Pmp Exam Practice Test - 3K Project Management Procurement

Front 1

Once signed, a contract is legally binding unless:

A. One party is unable to perform.

B. One party is unable to finance its part of the work.

C. It is in violation of applicable law.

D. It is declared null and void by either party's legal counsel.

Back 1

Answer C

Explanation Once signed, a contract is binding. Generally, the inability to perform orfinancing, or one party's belief that the contract is null and void does not change the fact that thecontract is binding. If, however, both sides agree to terminate the contract, the contract can moveinto the Close Procurements process.

Front 2

With a clear procurement statement of work, a seller completes work as specified, but the buyer isnot pleased with the results. The contract is considered to be:

A. Null and void.

B. Incomplete.

C. Complete.

D. Waived.

Back 2

Answer C

Explanation If the seller completes the work specified in the procurement statement of work, thecontract is considered complete. That does not mean the same thing as the procurement beingclosed. The Close Procurements process must still occur. However, in this situation, the contractwork is completed.

Front 3

All of the following statements concerning procurement documents are incorrect EXCEPT:

A. Well-designed procurement documents can simplify comparison of responses.

B. Procurement documents must be rigorous with no flexibility to allow consideration of sellersuggestions.

C. In general, procurement documents should not include selection criteria.

D. Well-designed procurement documents do not include a procurement statement of work.

Back 3

Answer A

Explanation Often the seller is required to inform the buyer of anything that is missing orunclear in the procurement documents. It is in the buyer's best interest to discover missingitems, since it will save the buyer money and trouble to correct the problem early. Procurementdocuments must contain terms and conditions and selection criteria, as well as documentationof all the work that is to be done (which includes the procurement statement of work). This isso the seller can price the project and know what is most important to the buyer. Well-designedprocurement documents can simplify comparison of responses. This is an important point and isthe best answer.

Front 4

A project manager for the seller is told by her management that the project should do whateverpossible to be awarded incentive money. The primary objective of incentive clauses in a contract is to:

A. Reduce costs for the buyer.

B. Help the seller control costs.

C. Synchronize objectives.

D. Reduce risk for the seller by shifting risk to the buyer.

Back 4

Answer C

Explanation Incentives are meant to bring the objectives of the seller in line with those of thebuyer, so both are progressing toward the same objective.

Front 5

AH the following statements about change control are incorrect EXCEPT:

A. A fixed-price contract will minimize the need for change control.

B. Changes seldom provide real benefits to the project.

C. Contracts should include procedures to accommodate changes.

D. More detailed specifications eliminate the causes of changes.

Back 5

Answer C

Explanation There are always good ideas (changes) that can add benefit to the project, regardlessof the contract type. Although detailed specifications may reduce the need for changes, they donot eliminate the causes. Contracts should include procedures to accommodate changes.

Front 6

A routine audit of a cost-reimbursable (CR) contract determines that overcharges are being made.If the contract does not specify corrective actions, the buyer should:

A. Continue to make project payments.

B. Halt payments until the problems is corrected.

C. Void the contract and start legal action to recover over-payments.

D. Change the contract to require more frequent audits.

Back 6

Answer A

Explanation Halting all payments would be a breach of contract on the buyer's part. Voiding thecontract and beginning legal action is too severe and cannot be done unilaterally. Changing thecontract to require more frequent audits does not solve the problem presented. A choice that said,"Halt payments on the disputed amount" would probably be the best answer, but it is not offered.The best choice available is to continue to make the payments.

Front 7

The primary objective of contract negotiations is to:

A. Get the most from the other side.

B. Protect the relationship.

C. Get the highest monetary return.

D. Define objectives and stick to them

Back 7

Answer B

Explanation As a project manager, you want to develop a good relationship during negotiations that will last throughout the project. Negotiation are not about getting the most from the other side (win-lose), as such actions will not create a good relationship. That doesn't mean the buyer sacrifices doing what is best for the organization.

Front 8

A seller is working on a cost-reimbursable (CR) contract when the buyer decides he would like toexpand the scope of services and change to a fixed-price (FP) contract. All of the following are theseller's options EXCEPT:

A. Completing the original work on a cost-reimbursable basis and then negotiating a fixed pricefor the additional work.

B. Completing the original work and rejecting the additional work.

C. Negotiating a fixed-price contract that includes the work.

D. Starting over with a new contract.

Back 8

Answer D

Explanation The seller can try to negotiate change or simply continue the original contract and refuse requests to complete additional work, but the seller cannot unilaterally decide to start over with a new contract. Both parties has to agree to this option through negotiations.

Front 9

All of the following MUST be present to have a contract EXCEPT:

A. A procurement statement of work.

B. Acceptance.

C. The address of the seller.

D. Buyers' signatures.

Back 9

Answer C

Explanation Many people miss the fact that a contract includes a procurement statement ofwork. To have a contract, you must also have acceptance. One set of signatures is not enough; youmust have sign-off (i.e., acceptance) from both parties, not just from the buyer. The address of theseller is not required, and therefore is the exception.

Front 10

Which of the following BEST describes the project manager's role in the procurement process?

A. The project manager has only minor involvement.

B. The project manager should be the negotiator.

C. The project manager should provide an understanding of the risks of the project.

D. The project manager should tell the contract manager how the contracting process should behandled.

Back 10

Answer C

Explanation The project manager knows the project risks. He or she needs to make sureprovisions are included in the contract to address these risks.

Front 11

Which of the following activities occurs during the Plan Procurement Management process?

A. Make-or-buy decisions

B. Answering sellers' questions about the bid documents

C. Advertising

D. Proposal evaluation

Back 11

Answer A

Explanation Answering sellers' questions, advertising, and proposal evaluation occur during theConduct Procurements process. Make-or-buy decisions are made earlier, in the Plan ProcurementManagement process.

Front 12

Which of the following is the BEST thing for a project manager to do in the ConductProcurements process?

A. Evaluate risk.

B. Select a contract type.

C. Perform market research.

D. Answer sellers' question about the procurement documents.

Back 12

Answer D

Explanation Risk analysis is done before the Conduct Procurements process begins, asprocurement is a risk mitigation and transference tool. Selecting a contract type is part ofPlan Procurement Management. Market research is also performed in the Plan ProcurementManagement process, to enable selection of the appropriate sellers for the needs of the project.During the Conduct Procurements process, the project manager answers questions submitted byprospective sellers.

Front 13

1he sponsor is worried about the seller deriving extra profit on the cost plus fixed fee (CPFF)contract. Each month he requires the project manager to submit CPI calculations and an analysisof the cost to complete. The project manager explains to the sponsor that extra profits should NOTbe a worry on this project because:

A. The team is making sure the seller does not cut scope.

B. All costs invoiced are being audited.

C. There can only be a maximum 10 percent increase if there is an unexpected cost overrun.

D. The fee is only received by the seller when the project is completed.

Back 13

Answer B

Explanation Cutting scope decreases profits on this type of contract, so that would not be a wayfor the seller to generate extra profits. CPFF contracts generally do not limit fee increases, andthe fee in a CPFF contract is usually paid out on a continuous basis during the life of the project.One of the ways to change the profit in a cost plus fixed fee contract is to invoice for items notchargeable to the project. Therefore, all invoiced costs should be audited.

Front 14

In a fixed-price (FP) contract, the fee or profit is:

A. Unknown.

B. Part of the negotiation involved in paying every invoice.

C. Applied as a line item to every invoice.

D. Determined with the other party at the end of the project.

Back 14

Answer A

Explanation The fee or profit is known to the seller, but this question is asked from the buyer'sperspective. The buyer does not know what profit the seller included in the contract.

Front 15

A project performed under a cost-reimbursable contract has finally entered the CloseProcurements process. What MUST the buyer remember to do?

A. Decrease the risk rating of the project.

B. Audit seller's cost submittals.

C. Evaluate the fee she is paying.

D. Make sure the seller is not adding resources.

Back 15

Answer B

Explanation Although a reserve might be decreased for the project overall when one of itsprocurements enters closure, the risk rating of the project is generally not affected. Evaluation ofthe fee should have been done during the Conduct Procurements process. Making sure the sellerdoes not add resources may be a concern during the Control Procurements process, but it is notcommon during Close Procurements. Auditing the seller's cost submittals is a required aspect ofthe Close Procurements process.

Front 16

The sponsor and the project manager are discussing what type of contract the project managerplans to use on the project. The sponsor points out that the performing organization spent a lot ofmoney hiring a design team to come up with the design. The project manager is concerned that therisk for the buyer be as small as possible. An advantage of a fixed-price contract for the buyer is:

A. Cost risk is lower.

B. Cost risk is higher.

C. There is little risk.

D. Risk is shared by all parties.

Back 16

Answer A

Explanation If yo had trouble with this one, you need to remember that the question are ask from the buyer's perspective unless otherwise noted. The seller has the most cost risk in fixed price contract, and the buyer's risk is lower.

Front 17

As part of the records management system, you are trying to make sure all records from theprocurement are documented and indexed. Which of the following do you NOT have to worry about?

A. Proposal

B. Procurement statement of work

C. Terms and conditions

D. Negotiation process

Back 17

Answer D

Explanation To answer this question, you need to know what a records management system is and that it would not be used to keep track of negotiations. The negotiation process is not a document. The proposal, procurement statement of work, and the contract term and conditions are all records that need to be documented and indexed.

Front 18

You are in the middle of a complex negotiation when the other party says, "We need to finish in one hour because I have to catch my plane." That person is using which of the following negotiation strategies?

A. Good guy, bad guy.

B. Delay.

C. Deadline.

D. Extreme demand.

Back 18

Answer C

Explanation Putting a time limit on the negotiation is an example of a deadline negotiation strategy.

Front 19

Which of the following is an advantage of centralized contracting?

A. Increased expertise

B. Easier access

C. No home for the procurement manager

D. More loyalty to the project

Back 19

Answer A

Explanation Centralized contracting usually means it is more difficult to get access to theprocurement manager, and the procurement manager has less loyalty to the project. The factthat the procurement manager has no home when he or she is not working on a project is adisadvantage of decentralized contracting. Increased expertise of the procurement manager is anadvantage of centralized contracting.

Front 20

With which type of contract is the seller MOST concerned about project scope?

A. Fixed price

B. Cost plus fixed fee

C. Time and material

D. Purchase order

Back 20

Answer A

Explanation In a fixed-price contract, the seller has the cost risk and therefore wants tocompletely understand the procurement statement of work before bidding.

Front 21

Your company has an emergency and needs contracted work done as soon as possible. Underthese circumstances, which of the following would be the MOST helpful to add to the contract?

A. A clear procurement statement of work

B. Requirements as to which subcontractors can be used

C. Incentives

D. A force majeure clause

Back 21

Answer C

Explanation If you follow the proper project management process, you ALWAYS have gooddefinition of scope (in this case, the procurement statement of work). In this situation, both goodscope definition and incentives are required. Along with good scope definition, you need the sellerto share your need for speed. Incentives bring the seller's objectives in line with the buyer's andthus would be the MOST helpful. Good scope definition alone does not ensure speed.

Front 22

During which procurement processes does procurement negotiation occur?

A. Plan Procurement Management and Close Procurements

B. Control Procurements and Close Procurements

C. Conduct Procurements and Control Procurements

D. Conduct Procurements and Close Procurements

Back 22

Answer D

Explanation Negotiation occurs during the Conduct Procurements process as part of the effortto create a contract or agreement that is approved by both the buyer and the seller. Negotiationalso occurs in the Close Procurements process to settle any outstanding disputes.

Front 23

The project team is arguing about the prospective sellers who have submitted proposals. One teammember argues for a certain seller while another team member wants the project awarded to adifferent seller. What part of the procurement process is the team in?

A. Plan Procurement Management

B. Control Procurements

C. Negotiate Contracts

D. Conduct Procurements

Back 23

Answer D

Explanation Selected sellers are an output of the Conduct Procurements process.

Front 24

A project manager is in the middle of creating a request for proposal (RFP). What part of theprocurement process is he in?

A. Conduct Procurement.

B. Plan Procurement Management.

C. Administer Procurements.

D. Make-or-Buy Analysis

Back 24

Answer B

Explanation The procurement documents are created during the Plan Procurement Managementprocess. The request for proposal is one of those documents, so the project manager is in the PlanProcurement Management process.

Front 25

Your program manager has come to you, the project manager, for help with a bid for her newestproject. You want to protect your company from financial risk, and you have limited scopedefinition. What is the BEST type of contract to choose?

A. Fixed price (FP)

B. Cost plus percentage of cost ( CPPC)

C. Time and material (T &M)

D. Cost plus fixed fee ( CPFF)

Back 25

Answer D

Explanation Of the options given, the only contract that limits fees for large projects with limitedscope definition is cost plus fixed fee.

Front 26

Negotiations between two parties are becoming complex, so Party A makes some notes thatboth parties sign. However, when the work is being done, Party B claims they are not requiredto provide an item they both agreed to during negotiations, because it was not included in thesubsequent contract. In this case, party B is:

A. Incorrect, because both parties must comply with what they agreed on.

B. Correct, because there was an offer.

C. Generally correct, because both parties are only required to perform what is in the contract.

D. Generally incorrect, because all agreements must be upheld.

Back 26

Answer C

Explanation Party B is only required to deliver what is defined in the contract.

Front 27

Your project has just been fast tracked and you are looking to quickly bring in a subcontractor tocomplete networking. There is no time to issue a request for proposal (RFP), so you choose to usea company you have used many times before for software development. A PRIMARY concern inthis situation is:

A. Collusion between subcontractors.

B. The subcontractor's qualifications.

C. The subcontractor's evaluation criteria.

D. Holding a bidder conference.

Back 27

Answer B

Explanation Although you have used this contractor before, how can you be sure the company is qualified to do the new work, since it is not exactly like the previous work? This is the risk you are taking.

Front 28

The project manager and project sponsor are discussing the project costs and whether it is betterto have their own company do part of the project or hire another company to do the work. If theyasked for your opinion, you might say it would be better to do the work yourself if:

A. There is a lot of proprietary data.

B. You have the expertise but you do not have the available manpower.

C. You do not need control over the work.

D. Your company resources are limited.

Back 28

Answer A

Explanation It is generally better to do the work yourself if using outside company means you have to turn over proprietary data to the other company.

Front 29

After much excitement and hard work, the procurement statement of work for the project iscompleted. Even after gaining agreement that the procurement statement of work is complete, theproject manager is still unsure of whether it actually addresses all the buyer's needs. The projectmanager is about to attend the bidder conference. He asks you for advice on what to do during thesession. Which of the following is the BEST advice you can give him?

A. You do not need to attend this session. The procurement manager will hold it.

B. Make sure you negotiate project scope.

C. Make sure you give all the sellers the opportunity to ask questions.

D. Let the project sponsor handle the meeting so you can be the good guy in the negotiation session.

Back 29

Answer C

Explanation The project manager should attend the bidder conference, although the procurementmanager may lead it. Did you select negotiating scope? Sellers may ask questions about scopeduring the conference, but negotiations occur after the seller is selected. Allowing ampleopportunity for all of the prospective sellers to ask questions is one of the many challenges of abidder conference. They may not want to ask questions while their competitors are in the room.

Front 30

A seller is awarded a contract to build a pipeline. The contract terms and conditions require awork plan to be issued for the buyer's approval prior to commencing work but the seller fails toprovide one. Which of the following is the BEST thing for the buyer's project manager to do?

A. File a letter of intent.

B. Develop the work plan and issue it to the seller to move things along.

C. Issue a default letter.

D. Issue a stop work order to the seller until a work plan is prepared.

Back 30

Answer C

Explanation When a seller does not perform according to the contract terms and conditions,they have defaulted and the project manager must take action. You might prefer a choice toinvestigate the default by contacting the seller and asking what is going on, but that choice isnot available here. You must send the formal written notice as soon as you become aware of thedefault so that you do not give up any right to receive the work plan in the future. You can contactthe seller for a discussion as the second thing you do. Therefore, the best choice is to let theseller know they are in default. The default notification letter will instruct the seller to meet theperformance requirement.

Front 31

Close Procurements is different from Close Project or Phase in that Close Procurements:

A. Occurs before Close Project or Phase.

B. Is the only one to involve the customer.

C. Includes the return of property.

D. May be done more than once for each contract.

Back 31

Answer A

Explanation The customer may be involved in lessons learned and procurement audits, andwould certainly be involved in formal acceptance. Both Close Procurements and Close Project orPhase involve the return of property. Close Procurements is done once for each procurement, atthe end of the contract. All procurements are closed before the project is closed.

Front 32

You have just started work on a procurement when management decides to terminate thecontract. What should you do FIRST?

A. Go back to the Plan Procurement Management process.

B. Go back to the Conduct Procurements process.

C. Finish the Control Procurements process.

D. Go to the Close Procurements process.

Back 32

Answer D

Explanation If the contract is terminated, the procurement needs to enter closure. The resultsof the procurement and its documentation are archived as historical records in the CloseProcurements process.

Front 33

The project team is arguing about the prospective sellers who have submitted proposals. One teammember argues for a certain seller while another team member wants the project to be awarded toa different seller. The BEST thing the project manager should remind the team to focus on in orderto make a selection is the:

A. Procurement documents.

B. Procurement audits.

C. Source selection criteria.

D. Procurement management plan.

Back 33

Answer C

Explanation The source selection criteria is the primary tool for evaluating potential sellers andshould be used by the team in order to make a selection.

Front 34

The performing organization is trying to decide whether to split the procurement departmentand assign procurement responsibilities to departments directly responsible for the projects.A procurement professional might not want this split to occur because he or she would lose_____ in a decentralized contracting environment.

A. Standardized company project management practices

B. Loyalty to the project

C. Experience

D. Access to others with similar experties

Back 34

Answer D

Explanation The change would not impact the organization's overall project managementpractices, only procurement. Loyalty to the project would be gained, not lost, in a decentralizedenvironment, as the procurement manager is part of the project team. In a decentralizedprocurement environment, there is less focus on maintaining the skill or expertise of thecontracting function, and access to other procurement professionals with comparable expertisewould be reduced.

Front 35

Your project team member delivers a project deliverable to the buyer. However, the buyer refuses the deliverable, stating it does not meet the requirement on page 300 of the ethical specifications. You review the document and find that you agree. What is the BEST thing to do?

A. Explain the contract is wrong and should be changed.

B. Issue a change order.

C. Review the requirements and meet with the responsible team member to review the WBS dictionary.

D. Call a meeting of the team to review the requirement on page 300.

Back 35

Answer C

Explanation This question is written from the perspective of the seller. The contract couldbe wrong, or the customer could be wrong, but this should have been discovered earlier if proper project management was followed. A seller cannot issue a change order (although they could request one). Did you select calling a meeting of the team? If so, remember that project management is not about making every decision with ALL the team members. The best choice involves reviewing the requirements documentation and meeting with the appropriate team member. If such a problem has arisen, it could mean something was wrong in the WBS dictionary or in how the team member completed the work.

Front 36

What type of contract do you NOT want to use if you do not have enough labor to audit invoices?

A. Cost plus fixed fee ( CPFF)

B. Time & material (T &M)

C. Fixed price (FP)

D. Fixed price incentive fee (FPIF)

Back 36

Answer A

Explanation If you got this question wrong, reread it. You need to audit invoices in all contracttypes, so how do you choose? Look for the answer that is BEST. In this case, would be the choicethat requires the greatest effort.A T&M contract should be used for low dollar and short duration contracts (remember that aT &M contract has no incentive to finish), so it does not have a high level of risk. FP and FPIFcontracts cannot be best, because the risk to the buyer is limited. The buyer is still only going topay the contracted price. In a CPFF contract, the buyer pays all costs. The seller could be chargingthe buyer for costs that should not be allocated to the buyer. Because of the size and dollar amountof this type of contract, and because the risk to the buyer is great, a CPFF contract requires themost auditing. In this case, you would not want to use a CPFF contract.

Front 37

A new project manager is about to begin creating the procurement statement of work. Onestakeholder wants to add many items to the procurement statement of work. Another stakeholderonly wants to describe the functional requirements. The project is important for the projectmanager's company, but a seller will do the work. How would you advise the project manager?

A. The procurement statement of work should be general to allow the seller to make their owndecisions.

B. The procurement statement of work should be general to allow for clarification later.

C. The procurement statement of work should be detailed to allow for clarification later.

D. The procurement statement of work should be as detailed as necessary for the type of project.

Back 37

Answer D

Explanation When the seller has more expertise than the buyer, the procurement statement ofwork should describe performance or function rather than a complete list of work. In any case, theprocurement statement of work should be as detailed as possible.