PMP 09 – Project Procurement Management

1  . All the following statements about change control are incorrect, EXCEPT :

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There are always good ideas (changes) that can add benefit to the project, regardless of the contract type. Although detailed specifications may reduce the need for changes, they do not eliminate the causes. Contracts should include procedures to accommodate changes.

Incorrect

 

2. All the following statements concerning procurement documents are incorrect, EXCEPT :

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Often the seller is required to inform the buyer of anything that is missing or unclear in the procurement documents. It is in the buyer's interest to discover missing item, since it will save the buyer money and trouble to correct the problem early. Procurement documents must contain terms and conditions and selection criteria, as well as documentation of all work that is to be done. This is so the seller can price the project and know what is most important to the buyer.

Well-designed procurement documents can simplify comparison of responses.. This is an important point for the real world and is the best answer.

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3. Which one of the following is NOT true about a cost reimbursable contract ?

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In a cost reimbursable contract, sellers usually write a detailed statement of work. Buyers mostly use this sort of contract in research and development or in information tech projects where the scope is unknown.

Incorrect

 

4. You are asked by management to select a contract type that will obligate the seller to accept all liability for poor workmanship, engineering errors, and consequential damages in the project. Which of the following contact types will you select ?

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The fixed price or lump sum contract, with usually pays a lump sum amount for all the work, please the risk on the seller. The seller may include a contingency in the contract to assist in minimizing the risk of reduced profits.

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5. In a fixed price incentive fee contract, the target cost is estimated at $250,000 and the fee at $35,000. The actual cost came to be $210,000, since there was a cost saving, the seller shares the saving at a 70/30 ratio ( 70 % to the buyer and 30% to the seller). What the final fee and final price ?

Correct

Total Savings is Total Cost - Actual Cost = $250,000 - $210,000 = $40,000

Seller portion is $40,000 * 30% = $12,000

so, the Final Fee will be $35,000 + $12,000 = $ 47,000

Final Price =  $210,000 + 47,000 = $257,000

Incorrect

 

6. You were asked by your management to investigate the cause of severe cost overrun in the one of the project that was completed last year. You found out that a certain contract was used in project that is considered to be very risky for the buyer as it does not encourage the seller to control costs; rather, it motivates the seller to be inefficient. What sort of contract was used in the project ?

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In a Cost plus percentage of cost (CPPC) contract, the buyer pays actual cost plus a percentage of cost as a fee. So, the morecost the seller shows, the more money the seller makes. Sellers have no incentive to control cost; rather, they get awarded for being in efficient. This type of contract is illegal in the US.

Incorrect

 

7. Which of the following is the process of documenting project purchasing decisions, specifying the approach, defining selection criteria to identify potential sellers, and putting together a procurement management plan ?

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Plan Procurement process is the process of documenting project purchasing decisions, specifying the approach, defining selection criteria to identify potential sellers, and putting together a procurement management plan

Incorrect

 

8. Lars is  a project manager overseeing an online age verification application for one of the very important clients for this organization. Three months in the project, Lars got a call from the client who informed him that they would end the contract due to a change in business direction. The client also discussed the compensation that the seller's organization is offering to Lar's organization for the work completed so far. This is an example of which one of the following ?

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Termination for convenience is a contract clause that permits the buyer to terminate a contract at any time for a cause or convenience. Usually there will be specific conditions associated with the execution of this clause. A letter of intent is a letter expressing the intention of the buyer to hire the seller. It is not a contract; thus, it does not have any legal binding.

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9. You are the project manager for an upcoming outdoor concert event. You're working on the procurement plan for the computer software program that will control the lighting, and screen projections during the concert. You're comparing the cost of purchasing a software product to the cost of your company programmers writing a custom software program. You are engaged in which of the following ?

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Make-or-buy Analysis is determining whether it's more cost effective to purchase the goods or services needed for the project or most cost effective for the organization to produce them internally.

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10. You are the project manager of a network replacement project for a 40-floor office building. You plan to hire a contractor to pull the old cable out and then install the new cable. The work has to be done in such a way to have minimum to zero disruption to the tenant organization during business hour, hence you need to hire a well experience reputed firm. You contracted the procurement department to develop a list of firms that have the capability to do work. What are you referring to ?

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You are referring to a qualified sellers' list. This is a shortlist of all sellers who have the capability to perform the work. So, by only inviting those sellers, you save  time going through the Conduct Procurement process.

Negotiating a contract happens when a seller has been selected. Evaluation criteria is established before a list of firms is to be created based on that criteria. Solicitation packages will be sent out after the list is available.

Incorrect