Contract & Procurement Risk Flashcards

Which elements are typically included in a procurement risk register?

Answer: Vendor performance history, contract terms risks, and supply chain vulnerabilities

A procurement risk register tracks risks specific to vendor relationships, including performance history, contractual obligations, and supply chain vulnerabilities.

What is the purpose of source selection criteria in project procurement?

Answer: To evaluate and rank vendor proposals objectively and consistently

Source selection criteria provide objective standards for evaluating vendor proposals, reducing the risk of biased or poor vendor selection decisions.

A project manager learns a key vendor is experiencing significant financial difficulties. Which risk response is most appropriate?

Answer: Develop a contingency plan including an alternative qualified vendor

Developing a contingency plan with an alternative vendor is a proactive response that ensures project continuity if the primary vendor becomes unable to deliver.

What does 'contract risk allocation' mean in project procurement management?

Answer: Assigning financial and performance responsibilities between the buyer and seller

Contract risk allocation defines which party bears specific risks, ensuring risks are assigned to the party best positioned to manage and absorb them.

Which procurement strategy best reduces the risk of schedule delays caused by vendor non-performance?

Answer: Including liquidated damages clauses tied to milestone dates

Liquidated damages clauses impose pre-defined financial penalties for schedule delays, creating a strong financial incentive for vendors to deliver on time.

In procurement risk management, what does a 'force majeure' clause address?

Answer: Excusing contract non-performance due to unforeseeable extraordinary events

A force majeure clause protects both parties from liability when extraordinary, unforeseeable events such as natural disasters or war prevent contract performance.

What is the primary risk to the buyer when using a time-and-materials (T&M) contract for a long-duration project?

Answer: The buyer assumes open-ended cost risk because total price is not fixed

In T&M contracts, the buyer pays for all hours worked and materials consumed, so cost risk rests entirely with the buyer unless a price ceiling is contractually specified.