Self Test

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1.	Which of the following may be used as a risk mitigation tool? Vendor proposal Contract Quotation Project requirements
2.	A contract cannot have provisions for which one of the following? A deadline for the completion of the work Illegal activities Subcontracting the work Penalties and fines for disclosure of intellectual rights
3.	You are the project manager for the 89A Project. You have created a contract for your customer. The contract must have what two things? Offer and consideration Signatures and the stamp of a notary public Value and worth of the procured item Start date and acceptance of start date
4.	The product description of a project can help a project manager create procurement details. Which one of the following best describes this process? A. The product description defines the contracted work. B. The product description defines the requirements for the contract work. C. The product description defines the contracted work, which must support the requirements of the project customer. D. Both parties must have and retain their own copy of the product description.
5.	Yolanda has outsourced a portion of the project to a vendor. The vendor has discovered some issues that will influence the cost and schedule of its portion of the project. How must the vendor update the agreement? As a new contract signed by Yolanda and the vendor. As a contract addendum signed by Yolanda and the vendor. As a memo and SOW signed by Yolanda and the vendor. Project Management contracts have clauses that allow vendors to adjust their work according to unknowns.
6.	The United States backs all contracts through which of the following? Federal law State law Court system Lawyers
7.	Terry is the project manager of the MVB Project. She needs to purchase a piece of equipment for her project. The Accounting department has informed Terry she needs a unilateral form of contract. Accounting is referring to which of the following? SOW Legal binding contract Purchase Order Invoice from the vendor
8.	Bonnie is the project manager for the HGH Construction Project. She has contracted a portion of the project to the ABC Construction Company. Bonnie has offered a bonus to ABC if they complete their portion of the work by August 30. This is an example of which one of the following? Project requirement Project incentive Project goal Fixed-price contract
9.	The purpose of a contract is to distribute between the buyer and seller a reasonable amount of which of the following: Responsibility Risk Reward Accountability
10.	Privity is what? Relationship between the project manager and a known vendor Relationship between the project manager and an unknown vendor Contractual, confidential information between customer and vendor Professional information regarding the sale between customer and vendor
11.	Sammy is the project manager of the DSA Project. He is considering proposals and contracts presented by vendors for a portion of the project work. Of the following, which contract is least dangerous to the DSA Project? Cost plus fixed fee Cost plus percentage of cost Cost plus incentive fee Fixed-price
12.	In the following contract types, which one requires the seller to assume the risk of cost overruns? Cost plus fixed fee Cost plus incentive fee Lump sum Time and materials
13.	Benji is the project manager of PLP Project. He has hired an independent contractor for a portion of the project work. The contractor is billing the project $120 per hour, plus materials. This is an example of which one of the following? Cost plus fixed fee Time and materials Unit-price Lump sum
14.	Mary is the project manager of JHG Project. She has created a Statement of Work (SOW) for a vendor. For Mary’s SOW to be a legal contract, what must be included? Affidavit of agreement Signatures of both parties agreeing to SOW Signature of vendor Signature of Mary
15.	You are the project manager for a software development project for an accounting system that will operate over the Internet. Based on your research, you have discovered it will cost you $25,000 to write your own code. Once the code is written you estimate you’ll spend $3,000 per month updating the software with client information, government regulations, and maintenance. A vendor has proposed to write the code for your company and charge a fee based on the number of clients using the program every month. The vendor will charge you $5 per month per user of the web-based accounting system. You will have roughly 1,200 clients using the system per month. However, you’ll need an in-house accountant to manage the time and billing of the system, so this will cost you an extra $1,200 per month. How many months will you have to use the system before it is better to write your own code than to hire the vendor? 3 months 4 months 6 month 15 months
16.	You are completing the closeout of a project to design a warehouse in Columbus, Ohio. The contract is a Cost Plus Incentive Fee contract. The target costs are $300,000, with a 10 percent target profit. However, the project came in at $275,000. The incentive split is 80/20. How much is the total contract cost?? $300,000 $275,000 $310,000 $330,000
17.	A contract between an organization and a vendor may include a clause that penalizes the vendor if the project is late. The lateness of a project has a monetary penalty; penalty should be enforced or waived based on which one of the following? If the project manager could have anticipated the delay If the project manager knew the delay was likely Whether the delay was because of an unseen risk Who caused the delay and the reason why
18.	A single source seller means what? There is only one qualified seller. There is only one seller the company wants to do business with. There is a seller that can provide all aspects of the project procurement needs. There is only one seller in the market.
19.	Which one of the following is not a valid evaluation criterion for source selection? Age of the contact person at the seller Technical ability of the seller Contract requirements Price
20.	Henry has sent the ABN Contracting Company a letter of intent. This means which one of the following? Henry intends to sue the ABN Contracting Company. Henry intends to buy from the ABN Contracting Company. Henry intends to bid on a job from the ABN Contracting Company. Henry intends to fire the ABN Contracting Company.
21.	Martha is the project manager of the MNB Project. She wants a vendor to offer her one price to do all of the detailed work. Martha is looking for which type of document? RFP RFI Proposal IFB
22.	Which one of the following is true about procurement documents? They offer no room for bidders to suggest changes. They ensure receipt of complete proposals. They inform the performing organization why the bid is being created. The project manager creates and selects the bid.
23.	In what process group does source selection happen? Initiating Planning Executing Closing
24.	You have an emergency on your project. You have hired a vendor that is to start work immediately. What contract is needed now? T&M Fixed fee Letter contract Incentive contract
25.	You are the project manager for a seller. You are managing another company’s project. Things have gone well on the project, and the work is nearly complete. There is still a significant amount of funds in the project budget. The buyer’s representative approaches you and asks that you complete some optional requirements to use up the remaining budget. You should do which one of the following? Negotiate a change in the contract to take on the additional work. Complete a contract change for the additional work. Gain the approval of the project stakeholder for the requested work. Deny the change because it was not in the original contract.

Answers

1.	þ B. Contracts can be used as a risk mitigation tool. Procurement of risky activities is known as transference; the risk does not disappear, but the responsibility for the risk is transferred to the vendor. ý A, C, and D are all incorrect. A vendor proposal, a quotation, and project requirements do nothing to serve as a risk mitigation tool.
2.	þ B. A contract cannot contain illegal activities. ý A is incorrect, as a contract can stipulate a deadline for the project work. C is incorrect; contracts can specify rules for subcontracting the work. D is also incorrect; a contract can assess a penalty and fines for disclosing intellectual rights and secret information.
3.	þ A. Of all choices presented, A is the best choice. Contracts have an offer and a consideration. ý B is incorrect, as not all contracts demand signatures and notary public involvement. C is incorrect; a contract may not explicitly determine what the value and worth of the procured product or service is. D is also incorrect; a contract may specify a start date, but the acceptance of the start date is vague and not needed for all contracts.
4.	þ C. The product description defines the details and requirements for acceptance of the project. This information also serves as a valuable input to the process of determining what needs to be procured. The product description defines what the end result of the project will be. When dealing with vendors to procure a portion of the project, the work to be procured must support the requirements of the project’s customer. ý A is incorrect because the product description defines the product as a whole, not just the contracted work, which may be just a portion of the project. B is incorrect; the product description does not define the requirements for the contract work. D is also incorrect; the vendor likely will not have a copy of the product description..
5.	þ B is the best answer of all the choices presented. Because the question is asking for the vendor to update the agreement, B is the best choice. ý A, while feasible, is not the best answer to the question. A new contract does not update the original agreement and may cause delays, as the contract may have to be resubmitted, re-approved, and so on. C and D are not viable answers.
6.	þ C. All contracts in the United States are backed by the US court systems. ý A, B, and D are not correct answers.
7.	þ C. A unilateral form of a contract is simply a purchase order. ý A, B, and D are all incorrect choices. A SOW is a statement of work. A legal binding contract does not fully answer the question. D, an invoice from the vendor, is not what the purchasing department is requesting.
8.	þ B. A bonus to complete the work by August 30 is an incentive. ý A is incorrect, as the question does not specify August 30 as a deadline. C is incorrect, as “project goal” does not fully answer the question. D is incorrect because the contract details are not disclosed in this question.
9.	þ B. A fair contract shares a reasonable amount of risk between the buyer and the seller. ý A is incorrect; a contract may transfer the majority of the responsibility to the vendor. C is incorrect; the reward is not an appropriate answer to the question. D is also incorrect; the accountability of the services contracted to the vendor is not shared between the buyer and the seller.
10.	þ C. Privity is a confidential agreement between the buyer and seller. ý A, B, and D are incorrect choices, as these choices do not fully answer the question.
11.	þ D. A Fixed-Price contract contains the least amount of risk for a project. The seller assumes all of the risk. ý A, B, C are incorrect, because these contract types carry the risk of cost overruns being assumed by the buyer.
12.	þ C. A Lump Sum is a fixed fee to complete the contract; the seller absorbs any cost overruns. ý A and B are incorrect because these contracts require the seller to carry the risk of cost overruns. D is incorrect because Time and Materials contracts require the buyer to pay for cost overruns on the materials and the time invested in the project work.
13.	þ B. The contractor’s rate of $120 per hour plus the cost of the materials is an example of a Time and Materials contract. ý A is incorrect; a Cost Plus Fixed Fee charges the cost of the materials, plus a fixed fee, for the installation or work to complete the contract. C is incorrect; a Unit-Price has a set price for each unit installed on the project. D is also incorrect, as a Lump Sum does not break down the time and materials.
14.	þ B. An SOW can be a contract if both parties agree to the SOW and sign the document as a contract. ý A, C, and D are incorrect. A is incorrect as it does not fully answer the question. C and D are incorrect; individuals with the authority from both parties need to sign the SOW.
15.	þ C. The monies invested in the vendor’s solution would have paid for your own code in six months. This is calculated by finding your cash outlay for the two solutions: $25,000 for your own code creation, and zero cash outlay for the vendor’s solution. The monthly cost to maintain your own code is $3,000. The monthly cost of the vendor’s solution is $7,200. Subtract your cost of $3,000 from the vendor’s cost of $7,200 and this equals $4,200. Divide this number into the cash outlay of $25,000 to create your own code and you’ll come up with 5.95 months. Of all the choices presented, C, six months, is the best choice. ý A, B, and D are all incorrect as they do not answer the question.
16.	þ C. The total contract cost is $310,000. Here’s how the answer is calculated: target cost is $300,000. The ten percent profit is $30,000. The finished cost was $275,000, a difference of $25,000 between the target and the actual. The contract calls for an 80/20 split if the contract comes in under budget. The formula reads finished costs + profit margin + (.20 X under budget amount). ý A, B, and D are all incorrect as these choices do not reflect the amount of the contract.
17.	þ D. The party that caused the delay is typically the party responsible for the delay. It would not be acceptable for the project manager to willingly cause a delay and then penalize the contractor because the project was late. ý A, B, and C are all incorrect. D is the best answer as it answers the question fully.
18.	þ B. A single source seller means there is only one seller the company wants to do business with. ý A describes a “sole source” seller. C is incorrect; there may be multiple sellers that can satisfy the project needs. D is also incorrect; just because there is only one seller in the market does not mean the seller can adequately and fully fill the project needs.
19.	þ A. The age of the contact at the seller should not influence the source selection. The experience of the person doing the work, however, can. ý B, C, and D are all incorrect, as technical ability, objective requirements (such as qualifications and certifications), and price can be valid evaluation criteria.
20.	þ B. Henry intends to buy from the ABN Contracting Company. ý A, C, and D are all incorrect; these choices do not adequately describe the purpose of the letter of intent.
21.	þ D. An IFB is typically a request for a sealed document that lists the seller’s firm price to complete the detailed work. ý A and B, Request for Proposal and Request for Information, are documents from the buyer to the seller requesting information on completing the work. C, a proposal, does not list the price to complete the work, but instead offers solutions to the buyer for completing the project needs.
22.	þ B. Procurement documents detail the requirements for the work to ensure complete proposals from sellers. ý A is incorrect; procurement documents allow input from the seller to suggest alternative ways to complete the project work. C is incorrect; informing the performing organization on why the bid is being created is not the purpose of the procurement documents. D is not realistic.
23.	þ C. Source selection happens during the Execution process group. ý A, B, and D are all incorrect, as these process groups do not include source selection.
24.	þ C. For immediate work, a letter contract may suffice. The intent of the letter contract is to allow the vendor to get to work immediately to solve the project problem. ý Choices A, B, and D are all incorrect; these contracts may require additional time to create and approve. When time is of the essence, a letter contract is acceptable.
25.	þ C. Any additional work is a change in the project scope. Changes to project scope should be approved by the mechanisms in the change control system. The stakeholder needs to approve the changes to the project scope. ý A, B, and D are not realistic expectations of the project. This questions border on the PMP Code of Professional Conduct. Typically, when a project scope has been fulfilled, the project work is done. The difference in this situation is that the additional tasks are optional requirements for the project scope.

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