NCMA Contract Types and Pricing 1

Question 1

Which contract type places the maximum cost risk on the contractor?

Accepted Answer

Firm-Fixed-Price (FFP)

Answer

Under a Firm-Fixed-Price contract, the contractor bears all cost risk because the price is fixed regardless of actual costs incurred.

Question 2

Under a Cost-Plus-Fixed-Fee (CPFF) contract, the fixed fee is:

Accepted Answer

Negotiated at contract award and does not vary with actual costs incurred

Answer

The fixed fee in a CPFF contract is negotiated before work begins and remains constant regardless of the actual costs incurred during performance.

Question 3

Which contract type is MOST appropriate when the extent or duration of work cannot be precisely estimated at the time of contract award?

Accepted Answer

Time-and-Materials (T&M)

Answer

Time-and-Materials contracts are used when it is not possible to estimate accurately the extent or duration of the work or anticipated costs, making FFP or cost-reimbursement unsuitable.

Question 4

Under FAR, a Time-and-Materials (T&M) contract is required to include:

Accepted Answer

A ceiling price that the contractor exceeds at its own risk

Answer

FAR requires T&M contracts to include a ceiling price, and any costs above that ceiling are at the contractor's risk, providing a degree of government cost protection.

Question 5

What is the primary feature that distinguishes a Fixed-Price-Incentive-Firm (FPIF) contract from a standard Firm-Fixed-Price (FFP) contract?

Accepted Answer

FPIF includes a share ratio to divide cost underruns and overruns between the parties

Answer

FPIF contracts establish a target cost, target profit, ceiling price, and share ratio so that both parties share in cost savings or cost overruns up to the ceiling price.

NCMA - National Contract Management Association Certification Practice Test

NCMA - National Contract Management Association Certification Practice Test

NCMA Contract Types and Pricing 1