CPCM Certified Professional Contract Manager: Contract Risk Assessment and Mitigation 2 â Questions and Answers
Question 1: A contractor requests a contract modification to add a force majeure clause after a supply chain disruption. What is the contracting officer's primary obligation?
- Approve immediately to avoid contractor default
- Evaluate the request against applicable regulations and existing contract terms (Correct answer)
- Deny the request because the contract is already executed
- Escalate to legal counsel without further review
Correct answer: Evaluate the request against applicable regulations and existing contract terms
The contracting officer must evaluate modification requests against applicable regulations and existing contract terms before approval or denial.
Question 2: Which risk mitigation strategy involves sharing potential losses with another party through a contractual arrangement?
- Risk avoidance
- Risk acceptance
- Risk transfer (Correct answer)
- Risk reduction
Correct answer: Risk transfer
Risk transfer shifts the financial burden of a potential loss to another party, commonly achieved through insurance requirements or indemnification clauses.
Question 3: In a cost-plus-fixed-fee (CPFF) contract, which party bears most of the cost risk?
- The contractor
- The government/buyer (Correct answer)
- A third-party insurer
- Both parties equally
Correct answer: The government/buyer
Under CPFF contracts, the buyer reimburses all allowable costs, so the buyer bears the majority of cost risk if costs exceed estimates.
Question 4: A risk register is BEST described as:
- A financial reserve set aside to cover unanticipated costs
- A document identifying, analyzing, and tracking project risks throughout the contract lifecycle (Correct answer)
- A legal clause limiting contractor liability
- An insurance policy requirement within a contract
Correct answer: A document identifying, analyzing, and tracking project risks throughout the contract lifecycle
A risk register is a living document used to identify, analyze, prioritize, and monitor risks across the contract lifecycle.
Question 5: Which contract clause is primarily used to allocate the risk of sovereign acts by the U.S. government that affect contract performance?
- Changes clause
- Sovereign immunity clause
- Sovereign acts doctrine (Correct answer)
- Government-Furnished Property clause
Correct answer: Sovereign acts doctrine
The sovereign acts doctrine protects the government from liability when a public law or regulationânot a contractual actionâaffects contractor performance.
Question 6: During contract execution, the contractor experiences a 20% cost overrun. Under a firm-fixed-price (FFP) contract, who is responsible for the overrun?
- The government, because it approved the contract price
- The contractor, because FFP places cost risk on them (Correct answer)
- Both parties share the overrun equally
- The surety bond provider covers the excess costs
Correct answer: The contractor, because FFP places cost risk on them
Under FFP contracts, the contractor bears full cost risk and cannot recover cost overruns from the buyer.
Question 7: What is the purpose of a warranty clause in a government contract from a risk management perspective?
- To transfer post-delivery performance risk back to the contractor (Correct answer)
- To establish the contractor's profit margin
- To limit the government's inspection rights
- To define the contractor's subcontracting obligations
Correct answer: To transfer post-delivery performance risk back to the contractor
Warranty clauses require the contractor to correct defects discovered after acceptance, transferring post-delivery risk back to the contractor.
CPCM Certified Professional Contract Manager: Contract Risk Assessment and Mitigation 2
A contractor requests a contract modification to add a force majeure clause after a supply chain disruption.
What is the contracting officer's primary obligation?