PM-ks-C12-Procurement-myManyTests

70. _____ are oral or written acts or omissions by someone with actual or apparent authority that can be construed to have the same effect as a written change order.

ANSWER: Constructive change orders

66. A(n) _____ is also known as a tender or quote, short for quotation.

ANSWER: bid

72. Controlling procurement also involves _____, which is sometimes referred to as contract closure.

ANSWER: closing procurements

76. A(n) _____ type of e-procurement that identifies new suppliers for a specific category of purchasing requirements using Internet technology.

ANSWER: e-sourcing

57. A(n) _____ contract has the least amount of risk for the buyer.

ANSWER: firm-fixed-price (FFP)

59. The cost at which the contractor assumes total responsibility for each additional dollar of contract cost is known as a(n) _____.

ANSWER: point of total assumption (PTA)

74. A(n) _____ system provides the ability to easily organize, find, and archive procurement-related documents.

ANSWER: records management

67. All procurement documents should be in _____ form in order to facilitate accurate and complete responses from prospective sellers.

ANSWER: written

6. Indirect costs are those costs can be traced back to a project in a cost-effective way. T/F

False Indirect costs are not directly related to the products or services of the project, but they are indirectly related to performing the project. Normally, these costs cannot be traced back to the project in a cost-effective way.

19. In project procurement management, a main output of controlling procurements is a source selection criteria. T/F

False The main outputs of this process include closed procurements, work performance information, procurement documentation updates, change requests, project management plan updates, project documents updates, and organizational process assets.

3. Project procurement management consists primarily of two processes: assessing procurements and controlling procurements. T/F

False There are three main processes in project procurement management. These consist of planning procurement management, conducting procurements, and controlling procurements.

18. Reviewing performance records reduces the risk of selecting a supplier with a poor track record..

True A key factor in evaluating bids, particularly for projects involving IT, is the past performance record of the bidder. Reviewing performance records and references reduces the risk of selecting a supplier with a poor track record

17. A key factor in evaluating bids, particularly for projects involving information technology, is the past performance record of the bidder. T/F

True A key factor in evaluating bids, particularly for projects involving IT, is the past performance record of the bidder. The RFP should require bidders to list other similar projects they have worked on and provide customer references for those projects.

13. Make-or-buy analysis involves comparing the internal costs of providing a product with the cost of outsourcing. T/F

True Make-or-buy analysis involves estimating the internal costs of providing a product or service and comparing the estimate to the cost of outsourcing.

4. If an organization has no need to buy any products or services from outside the organization, then it has no need to perform any of the procurement management processes. T/F

True Planning procurements involves identifying which project needs can best be met by using products or services outside the organization. If there is no need to buy products or services from outside the organization, then further procurement management is not needed.

22. Procurement audits are often done during contract closure to identify lessons learned in the entire procurement process. T/F

True Procurement audits are often done during contract closure to identify lessons learned in the entire procurement process. Organizations should strive to improve all of their business processes, including procurement management.

21. The closing procurements process involves updating records to reflect final results and archiving information for future use. T/F

True The final process in project procurement management is closing procurements. This process involves determining if all work required in each contract was completed correctly and satisfactorily. The team should also update records to reflect final results and archive information for future use.

16. The main sections of an RFP can include the statement of work and schedule information. T/F

True The main sections of an RFP usually include its statement of purpose, background information on the organization issuing the RFP, the basic requirements for the products and services being proposed, and the hardware and software environment.

15. Contents of the procurement management plan vary with project needs. T/F

True The procurement management plan is a document that describes how the procurement processes will be managed. Like other project plans, contents of the procurement management plan will vary with project needs.

5. A single contract can include all three categories of contracts. T/F

True Three broad categories of contracts are fixed price or lump sum, cost reimbursable, and time and material. A single contract can include all three of these categories if it makes sense for a particular procurement.

9. In unit pricing, the total value of the contract is a function of the quantities needed to complete the work. T/F

True Unit pricing can be used in various types of contracts to require the buyer to pay the supplier a predetermined amount per unit of product or service. The total value of the contract is a function of the quantities needed to complete the work.

2. While outsourcing, organizations should protect strategic information because it can become vulnerable in the hands of suppliers. T/F

True While outsourcing, organizations should be careful to protect strategic information that could become vulnerable in the hands of suppliers.

52. _____ refers to the process of acquiring goods and/or services from an outside source.

ANSWER: Procurement

54. _____ management includes the processes required to acquire goods and services for a project from outside the performing organization.

ANSWER: Project procurement

61. _____ contracts are a hybrid of fixed-price and cost-reimbursable contracts.

ANSWER: Time and material (T&M)

47. A document used to solicit quotes or bids from prospective suppliers is known as a(n) _____. a. RFQ b. RFP c. WBS d. SOW

ANSWER: a A Request for Quote (RFQ) is a document used to solicit quotes or bids from prospective suppliers.

24. Outsourcing suppliers can often provide economies of scale, especially for hardware and software, that may not be available to the client alone. Which benefit does this offer an organization? a. reduction in costs b. increased flexibility c. increased accountability d. access to specific skills

ANSWER: a Companies can use outsourcing to reduce labor costs on projects by avoiding the costs of hiring, firing, and reassigning people to projects or paying their salaries when they are between projects. Outsourcing suppliers often can provide economies of scale that may not be available to the client alone, especially for hardware and software.

50. The process of choosing suppliers or sellers is known as _____. a. source selection b. a bid c. WBS d. a change order

ANSWER: a Selecting suppliers or sellers is called source selection. The process involves evaluating proposals or bids from sellers, choosing the best one, negotiating the contract, and awarding the contract.

30. In project procurement management, which process involves obtaining seller responses, selecting sellers, and awarding contracts? a. conducting procurements b. closing procurements c. settling contracts d. planning procurement management

ANSWER: a The process of conducting procurements involves obtaining seller responses, selecting sellers, and awarding contracts.

34. The procurement statements of work are an output of the _____ process of project procurement management. a. planning b. executing c. monitoring and controlling d. closing

ANSWER: a The procurement statements of work are an output of the planning process of project procurement management. Other outputs of the process include the procurement management plan, procurement documents and source selection criteria.

49. In project procurement management, which is one of the main outputs of the conducting procurement process? a. selected seller b. procurement management plan c. procurement statement of work d. closed procurement

ANSWER: a Two of the main outputs of the conducting procurement process are selected sellers and a procurement contract award.

41. With a(n) _____ contract, the buyer pays the supplier for allowable performance costs plus a fixed fee payment usually based on a percentage of estimated costs. a. CPFF b. FPIF c. CPAF d. CPIF

ANSWER: a With a cost plus fixed fee (CPFF) contract....This fee does not vary unless the scope of the contract changes.

44. A(n) _____ contract carries the least risk for suppliers. a. CPPC b. FFP c. CPAF d. FP-EPA

ANSWER: a With a cost plus percentage of costs (CPPC) contract, the buyer pays the supplier for allowable performance costs along with a predetermined percentage based on total costs. From the supplier's perspective, a CPPC contract carries the least risk.

31. Outputs of the _____ process consist of selected sellers and change requests. a. closing procurements b. conducting procurements c. planning procurement management d. controlling procurements

ANSWER: b Conducting procurements involves obtaining seller responses, selecting sellers, and awarding contracts. Outputs include selected sellers, agreements, change requests, and updates to the project management plan and other project documents.

35. In project procurement management, obtaining seller responses, selecting sellers, and awarding contracts is part of the _____ process. a. planning b. conducting procurements c. controlling d. closing

ANSWER: b Conducting procurements is part of the executing process of project procurement management. It involves obtaining seller responses, selecting sellers, and awarding contracts.

51. Which of the following is an output of the contract closure process? a. procurement statements of work b. open item resolution c. resource calendars d. work performance information

ANSWER: b Contract closure involves completion and settlement of contracts and resolution of any open items.

38. Which is true of lump-sum contracts? a. They incur a high degree of risk for the buyer. b. They involve a fixed total price for a well-defined product or service. c. They consist of a fee based on the satisfaction of subjective performance criteria. d. They are also known as cost-reimbursable contracts.

ANSWER: b Fixed-price or lump-sum contracts involve a fixed total price for a well-defined product or service. The buyer incurs little risk in this situation because the price is predetermined.

40. In a(n) _____ contract, the buyer pays the supplier for allowable performance costs along with a predetermined fee and an incentive bonus. a. FFP b. CPIF c. CPPC d. FPIF

ANSWER: b In a cost plus incentive fee (CPIF) contract, the buyer pays the supplier for allowable performance costs along with a predetermined fee and an incentive bonus.

26. Outsourcing to provide extra workers during periods of peak workloads can be much more economical than trying to fill entire projects with internal resources. Which advantages does this characteristic of outsourcing provide organizations? a. offers control over all aspects of projects that suppliers carry out b. provides flexibility c. shifts accountability from external suppliers to internal staff d. helps avoid any form of dependency on suppliers

ANSWER: b Outsourcing to provide extra staff during periods of peak workloads can be much more economical than trying to staff entire projects with internal resources. Many companies cite better flexibility in staffing as a key reason for outsourcing.

33. In project procurement management, which process involves completion and settlement of each contract, including resolution of any open items? a. planning procurement management b. controlling procurements c. negotiating procurements d. conducting procurements

ANSWER: b The process of controlling procurements involves closing and completion and settlement of each contract or agreement, including resolution of any open items.

68. A(n)_____ conference helps ensure that everyone has a clear, common understanding of the buyer's desired products or services.

ANSWER: bidders' ( supplier) (pre-bid)

46. A(n) _____ is a document used to solicit proposals from prospective suppliers. a. RFQ b. WBS c. RFP d. SOW

ANSWER: c A Request for Proposal (RFP) is a document used to solicit proposals from prospective suppliers.

27. What is one drawback of outsourcing? a. it does not provide access to specific skills or technologies b. it invariably results in an increase in both fixed and recurrent costs c. it can make an organization become overly dependent on particular suppliers. d. it cannot increase accountability of suppliers through a written contract

ANSWER: c An organization can become too dependent on particular suppliers. If those suppliers went out of business or lost key personnel, it could cause great damage to a project.

39. _____ contracts involve payment to the supplier for direct and indirect actual costs and often include fees. a. Firm-fixed-price b. Lump sum c. Cost-reimbursable d. Fixed-price incentive fee

ANSWER: c Cost-reimbursable contracts involve payment to the supplier for direct and indirect actual costs. Such contracts often include fees, such as a profit percentage or incentives for meeting or exceeding selected project objectives.

23. A shortage of qualified personnel is one of the main reason that companies outsource. A project may require experts in a particular field for several months and planning for this procurement ensures that the needed services will be available for the project. Which benefit does this characteristic of outsourcing provide an organization? a. reduces focus on its core business b. increases control over all aspects of projects that suppliers carry out. c. provides access to specific skills d. reduces dependency on suppliers

ANSWER: c Feedback: Organizations can gain access to specific skills and technologies by using outside resources.

42. In which contract does the buyer pay the supplier for allowable performance costs along with a predetermined percentage based on total costs? a. FPIF b. CPIF c. CPPC d. CPAF

ANSWER: c With a cost plus percentage of costs (CPPC) contract, the buyer pays the supplier for allowable performance costs along with a predetermined percentage based on total costs.

53. A(n) _____ is a mutually binding agreement that obligates the seller to provide the specified products or services and obligates the buyer to pay for them.

ANSWER: contract

69. The process of source selection involves evaluating proposals from sellers, choosing the best one, negotiating, and awarding the _____.

ANSWER: contract

63. If an SOW is used as part of a contract to describe only the work required for that particular contract, it is called a(n) _____.

ANSWER: contract statement of work

60. Three types of cost-reimbursable contracts include cost plus incentive fee, cost plus fixed fee, and _____.

ANSWER: cost plus percentage of costs (CPPC)

48. After planning for procurement management, the next process involves ____. a. determining the evaluation criteria for the contract award b. developing procurement statements of work c. using expert judgement in planning purchases and acquisitions d. sending appropriate documentation to potential sellers

ANSWER: d After planning for procurement management, the next process involves deciding whom to ask to do the work, sending appropriate documentation to potential sellers, obtaining proposals or bids, selecting a seller, and awarding a contract.

25. Most organizations are not in business to provide information technology services, yet many have spent valuable time and resources on information technology functions when they should have instead worked on important competencies such as marketing, customer service, and new product design. Outsourcing helps tackle this problem. Which benefit does outsourcing primarily provide in such a scenario? a. reduces fixed and recurrent costs b. protects strategic information from being accessible to external suppliers c. increases accountability even without a written contract d. helps focus on an organization's core business

ANSWER: d By outsourcing many IT functions, employees can focus on jobs that are critical to the success of the organization.

37. In project procurement management, which is an output of the planning process? a. change requests b. selected sellers c. resource calendars d. make-or-buy decisions

ANSWER: d Outputs of this process include a procurement management plan, procurement strategy, bid documents, procurement statement of work, source selection criteria, MAKE OR BUY DECISIONS, independent cost estimates, change request, project documents, updates, and organizational process assets updates.

36. In project procurement management, which is an output of the conducting procurements process? a. make-or-buy decisions b. statements of work c. source selection criteria d. change requests

ANSWER: d Outputs of this process include selected sellers, agreements, change requests, project management plan updates, project documents updates.

32. Which process of project procurement management involves managing relationships with sellers, monitoring contract performance, making changes as needed, and closing contracts? a. negotiating procurements b. settling contracts c. deciding on the services to procure d. controlling procurements

ANSWER: d The process of controlling procurements involves managing relationships with sellers, monitoring contract performance, making changes as needed, and closing contracts.

29. In project procurement management, which process involves determining what to procure, when, and how? a. closing procurements b. controlling procurements c. conducting procurements d. planning procurement management

ANSWER: d The process of planning procurement management involves determining what to procure and when and how to do it.

28. What is the first step in project procurement management? a. closing procurement management. b. controlling procurements. c. conducting procurements. d. planning procurement management.

ANSWER: d The process of planning procurement management involves determining what to procure and when and how to do it. This is the first step of project procurement management.

45. The _____ is a description of the work required for a procurement. a. RFQ b. RFP c. WBS d. SOW

ANSWER: d The statement of work (SOW) is a description of the work required for a procurement. Some organizations use the term statement of work for a document that describes internal work as well.

43. From the buyer's perspective, the _____ is the least desirable among all contracts because the supplier has no incentive to decrease costs. a. CPIF b. CPFF c. CPAF d. CPPC

ANSWER: d With a cost plus percentage of costs (CPPC) contract, the buyer pays the supplier for allowable performance costs along with a predetermined percentage based on total costs. From the buyer's perspective, this is the least desirable type of contract because the supplier has no incentive to decrease costs.

75. A(n) _____ type of e-procurement that sends requests for information and prices to suppliers and receives the response of suppliers using Internet technology.

ANSWER: e-tendering

58. A(n) _____ contract includes a special provision for predefined final adjustments to the contract price due to changes in conditions such as inflation.

ANSWER: fixed-price with economic price adjustment (FP-EPA)

71. In procurement management, evaluation of any change should include a(n) _____ analysis.

ANSWER: impact

56. A(n) _____ decision is one in which an organization decides if it is in its best interests to make certain products or perform certain services inside the organization, or if it is better to buy them from an outside organization.

ANSWER: make-or-buy

73. Tools used in contract closure include procurement audits, _____, and a records management system.

ANSWER: negotiated settlements

55. Procurement statements of work are an output of the _____ process.

ANSWER: planning procurement management

65. A(n) _____ is a document prepared by a seller when there are different approaches for meeting buyer needs.

ANSWER: proposal

64. A contract statement of work is a type of _____ statement that describes the work in sufficient detail to allow prospective suppliers to determine if they can provide the required goods and services and to determine an appropriate price.

ANSWER: scope

62. A(n) _____ is a contract clause that allows the buyer or supplier to end the contract.

ANSWER: termination clause

11. In an FPI contract, all of the risk is borne by the buyer. T/F

False A firm-fixed-price (FFP) contract has the least amount of risk for the buyer, followed by a fixed-price incentive fee (FPIF) contract.

7. Buyers absorb lesser risk with cost-reimbursable contracts than they do with fixed-price contracts.

False Cost-reimbursable contracts often include fees, such as a profit percentage or incentives for meeting or exceeding selected project objectives. Buyer absorb more of the risk with cost-reimbursable contracts than they do with fixed-price contracts.

12. An FP-EPA contract carries the least risk for a supplier. T/F

False For a seller, an FFP carries the most risk. An FP-EPA contract carries a higher degree of risk for a seller than a CPPC, CPFF, CPIF, CPAF, or an FPI.

14. A company is considering whether to purchase or lease a piece of equipment for an upcoming project. The cost to purchase is $10,000 plus $100 per day to operate or $500 per day to lease (including operating costs). If the company anticipates using the equipment for a total of 20 days, they will be indifferent as to whether or lease or purchase it. T/F

False If the company uses the equipment for 20 days, they would be better off with a lease at a total cost of $10,000 (20 x $500). The purchase cost of $10,000 will be increased by $2,000 of operating costs (20 x $100).

8. The fee in a CPFF contract constantly varies even when the scope of a contract remains the same.

False With a cost plus fixed fee (CPFF) contract, the buyer pays the supplier for allowable performance costs plus a fixed fee payment that is usually based on a percentage of estimated costs. This fee does not vary, however, unless the scope of the contract changes.

10. All contracts should include specific clauses that take into account issues unique to the project.

True Any type of contract should include specific clauses that take into account issues unique to the project.

20. The contractual relationship is a legal relationship, which means it is subject to state and federal contract laws. T/F

True Controlling procurements ensures that the seller's performance meets contractual requirements. The contractual relationship is a legal relationship, which means it is subject to state and federal contract laws.

1. Suppliers are those organizations or individuals who provide procurement services. T/F

True Organizations or individuals who provide procurement services are referred to as suppliers. Suppliers are also known as vendors, contractors, subcontractors, or sellers.

Economies of scale

factors that cause a producer's average cost per unit to fall as output rises