CPCM Contract Formation and Types 1

Question 1

Which element is NOT required for a valid contract to be formed?

Accepted Answer

Notarization

Answer

A valid contract requires offer, acceptance, consideration, and mutual assent — notarization is not a required element for most contracts.

Question 2

A firm-fixed-price (FFP) contract places the cost risk primarily on which party?

Accepted Answer

The contractor

Answer

Under a firm-fixed-price contract, the contractor bears full cost risk because the price is not subject to adjustment based on actual costs.

Question 3

What type of contract reimburses the contractor for all allowable costs plus a fixed fee?

Accepted Answer

Cost-Plus-Fixed-Fee (CPFF)

Answer

A Cost-Plus-Fixed-Fee contract reimburses all allowable, allocable costs and adds a pre-negotiated fixed fee regardless of actual cost outcomes.

Question 4

Which contract type is considered the highest risk for the government?

Accepted Answer

Cost-Plus-Percentage-of-Cost

Answer

Cost-Plus-Percentage-of-Cost contracts are generally prohibited in US federal contracting because they incentivize the contractor to increase costs.

Question 5

An Indefinite Delivery/Indefinite Quantity (IDIQ) contract must specify a:

Accepted Answer

Minimum and maximum quantity

Answer

FAR requires IDIQ contracts to establish both a minimum and maximum quantity to obligate the government to purchase at least the minimum.

CPCM Exam Practice Test