CPCM Certified Professional Contract Manager: Contract Risk Assessment and Mitigation 5 â Questions and Answers
Question 1: Which of the following is the BEST indicator that a contract's risk management plan is effective?
- No risks were identified during the planning phase
- Identified risks are regularly reviewed and response plans are updated as conditions change (Correct answer)
- All risks were transferred to the contractor through fixed-price contract type
- The contract was completed within the original schedule
Correct answer: Identified risks are regularly reviewed and response plans are updated as conditions change
An effective risk management plan is a living process with ongoing monitoring and updating, not a one-time activity.
Question 2: Under the Anti-Deficiency Act, what is the primary risk associated with a contracting officer obligating funds beyond the appropriated amount?
- The contractor bears the additional cost
- The contracting officer faces personal criminal and civil liability (Correct answer)
- The contract automatically becomes void
- The agency must seek supplemental appropriations within 30 days
Correct answer: The contracting officer faces personal criminal and civil liability
The Anti-Deficiency Act prohibits obligating funds in excess of appropriations, and violations can result in personal criminal and civil penalties for the responsible official.
Question 3: A contract includes an economic price adjustment (EPA) clause tied to the Producer Price Index. This clause PRIMARILY manages which type of risk?
- Schedule risk
- Technical performance risk
- Cost risk due to inflation or material price fluctuations (Correct answer)
- Contractor financial solvency risk
Correct answer: Cost risk due to inflation or material price fluctuations
EPA clauses share the risk of cost fluctuationsâsuch as inflation or commodity price changesâbetween buyer and seller using an objective index.
Question 4: When a contract manager applies the 'superior knowledge' doctrine, it means the government may be liable because:
- The contractor failed to research publicly available information
- The government possessed critical information the contractor needed but did not disclose it (Correct answer)
- The contractor claimed expertise it did not actually have
- The government's technical staff outperformed the contractor's team
Correct answer: The government possessed critical information the contractor needed but did not disclose it
The superior knowledge doctrine holds that the government must disclose information it possesses that a contractor would need to perform and could not reasonably be expected to know.
Question 5: Which of the following scenarios BEST represents a secondary risk in contract management?
- A risk identified in the initial risk assessment that was never addressed
- A new risk created as a direct result of implementing a risk response (Correct answer)
- A risk that has a low probability but catastrophic impact
- A risk accepted without any mitigation action
Correct answer: A new risk created as a direct result of implementing a risk response
Secondary risks emerge from the mitigation actions themselvesâfor example, hiring a backup supplier to reduce supply chain risk may introduce a quality risk.
Question 6: In federal contracting, the Limitation of Government's Obligation (LGO) clause is used to:
- Cap the contractor's total fee in cost-plus contracts
- Limit the government's financial commitment in incrementally funded contracts (Correct answer)
- Restrict the contractor's right to subcontract work
- Limit the number of contract modifications allowed
Correct answer: Limit the government's financial commitment in incrementally funded contracts
The LGO clause protects the government by specifying the maximum amount obligated for an incrementally funded contract, preventing unlawful overspending.
Question 7: A risk response that involves changing the project plan to eliminate a threat entirely is called:
- Risk mitigation
- Risk acceptance
- Risk avoidance (Correct answer)
- Risk transfer
Correct answer: Risk avoidance
Risk avoidance eliminates the threat by changing plans or scope to remove the risk entirely, rather than reducing or shifting it.
CPCM Certified Professional Contract Manager: Contract Risk Assessment and Mitigation 5
Which of the following is the BEST indicator that a contract's risk management plan is effective?