CAPM Project Procurement Management 2 — Questions and Answers
Question 1: In a Cost Plus Incentive Fee (CPIF) contract, what happens if the seller beats the target cost?
- The seller receives only the base fee with no bonus
- The seller and buyer share the savings according to a pre-agreed formula (Correct answer)
- The buyer keeps all savings and the seller is penalized
- The contract is renegotiated at the new cost level
Correct answer: The seller and buyer share the savings according to a pre-agreed formula
In a CPIF contract, cost savings below the target are shared between buyer and seller according to a pre-set sharing ratio, incentivizing the seller to control costs.
Question 2: Which tool or technique used in Conduct Procurements allows buyers to gather early information from the market before issuing formal procurement documents?
- Source Selection Criteria
- Bidder Conferences
- Advertising
- Market Research (Correct answer)
Correct answer: Market Research
Market research involves collecting information about industry capabilities, pricing trends, and potential sellers before issuing formal solicitation documents.
Question 3: What is the purpose of a Bidder Conference in procurement?
- To negotiate the final contract price with the winning bidder
- To ensure all prospective sellers have a clear and equal understanding of the procurement requirements (Correct answer)
- To evaluate the technical proposals of competing sellers
- To close out contracts with unsuccessful bidders
Correct answer: To ensure all prospective sellers have a clear and equal understanding of the procurement requirements
Bidder conferences (also called contractor conferences) ensure all prospective sellers receive the same information and have equal opportunity to clarify requirements.
Question 4: Which contract type is most appropriate for projects where the scope is well-defined and risks of cost overruns are low?
- Cost Plus Fixed Fee (CPFF)
- Time and Material (T&M)
- Fixed Price Incentive Fee (FPIF)
- Firm Fixed Price (FFP) (Correct answer)
Correct answer: Firm Fixed Price (FFP)
FFP contracts work best when scope is well-defined and stable, allowing both parties to agree on a set price with minimal uncertainty.
Question 5: What is a Teaming Agreement in the context of project procurement?
- An internal agreement between the project team and sponsor
- A legal agreement between two potential sellers to combine capabilities to bid on a contract (Correct answer)
- A contract clause requiring the seller to use subcontractors
- An agreement between stakeholders on project objectives
Correct answer: A legal agreement between two potential sellers to combine capabilities to bid on a contract
Teaming Agreements are legal agreements that allow two companies to combine their capabilities and bid together on a procurement opportunity.
Question 6: The Control Procurements process is primarily concerned with:
- Identifying potential sellers for the project
- Managing procurement relationships, monitoring contract performance, and making changes as needed (Correct answer)
- Developing the procurement management plan
- Formally closing and documenting completed contracts
Correct answer: Managing procurement relationships, monitoring contract performance, and making changes as needed
Control Procurements manages the ongoing relationship with sellers, monitors their performance against contract terms, and processes changes or corrections as needed.
Question 7: What does the term 'Privity of Contract' mean in procurement management?
- The confidential pricing information within a contract
- The direct legal relationship between two contracting parties (Correct answer)
- The right of the project manager to audit vendor records
- The privacy clauses protecting trade secrets in a contract
Correct answer: The direct legal relationship between two contracting parties
Privity of contract is the legal relationship that exists directly between contracting parties; third parties generally cannot enforce or be bound by the contract.
CAPM Project Procurement Management 2
In a Cost Plus Incentive Fee (CPIF) contract, what happens if the seller beats the target cost?