Knowledge Area Test: Project Procurement Management

Question 1

1. 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?

Answer 1

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. [PMBOK® Guide 6th edition, Page 476]

Question 2

2. 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?

Answer 2

Make-or-buy analysis

Make-or-buy analysis is not a valid technique in the Conduct Procurements process. The other three choices are valid techniques. [PMBOK® Guide 6th edition, Page 482]

Question 3

3. 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?

Answer 3

US$80,000

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. [PMBOK® Guide 6th edition, Page 472]

Question 4

4. 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?

Answer 4

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. [PMBOK® Guide 6th edition, Page 492]

Question 5

5. You have recently initiated a project with a massive scope. The project would require the entire scope to be broken down into multiple components and some of these components have to be outsourced as soon as possible to ensure the timely completion of the project. Which of the following statements is correct?

Answer 5

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 on many levels on any one project, and between organizations internal to and external to the acquiring organization. [PMBOK® Guide 6th edition, Page 461]

Question 6

6. You recently took over a project as the project manager. This is your first project management assignment. The project sponsor is very supportive and is helping you out in successfully managing the project. Recently, some bad quality deliverables were received on the project, and the project sponsor suggested that you to periodically review the vendor’s progress to deliver project scope and quality, within cost and on schedule, as compared to the contract. Which of the following statements is true in this context?

Answer 6

The sponsor has asked you to carry out regular procurement performance reviews.

The sponsor is not giving you more workload. He is asking you to carry out regular procurement performance reviews, which is a good project management practice. [PMBOK® Guide 6th edition, Page 498]

Question 7

7. You are managing a construction project where all mechanical works have been contracted to a contracting firm. You are not satisfied with the quality of work from the contractor and despite many warnings and notices, this hasn’t improved. Now you want to terminate this contract. The termination clause and alternative dispute resolution (ADR) mechanism for each procurement in a project is contained in the:

Answer 7

Agreement

The termination clause and alternative dispute resolution (ADR) mechanism for each procurement in a project are documented in the respective procurement agreement. [PMBOK® Guide 6th edition, Page 498]

Question 8

8. 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 violated any provision of the contract. What should you do?

Answer 8

Negotiate a contact amendment with the subcontractor requiring compliance to the standards

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. [PMBOK® Guide 6th edition, Page 492]

Question 9

9. You are leading an airport construction project that requires a number of scope items to be outsourced to outside vendors. Early during the project you realize that most of the vendors have their own vested interests which do not necessarily match your interests. In spite of that, what do you and the vendors have in common with regards to Control Procurements?

Answer 9

Both parties ensure that they meet their contractual obligations and that their own legal rights are protected.

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. [PMBOK® Guide 6th edition, Page 494]

Question 10

10. 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:

Answer 10

Inspections and Audits

A contractually authorized review by the buyer of work and deliverables is an example of an inspection and audit. [PMBOK® Guide 6th edition, Page 498]