Answers

1. 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. A, C, and D are all incorrect. A vendor proposal, a quotation, and project requirements do nothing to serve as a risk mitigation tool. For more information, see the PMBOK, Section 12.2.1.4.

2. A. Of all choices presented, A is the best choice. Contracts have an offer and a consideration. 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. For more information, see the PMBOK, Section 12.4.3.2.

3. C. The project scope statement defines the details and requirements for acceptance of the project, serves as a valuable input to the process of determining what needs to be procured, and defines what the end result will be. When dealing with vendors to procure a portion of the project, the procured work must support the requirements of the project's customer. A is incorrect because the project scope statement defines the project as a whole, not just the contracted work, which may be just a portion of the project. B is incorrect; the project scope statement 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. For more information, see the PMBOK, Section 12.1.1.3.

4. B. This is the best answer of all the choices presented. The contract change control system will determine the best route to incorporate the change. 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, reapproved, and so on. C and D are not viable answers. For more information, see the PMBOK, Section 12.5.2.1.

5. C. All contracts in the United States are backed by the U.S. court systems. A, B, and D are not correct answers. For more information, see the PMBOK, Section 12.4.3.2.

6. C. A purchase order is an example of a unilateral contract. A, B, and D are all incorrect choices. An SOW is a statement of work. A legally binding contract does not fully answer the question. D, an invoice from the vendor, is not what the purchasing department is requesting. For more information, see the PMBOK, Section 12.1.2.3.

7. B. A fair contract shares a reasonable amount of risk between the buyer and the seller. 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. For more information, see the PMBOK, Section 12.1.2.3.

8. C. Privity is a confidential agreement between the buyer and seller. A, B, and D are incorrect choices, as these do not fully answer the question.

9. D. A fixed-price contract contains the least amount of risk for a project. The seller assumes all of the risk. A, B, and C are incorrect because these contract types carry the risk of cost overruns being assumed by the buyer. For more information, see the PMBOK, Section 12.1.2.3.

10. C. A lump-sum contract provides a fixed fee to complete the contract; the seller absorbs any cost overruns. A and B are incorrect because these contracts require the seller to carry the risk of cost overruns. D is incorrect, because a time and materials contract requires the buyer to pay for cost overruns on the materials and the time invested in the project work. For more information, see the PMBOK, Section 12.1.2.3.

11. B. The contractor's rate of $120 per hour plus the cost of the materials is an example of a time and materials contract. A is incorrect; a cost plus fixed fee contract 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 contract has a set price for each unit installed on the project. D is also incorrect, as a lump-sum contract does not break down the time and materials. For more information, see the PMBOK, Section 12.1.2.3.

12. C. The risk register is not an input to the contract statement of work. Only A, B, and D are inputs for the contract statement of work. For more information, see the PMBOK, Section 12.1.3.2.

13. 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; 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, 6 months, is the best choice. A, B, and D are all incorrect, as they do not answer the question. For more information, see the PMBOK, Section 12.1.2.1.

14. B. Henry intends to buy from the ABN Contracting Company. A, C, and D are all incorrect; these choices do not adequately describe the purpose of the letter of intent.

15. D. An invitation for bid is a request for a sealed document that lists the seller's firm price to complete the detailed work. 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. For more information, see the PMBOK, Section 12.2.2.1.

16. B. Procurement documents detail the requirements for the work to ensure complete proposals from sellers. 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 as to why the bid is being created is not the purpose of the procurement documents. D is not realistic. For more information, see the PMBOK, Section 12.2.3.1.

17. C. The select seller process happens during the execution process group. A, B, and D are all incorrect, as these process groups do not include source selection. For more information, see the PMBOK, Sections 12.4 and 3.2.3.7.

18. 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. 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.

19. C. Any additional work is a change in the project scope. Changes to the project scope should be approved by the mechanisms in the contract change control system. The stakeholder needs to approve the changes to the project scope. A, B, and D are not realistic expectations of the project. This question borders 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. For more information, see the PMBOK, Section 12.5.2.1.

20. A. Force majeure, sometimes called "an act of God," is a natural disaster that can wreck a project. B, risk transference, is incorrect, as this describes the response to the risk, not the tornado itself. C, direct cost, describes costs that cannot be shared with other organizations but that are attributed directly to your project. D, an unknown unknown, does not fully describe the tornado as choice A does, so this choice is also incorrect. For more information, see the PMBOK, Section 12.2.1.4.

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