Contracts Flashcards
(9 cards)
81A previously identified technical issue has been resolved and the project is moving forward. The project manager has been warned that the same issue will probably arise on similar projects in the future. What should be done first when responding to this warning?
SELECT THE CORRECT ANSWER
Ensure that the issue log is updated.
Create a risk report and keep the report current.
Notify the project sponsor about the warning.
Ensure that the lessons learned register is updated.
Correct Option:A
EXPLANATION
The issue log will help the project manager effectively track and manage issues, ensuring that they are investigated and resolved. PMBOK Guide Sixth Edition (2018), 4. Project Integration Management / 4.3.3.3 Issue Log, p96
21
You are managing a project and you have decided to outsource a part of the project to a vendor. You have offered a bonus to the vendor if the work is completed in two months. This is an example of:
SELECT THE CORRECT ANSWER
Project incentive
Project goal
Fixed price contract
None of the above
Correct Option:A
EXPLANATION
This is an example of project incentive.
Bonus as additional motivation
23
Of the following types of contracts, which has the highest risk for the seller?
SELECT THE CORRECT ANSWER
Cost plus fixed fee - CPFF
Time and Material - T and M
Firm Fixed Price Contract - FFP
Cost plus Incentive fee CPIF
Correct Option:C
EXPLANATION
The riskiest for the seller among the options stated is Firm Fixed Price Contract, FFP. It’s a Fixed price contract in which total costs are fixed. The scope of work is clearly defined and stated. Cost-reimbursable contracts are the least risky for the seller since the costs are not fixed and paid at actuals. Time and material have medium risk from the perspective of the buyer and seller and are typically used for smaller dollar amounts.
62
You are in charge of a project for the electrical layout of a five-star hotel. You see this as a very simple project as you and your team have a lot of experience executing similar projects. As a result, your organization has a wealth of Organizational Process assets. You have worked out the exact details of the work involved and have a very detailed WBS with granular-level activities defined. You decide to employ the services of a contractor for laying out of the cable trays. What kind of a contract would be the best choice?
SELECT THE CORRECT ANSWER
Cost-reimbursable contract
Fixed-price contract
Time and Material contract
None of the above
Correct Option:B
EXPLANATION
When as a buyer you are clear of the scope and statement of work, the contract choice should be Fixed-price. In this type of contract, the scope is clearly defined, and almost all the risk lies with the seller. Here, the buyer has experience executing similar projects in the past and has also broken down WBS into detailed activities. So, the scope is clear, and the correct answer is option B.
84You are negotiating with a contractor for additional staff of software developers and testers. As a buyer, you don’t quite have the exact statement of work ready. What kind of contract is MOST appropriate for this kind of work?
SELECT THE CORRECT ANSWER
Time and Materials - T and M
Cost plus fixed fee - CPFF
Firm Fixed Price Contract - FFP
Fixed Price Incentive Fee Contracts FPIF
Correct Option:A
EXPLANATION
As the nature of work is not quite clear and this deals with contracting additional staff, the best choice of contract is T and M. Fixed price contracts are applicable where scope of work is quite clear, which is not the case here. Choosing a Cost-reimbursable contract makes no sense since you and the seller can agree on the unit rate of staff. So, the best option is T and M.
122In which form of contract will the cost risk lie with the seller?
SELECT THE CORRECT ANSWER
CPIF
T and M
CPAF
FP
D
EXPLANATION
Cost risk lies with the seller in a Fixed price contract.
113While reviewing the stakeholder engagement assessment matrix, you notice that one of the important stakeholders is at an unaware state at the moment and has no clue about what is going on in your project. As this stakeholder can contribute significantly to your project success, you decide to bring him to a “supportive” or “leading” state. Which of the following will help you to achieve your goal with this stakeholder?
SELECT THE CORRECT ANSWER
Send him regular reports on the project and its benefits
Offer him a paid vacation in Hawaii in exchange for his support
Assign top priorities to his expectations, concerns, and issues
Involve him in some project activities
Correct Option:D
EXPLANATION
Involving stakeholders in some project activities is a good way to bring them to a supportive or a leading state.
65Your team is in the process of finalizing the type of contract for procurement. It is observed that the procurement statement of work is not precise and there are some constraints which do not permit further clarity in defining the statement of work. It is agreed amongst stakeholders that the team can go for a slightly open-ended and flexible arrangement with the seller. Which of the following contract types would be best suited?
SELECT THE CORRECT ANSWER
Fixed price incentive fee contracts
Cost plus fixed fee
Time and materials or T and M
Fixed price-EPA
Correct Option:C
EXPLANATION
Time and materials or T and M contract works best for flexible arrangements.
70 CONTRACTS
During a large scale oil and gas project, you wanted to outsource a part of the project work which contains high amount of risk. Due to the risk involved in the work, not many contractors are interested to take up the work. What type of contract you would suggest to attract the vendors and contractors?
SELECT THE CORRECT ANSWER
Cost plus fixed fee
Cost plus award fee
Fixed price incentive fee
Firm fixed price contract
Correct Option:B
EXPLANATION
Due to the nature of the work, if the contractors are not interested to take up the job, the project manager can suggest to go for a cost plus award fee contract as it gives extra award to the contractor who is willing to take up the job.
