CCT CCT Procurement & Contract Management 2 — Questions and Answers
Question 1: What is the key advantage of a Cost Plus Incentive Fee (CPIF) contract?
- It guarantees the lowest possible price
- It motivates the contractor to control costs by sharing savings above a target cost (Correct answer)
- It eliminates all owner financial risk
- It requires no auditing of contractor costs
Correct answer: It motivates the contractor to control costs by sharing savings above a target cost
CPIF contracts include a target cost and share ratio so the contractor earns more fee when actual costs are below target, incentivizing cost control.
Question 2: Which document formally defines the rights, responsibilities, and obligations of parties in a construction project?
- Project schedule
- Cost estimate
- Contract agreement (Correct answer)
- Bid tabulation
Correct answer: Contract agreement
A contract agreement is the legally binding document that defines the obligations, rights, and responsibilities of all parties involved in the project.
Question 3: What is 'competitive sealed bidding' designed to ensure?
- That all bids are identical
- Transparency, fairness, and equal opportunity for all qualified bidders (Correct answer)
- Only pre-approved contractors may bid
- That the highest-quality contractor is always selected
Correct answer: Transparency, fairness, and equal opportunity for all qualified bidders
Competitive sealed bidding ensures a fair, transparent process where all qualified bidders compete on equal terms and bids are opened simultaneously.
Question 4: In procurement, what does 'sole source justification' mean?
- A single contractor submits multiple bids
- Documentation supporting why a contract is awarded without competition (Correct answer)
- A cost estimate from only one supplier
- A contract funded by a single source
Correct answer: Documentation supporting why a contract is awarded without competition
Sole source justification is formal documentation explaining why competitive bidding is impractical and a specific vendor is the only viable option.
Question 5: What is the primary risk of using a Time and Materials (T&M) contract?
- The owner has no visibility into work performed
- Costs can escalate without a ceiling if not carefully managed (Correct answer)
- Contractors refuse to bid on such contracts
- The schedule cannot be tracked
Correct answer: Costs can escalate without a ceiling if not carefully managed
T&M contracts pay for actual hours and materials, creating the risk of cost overruns if a not-to-exceed ceiling or strong oversight is not in place.
Question 6: Which procurement document establishes the minimum qualifications a contractor must meet before receiving a bid invitation?
- Request for Quotation
- Prequalification questionnaire (Correct answer)
- Notice to Proceed
- Change order
Correct answer: Prequalification questionnaire
A prequalification questionnaire screens contractors on financial strength, experience, and safety record before they are invited to bid.
CCT CCT Procurement & Contract Management 2
What is the key advantage of a Cost Plus Incentive Fee (CPIF) contract?