in the contact’s ADR provisions
Your actions should be legal and legitimate. Termination and withholding payments are illegal options. Further amicable solution is always preferred over arbitration. The best way to deal with this situation to offer a price for compliance to the required standards and amend the contract accordingly.
57
```
A project manager is looking at a make-or-buy analysis as part of the Procurement Management process. What type of costs should the project manager consider for this analysis?
Select one Mark question
Indirect costs
Both direct as well as indirect costs
Direct costs
Out-of-pocket costs
```
The make-or-buy analysis needs to be as comprehensive as possible. Hence, it should consider all possible costs, both direct and indirect.
58
Project knowledge management is concerned with managing which type of project knowledge?
Select one Mark question
“Explicit” knowledge; as this can be readily codified
“Tacit” knowledge; as this involves beliefs, insights, experience and “know-how”
“Tacit” knowledge; as this is difficult to express
Both “explicit” and “tacit” knowledge
Knowledge is commonly split into explicit (knowledge that can be readily codified using words, pictures, and numbers) and tacit (knowledge that is personal and difficult to express). Knowledge management is concerned with managing both tacit and explicit knowledge.
59
```
A project is contracted on a Cost-Plus-Incentive-Fee (CPIF) basis. The contract states that if the final costs are less than expected costs, the sharing formula for cost savings is 80:20. The targeted cost is US$500,000 with a 10 percent fee. If the project comes in at US$450,000, what would be the total cost of the contract?
Select one Mark question
US$505,000
US$510,000
US$495,000
US$550,000
```
In a cost-plus-incentive-fee (CPIF) type of contract, the seller is reimbursed for allowable costs for performing the contract work and receives a predetermined fee. In some cases, if the final costs are less than the expected costs, then both the buyer and the seller benefit from the cost saving based on a pre-negotiated sharing formula. In the current situation, the predetermined fee is 10% of us$500,000 = us$50,000. Since the project came in at us$450,000, the cost saving is 500,000 450,000 = 50,000. The sharing formula is 80:20, hence the additional payout to the seller = (20/100)*50,000 = 10,000. Therefore, the total cost of the contract = 450,000 + 50,000 + 10,000 = us$510,000.
60
While applying the logical relationships to the project activities, a project manager must be careful not to:
Select one Mark question
Have FS relationships for the non-critical activities
Select the relationship with the highest impact
Have FF relationships for the critical activities
Have closed loops relationships between activities
Multiple relationships between the same activities are not recommended, so a decision has to be made to select the relationship with the highest impact. Closed loops are also not recommended in logical relationships.
61
```
As a project manager for a small university, you are currently in the process of selecting a vendor to develop a textbook and other training materials for a new course. Several vendors are interested in bidding on the contract. During a bidder conference, one of the prospective suppliers asks about ownership of the intellectual property that will be created from the project. Which project document should have this information at this stage of the project?
Select one Mark question
Source selection criteria
Requirements documentation
Seller proposals
Procurement contract
```
The requirements documentation may include technical and nontechnical requirements that the seller is required to satisfy. Nontechnical requirements include requirements with contractual and legal implications including intellectual property rights among others. The question implies that the project manager is carrying out the Conduct Procurements process. Information on ownership of the intellectual property can be included in the requirements documentation which is an input to the Conduct Procurements process or the procurement contracts which are an output from the process. Based on the scenario described, a bidder conference takes place; therefore, it is reasonable to assume that no contracts have been awarded yet. This means that at this stage of the project, of the available options, the requirements documentation is the best place to find information on intellectual property rights.
62
```
During the Control Procurements process, a number of documents might get updated due to various reasons. Which of the following components of the project management plan is least likely to get updated during this process?
Select one Mark question
Schedule baseline
Procurement management plan
Quality management plan
Cost baseline
```
The procurement management plan, schedule baseline, and the cost baseline typically gets updated as result of a significant change in procurement contracts or strategy. However, the quality management plan is least likely to get updated during this process since quality requirements always need to be met by all contractors. The contractors can be allowed more money or time to complete the works but cannot be allowed to compromise the quality of the works.
63
You have recently taken over a project as the project manager. The project is midway through execution, and most of the project work has been subcontracted. You have just found out that one of the subcontractors, who was responsible for all demolitions, has been paid 50 percent of the subcontracted value, but he has delivered only 25 percent of the required works. Upon investigation, you learned that all the payments are in line with the signed contract between the two parties and the subcontractor’s work is compliant with the contract specifications. You are annoyed because this does not give you enough control over the subcontracted works. Which of the following is not an appropriate thing to do at this stage?
Select one Mark question
Continue with the arrangement
Document the story as a lesson learned
Discuss your concerns with appropriate stakeholders so that this mistake is not repeated
Terminate the contract unless there is a violation of the contract
According to the scenario the subcontractor is conforming to the contract’s requirements. However, the project manager is not happy since the contractual terms and conditions do not give him enough control over the subcontracted work. The contract should not be terminated unless there is any violation of the contract, but appropriate steps need to be taken to avoid such mistakes in the future.
64
Which of the following is accurate regarding agreements in Project Procurement Management?
Select one Mark question
Agreements are legal documents between a buyer and a seller.
Terms and conditions never include the seller’s proposal.
Agreements are informal documents.
Agreements can never be terminated.
Agreements are legal and formal documents between buyers and sellers.
65
Rosanne is an experienced project manager working on a pharmaceutical project. This project involves two large vendors supplying chemical products with specific compositions for preparing drugs. While reviewing documents to see how a seller is performing, she notices the seller did not meet some of the contractual terms. Since it is a first-time violation, she would like to initiate a corrective action to bring the seller’s performance in line with the statement of work. Which of the following are not outputs of Rosanne’s effort?
Select one Mark question
Work performance data and approved change requests
Change requests and Project management plan updates
Work performance information and change requests
Change requests and Organizational process assets update
Evaluating the performance of the seller is done during the control procurements process. If the contractual terms are not met by the seller, a corrective action can be initiated. If there are severe violations, the contract can be terminated based on the language used in the contract. Work performance information, change requests, project management plan updates, project document updates and organizational process updates are the outputs of this process. Work performance data and approved change requests are inputs to this process.
66
```
Which of the following is an output of the Conduct Procurements process?
Select one Mark question
Bidder conferences
Selected Sellers
Expert Judgment
Advertising
```
Selected seller is the output of the conduct procurements process. The other choices are the tools and techniques of this process.
67
During the Conduct Procurements process, the procuring organization found that there were significant differences in pricing by different sellers. What is the best course of action in such a scenario?
Select one Mark question
Award the project to the highest bidder.
Cancel the procurement activity.
Award the project to a supplier who is already on the procuring organization's preferred supplier list.
Investigate whether the procurement statement of work was defective or ambiguous.
If there are significant differences in pricing by sellers, it usually indicates that either the procurement statement of work was defective or ambiguous or that the sellers misunderstood or failed to respond completely to the procurement statement of work. In such instances, an investigation needs to be launched to understand the reasons for the differences in pricing.
68
Apart from the difference in the overall governance approach used for the projects performed under the predictive and adaptive lifecycles, the project manager should also be familiar with:
Select one Mark question
The tools and techniques used in both approaches.
The difference in the quality standards in both approaches.
The difference in the cost/benefit analysis techniques in both approaches.
The risk management processes used in both approaches.
The role of the project manager does not change bases on managing project using a predictive development life cycle or managing project in adaptive environments. However, to be successful in used adaptive approaches, the project manager will need to be familiar with the tools and techniques to understand and how to apply them effectively.
69
```
Which of these is not an input to the Control Procurements process?
Select one Mark question
Change requests
Project management plan
Work performance data
Agreements
```
Change requests are not inputs to the control procurements process. The other choices are valid inputs to this process.
70
```
The business case documents the business need and the cost benefit analysis that justify the project. The summary of how the project has achieved the business needs identified in the business case is document in the:
Select one Mark question
Project charter
Project Scope Statement
Project final report
Project WBS
```
The summary of how the project has achieved the business needs identified in the business case is included in a project’s final report. The other choices are either project initiating or planning documents.
71
```
Which of the following roles in a project is most likely to be involved in negotiations on procurements during the Conduct Procurements phase?
Select one Mark question
Project manager
Project sponsor
Project coordinator
Procurement administrator
```
The project manager, a team member or the project sponsor do not typically perform the role of lead negotiator on procurements. Due to the legal nature of the contractual relationship involved, a legal representative or a procurement administrator is involved.
72
If a project manager believes that a particular subcontract needs to be terminated, which of the following can provide guidance on the contract termination procedure?
Select one Mark question
The termination clause of the specific subcontract
The contract termination procedures in the organizational process assets
The contract termination procedures in the project procurements management plan
The change control procedures in the project management plan
Each contract is unique and so are its obligations, provisions and clauses. Any contract that need to be terminated must be terminated in accordance with the termination clause of that contract. These contract termination provisions are agreed and signed off by both parties at the time of the contract award.
73
You are managing a construction project. Your company does not specialize in construction design so you outsourced the construction design to a third party. You are conducting regular procurement performance reviews and are dissatisfied. You want to carry out a detailed audit of the design supplier’s work processes to determine the root cause. Can you do that?
Select one Mark question
No, you are only authorized to perform quality audits on the delivered products and not the supplier’s internal work processes.
Yes, if there is a provision in the contract allowing work process audits.
No, a detailed procurement audit cannot be performed until you terminate the contract.
Yes, it is a good project management technique advocated by the PMBOK guide.
Inspections and audits required by the buyer and supported by the supplier, if specified in the procurement contract, can be conducted during execution of the project to verify compliance in the seller’s work processes or deliverables.
74
A seller entered into a contract with a buyer. At the end of the project, the seller was reimbursed for the cost of the project but received a low fee based on certain subjective criteria that were specified in the contract. What type of contract is this likely to be?
Select one Mark question
Cost Plus Award Fee (CPAF) contract
Cost Plus Incentive Fee (CPIF) contract
Cost Plus Fixed Fee (CPFF) contract
Fixed Price Incentive Fee (FPIF) contract
This is likely to be a cost-plus-award-fee (CPAF) contract. In such a contract, the seller is reimbursed for all legitimate costs, but the fee is based on the satisfaction of certain broad subjective performance criteria defined in the contract. It is generally not subject to appeals.
75
Your construction project is in execution, and you require a major change to one of your supplier agreements. Can you directly make this change with mutual consent of the supplier during the Control Procurements process, or do you have to visit the Perform Integrated Change Control process, as well?
Select one Mark question
1. The change request can be directly processed through the Control Procurements process since the change requests only affects a particular supplier agreement.
2. The change request needs to be approved through the Control Procurements process prior to making the change through the Integrated Change Control process.
3. The Control Procurements process is about identifying variances. The supplier contract can directly be altered through the Perform Integrated Change Control process.
4. The change request needs to be approved through the Perform Integrated Change Control process prior to making the change through the Control Procurements process.
The change request needs to be approved through the perform integrated change control process prior to making the change through the control procurements process. Approved change requests from the perform integrated change control process are inputs of the control procurements process.
76
```
What is the BEST tool/technique that provides expected cost of a procurement by a third party and helps identify significant variations from cost estimates prepared in-house?
Select one Mark question
Screening system
Bidder conferences
Buyer-conducted performance review
Independent estimates
```
Independent estimates provides the expected cost of a procurement by a third party. It helps identify significant variations from cost estimates prepared by the project team.
77
```
You have completed a nine-month project, and you are in the closing stage. The project completed on time and under budget and everyone in your department has congratulated you on your achievement. The vice president of your company heard about the success of your project and wants a summary overview of project performance so that he can talk about your success at the next board meeting. What should you provide to him?
Select one Mark question
Final report
Final lessons learned register
Lessons learned repository
Project closure documents
```
The scenario suggests the project has been closed. In other words, the Close Project or Phase process is now complete. The final report is one of the outputs from this process. The final report includes information such as a summary level description of the project, a summary of any risks and issues encountered and how they were addressed, a summary of how the final product, service or result was achieved, and more. Since the vice president wants a summary overview of project results, providing the vice president with the final report will likely meet their needs and is, therefore, of the choices provided, the best answer to the question asked.
78
```
You are the project manager for a Fortune 100 IT company, and you are currently engaged in an important project. You want to choose the best contractor for a specialized task. What should you do to evaluate potential contractors?
Select one Mark question
Perform a Make-or-Buy analysis
Create a lessons-learned document
Conduct a performance review
Evaluate proposals
```
An input to the conduct procurements process, seller proposals are prepared by sellers in response to a procurement document package. These are then evaluated by the buyer to perform source selection.
79
You are building a mansion that will have copper roofs. The duration of the project will be approximately three years. You have built into the contract that, as the price of copper increases, your price increases as a percentage of the cost of the copper. However, all other costs are fixed. This is an example of what type of contract?
Select one Mark question
Fixed Price Incentive Fee
Unit Price
Fixed Price with Economic Price Adjustment
Time and Materials
Since the price increases are tied only to the rising costs of the copper, this is a fixed-price with economic price adjustment (FP-EPA) contract. This is common with multi-year contracts
80
```
What type of method uses a weighting ranking system for quantifying qualitative data to minimize the effect of personal bias during the process of selecting a seller?
Select one Mark question
Source Selection Criteria
Vendor audits
Independent estimates
Sourcing workshops
```
A weighting system is a method for quantifying qualitative data to minimize the effect of personal bias on seller selection. This is a part of the source selection criteria.
81
```
A seller organization was executing work for a project under a contract. During the course of the project, a number of disputes arose over the scope and quality of the work. Which of the following is the preferred method of resolving these claims?
Select one Mark question
Appeals court
Alternative dispute resolution (ADR)
Negotiation
Claims court
```
When a buyer and seller enter into a dispute over the execution of work under the terms of a contract, negotiation is the preferred method of resolution of all claims and disputes.
82
```
Which of the following techniques can help clarify the structure, requirements, and other terms of the purchases so that mutual agreement between a buyer and a seller can be reached prior to signing the contract?
Select one Mark question
Bidder conferences
Independent estimates
Procurement negotiations
Advertising
```
Procurement negotiations help clarify the structure, requirements, and other terms of the purchases so that mutual agreement between a buyer and a seller can be reached prior to signing the contract. The bidders’ conferences are carried out prior to this stage, and they are used to ensure that all prospective sellers have a clear and common understanding of the procurement requirements. Advertising and independent estimates cannot help in this case.
83
```
You have recently joined an organization as the procurements manager. You have just received an invoice from a contractor. Some of the items from the invoice are as follows: EV of work completed to date: $50,000. AC of work completed to date: $40,000. Total costs reimbursed by the buyer to date: $35,000. If the contract between the buyer and the contractor is a CPIF contract, what is the total value payable to this contractor? (Assume that the contract allows for a 10 percent fee over net payable whenever CPI > 1).
Select one Mark question
$500
$55,000
$5,500
$44,000
```
Since this is a CPIF (cost plus incentive fee) contract, the fee is calculated as a percentage of the actual cost provided that the CPI is greater than 1. In this case CPI is greater than one (i.e. CPI = 1.25) and hence 10% fee is applicable on the total cost reimbursable. AC is $40k out of which $35k has already been reimbursed. Hence total cost reimbursable is $5k. The total payable in this case is $5k x 1.1 = $5,500.
84
During the procurement process, a contractual relationship is established between a buyer and a seller. During the contract lifecycle, what is the correct sequence in which the following terminology is applied to a seller: Vendor, selected source, and bidder?
Select one Mark question
The seller is viewed first as a vendor, then as a bidder and then as a selected source.
The seller is viewed first as a selected source, then as a bidder and then as a vendor.
The seller is viewed first as a bidder, then as a selected source and then as a vendor.
The seller is viewed first as a bidder, then as a vendor, then as a selected source
During the contract life cycle, the seller can be viewed first as a bidder, then as a selected source, and then as the contracted supplier or vendor.
85
```
A project is contracted on a Cost-Plus-Fixed-Fee (CPFF) basis with a fee of 10 percent of estimated costs. The estimated cost is US$50,000. If the project comes in at US$75,000 with no changes in project scope, what would be the total cost of the contract?
Select one Mark question
US$125,000
US$80,000
US$55,000
US$75,000
```
In the cost-plus-fixed-fee (CPFF) type of contract, the seller is reimbursed for allowable costs for performing the contract work and receives a fee calculated as an agreed-upon percentage of the costs. The costs vary depending on the actual cost. The fee is based on estimated costs unless the scope of the project changes. For the current project, the agreed-upon percentage of costs is 10%. The actual cost is us$75,000 even though the initial estimate was us$50,000. However, the fee is calculated as 10% of 50,000 = (10/100)*50,000 = 5,000. The total cost of the contract is 75,000 + 5,000 = us$80,000.
86
```
A team member has been tasked to send the request for proposal (RFP), source selection criteria, and procurement statement of work (SOW) to potential sellers. The documentation is stored digitally on the corporate computer network. Which folder from the project directory is most likely to include these documents?
Select one Mark question
Procurement documentation
Bid documents
Requirements documentation
Test and evaluation documents
```
The question suggests that the Conduct Procurements process is underway. Procurement documentation provides a written record used in reaching the legal agreement and can include bid documents, procurement statement of work, independent cost estimates, and the source selection criteria. Of the available options, only the procurement documentation contains all of the elements specified by the question.
87
```
Different types of contracts are appropriate for different types of purchases. Which of these is not one of the three broad categories of contracts?
Select one Mark question
Cost-reimbursable
Fixed-price or lump sum
Time and Material
Fixed assessment
```
Fixed-assessment is not a category of contracts. Other choices are valid contract types.
88
Large organizations typically manage a wide range of projects; from small projects to large initiatives requiring long-term commitments. Which of the following factors can be used in scaling such projects:
Select one Mark question
Team size, geographical distribution, regulatory compliance, organizational complexity and technical complexity.
Team size, geographical distribution and regulatory compliance.
Team size, geographical distribution, regulatory compliance and organizational complexity.
Team size, geographical distribution, regulatory compliance, organizational complexity, technical complexity, and funds availability.
In large organizations, there may be a mixture of small projects and large initiatives requiring long-term commitments to manage these programs using scaling factors such as team size, geographical distribution, regulatory compliance, organizational complexity, and technical complexity. Funds availability is a constraint applicable to all projects.
89
Many organizations favor fixed-price contracts because the buyer's risk is minimized by such contracts. However, to minimize the seller's risk, which of the following is crucial for a fixed price contract?
Select one Mark question
The buyer must precisely specify the service or product to be procured.
The buyer must precisely specify the time for completing the contract.
The buyer must precisely specify the price of the contract.
The buyer must precisely specify the number of resources to be used for procurement.
In a fixed-price contract, the buyer must precisely specify the product or service to be procured. Any changes in the contract may involve additional cost to the buyer. Therefore, buyers must be careful while preparing the statement of work.
90
```
Which of the following approaches can assist in managing ambiguity risks?
Select one Mark question
Conducting sprint retrospectives
Root cause analysis
Monte Carlo analysis
Seeking expert external input
```
Ambiguity risks are managed by defining those areas where there is a deficit of knowledge or understanding, then filling the gap by obtaining expert external input or benchmarking against best practices.
91
Maintaining good supplier relationships should be important to all project managers. A good buyer-seller relationship is a partnership that results in a win-win situation that nurtures both parties. Which of the following is both a short- and long-term benefit of treating a supplier with courtesy, honesty, and fairness?
Select one Mark question
The buyer can delay the payments without jeopardizing the relationship
There is no need to have formal contracts in place
Delivery of quality products and services at the best price
The supplier can charge a price higher than the market price
Charging higher than market price or delaying the payment will damage the relationship in the long-run. Further formal contracts should always be in place as it is a good project management practice and it mitigates risk for both parties and avoids conflicts. The benefit of good supplier relationship is delivery of quality products at competitive prices. [pmi best practice; not explicitly stated in pmbok] [project procurement management]
92
```
The Make-or-Buy analysis is a technique used as part of the Plan Procurement Management process. It can determine whether the project team can produce a particular product or service, or if it should be purchased. The analysis to arrive at a decision should include:
Select one Mark question
Indirect costs only
Direct as well as Indirect costs
Direct costs only
Staffing costs only
```
The analysis should include both indirect as well as direct costs.
93
During a bidder conference, a supplier asks why a section is missing from the request for quotation (RFQ). The project manager, realizing that an aspect of the project is indeed missing, becomes flustered and stumbles through a brief reply. When the seller responses were received, all but three fail to address the missing section. What is the best course of action?
Select one Mark question
Hold the bidder conference again, and explain the importance of the point that was initially missed
Select from the three vendors that submitted complete proposals
Extend the deadline and allow all of the vendors to resubmit their proposals
Send a revised RFQ to all prospective suppliers and allow them the opportunity to resubmit their proposals
In this scenario, sending the new RFQ to all suppliers, clarifying the critical point that was previously missing, and receiving updated responses to the RFQ would be fair to all suppliers. It may not be practical or cost-effective to conduct another bidder conference, especially as other aspects of the project have already been covered in the prior bidding conference. Apart from fairness, re-issuing the RFQ ensures that requirements are understood. Another benefit of sending out a revised RFQ would be receiving more viable bids from other vendors. Therefore, of the available options, the best course of action for the project manager is to send a revised RFQ containing the new information to all prospective suppliers and allow them the opportunity to resubmit their proposals.
94
What do the buyer and seller have in common with regard to Control Procurements?
Select one Mark question
Both parties ensure that they meet their contractual obligations and that their own legal rights are protected.
Both parties have specific resources that can be idle.
Both parties have a contract change management plan.
Each party has its own project plan and legal team.
Both the buyer and the seller administer the contract for similar purposes. Each party ensures that both it and the other party meet their contractual obligations and that their own legal rights are protected.
95
```
Vendor selection, vendor management, and documentation of lessons learned are tasks that fall under this process:
Select one Mark question
Conduct Procurements
Procurement management
Deliverable management
Scope management
```
The conduct procurements process involves collecting sellers’ responses, selecting the seller, and awarding the contract.
96
```
You have received a proposal for an RFP that was sent to vendors. One of the vendors has proposed doing the project for $12,500. The cost for the project is $10,000, and their profit will be $2,500. Which type of contract is most suitable if the type of work is predictable and the requirements are well-defined and not likely to change?
Select one Mark question
Cost Plus Fixed Fee
Cost Plus Incentive Fee
Fixed price
Cost Plus Percentage of Cost
```
Fixed-price contracts are most suitable if the type of work is predictable and the requirements are well defined and not likely to change.
97
Your drug manufacturing project requires the synthesis of many pharmaceutical chemicals to produce an active ingredient for a drug. You are managing a contractor to supply all these chemicals. Recent quality testing of the drugs raised concerns over the quality of the chemicals supplied by the contractor. Which of the following must be your first action to ensure that the contractor is meeting all contractual obligations?
Select one Mark question
Escalate this issue to the sponsor and submit all drug testing reports
Convene a meeting with stakeholders and communicate the findings
Carry out audits and inspections to verify compliance in the seller's deliverables
Reject all poor quality drugs and penalize the contractor
Since the drug testing raised doubts over the chemicals supplied by the contractor, you must ensure that the contractor is satisfying quality requirements by inspecting and auditing the seller’s deliverables. Auditing can also include seller's personnel. All other actions, including meeting with the sponsor and stakeholders, can be performed later if the seller is not meeting contractual requirements. Therefore, your first action should be to perform audits and inspections to verify compliance of the seller's deliverables.
98
The scope of work in a project could not be clearly defined. There was also a strong possibility that the scope would change during the course of the project. Which type of contract would suit this type of situation?
Select one Mark question
Fixed-price with economic price adjustment contract
Cost-reimbursable contract
Fixed-price incentive contract
Fixed-price contract
A cost-reimbursable contract gives the project flexibility to redirect a seller whenever the scope of work cannot be precisely determined at the start of the project and needs to be altered, or when high risks may exist in the effort.
99
```
The State of New York has contracted with your company to provide a claims payment system for Medicaid benefits. In the contract, a clause states that the State of New York can review your work processes and deliverables. This is an example of:
Select one Mark question
Deliverables Checklist
Record Management System
Inspections and Audits
Performance Report
```
A contractually authorized review by the buyer of work and deliverables is an example of an inspection and audit.
100
A seller began a project that was contracted on a time-and-materials (T&M) basis. Based on the agreed-upon rates and effort, the initial contract amount was $100,000 over a one-year period. However, when the project was completed, the total contract value turned out to be $350,000 over a two-year period. What mechanism could the buyer have used to prevent this unlimited cost growth and schedule change?
Select one Mark question
A service level agreement
Use of a fixed price contract
Use of a not-to-exceed value and a time limit on the contract
A penalty based on the increased cost and timeline
Use of not-to-exceed values and time limits on t & m contracts help prevent unlimited cost growth or schedule changes. A fixed-price contract is an option, but whether to choose that option is a decision to be made prior to awarding the project and signing the contract.
101
Work Performance Data is an important input to the Control Procurements process. Which of the following is not a component of Work Performance Data?
Select one Mark question
Data regarding supplier’s conformance to quality standards
Data regarding incurred or committed costs on each supplier contract
Data on supplier invoices and respective payments
Data on completed deliverables
Data on status of deliverables progress is part of work performance information and not work performance data. The subtle difference between work performance data and work performance information confuses many people, however it is very important to clearly distinguish between these two concepts
102
A program management office (PMO) chose you to write a purchase order because of your expertise in business writing. You learned the PMO has already selected a seller for a software product and would like to award the procurement contract to the selected seller as a purchase order, which you must prepare. In this scenario, the PMO is administering:
Select one Mark question
The plan procurement management process
The control procurements process
The monitor stakeholder engagement process
The conduct procurements process
In the conduct procurements process, sellers are selected and procurement contracts are awarded to them. Contracts can be awarded in the form of a purchase order. Since the pmo selected you to write the purchase order, it is in the process of conducting procurements.
103
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Which of the following techniques can help a project manager review a supplier’s internal work processes to ensure compliance to standards during the production of the deliverables? (Assume that all of the given choices are available to the project manager.)
Select one Mark question
Inspections
Contract change control
Audits
Performance reporting
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Inspections required by the buyer and supported by the supplier, if specified in the procurement contract, can be conducted during execution of the project to verify compliance in the seller’s work processes or deliverables.
104
Performance reports are produced during the Control Procurements process by evaluating work performance data against the agreement requirements. Which of the following is the prime objective of producing such reports?
Select one Mark question
Performance reports document the analysis of the project manager and does not require supplier’s participation.
Performance reporting is a good project management practice and must be carried out on all projects.
Providing management with information about how effectively the seller is achieving the contractual objectives.
Performance reports are produced so they can be added to lessons-learned database, and the future project might benefit.
All of the choices are valid but the question is asking for the prime/main reason for conducting this exercise. The prime objective of this exercise is to provide management with information about how effectively the sellers are achieving the contractual objectives and obligations.
105
You are managing a complex submarine causeway construction project. When you started the project, the scope of work was not clear and was based on a rather high-level estimate. Now that you are in the middle of the project, more information has become available. As a result, you now need to change some of the key subcontracts on the project. Which of the following will guide you through the change process?
Select one Mark question
Organizational process assets
Project management plan’s change control procedures
Change control terms of the individual subcontracts
Supplier’s contract administrator
Your project’s change control procedures are internal to your project, that is, the scope of work directly under your project’s control. Specific contract change control procedures can be found in the individual subcontracts that can be different for each subcontract.
106
A buyer and seller set the rates for junior engineers, senior engineers, architects, and other predefined roles. In what type of contract would this be applicable?
Select one Mark question
Fixed-price with economic price adjustment contract
Time and material contract
Fixed-price contract
Fixed-price incentive contract
In time-and-materials contracts, the buyer and seller agree on unit labor rates and the actual cost of materials. Both parties agree on specific hourly rates for such categories as junior or senior engineers
107
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All requested changes to a contract go through Contract Change Control Systems of both parties. The Contract Change Control system documents all requested changes for future reference. However, requested but unresolved changes might not make it up to either party’s Change Control Systems. If you are contesting a dispute, where can you find a record of such requested changes?
Select one Mark question
Project management plan
Procurement management plan
Project correspondence
Approved change requests log
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If a contract change request is rejected early in the process, it might not make it up to either party’s change control system and hence might not get documented as a rejected change request. You can obtain a record of such requested changes in your project’s correspondence with the customer in this case.
108
You are currently managing an urban development project for a municipal authority. You and your team are managing the project and have outsourced most of the project work to specialist contractors. All the contracts awarded were FFP contracts. The project is almost 50 percent complete, and most of the contractors have requested amendments to their contacts. Work specifications were not clear at the time of contract awards, and as a result, new work requirements have come up. What is your lesson learned?
Select one Mark question
Cost-plus contracts are ideal types of contracts for construction projects
Never award FFP contracts in the future since they usually result in disputes and contests
Good and credible contractors were not selected for the project at the time of award
Do not award FFP contracts unless the scope of work and specifications are precisely articulated.
Ffp contracts should not be awarded unless the scope of work and specifications are precisely articulated and documented. In such cases cost-plus or t&m contracts may be used. If work specifications are not precisely documented in a ffp contract, this will usually result in disputes and future claims
109
What is the purpose of a bidder conference?
Select one Mark question
Developing a comprehensive seller's list
Ensuring all vendors have a clear understanding of the procurement
Pre-qualifying the potential sellers
Awarding a contract to the most suitable vendor
Bidder conferences are also called contractor conferences or vendor conferences. Their purpose is to provide all vendors with an understanding of the project requirements and to give all vendors equal time to get their questions answered.
110
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A company manages SBG contracting bids for government tenders and all successful bids as a separate project. The structure of the company is mainly projectized for a dedicated project team to manage each project. However, to realize economies of scale, there are some central departments that serve all projects. Which of the following role is most likely to be working in a central department instead of directly working with a project team?
Select one Mark question
Procurement administrator
Project planner
Quality control inspector
Construction manager
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In order to realize economies of scope, many organizations treat contract administration as an administrative function separate from the project organization. This is usually true if the performing organization is also the seller of the project to an external customer.
111
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A company manages SBG contracting bids for government tenders and all successful bids as a separate project. The structure of the company is mainly projectized for a dedicated project team to manage each project. However, to realize economies of scale, there are some central departments that serve all projects. Which of the following role is most likely to be working in a central department instead of directly working with a project team?
Select one Mark question
Procurement administrator
Project planner
Quality control inspector
Construction manager
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Proposal evaluation techniques are the tools and techniques of the conduct procurement process. The other choices are the valid inputs to this process.
112
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Which of the following is not an input to the Conduct Procurements process?
Select one Mark question
Procurement management plan
Proposal evaluation techniques
Cost baseline
Seller proposals
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Proposal evaluation techniques are the tools and techniques of the conduct procurement process. The other choices are the valid inputs to this process.
113
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In a manufacturing project, you have requested bids to procure stainlesssteel products. However, your sponsor insists that you conduct bidder conferences before selecting sellers. What mandatory standard in the PMI Code of Ethics and Professional Conduct is met by conducting bidder conferences?
Select one Mark question
Respect
Honesty
Fairness
Responsibility
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Bidder conferences or vendor conferences are used to provide a clear understanding of the procurement process to all prospective sellers. This process ensures that the mandatory standard of fairness is followed in the bidding process. Fairness in this case means making opportunities equally available to all qualified candidates.
114
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The project sponsor is concerned about possible ethics violations between the project and vendors. What independent review can the sponsor order?
Select one Mark question
Monte-Carlo analysis
Procurement audit
Team assessment
Performance review
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The scenario implies the Control Procurements process should be carried out to determine if any ethics violations between the project and vendors took place. To improve the procurement process and proceedings, organizations seek reviews independent of the project via procurement audits. Conducting these audits independent of the team intimately involved in the project enables the review of the procurement activities and process without influence. The organization's code of ethics, its legal counsel, and external legal advisory arrangements including any ongoing anti-corruption initiatives can contribute to proper procurement controls. A procurement audit reviews the contracts and the contracting process for completeness, accuracy, and effectiveness. If there are any ethical violations as the project sponsor speculates, it is possible those will come to life during a procurement audit. The violations would unlikely emerge from performance reviews, assessments of the project team, or a Monte-Carlo simulation.
115
If you had an experience with a particularly well or poorly performing vendor, what is the correct way to document this experience for future projects?
Select one Mark question
Vow to only work with that vendor from now on
Create a seller performance evaluation
Call the vendor and talk to them about the experience
Tell all your friends about it
A seller performance evaluation is created by the buyer and provides information about the seller's performance.
116
You are building a mile-long bridge on a T&M contract. During the excavation activity, you learned some telephone cables are crossing the alignment where you have to construct the bridge. You need to relocate these telephone cables, but there is no provision of such an activity in the contract. Further, the relocation of the cables is a costly task, and you need to do a lot of government paperwork, as well. You requested an amendment in the contract, but the buyer rejected it. Despite many efforts, you both could not resolve this issue. What should you do next?
Select one Mark question
File a judicial petition in accordance with the state’s law.
Terminate the contract following the termination procedures mentioned in the contract.
Seek arbitration following the ADR procedures in the contract.
Relocate the cables at your own expense since the contract does not cover this activity.
In this scenario there has been an increase in the scope of works. Since the contract doesn’t accommodate this, the contractor rightfully requested for an amendment. However, since both parties cannot settle this amicably, the next step is to seek arbitration.
117
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Your company requires that before you purchase any routers or switches for the data center you are building, you need to solicit quotes from three separate suppliers prior to submitting the purchase request to the finance department. This policy belongs to:
Select one Mark question
Organizational Process Assets
Make-or-Buy Decision
Enterprise Environmental Factors
Procurement Management Knowledge Area
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Any type of corporate policy or formal procurement procedure is an organizational process asset.
118
Three years back, your organization awarded a fixed price contract to a reputable local contractor to construct a new airport terminal in the city. A few days back, you received a change request from the contractor requesting to adjust the contract’s price. The contractor is claiming that as a result of the recent national recession, the prices of raw materials have gone up and he cannot complete the rest of the project at the contract price. Is the contactor’s request legitimate?
Select one Mark question
Yes, unless there is no Economic Price Adjustment provision in the contract.
No, the price of the contract is fixed and cannot be changed.
No, the price hike due to recession must be adjusted against the contractor’s profit.
Yes, you cannot penalize the contactor for price escalations due to force majeure.
Unless there is no provision for economic price adjustment due to inflation, a fixed price contract’s value cannot be changed. Usually fixed price contracts spanning over one year in duration have this provision built into the contract.
119
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The Control Procurements process receives a very important input from the Direct and Manage Project Work process. Which one is it?
Select one Mark question
Work performance data
Agreements
Approved change requests
Procurement documents
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Work performance data is provided to the control procurements process by the direct and manage project work process.
120
Which of the following is incorrect regarding a bidders conference?
Select one Mark question
Bidder conferences should not involve individual face-to-face meetings.
All prospective sellers should be allowed to have a common understanding of the procurement.
No bidders should receive preferential treatment, even if they are part of the company's existing list of approved suppliers.
Questions from each seller should be handled confidentially and not shared with other sellers.
A key objective of a bidders conference is to ensure that all bidders have the same level of understanding of the procurements. Hence, to be totally fair, buyers must ensure that all prospective sellers hear every question from any individual prospective seller and every answer from the buyer.
121
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While rating a proposal, one of the requirements was: "The proposed project manager needs to be a certified Project Management Professional, PMP®" This is an example of:
Select one Mark question
Assumptions
Source Selection Criteria
Constraints
Good practice
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This is an example of source selection criteria used to rate or score proposals.
122
In the procurement process, the seller may be viewed initially as a bidder, then as the selected source, and then as the contracted supplier. The seller will typically manage the work as a project. In such an instance, which of the following is not true?
Select one Mark question
Terms and conditions of the contract become key inputs to many of the seller’s management processes (ex: major deliverables, key milestones, cost objectives).
There need not be a contractual relationship between the buyer and the seller.
The buyer becomes the customer and is then a key project stakeholder for the seller.
The seller’s project management team is concerned with all the processes of project management and not just procurement management.
The statement that there need not be a contractual relationship between the buyer and the seller is incorrect. Whenever the seller is external to the organization, there needs to be a contractual relationship between the buyer and the seller. The other statements are correct.
123
Andy’s project stakeholders are not happy as the project is lagging behind schedule. During the executive committee meeting, Andy requests all stakeholders to keep their calm as most of the project deliverables have been completed and only quality inspections of these deliverables is pending. He assures the stakeholders that he is planning to crash the project to meet the completion deadline. What should be the stakeholders’ biggest concern now?
Select one Mark question
Crashing at this stage might result in undetected errors, decreased profits, and increased post-implementation risks.
Crashing at this stage might result in an exponential cost increase and more time will be required to recover that cost.
Why Andy hasn’t chosen to fast-track the project instead of crashing the project.
Stakeholders do not know the PMBOK jargon; crashing is a valid schedule compression technique.
Meeting project schedule objectives by rushing planned quality inspections may result in undetected errors, decreased profits, and increased post-implementation risks. The other choices are incorrect.
124
The performance reports produced during the Control Procurements process are then provided to which project management process for further processing?
Select one Mark question
Performance report is not an output of the Control Procurement process
Direct & Manage Project Work in the form of work performance data
Monitor & Control Project Work in the form of work performance information
Perform Integrated Change Control in the form of a change request
Although, pmbok does not explicitly mentions performance reports as an output of the control procurements process, these reports are produced during this process. The performance reports are then provided to the monitor & control project work in the form of work performance information.
125
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Which of the following may help in ensuring that certain bidders in the procurement process do not receive preferential treatment and that all prospective sellers have a clear and common understanding of the procurement?
Select one Mark question
Use of screening techniques
Use of bidder conferences
Use of weighted criteria
Use of expert judgment
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Bidder conferences allow prospective sellers and buyers to meet prior to submission of a bid. This ensures that all prospective sellers have a clear and common understanding of the procurement. This usually prevents any bidders from receiving preferential treatment.
126
You are conducting the source selection analysis for an office building renovation project. One project requirement involves setting up the WiFi system once the hardware has been installed. The value of this procurement is relatively small, and you have decided that a full selection process does not make sense. With three prospective vendors listed as pre-approved sellers, what is the best course of action?
Select one Mark question
Use a firm fixed price contract
Utilize a sole source for the procurement
Establish a qualifications only selection method
Conduct a bidder conference
Souce selection analysis is one of the tools and techniques associated with the Plan Procurement Management process and is used to determine the appropriate vendor selection method. The qualifications only selection method applies when the time and cost of a full selection process would not make sense because the value of the procurement is relatively small. The buyer establishes a short list (represented by the three preapproved sellers in this scenario) and selects the bidder with the best credibility, qualifications, experience, expertise, areas of specialization, and references. Therefore, of the available choices, establishing a qualifications only selection method to select the vendor is the best course of action.
127
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Many organizations consider contract administration to be an administrative function separate from the project organization. Who carries out the function of contract administration in such organizations?
Select one Mark question
The Project Manager
The Contract Advisor
The Procurement Administrator
The Procurement Advisor
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In many organizations, a procurement administrator is responsible for ensuring that the procurement relationship is properly managed. The procurement administrator may be on the project team but typically reports to a supervisor from a different department.
128
How does the role of a project manager change based on managing projects using a predictive development life cycle then managing projects in adaptive environments?
The role of the project manager does not change bases on managing project using a predictive development life cycle or managing project in adaptive environments.
