Rita Questions - Ch 12 Procurement Management

13. Which ofthe following activities occurs during the Plan Procurements process? A. Make-or-buy decisions B. Answering sellers' questions about the bid documents C. Advertising D. Proposal evaluation

Answer A Answering sellers' questions (choice B), advertising (choice C), and proposal evaluation (choice D) occur during the Conduct Procurements process.

21. Which of the following is an advantage of centralized contracting? A. Increased expertise B. Easier access C. No home D. More loyalty to the project

Answer A Centralized contracting usually means harder access and less loyalty. Therefore, choices B and D are disadvantages. The fact that procurement managers have no home when they're not working on a project (choice C) is also a disadvantage.

34. Close Procurements is different from Close Project or Phase in that Close Procurements: A. Occurs before project closure B. Is the only one to involve the customer C. Includes the return of property D. May be done more than once for each contract

Answer A Choice B cannot be correct since the customer may be involved in lessons learned and procurement audits and would certainly be involved in formal acceptance. Choice C cannot be correct since both Close Procurements and Close Project or Phase involve the return of property. Close Procurements is done only once for each contract, so choice D cannot be correct. Choice A is correct because contracts are closed out before the project is closed out with the Close Project or Phase process.

12. What is one of the KEY objectives during contract negotiations? A. Obtain a fair and reasonable price B. Negotiate a price under the seller's estimate C. Ensure that all project risks are thoroughly delineated D. Ensure that an effective communications management plan is established

Answer A Choices C and D are good ideas, but not the key objective. Negotiations should be win/win, so choice B is not the best choice. A fair and equitable price (choice A) will create a good working atmosphere. Otherwise, you will pay later, on change orders.

39. What type of contract do you NOT want to use if you do not have enough labor to audit invoices? A. Cost plus fixed fee (CPFF) B. Time & material (T&M) C. Fixed price (FP) D. Fixed price incentive fee (FPIF)

Answer A If you got this question wrong, reread it. You need to audit invoices in all contract types, so how do you choose? Look for the answer that is BEST. In this case, it would be the choice that requires the greatest effort. A T&M contract (choice B) should be for small dollars and short duration (remember that a T&M contract has no incentive to finish), so it does not have a great risk. Choices C and D cannot be best because the risk to the buyer is limited-they are still only going to pay the contract price. In a CPFF contract, the buyer pays all costs. The seller could be charging the buyer for costs that should not be allocated to the buyer. Because of the size and dollar amount of these type of contracts and because the risk to the buyer is great, CPFF contracts need the most auditing. Since this question asked for which one you do not want to use, the answer must be choice A.

18. The sponsor and the project manager are discussing what type of contract the project manager plans to use on the project. The buyer points out that the performing organization spent a lot of money hiring a design team to come up with the design. The project manager is concerned that the risk for the buyer be as small as possible. An advantage of a fixed price contract for the buyer is: A. Cost risk is lower B. Cost risk is higher C. There is little risk D. Risk is shared by all parties

Answer A If you had trouble with this one, you need to remember that the questions are asked from the buyer's perspective unless otherwise noted. In this case, the seller has the most cost risk, and the buyer's risk is lower.

22. With which type of contract is the seller MOST concerned about project scope? A. Fixed price B. Cost plus fixed fee C. Time and material D. Purchase order

Answer A In a fixed price contract, the seller has the cost risk and therefore wants to completely understand the procurement statement of work before bidding.

31. The project manager and project sponsor are discussing the project costs and whether it is better to have their own company do part of the project or hire another company to do the work. If they asked for your opinion, you might say it would be better to do the work yourself if: A. There is a lot of proprietary data B. You have the expertise but you do not have the available manpower C. You do not need control over the work D. Your company resources are limited

Answer A It is generally better to do the work yourself if using an outside company means you have to turn over proprietary data to the other company.

6. A routine audit of a cost reimbursable (CR) contract determines that overcharges are being made. If the contract does not specify corrective action, the buyer should: A. Continue to make project payments B. Halt payments until the problem is corrected C. Void the contract and start legal action to recover overpayments D. Change the contract to require more frequent audits

Answer A Notice that choice B is really saying "halt ALL payments," Halting all payments would be a breach of contract on the buyer's part. Choice C is too severe and cannot be done unilaterally. Choice D does not solve the problem presented. A choice that said, "Halt payments on the disputed amount" would probably be the best answer, but it is not offered. The best answer is A.

3. All of the following statements concerning procurement documents are incorrect EXCEPT: A. Well-designed procurement documents can simplify comparison of responses B. Procurement documents must be rigorous with no flexibility to allow consideration of seller suggestions C. In general, bid documents should not include evaluation criteria D. Well-designed procurement documents do not include a procurement statement of work

Answer A Often the seller is required to inform the buyer of anything that is missing or unclear in the procurement documents (choice B). It is in the buyer's best interest to discover missing items, since it will save the buyer money and trouble to correct the problem early. Procurement documents must contain terms and conditions and evaluation criteria (choice C), as well as all the work that is to be done, including the procurement statement ofwork (choice D). This is so the seller can price the project and know what is most important to the buyer. Choice A is an important point for the real world and is the best answer.

16. In a fixed price (FP) contract, the fee or profit is: A. Unknown B. Part of the negotiation involved in paying every invoice C. Applied as a line item to every invoice D. Determined with the other party at the end of the project

Answer A To the seller, it is known, but this question is from the buyer's perspective. You do not know what profit the seller included in the contract.

17. A project performed under a cost reimbursable contract has finally entered the Close Procurements process. What MUST the buyer remember to do? A. Decrease the risk rating of the project B. Audit seller's cost submittals C. Evaluate the fee he is paying D. Make sure that the seller is not adding resources

Answer B Although a reserve might be decreased for the project overall when one of its contracts enters closure, the risk rating of the project (choice A) may not be affected. Choice C should have been done during the Conduct Procurements process. Although choice D may be a concern during the Administer Procurements process, it is not common during Close Procurements. Choice B, audit seller's cost submittals, is part of the procurement audit and is a required aspect of Close Procurements.

30. Your project has just been fast tracked and you are looking to quickly bring in a subcontractor to complete networking. There is no time to issue a request for proposal (RFP), so you choose to use a company you have used many times before for software development. A PRIMARY concern in this situation is: A. Collusion (Geheime Absprachen) between subcontractors B. The subcontractor's qualifications C. The subcontractor's evaluation criteria D. Holding a bidder conference

Answer B Although you have used this contractor before, how can you be sure the company is qualified to do the new work, since it is not exactly like the previous work? This is the risk you are taking.

7. The primary objective of contract negotiations is to: A. Get the most from the other side B. Protect the relationship C. Get the highest monetary return D. Define objectives and stick to them

Answer B As a project manager, you want to develop a relationship during negotiations that will last throughout the project.

15. The sponsor is worried about the seller deriving extra profit on the cost plus fixed fee (CPFF) contract. Each month he requires the project manager to submit CPI calculations and an analysis of the cost to complete. The project manager explains to the sponsor that extra profits should NOT be a worry on this project because: A. The team is making sure the seller does not cut scope B. All costs invoiced are being audited C. There can only be a maximum 10 percent increase if there is an unexpected cost overrun D. The fee is only received by the seller when the project is completed

Answer B Choice A cannot be best because cutting scope decreases profits on this type of contract. Choice C cannot be best, as CPFF contracts generally do not limit fee increases. Choice D cannot be best, as the fee in a CPFF contract is usually paid out on a continuous basis during the life of the project. One of the ways to change the profit in a cost plus fixed fee contract is to invoice for items not chargeable to the project (choice B).

27. A project manager is in the middle of creating a request for proposal (RFP). What part of the procurement process is she in? A. Conduct Procurements B. Plan Procurements C. Administer Procurements D. Make-or-Buy Analysis

Answer B In the Plan Procurements process, we create the procurement documents. The request for proposal is one of those documents.

26. The project team seems to like to argue; they have argued about everything. Luckily the project manager has set in place a reward system and team-building sessions that will help and encourage the team to cooperate more. The Iatest thing they are arguing about is whether they should complete a work package themselves or outsource the work to someone else. What part of the procurement process must they be in? A. Conduct Procurements B. Plan Procurements C. Administer Procurements D. Claims Administration

Answer B Notice that much of this question is irrelevant? Did you also notice that the words "make-or-buy decision' were not used in the question? Instead, the question used the definition of make-or-buy. Watch out for this on the exam. A make-or-buy decision is needed before the rest of the procurement process can occur. Therefore, the situation must be taking place in one of the early steps of the procurement process.

33. A seller is awarded a contract to build a pipeline. The contract terms and conditions require that a work plan be issued for the buyer's approval prior to commencing work, but the seller fails to provide one. Which of the following is the BEST thing for the buyer's project manager to do? A. File a letter of intent B. Develop the work plan and issue it to the seller to move things along C. Issue a default letter D. Issue a stop work order to the seller until a work plan is prepared

Answer C Any time that a seller does not perform according to the contract, the project manager must take action. The preferred choice might be to contact the seller and ask what is going on, but that choice is not available here. Therefore, the best choice is to let him know he is in default (choice C).

11. Which of the following BEST describes the project manager's role during the procurement process? A. The project manager has only minor involvement B. The project manager should be the negotiator C. The project manager should supply an understanding of the risks of the project D. The project manager should tell the contract manager how the contracting process should be handled

Answer C As the project manager, you know what the project risks are. You need to make sure that provisions are included in the contract to address these risks.

9. Bidder conferences are part of: A. Plan Procurements B. Administer Procurements C. Conduct Procurements D. Communications Management

Answer C Expect many questions on the exam that require you to know in what part of the procurement process activities are done.

2. With a clear contract statement of work, a seller completes work as specified, but the buyer is not pleased with the results. The contract is considered to be: A. Null and void B. Incomplete C. Complete D. Waived

Answer C If the seller completes the work specified in the procurement statement of work, the contract is considered complete. That does not mean the same thing as contract closed. The Close Procurements process must still occur. However, in this situation, the contract work is completed. Tricky!

23. Your company has an emergency and needs contracted work done as soon as possible. Under these circumstances, which of the following would be the MOST helpful to add to the contract? A. A clear procurement statement of work B. Requirements as to which subcontractors can be used C. Incentives D. A force majeure clause

Answer C If you follow the proper project management process, you ALLWAYS have good definition of scope (choice A). In this situation, you are in a time crunch. Both good scope definition and incentives are required to make it happen. Which provides the better answer? Along with good scope definition, you need the seller to feel your need for speed. Incentives bring the seller's objectives in line with the buyer's and thus would be the MOST helpful. Good scope definition alone does not ensure speed.

38. During project executing, your project team member delivers a project deliverable to the buyer. However, the buyer refuses the deliverable, stating that it does not meet the requirement on page 300 of the technical specifications. You review the document and find that you agree. What is the BEST thing to do? A. Explain that the contract is wrong and should be changed B. Issue a change order C. Review the requirements and meet with the responsible team member to review the WBS dictionary D. Call a meeting of the team to review the requirement on page 300

Answer C In choice A, the contract could be wrong, or the customer could be wrong, but this would have/should have been discovered earlier if proper project management was followed. If you picked choice B, you have forgotten that a seller cannot issue a change order (although he could request one). Did you select choice D? If so, remember that project management is not about making every decision with ALL the team members. Choke C involves meeting with the appropriate team member. If such a problem has arisen, it could mean something was wrong in the WBS dictionary or in how the team member completed the work.

4. A project manager for the seller is told by her management that the project should do whatever possible to be awarded incentive money. The primary objective of incentive clauses in a contract is to: A. Reduce costs for the buyer B. Help the seller control costs C. Synchronize objectives D. Reduce risk for the seller by shifting risk to the buyer

Answer C Incentives are meant to bring the objectives of the seller in line with those of the buyer. That way both are progressing toward the same objective.

10. All of the following MUST be present to have a contract EXCEPT: A. Procurement statement of work B. Acceptance C. Address of the seller D. Buyers' signatures

Answer C Many people miss the fact that a contract includes a procurement statement of work(choice A). To have a contract, you must also have acceptance (choice B). One set of signatures is not enough; you must have sign-off (i.e., acceptance) from both parties, so choice D is only partially correct. The address of the seller (choice C) is not required, and therefore is the exception.

1. Once signed, a contract is legally binding unless: A. One party is unable to perform B. One party is unable to finance its part of the work C. It is in violation of applicable law D. It is declared null and void by either party's legal counsel

Answer C Once signed, a contract is binding. Generally, the inability to perform, get financing, or one party's belief that the contract is null and void does not change the fact that the contract is binding. If, however, both sides agree to terminate the contract, the contract can move into closure. Once closure is completed, the project is considered completed.

29. Negotiations between two parties are becoming complex, so party A makes some notes that both parties sign. However, when the work is being done, party B claims that they are not required to provide an item they both agreed to during negotiations, because it was not included in the subsequent contract. In this case, party B is: A. Incorrect, because both parties must comply with what they agreed upon B. Correct, because there was an offer C. Generally correct, because both parties are only required to perform what is in the contract D. Generally incorrect, because all agreements must be upheld

Answer C Party B is only required to deliver what is defined in the contract.

20. You are in the middle of a complex negotiation when the other party says, "We need to finish in one hour because I have to catch my plane:' That person is using which of the following negotiatian strategies? A. Good guy, bad guy B. Delay C. Deadline D. Extreme demands

Answer C Putting a time limit on the negotiation is an example of deadline.

5. All the following statements about change control are incorrect EXCEPT: A. A fixed price contract will minimize the need for change control B. Changes seldom provide real benefits to the project C. Contracts should include procedures to accommodate changes D. More detailed specifications eliminate the causes of changes

Answer C Since there can be changes in any form of contract, choice A is not the best answer. There are always good ideas (changes) that can add benefit to the project, so choice B cannot be the best answer. In choice D, the word "eliminate" implies that changes will not occur. As that is not true, this cannot be the best answer.

36. The project team is arguing about the prospective sellers who have submitted proposals. One team member argues for a certain seller while another team member wants the project to be awarded to a different seller, The BEST thing the project manager should remind the team to focus on in order to make a selection is the: A. Procurement documents B. Procurement audits C. Evaluation criteria D. Procurement management plan

Answer C The evaluation criteria are the primary tools for evaluating potential sellers and should be used by the entire team in order to make a selection.

32. After much excitement and hard work, the procurement statement of work for the project is completed. Even after gaining agreement that the procurement statement of work is complete, the project manager is still concerned whether it actually addresses all the buyer's needs. The project manager is about to attend the bidder conference. He asks you for advice on what to do during the session. Which of the following is the BEST advice you can give him? A. You do not need to attend this session. The contract manager will hold it B. Make sure you negotiate project scope C. Make sure you give all the sellers enough time to ask questions. They may not want to ask questions while their competitors are in the room D. Let the project sponsor handle the meeting so you can be the good guy in the negotiation session

Answer C The project manager should attend the bidder conference, so choice A is incorrect. Did you select choice B because the question referred to a concern about scope? Then read the choice again. lt talks about negotiation, and negotiation occurs after the seller is selected, not during the bidder conference. The procurement manager usually holds the bidder conference, so choice D is incorrect. Choice C describes one of the many challenges of a bidder conference and is therefore the best answer.

37. The performing organization is trying to decide whether to split the contracts department and assign procurement responsibilities to departments directly responsible for the projects. A procurement professional might not want this split to occur because they would lose ____ in a decentralized contracting environment. A. Standardized company project management practices B. Loyalty to the project C. Experience D. Access to others with similar expertise

Answer D Choice A is incorrect, as the change would not impact the entire project management process, only procurement. Loyalty to the project (choice B) would be gained, not lost, in a decentralized environment. In a decentralized procurement situation, there is less focus on maintaining the skill or expertise of the contracting function, making choice D the best answer.

14. Which of the following is the BEST thing for a project manager to do in the Conduct Procurements process of procurement management? A. Evaluate risks B. Select a contract type C. Update the project schedule D. Answer sellers' questions about bid documents

Answer D During the Conduct Procurements process, you normally answer questions submitted by the sellers. The risk analysis processes (choice A) are done before the procurement process begins, as procurement is a risk mitigation and transference tool. Selecting a contract type (choice B) is part of Plan Procurements. Changes to the project schedule (choice C) may be an output of the Administer Procurements process.

35. You have just started administering a contract when management decides to terminate the contract. What should you do FIRST? A. Go back to the Plan Procurements process B. Go back to the Conduct Procurements process C. Finish the Administer Procurements process D. Go to the Close Procurements process

Answer D If the contract is terminated, the project needs to enter closure. You need those results for historical purposes.

24. During what part of the procurement process does procurement negotiation occur? A. Plan Procurements B. Close Procurements C. Administer Procurements D. Conduct Procurements

Answer D Negotiation occurs during the Conduct Procurements process.

28. Your program manager has come to you, the project manager, for help with a bid for her newest project. You want to protect your company from financial risk. You have limited scope definition. What is the BEST type of contract to choose? A. Fixed price (FP) B. Cost plus percentage of cost (CPPC) C. Time and material (T&M) D. Cost plus fixed fee (CPFF)

Answer D Of the options given, the only contract that limits fees for large projects with limited scope definition is cost plus fixed fee.

25. The project team is arguing about the prospective sellers who have submitted proposals. One team member argues for a certain seller while another team member wants the project awarded to a different seller. What part of the procurement process is the team in? A. Plan Procurements B. Administer Procurements C. Negotiate Contract D. Conduct Procurements

Answer D Selected sellers are an output of the Conduct Procurements process.

8. A seller is working on a cost reimbursable (CR) contract when the buyer decides he would like to expand the scope of services and change to a fixed price (FP) contract. All of the following are the seller's options EXCEPT: A. Completing the original work on a cost reimbursable basis and then negotiating a fixed price for the additional work B. Completing the original work and rejecting the additional work C. Negotiating a fixed price contract that includes all the work D. Starting over with a new contract

Answer D The seller does not have the choice to start over. The contract that exists is binding. Both parties could agree to start over, but this is a drastic step.

40. A new project manager is about to begin creating the procurement statement of work. One stakeholder wants to add many items to the procurement statement of work. Another stakeholder only wants to describe the functional requirements. The project is important for the project manager's company, but a seller will do the work. How would you advise the project manager? A. The procurement statement of work should be general to allow the seller to make his own decisions B. The procurement statement of work should be general to allow clarification later C. The procurement statement of work should be detailed to allow clarification later D. The procurement statement of work should be as detailed as necessary for the type of project

Answer D When the seller has more expertise than the buyer, the procurement statement of work should describe performance or function rather than a complete list of work. In any case, the procurement statement of work should be as detailed as possible.

19. As part of the records management system, you are trying to make sure that all records from the procurement are documented and indexed. Which of the following do you NOT have to worry about? A. Proposal B. Procurement statement of work C. Terms and conditions D. Negotiation process

Answer D You will see long, wordy questions consisting of many paragraphs on the exam, but do not let them worry you. Sometimes the briefer questions are harder. To answer this question, you need to know what a records management system is and that it would not be used to keep track of negotiations. The negotiation process is not a document.