Project Risk Management Contract & Procurement Risk

Question 1

Which contract type transfers the most financial risk to the seller?

Accepted Answer

Fixed-price contract

Answer

Cost-plus-fixed-fee contract

Answer

Time and material contract

Answer

Cost-plus-incentive-fee contract

Question 2

What is the primary purpose of a make-or-buy analysis in project risk management?

Accepted Answer

To assess the risks and costs of producing internally versus outsourcing

Answer

To determine whether to hire internal or external staff

Answer

To evaluate the quality of vendor proposals

Answer

To establish contract payment terms

Question 3

In a Cost-Plus-Incentive-Fee (CPIF) contract, how is seller performance risk managed?

Accepted Answer

The seller receives incentive fees for meeting defined performance targets

Answer

The buyer absorbs all cost overruns with no seller accountability

Answer

Costs are fixed regardless of actual expenditures

Answer

The seller guarantees delivery at a set price

Question 4

Which procurement document is used to solicit bids when the scope of work is clearly and completely defined?

Accepted Answer

Invitation for Bid (IFB)

Answer

Request for Information (RFI)

Answer

Request for Proposal (RFP)

Answer

Request for Quotation (RFQ)

Question 5

What does a warranty clause in a procurement contract primarily protect against?

Accepted Answer

Defects or failures in delivered goods and services after acceptance

Answer

Schedule delays caused by the buyer

Answer

Cost overruns during project execution

Answer

Scope creep introduced by the seller

Question 6

Which risk response strategy is employed when a project team outsources project work to an external vendor through a contract?

Accepted Answer

Transfer

Answer

Avoid

Answer

Mitigate

Answer

Accept

Question 7

What is a key risk associated with sole-source procurement?

Accepted Answer

Vendor dependency and lack of competitive pricing leverage

Answer

Increased competition driving up costs

Answer

Difficulty in evaluating multiple vendor proposals simultaneously

Answer

Longer procurement lead times due to evaluation complexity