PMI Procurement & SOW Development 3 — Questions and Answers
Question 1: A project manager is evaluating contract types for a research project with highly uncertain scope. Which contract type best protects the buyer from bearing all risk?
- Cost Plus Fixed Fee (CPFF) (Correct answer)
- Firm Fixed Price (FFP)
- Time and Material (T&M)
- Fixed Price with Economic Price Adjustment (FP-EPA)
Correct answer: Cost Plus Fixed Fee (CPFF)
CPFF reimburses actual costs and pays a fixed fee, limiting buyer exposure while acknowledging the uncertain scope — but the seller has reduced incentive to control costs.
Question 2: Which element of a SOW describes the quality standards, codes, regulations, and industry norms the deliverables must conform to?
- Scope of work
- Applicable standards and regulations (Correct answer)
- Technical requirements
- Acceptance criteria
Correct answer: Applicable standards and regulations
The applicable standards and regulations section specifies the codes, standards, and legal requirements the seller's work and deliverables must meet.
Question 3: During source selection, a proposal evaluation team scores a vendor high on technical merit but low on price. Which source selection method best balances these factors?
- Lowest price technically acceptable (LPTA)
- Sole source selection
- Best value continuum (Correct answer)
- Competitive sealed bidding
Correct answer: Best value continuum
The best value continuum allows trade-offs between technical merit and price, so the organization can pay more for superior technical capabilities when justified.
Question 4: A project manager learns a key subcontractor used by the prime vendor has filed for bankruptcy. Which contract clause gives the buyer the right to approve subcontractors and their replacements?
- Force majeure clause
- Limitation of liability clause
- Consent to subcontract clause (Correct answer)
- Indemnification clause
Correct answer: Consent to subcontract clause
A consent to subcontract clause requires the seller to obtain buyer approval before assigning work to subcontractors or replacing them.
Question 5: What is the primary purpose of the pre-bid conference (bidder's conference) in the procurement process?
- To allow sellers to submit initial proposals
- To evaluate competing vendors' financial stability
- To ensure all prospective sellers have a common understanding of the procurement requirements (Correct answer)
- To negotiate prices before formal bidding
Correct answer: To ensure all prospective sellers have a common understanding of the procurement requirements
A bidder's conference allows all prospective sellers to ask questions simultaneously, ensuring they all receive the same information and have a uniform understanding of requirements.
Question 6: In a Cost Plus Incentive Fee (CPIF) contract, what happens if the seller's actual cost falls below the target cost?
- The seller receives only the base fee with no additional incentive
- The seller and buyer share the savings according to the share ratio, increasing the seller's fee (Correct answer)
- The buyer keeps all the savings
- The contract converts to a fixed-price type
Correct answer: The seller and buyer share the savings according to the share ratio, increasing the seller's fee
In CPIF, cost savings below target are shared between buyer and seller per the agreed share ratio, rewarding the seller with a higher fee for cost efficiency.
Question 7: A project manager is closing a procurement. Which action is performed LAST in the procurement closure process?
- Conducting a procurement audit
- Issuing formal written notice of contract completion to the seller (Correct answer)
- Updating organizational process assets with lessons learned
- Releasing retained payments to the seller
Correct answer: Issuing formal written notice of contract completion to the seller
The formal written notice of contract completion or termination is the final administrative action that officially closes the contract.
PMI Procurement & SOW Development 3
A project manager is evaluating contract types for a research project with highly uncertain scope.
Which contract type best protects the buyer from bearing all risk?