CAPM Procurement & Contract Management 3

Question 1

In a Cost Plus Incentive Fee (CPIF) contract, what happens if the seller's actual costs are below the target cost?

Accepted Answer

The seller and buyer share the savings according to a formula

Answer

In a CPIF contract, cost underruns are shared between buyer and seller based on a pre-agreed share ratio, incentivizing cost efficiency.

Question 2

What does 'privity of contract' mean in project procurement?

Accepted Answer

A direct contractual relationship between two parties

Answer

Privity of contract means only parties who are directly named in the contract have legal rights and obligations under it.

Question 3

Which process involves documenting completed deliverables and formally accepting the seller's work?

Accepted Answer

Close Procurements

Answer

Close Procurements finalizes all procurement activities, confirms work is complete, and provides formal acceptance of seller deliverables.

Question 4

What is the main risk to the buyer in a Time and Material (T&M) contract?

Accepted Answer

Total costs can grow unchecked if the scope is not controlled

Answer

T&M contracts have no fixed ceiling, so costs can escalate indefinitely if hours or materials are not carefully monitored.

Question 5

A project manager discovers a seller is consistently delivering below the quality standards in the contract. What is the most appropriate first action?

Accepted Answer

Issue a formal letter documenting the performance issue

Answer

Issuing a formal written notice documents the deficiency and gives the seller an opportunity to cure the performance problem as required by most contracts.

CAPM Practice Test

CAPM Practice Test

CAPM Procurement & Contract Management 3