Contract & Procurement Risk Flashcards

What is the primary purpose of the contract closeout process in project risk management?

Answer: To confirm deliverables are complete, payments settled, and lessons learned captured

Contract closeout verifies all deliverables are formally accepted, financial obligations are settled, and lessons learned are documented to improve future procurement risk management.

Which document formally establishes the buyer-seller relationship and defines legal obligations in project procurement?

Answer: The signed contract as a legally binding agreement

The contract is the legally binding document that establishes obligations, rights, and risk responsibilities between the buyer and seller.

A project is heavily dependent on a single overseas supplier for critical components. Which risk category best describes this situation?

Answer: Supply chain concentration and single-source dependency risk

Heavy reliance on a single overseas supplier creates supply chain concentration risk, where any disruption to that one source can halt the entire project.

What is the role of a procurement audit in project risk management?

Answer: To review procurement processes and capture lessons learned for improvement

A procurement audit reviews the full procurement process to identify successes and failures, supporting continuous improvement and risk reduction in future procurements.

Requiring a vendor to obtain a performance bond before contract award is an example of which risk strategy?

Answer: Risk transfer

Requiring a performance bond transfers the financial risk of vendor non-performance to a surety company, protecting the buyer if the vendor fails to fulfill their contractual obligations.

What is 'scope creep risk' in a project procurement context?

Answer: Risk that poorly defined scope leads to unauthorized work, cost overruns, and disputes

Poorly defined scope in procurement contracts creates scope creep risk, where ambiguities lead to unauthorized additional work, cost overruns, and contractual disputes.

In procurement risk management, what does vendor due diligence primarily assess before contract award?

Answer: The financial stability, past performance, and delivery capability of potential vendors

Vendor due diligence assesses financial stability, past performance, and overall capability to ensure a vendor can reliably fulfill contractual obligations before award.