Procurement Flashcards
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
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.
Which of the following approaches can assist in managing ambiguity risks?
Monte Carlo analysis
Root cause analysis
Seeking expert external input
Conducting sprint retrospectives
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.
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.
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
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 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.
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
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.
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 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.
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
Cost plus contracts are suitable when the work is evolving, likely to change, or not well defined..
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
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.
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
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.
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.
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.
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
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.
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
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.
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
Work performance data is provided to the control procurements process by the direct and manage project work process.
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
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.
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
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.
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
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.
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
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.
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
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.
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
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.
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.
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.
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
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.
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
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.
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.
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.
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
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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
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.
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.
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.
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
Make-or-buy analysis is not a valid technique in the conduct procurements process. The other three choices are valid techniques.
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.
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
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
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
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.
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
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.
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.
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
The source selection criteria is an output of the plan procurement management process.
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.
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.
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.
