CFCM Contract Administration & Performance Management 3 — Questions and Answers
Question 1: Under FAR Subpart 42.7, which party is responsible for performing contract audits on cost-type contracts?
- The Defense Contract Management Agency (DCMA)
- The Defense Contract Audit Agency (DCAA) (Correct answer)
- The contracting officer's technical representative
- The Small Business Administration (SBA)
Correct answer: The Defense Contract Audit Agency (DCAA)
DCAA is the primary audit agency responsible for auditing contractor accounting systems, incurred costs, and proposals on cost-type contracts.
Question 2: What happens to the government's rights when a contractor delivers nonconforming supplies and the government accepts them without noting the defect?
- The government permanently waives all rights to reject the supplies
- The government may still recover damages for latent defects discovered later (Correct answer)
- The contractor is automatically relieved of all warranty obligations
- The contracting officer must issue a show-cause notice within 30 days
Correct answer: The government may still recover damages for latent defects discovered later
Acceptance of nonconforming supplies does not waive the government's right to seek damages for latent (hidden) defects discovered after acceptance.
Question 3: A fixed-price contract includes FAR 52.211-18 (Variation in Estimated Quantity). The actual quantity delivered is 15% above the estimated quantity. What is the price adjustment?
- No adjustment; the contractor absorbs the cost difference
- The unit price is renegotiated for the entire quantity
- The excess quantity is priced at the original unit price (Correct answer)
- The contractor receives a 10% premium for quantities above estimate
Correct answer: The excess quantity is priced at the original unit price
FAR 52.211-18 provides that quantities outside the variation range trigger a unit price adjustment, but within the standard ±10% variation, the original unit price applies.
Question 4: Which performance metric type measures the ratio of earned value to actual costs incurred on a contract?
- Schedule Performance Index (SPI)
- Cost Performance Index (CPI) (Correct answer)
- Budget at Completion (BAC)
- Estimate to Complete (ETC)
Correct answer: Cost Performance Index (CPI)
The Cost Performance Index (CPI) = Earned Value ÷ Actual Cost, measuring cost efficiency of work performed.
Question 5: Under FAR 52.246-2, Inspection of Supplies — Fixed-Price, when must the government perform final inspection and acceptance?
- At the contractor's plant before shipment
- At destination unless the contract specifies otherwise (Correct answer)
- Within 30 days of delivery
- Only after the contractor certifies conformance
Correct answer: At destination unless the contract specifies otherwise
FAR 52.246-2 establishes destination inspection/acceptance as the default unless the contract specifies inspection at origin.
Question 6: What is a 'value engineering change proposal' (VECP) under FAR Part 48?
- A government-initiated scope reduction to lower costs
- A contractor proposal to modify contract requirements to reduce cost while maintaining function (Correct answer)
- A request by the contracting officer to renegotiate contract pricing
- A change order that substitutes lower-quality materials
Correct answer: A contractor proposal to modify contract requirements to reduce cost while maintaining function
A VECP is a contractor-initiated proposal to change contract requirements in a way that reduces cost while maintaining required performance, with the savings shared between the parties.
Question 7: Under the Prompt Payment Act, what interest rate applies to late payments on government contracts?
- The prime lending rate set by the Federal Reserve
- The rate established by the Secretary of the Treasury (Correct answer)
- A fixed statutory rate of 6% per annum
- The contractor's cost of borrowing as documented in invoices
Correct answer: The rate established by the Secretary of the Treasury
The Prompt Payment Act requires the government to pay interest at the rate set semiannually by the Treasury Secretary on any late invoice payments.
CFCM Contract Administration & Performance Management 3
Under FAR Subpart 42.7, which party is responsible for performing contract audits on cost-type contracts?