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

In a fixed-price contract, the seller must complete the work at the agreed price regardless of actual costs, bearing the full financial risk.

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

A make-or-buy analysis evaluates the risks, costs, and benefits of producing a product or service internally versus outsourcing to an external vendor.

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

CPIF contracts include incentive fees tied to performance metrics, motivating sellers to control costs while sharing financial risk with the buyer.

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

An Invitation for Bid (IFB) is used when scope is fully defined and vendor selection is based primarily on price.

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

A warranty clause requires the seller to repair or replace defective goods or services for a specified period after delivery and acceptance, protecting the buyer.

Project Risk Management Practice Test

Project Risk Management Practice Test

Project Risk Management Contract & Procurement Risk