PMP - Practice Questions

12. A software development team has been used to developing detailed budgets, which has often resulted in cost overruns due to the customer asking for numerous changes as the project progresses. This time, they are asked to simply provide a Beta distribution estimate for their work. What is the correct formula

(O+4M+P)/6

30. During a discussion on quality, the team receives information from the customer that the primary focus needs to be on making the product easy to assemble by untrained people. The team reviews the current product and realizes that by making parts a certain way, the product cannot be put together incorrectly. This focus on assembly is known as what?

Design for X

52. Mary, John, Andrea and Ralph are working on the Conduct Procurements process. They are hosting a final meeting with the selected vendor to sign the contract. Brent, a senior manager from the finance department and Morgan, the company attorney, are joining them for this final meeting. What would be the most-likely reason why Brent and Morgan would need to be at this meeting?

Brent & Morgan have the authority to sign the contract

57. Paul and a group of engineers are reviewing the risk register. They see that there are a set of risks that, on their own, do not impact the project in a significant way. However, if they all occur, the impact would be high. As a result, they decide to run all the risks through a computerized model that simulates the combined effects as to determine the potential impacts. This is known as what?

Monte Carlo Simulation

25. Clifford is managing a 12-month information technology infrastructure project with a project budget of $816,000. If the project is in the 9th month, what would the Planned Value (PV) be?

816*(9/12) = 612 = $612,000

84. The project team is using an agile methodology for the first time with the new project. What is a key difference in how the project scope will be managed by adopting agile methods?

84. The new project will now use backlogs rather than a baseline to reflect current needs Agile: Iterative development with small product releases—delivering products frequently allows customers to provide regular feedback and gives the team the ability to react to changes in the market place. Test-driven development—developers write the test cases for the new software before they implement the code changes. Preparing tests before coding improves quality and facilitates rapid feedback. Collocation—team members (including customer representatives) are collocated to facilitate communication and minimize wasteful waiting times. Self-organizing teams—team members assume multiple roles, improvise, and spontaneously collaborate, while simultaneously learning from and teaching their peers without a command-and-control manager. A team normally consists of a project manager (also called coach or scrum master), product owner, customer representatives, developers, testers, and architect. Product (requirement) backlog—an evolving, prioritized queue of business and technical requirements. At every iteration, the backlog is reviewed by the full team and functionality is selected to be built in the next iteration. The product owner is responsible for managing and controlling the product backlog.

83. The project team is reviewing a tally of items to develop the Project Management Plan that are developed from their industry's advisory body. This is assisting them in making sure they have not missed any regulations. What is this known as?

A checklist It is a good idea to develop a checklist at the very onset of a project as it assures from the very beginning that all relevant tasks and activities are itemized in one central location throughout the life of the project.

61. Ralph, the project manager, has just received information regarding a particular risk. This risk has occurred and upon reviewing the communications management plan, a special communication needs to be produced for the executive managers, including the chief executive officer. This communication would most likely be in which format?

A formal report, following the details listed in the Project Management Plan

24. Changes to the cost baseline requires what?

A formally-approved change request

69. The focus group team is working with twenty panelists. The team listens to each of the panelists and then rephrases the person's key points to ensure that they understood the response. This is an example of what?

Active listening

49. Kelly and her team are in the direct and manage project work process on producing the deliverables for the project. An important component of the output of this process is change control so that the team and other stakeholders know what occurs as the process repeats. When should change control be applied?

After the first deliverable.

17. Andrea and Colin are working on updating a project document with the results of the Estimate Activity Resources. The information contains information regarding the types and quantities of resources required. They have made some estimates on equipment, hours of operation and various restrictions. What document are they updating?

Assumption Log

76. The project manager and executive team are writing the Project Charter. They are wondering how to keep track of the various suppositions, constraints and restrictions so that the project team will have access to them and be able to update these. What document will contain this information?

Assumption Log An assumption log is created during project initiation when forming the business case and the content will be used in the project charter.

2. A certain amount of equipment and resources were thought to be accurate during the planning for a major global project. Now with controlling resources, these thoughts have changed. Which document should be updated?

Assumption log

23. Carl has been tasked with researching completed projects that were done by another division of the company. These project are similar in scope to the newest project. He is to provide a list of best practices, ideas and methods to compare the newest project with the completed projects. This is known as what?

Benchmarking

10. A project team and their manager are documenting the latest lessons learned as part of the manage project knowledge process. They have the subject matter expert on this iteration of the project, as well as project information management system and a list of the key challenges that they faced. What other tool or technique would be most useful for them to use?

Interpersonal and team skills

50. Kelly is placed in charge of reviewing the RFQs from six vendors on a construction project. She notices that in one sub-section of the procurement statement of work statement that all six vendors have responded differently. She brings this to the attention of the project manager, Jill. Jill reviews this with her and believes that there is some confusion with the procurement statement of work. What is the best course of action for them to take?

Conduct a bidder conference

67. The contractor is concerned about a contract that her company is bidding on. Their company would be reimbursed for the costs of the work but the primary profit would be based on some subjective performance criteria defined by the buyer's demands. What kind of contract type is this?

Cost plus award fee Cost Plus Award Fee (CPAF) A CPAF is very similar to the CPIF we just discussed. However, the main difference here is the award fee is at the sole discretion of the buyer.

15. A large project team consists of twenty people from five different organizations all located in one city. Each organization has a different corporate structure and some individuals are experienced in projects with a formal framework, while one company is used to using agile methodologies. What interpersonal skill would be most useful with these differing organizations

Cultural awareness

6. A new project manager recently attended a meeting about agile project methodology. He informs his project team that starting immediately, they will begin using these new agile methods. The team refuses to do work on an agile schedule as they are not experienced with agile methodology. What team skill has the project manager forgotten to use?

Cultural awareness

13. A summary of project risks or issues encountered on a project and how these risks and issues were addressed are performed in which process

Close Project or Phase

26. Agreements are an input to which process?

Close Project or Phase

80. Which process has an input of Accepted deliverables?

Close Project or Phase

97. Which process is included in the Closing Process Group?

Close Project or Phase

55. One of the bidding vendors is concerned about tracking numerous changes during the life of an agile project. They are relatively new to agile projects and want a document on how these changes will be handled. Which plan would provide the information that the vendor is requesting?

Configuration Management Plan Configuration management system. A subsystem of the overall project management system. It is a collection of formal documented procedures used to apply technical and administrative direction and surveillance to Identify and document the functional and physical characteristics of a product, result, service, or component Control any changes to such characteristics Record and report each change and its implementation status Support the audit of the products, results, or components to verify conformance to requirements It includes the documentation, tracking systems, and defined approval levels necessary for authorizing and controlling changes.

62. Risk audits are used to do what?

Consider the effectiveness of the risk management process.

47. Joe is a member of PMI and has been asked to review several candidates for a project manager position. The PMP certification is a requirement for the position. He reviews several candidates. He believes that Ken is the best candidate and Ken has other PMI credentials. Ken, however, has been approved to take the PMP exam but has not earned the certification. What should Joe do?

Continue looking for a PMP certified project manager

21. Bill, a long-term operations manager, has been put in charge of a new project. He is beginning to identify key stakeholders and the plan to keep them engaged. He asks Andrea, from the PMO, what the key is to effective stakeholder management. The best response is which

Continuous communication with all stakeholders

32. Edwin, an experienced project manager, but new to the We-Do-Projects-Right company, was just informed that the Configure Computer Servers contract has delivered all configured servers and all the work is completed. Which process should Edwin be in to close a contract?

Control Procurements The contract was for procurement, not project deliverables.

22. Billy is a new project manager and he needs to determine if a deliverable meets the established quality standards. In which process is Billy involved with?

Control Quality

41. If the project team meets to review a deliverable to determine whether it complies with quality and requirements, which process would they be in?

Control Quality

51. Lucy, the project manager, just found out that the SPI is 0.45 and needs to take immediate action in order to submit a change request. Which process is the project manager in?

Control Schedule

95. The team member who is responsible for tracking time and labor costs is new to working with managing quality as a cost. He sees that there is a budget for various reserves. Which category should this team member be using for quality management?

Cost of quality

38. How many times can the Close Project or Phase process be performed?

Depends on the project

43. In controlling project costs, what is Cost Variance (CV), if the Earned Value (EV) is $160,000 and the Actual Cost (AC) is $225,000?

EV - AC = 160 - 225 = -65

31. Early on in the project, there is a change to the Business Case. The project sponsor has realized that the market has increased due to a competitor failing to produce enough product. As a result, the sponsor wants to change the scope to change the project to double the number of deliverables produced. This risk response strategy is best described as what?

Enhance Exploit. Take steps to ensure that it's realized. This is the counterpart to avoiding a risk. If you wanted to exploit the opportunity to save money on supplies, you would approach the other project managers and functional managers to coordinate ordering and purchasing. By taking the initiative and moving ahead, you are ensuring that you will benefit from the opportunity. Share. You share an opportunity when you don't have the ability to take advantage of the situation yourself. You find someone to work with to be able to reap the rewards. This is the counterpart to risk transfer. For example, if your company wanted to bid on a contract because it's a good fit for the engineering aspect of the contract but weak in the construction aspect, your company could approach a construction firm and offer to partner with it on the bid. Enhance. Increase the probability that the opportunity will occur, or the benefit (impact) if it does. This is similar to mitigating a risk. Using the earlier hypothetical opportunity of replacing Joanne with John, you could approach John's manager directly and see about negotiating for him. This proactive approach will improve your chances of obtaining John, although it won't guarantee them. Accept. This is the same for opportunities and risks. This is a passive approach. If the opportunity presents itself, you will take advantage of it, but you are not proactively pursuing the opportunity.

27. Daniel is facing a deadline on his project. His task will not be complete before the deadline, but his work is not on the critical path and there is some float available. His manager asks if he will be done by the deadline. What should he tell the manager?

Explain that his work may be delayed and ask if he can submit a change log to get an extension.

1. A project manager is working on a project in a different country. The CEO of the client offers him a gift worth several thousand dollars for completing the project ahead of schedule. However, the project manager's company only permits personal gifts of less than fifty dollars. What is the best course of action for the project manager?

Explain to the CEO that you are not permitted to accept this gift by your company.

59. Phillip, who is managing a critical project, has been informed that due to marketplace opportunities, senior management wants this project completed 2 months ahead of schedule and no additional funding will be authorized. Phillip must use the existing resources. Phillip is in Control Schedule. With the funding and resources constraints given to Phillip, which technique should he use to achieve the objective to deliver the project 2 months ahead of schedule?

Fast track the schedule Fast-tracking is a technique where activities that would have been performed sequentially using the original schedule are performed in parallel. In other words, fast tracking a project means the activities are worked on simultaneously instead of waiting for each piece to be completed separately.

58. Paul and his team are in the third week of a six-week project. They decide that they want to get a better understanding of how the other stakeholders are responding to the project. They send out an email with ten questions as a survey. What type of information are they looking for?

Feedback

34. Frank is reviewing the latest change requests. He sees that one minor request is from the project HR administrator. He is unsure why this individual would be requesting changes. What should Frank do in this instance

Forward the request to the change control board

4. A focus for the project manager is project integration. What is the key responsibility for a project manager regarding project integration?

Project managers work with the project sponsor to ensure that the project is aligned with the higher level objectives of the business, program or portfolio. The project manager is also responsible to guide the team to focus on the essentials of the project

88. The quality management plan requires several inputs regarding stakeholders such as the stakeholder register. What is the best reason why the stakeholders would be involved?

Identifies stakeholders who have an impact on quality.

5. A key stakeholder has requested that an approved change request be postponed. The request is for a safety problem. The stakeholder states that the change will affect his company's schedule on another project. What is the best course of action?

Implement the change

Now that a risk has occurred, what should the project team do first?

Implement the response

73. The parks and recreation committee wants to use social media to keep the public informed about a new park they are building. They want to have a comments section where they can get feedback and respond to those comments. What kind of communication method is this?

Interactive

87. The quality assurance team is asking for updates on the quality checklists. The project team reviews the checklists and prepares the email according to the Communications Management Plan. They also need to send a more-extensive, customized presentation to a key stakeholder who needs quality information. These are all a part of what?

Project reporting

99. Tom and the team are conducting their weekly retrospective. They are discussing the various challenges, problems and successes that they have had this week. The team wants to write these down and include information as to who brought them up, who is working on them, when the problem is resolved and document the solution for lessons learned. What document should they be working on?

Issue log Risks (future), Issues (present) , and Changes (past) The lessons learned register is created as an output of the Direct and Manage Project Work process and then used as an input and updated as an output in many processes throughout the project. Knowledge can be documented using videos, pictures, audios, or other suitable means that ensure the efficiency of the lessons captured. At the end of a project or phase, the information is transferred to the lessons learned knowledge base.

82. The project team is holding a meeting to review the latest iteration of the software package. Several of the end users are upset that their ideas are not in the version they have been testing. The Scrum Master informs them that their requests are in the backlog. What is the process the team is in?

Manage Stakeholder Engagement A Scrum Master is a coach and facilitator. A project manager helps manage the project timeline, resources, and scope in order to meet business requirements. A Scrum Master, however, helps ensure the scrum team is successful. ... Nor do all project managers have the skills required to be a Scrum Master.

8. A number of key project stakeholders have complained to Debbie, the project manager, that their major reports are not being delivered weekly, as they previously requested. What process must Debbie be in that would identify this variance?

Monitor Communications

28. Derrick, the project manager, and his project team are monitoring and controlling project work and are in the process to complete a project status report. Which process are they in?

Monitor and Control Project Work

3. A company has just expanded into two new regions. Each of these regions has its own PMO without a centralized PMO. What is the most-likely organizational structure that the company is using?

Multi-divisional

9. A project manager is working on a project when she discovers that a close family member has been brought on by the client and is a critical stakeholder. She is concerned that there might be a conflict of interest. What should she do?

Notify the project management team of the situation and let them decide if there is a conflict of interest.

94. The team is meeting with the procurement office to discuss conducting the procurements of specialized machinery for the project. Some of the members are confused as to what they should focus on during this process. What are the three main steps in conducting procurements?

Obtaining seller responses, selecting a seller, and awarding the contract.

65. The Closing Process Group has how many process?

One

72. The owner of a company is managing the budget of an internal project. What is the most-likely organizational structure of the organization?

Organic or simple

19. As part of a new museum, the publicity team is creating a website and a place for the project staff to solicit information and reviews from the local community. They will also be posting updates on the new construction and advertising construction tours. These are all part of what part of the communication process?

PMIS (project management information system)

18. Approved change requests are created only once as an output from which process?

Perform Integrated Change Control

56. One of the company's organizational process assets is a predetermined set of categories of risks for a given type of project. This aids a project team to generate ideas to identify risks. This is known as what?

Prompt list The prompt list is a predetermined list of risk categories that are at the lowest level of the risk breakdown structure which is used to assist in identifying risks of the projects.

33. Eric, the project manager is new to the organization and has been assigned to manage a very important strategic project. Since Eric is monitoring stakeholder engagement, which interpersonal and team skills to best suit him with this important strategic project?

Political awareness

71. The human resource office is reviewing the Project Charter and the needed resources. She sees that several senior developers have been named in the Charter. She puts those names on the top of the lists for needed resources. This tool is known as what?

Pre-assignment

60. Project Alpha is a large long-term project that will involve a large number of stakeholders that will change throughout the project. What will be the most useful tool for identifying stakeholders for this project?

Prioritization

89. The quality management team has provided a list of organizational process assets that relate to quality. This includes bugs per line of code, quality improvements per release, and number of faults per number of tests. These are all example of what?

Quality metrics

40. If during cost control and performing reserve analysis, it is determined that a contingency reserve related to an identified risk will not occur, what should the project manager do with that unused contingency reserve?

Remove the unused contingency reserve from the project budget

93. The team is completing the scope management plan. Which other plan will be developed along with this in the plan scope management process?

Requirements Management Plan

44. In controlling resources, if a number of resources were recently replaced, which input document would the project manager best refer to, in order to identify these replaced resources?

Resource Breakdown Structure It is a graphical representation of the hierarchical structure of resources by category and resource type where each level is broken down until it is small enough to be used in conjunction with the work breakdown structure (WBS). The goal is to have all resources on a project, not only human resources, linked to specific activities in the WBS in order to plan, monitor, and control the project work. Being able to link resources back to the WBS is essential in ensuring that each activity will be successfully performed. One thing to remember when taking the PMP Exam is that the acronym RBS has two meanings in the world of project management; Resource Breakdown Structure and Risk Breakdown Structure. If you read the questions carefully and understand the context of the question context (i.e., are they asking about resources or risks?) you should not encounter any problems.

90. The resource management team is estimating the activity resources needed for the first iteration of agile project XYZ. They have the backlog, scope baseline and some other project documents. They are concerned about the amount of work that some key developers can do as those developers are also working on another project, called NMO. Where would be the best place to look when those developers are not dedicated to the other project?

Resource calendar for NMO

7. A new software package is being developed. There are three teams involved: one to develop the user interface, one to develop the database and finally testing team. After an initial meeting of the team leaders, the individual teams write a list of values, communication guidelines, meeting rules and other guidelines for their own team. These are known as what?

Team Charters

92. The team has completed a couple of iterations on an agile project. They have been training and working on mentoring junior members. What tool would indicate an improvement of the team's cooperation and competencies?

Team performance assessment

35. Gary is managing a high-performance team. During a retrospective, Charles and Gail begin blaming each other for a failed test of the software. Gary needs to help them resolve the conflict as the test will be performed again during the next iteration. What would be the best course of action?

Review the lessons learned and help the team work on preparing for the next test

98. There is a large, complex procurement being bid on by multiple sellers. There is a large technical portion of the project that needs to be reviewed in detail, in addition to a complex financial arrangement due to the contract lasting ten years. What would be the best approach on how to review the bids?

Review the technical section and then review the financial section

91. The risk management team is holding a meeting to prioritize the risks identified in the risk register. One risk would have a lot of impact on the project. However, when they research the risk, they discover that it is based on outdated information. As a result, they lower the probability of the risk to a lower category. What technique is the team using?

Risk data quality assessment

77. The project manager and sponsor are discussing some key stakeholders' opposition to one aspect of the project. They do not understand why these stakeholders are very opposed to this one aspect when they are so supportive of the project as a whole. What tool would help them with this analysis?

Root-cause analysis Why-why diagram Cause-and-Effect Diagram, or Fishbone Diagram, or Ishikawa Diagram, or Why-Why Diagram - Don't forget - these terms all mean the same thing. Mr. Ishikawa designed the diagram to show all of the categories of causes that lead to a particular effect - and it looks like a fishbone!

63. Susan and her project team are working in the develop schedule process. They are reviewing the critical path, the availability of resources, and are looking at an activity that has a high risk for impacting the schedule. They are using what technique to develop the project schedule model?

Schedule Network Analysis For creating a final schedule, a schedule network analysis is completed using an initial schedule. Multiple techniques can be used to create the final schedule such as: Critical path method Schedule compression What-if scenario analysis Resource leveling Critical chain method - uses a network diagram and develops a schedule by assigning each activity to occur as late as possible to still meet the end date.

78. The project manager realizes his team has not worked together before. Since the planning process is being worked on by a different group, he focuses his attention on growing his team's skills, learning and development so that when they begin executing the project, they are well-prepared to do so. This type of leadership is known as what?

Servant Leadership

81. The project team is classifying various stakeholders according to their directions of influence. One of the stakeholders is a project manager working on a similar project. Both projects need to utilize a team of engineers and need to coordinate their activities. This other project manager would be classified in which way?

Sideward Others: Upward, downward, outward

75. The procurement team is reviewing the procurement documentation. They have the bid documents but are not sure what other document would be most useful on evaluating the bids. Which document should be provided?

Source selection criteria Under project management, source selection criteria are often included as part of the procurement documents.

66. The Communications Management Plan has information on how communications are to be handled. However, in order to identify who needs a special risk report, the team should look at which document?

Stakeholder Register A stakeholder register is a project document that has information about the project stakeholders. It identifies the people, groups, and organizations that have any interest in the work and the outcome.

14. After meeting with the people who will be using the project's deliverables, the project manager has updated the change requests. As a result, the end users also need to be updated when their requests are approved and implemented. Which document should be updated to reflect this new information

Stakeholder engagement plan

70. The hospital is installing a new records system. The project manager has planned that the staff will start the new system on Friday to test it. Once the testing is complete, the old system will be turned off on Monday. This dependency is known as what

Start to finish SF is not a very difficult concept to understand but sometimes it is confused with Finish to Start (FS) relationship. Some authors (incorrectly) claim that FS and SF are essentially same but it is not true.

29. Due to conflicts on the team, the project manager has come to realize that team performance and morale is low. He will need to replace three members of his team. What is the next action he should take?

Submit a change request

39. If a configuration diagram must be changed, what should be done?

Submit a formal change request

48. James is controlling the project schedule and must perform major revisions to the project schedule network diagram. James must add leads and lags to the project schedule network diagram. What is a lead?

The amount of time a successor activity can be advanced in relation to its predecessor activity.

85. The project team, who is being managed by Ryan, is working hard to meet a deadline to baseline the Project Management Plan in 2 weeks. One stakeholder asks if she should submit a formal change request and go through the integrated change control process as some cost estimates have changed? How should Ryan respond?

There is no need to submit a formal change request until the Project Management Plan is baselined

86. The project's critical path is a tool used in creating or controlling (revising) the project schedule. The critical path is determined by identifying the longest path through the network diagram. When a project is fast tracked the critical path could be impacted. How many critical paths can exist on a project?

There is no set number. Think about it! Theoretically, you could have many different paths that all take the exact same amount of time.

37. If a seller of a contract is being late with many deliverables, what should the project manager recommend?

Visit the seller to try to understand why the deliverables are late

1. In which contract type is the seller most concerned about creating an accurate budget based on a detailed scope of work? a. Cost-plus award b. Fixed-price incentive fee c. Firm-Fixed priced. d. Time and materials

c. Firm-Fixed priced.

42. In controlling costs, Actual Cost is what?

The money spent during a given period of time related to a project

45. In controlling costs, what does the To-Complete-Performance-Index (TCPI) measure?

The performance that the project will need to achieve in order for the project to end on target.

96. The variance on a critical path will have a direct and negative impact on what?

The project end date

20. Bill is controlling costs for a major project he is managing and has calculated that the project has a CPI of 1.30. How should Bill report this CPI of 1.30 to senior management in the project status report? ( cost performance index)

The project is getting $1.30 worth of performance for every $1.00 expended.

16. After the project charter is approved, a kick-off meeting is held. Six months into a project, the project team welcomes in new members and sets up a kick-off meeting. Three months later, a third kick-off meeting is held. One of the new team members asks why they are having a kick-off meeting after the project has been underway. What is the most-likely reason for a third kick-off meeting?

The project is now entering a new phase

74. The PMO is reviewing a Business Case for a construction project. They had an issue with a project manager not being prepared to run the project because she had been brought in too late. When should the PMO assign a project manager to this new project?

The project manager should be brought in as early as possible during the development of the Project Charter process.

79. The project manager, Joyce, of We-Do-Projects-Right, had a very intense discussion with Gary, a major stakeholder, who has high power and high interest on the project. Gary stated a number of concerns to Joyce that should be addressed and clearly Gary's attitude has changed, which is not good for the project. What should Joyce do first?

Update the Issue Log

64. The change control board (CCB) just notified the project manager of a number of approved change requests and there were also a number of rejected change requests. What should the project manager do next?

Update the change log The change log is a type of documentation that contains the list of changes that are made during the entire project management design. It tracks the progress of each change based on its review, approval (or rejection), implementation as well as closure.

36. Harry and the quality assurance team are analyzing the root cause of a major problem. They want to use a tool to help them with this. What is the best tool to assist them in this work?

Why-why diagram Cause-and-Effect Diagram, or Fishbone Diagram, or Ishikawa Diagram, or Why-Why Diagram - Don't forget - these terms all mean the same thing. Mr. Ishikawa designed the diagram to show all of the categories of causes that lead to a particular effect - and it looks like a fishbone!

68. The Control Schedule process has four inputs: 1) Project Management Plan, 2) Project documents, 3) Organizational process assets. Which input would make the 4th input?

Work Performance Data In a M&C process, WPD is always an input & WPI is always an output.

11. A risk that had not been foreseen in planning risk management has happened. The team meets and decides that this is minor setback. They review the plan and find a risk that is similar and implement the response. This is best described as what?

Work around

46. In planning resources, agile methods have given rise to a new type of team which does not have a centralized point of control. These are best known as what?

self-organizing teams

54. On a large project, your team has been delayed by another activity. As a result, you have determined that you will need to bring in outside contractors to handle low priority work to free up critical time for your internal team. You have your selection criteria for what you need. What is the best contract type in this instance

time & materials Time and Material Contracts (T&M) Last but certainly not least are time and material contracts. T&M contracts are a cross between fixed-price and cost-reimbursable. They are a cross because they can take on either form. T&M are typically used when the scope of work cannot be well defined when the contract is created. Fixed-Price Contracts A Fixed-Price contract is a contract that has a predetermined-set price for a specific product or service. Firm Fixed Price (FFP) A FFP is the most common type of fixed-price contract. In an FFP contract that scope of the product or service should be exact. Fixed Price Incentive Fee (FPIF) A FPIF is similar to the FFP; however, a FPIF also offers an incentive if the product or service exceeds an expectation. Fixed Price with Economic Price Adjustment (FP-EPA) A FP-EPA is like a FFP, with one exception, if the product or service is largely reliant on an input with a price that is governed by supply and demand, a seller could increase the price of the overall contract accordingly. Cost-reimbursement Contracts Cost-reimbursement contracts are different from fixed-price contracts as the buyer takes on more risk. In all the cost-reimbursement contracts the seller can charge for all legitimate expenses related to completing the product or service, as well as charge a fixed fee as profit for their work. Cost Plus Fixed Fee (CPFF) In a CPFF the seller can charge the buyer for all legitimate expenses related to completing the product or service. However, the seller can also charge a fixed-fee that is a percentage of the overall contract price. Cost Plus Incentive Fee (CPIF) In a CPIF both the seller and the buyer assume risk. Cost Plus Award Fee (CPAF) A CPAF is very similar to the CPIF we just discussed. However, the main difference here is the award fee is at the sole discretion of the buyer.