CGFO Procurement 5 — Questions and Answers
Question 1: What is the primary purpose of an independent cost estimate (ICE) in government procurement?
- To determine the vendor's profit margin
- To provide a government benchmark for evaluating whether bids or proposals are reasonable (Correct answer)
- To set the exact price the government will pay under the contract
- To satisfy audit requirements after contract award
Correct answer: To provide a government benchmark for evaluating whether bids or proposals are reasonable
An ICE is prepared by the government before solicitation to serve as a baseline for assessing the reasonableness of contractor proposals and identifying pricing anomalies.
Question 2: Which contract type is considered most risky for the government when scope is uncertain?
- Firm fixed-price
- Fixed-price incentive
- Cost-plus-percentage-of-cost (Correct answer)
- Indefinite delivery/indefinite quantity
Correct answer: Cost-plus-percentage-of-cost
Cost-plus-percentage-of-cost contracts give contractors no incentive to control costs since their fee increases as costs rise; they are generally prohibited in federal contracting.
Question 3: What is 'price analysis' in the context of government contract pricing?
- Reviewing a contractor's cost accounting records to verify claimed costs
- Evaluating the reasonableness of a proposed price without examining cost elements, using market comparisons or other benchmarks (Correct answer)
- Calculating the government's independent cost estimate
- Auditing contractor invoices after contract completion
Correct answer: Evaluating the reasonableness of a proposed price without examining cost elements, using market comparisons or other benchmarks
Price analysis evaluates whether a proposed price is reasonable by comparing it to market prices, historical prices, or other benchmarks without examining the vendor's underlying cost structure.
Question 4: A government agency issues an emergency purchase for flood response supplies without competitive bidding. Which principle of public procurement is being applied?
- Economy of scale
- Emergency or exigency exception to competition requirements (Correct answer)
- Sole source preference
- Cooperative purchasing
Correct answer: Emergency or exigency exception to competition requirements
Most procurement laws allow an emergency or exigency exception to competition requirements when there is an immediate threat to public health, safety, or property requiring urgent action.
Question 5: Which of the following is NOT a characteristic of a valid contract under government procurement law?
- Offer and acceptance
- Mutual consideration
- Verbal agreement for purchases over $10,000 (Correct answer)
- Authorized signature of a contracting officer
Correct answer: Verbal agreement for purchases over $10,000
Government contracts above micro-purchase thresholds typically must be in writing and signed by an authorized contracting officer; verbal agreements are not enforceable.
Question 6: What does 'contract administration' primarily involve after a government contract is awarded?
- Re-negotiating the contract price with the vendor
- Monitoring contractor performance, processing payments, and managing contract modifications to ensure compliance with terms (Correct answer)
- Conducting a new competitive procurement to replace the existing contract
- Auditing the procurement process that led to the contract award
Correct answer: Monitoring contractor performance, processing payments, and managing contract modifications to ensure compliance with terms
Contract administration encompasses all post-award activities including monitoring delivery and performance, processing invoices, managing changes, and enforcing contract terms.
Question 7: Under the Uniform Guidance, a non-federal entity must maintain written procurement standards that include which of the following?
- A preference for local vendors over out-of-state vendors
- Procedures for avoiding acquisition of unnecessary or duplicative items (Correct answer)
- Mandatory use of federal GSA schedules for all purchases
- A requirement to use the lowest cost option regardless of quality
Correct answer: Procedures for avoiding acquisition of unnecessary or duplicative items
2 CFR 200.318 requires non-federal entities to have written procurement procedures that include analysis to avoid purchasing unnecessary or duplicative items.
CGFO Procurement 5
What is the primary purpose of an independent cost estimate (ICE) in government procurement?