CAPM Procurement Management 3 — Questions and Answers
Question 1: When the scope of work is well-defined and risk should be transferred to the seller, which contract type is most appropriate?
- Cost Plus Fixed Fee (CPFF)
- Fixed Price Lump Sum (FPLS) (Correct answer)
- Time and Material (T&M)
- Cost Plus Incentive Fee (CPIF)
Correct answer: Fixed Price Lump Sum (FPLS)
Fixed-price contracts transfer cost risk to the seller and work best when scope is clearly defined and unlikely to change significantly.
Question 2: A project manager notices a seller consistently delivering below the agreed quality standard. What should the PM do first?
- Terminate the contract immediately
- Issue a formal claim against the seller
- Document the issue and issue a formal notice to the seller (Correct answer)
- Request a new bid from other vendors
Correct answer: Document the issue and issue a formal notice to the seller
The project manager should first formally document the nonconformance and notify the seller in writing, giving them the opportunity to correct performance.
Question 3: What does 'privity of contract' mean in the context of procurement management?
- A confidentiality clause protecting proprietary information
- A direct contractual relationship between two parties (Correct answer)
- The seller's right to subcontract work
- The buyer's right to audit the seller's records
Correct answer: A direct contractual relationship between two parties
Privity of contract means that only the parties directly in the contract have rights and obligations under it; the buyer typically has no direct legal relationship with subcontractors.
Question 4: Which process produces the procurement statement of work (SOW) as an output?
- Conduct Procurements
- Control Procurements
- Plan Procurement Management (Correct answer)
- Close Procurements
Correct answer: Plan Procurement Management
The Plan Procurement Management process produces the procurement SOW, which describes the portion of project scope to be included in a contract.
Question 5: A buyer and seller disagree on whether additional work requested falls within the original contract scope. This type of dispute is called a:
- Claim (Correct answer)
- Change request
- Defect report
- Variance
Correct answer: Claim
A claim is a request, demand, or assertion of rights by a seller against a buyer, often arising from disputed changes or ambiguous contract language.
Question 6: In which contract type does the buyer bear the MOST financial risk?
- Firm Fixed Price (FFP)
- Fixed Price with Economic Price Adjustment (FPEPA)
- Cost Plus Percentage of Cost (CPPC) (Correct answer)
- Time and Material (T&M)
Correct answer: Cost Plus Percentage of Cost (CPPC)
CPPC reimburses the seller for all costs plus a fee that grows with costs, giving the seller no incentive to control spending, placing maximum risk on the buyer.
Question 7: What is the primary purpose of a bidders conference?
- To negotiate final contract terms with all vendors simultaneously
- To ensure all prospective sellers have the same understanding of procurement requirements (Correct answer)
- To select the preferred vendor from the pool of respondents
- To review seller invoices for accuracy
Correct answer: To ensure all prospective sellers have the same understanding of procurement requirements
A bidders conference (also called a contractor conference) gives all prospective sellers equal access to clarifications about procurement documents before submitting proposals.
CAPM Procurement Management 3
When the scope of work is well-defined and risk should be transferred to the seller, which contract type is most appropriate?