Project Procurement Management  ◾  285

Practice Questions
INSTRUCTIONS: Note the most suitable answer or
each multiple-choice question in the appropriate
space on the answer sheet.

1. What doctrine causes a party to relinquish rights

under a contract because it knowingly ails to execute
those rights?
a. Assignment o claims
b. Material breach
c. Waiver
d. Warranties

2. Which term describes those costs in a contract that are

associated with two or more projects but are not traceable
to either o them individually?
a. Variable
b. Direct
c. Indirect
d. Semivariable

3. Contract type selection is dependent on the degree o

risk or uncertainty acing the project manager. From the
perspective o the buyer, the pre erred contract type in a
low-risk situation is—
a. Firm- xed-price
b. Fixed-price-incentive
c. Cost-plus- xed ee
d. Cost-plus-a-percentage-o -cost
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4. The buyer has negotiated a cost-plus-incentive ee contract

with the seller. The contract has a target cost o $300,000,
a target ee o $40,000, a share ratio o 80/20, a maximum
ee o $60,000, and a minimum ee o $10,000. I the
seller has actual costs o $380,000, how much ee will the
buyer pay?
a. $104,000
b. $56,000
c. $30,000
d. $24,000

5. Which term describes the ailure by either the buyer or

the seller to per orm part or all o the duties o a contract?
a. Termination o contract
b. Partial per ormance
c. Breach o contract
d. Contract waiver

6. In some cases, contract termination re ers to—

a. Contract closeout by mutual agreement
b. Contract closeout by delivery o goods or services
c. Contract closeout by success ul per ormance
d. Certi cation o receipt o nal payment

7. Signi cant di erences between the seller’s price and

your independent estimate may indicate all the ollowing
EXCEPT the—
a. SOW was not adequate
b. Seller misunderstood the SOW
c. Sellers ailed to respond
d. Project team chose the wrong contract type
 Project Procurement Management  ◾  287

8. You are a contractor or a state agency. Your company

recently completed a water resource management project
or the state and received payment on its nal invoice
today. A procurement audit has been conducted. Formal
noti cation that the contract has been closed should be
provided to your company by the—
a. State’s project manager
b. Person responsible or procurement administration
c. Project control o cer
d. Project sponsor or owner

9. Which term describes contract costs that are traceable to

or caused by a speci c project work e ort?
a. Variable
b. Fixed
c. Indirect
d. Direct

10. When a seller breaches a contract, the buyer cannot

receive—
a. Compensatory damages
b. Punitive damages
c. Liquidated damages
d. Consequential damages

11. Which term is NOT a common name or a procurement

document that solicits an o er rom prospective sellers?
a. Contractor initial response
b. Request or in ormation
c. Request or quotation
d. Invitation or negotiation
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12. Because you are working under a rm- xed-price

contract, management wants you to submit the nal
invoice and close out the contract as soon as possible.
Be ore nal payment on the contract can be authorized,
you must—
a. Prepare a contract completion statement
b. Audit the procurement process
c. Update and archive contract records
d. Settle subcontracts

13. Recent data indicate that more than 10,000 airline pas-
sengers are injured each year rom baggage that alls rom
overhead bins. You per ormed a make-or-buy analysis
and decided to outsource an improved bin design and
manu acture. The project team needs to develop a list o
quali ed sources. As a general rule, which method would
the project team nd especially help ul?
a. Advertising
b. Internet
c. Trade catalogs
d. Relevant local associations

14. As you prepare to close out contracts on your project,

you should review all the ollowing types o documentation
EXCEPT the—
a. Contract document or the contract being closed
b. Procurement audit report
c. Invoice and payment records
d. Seller per ormance reports
 Project Procurement Management  ◾  289

15. You are working on a new project in your organization.

You need to decide how best to sta the project and
handle all its resource requirements. Your rst step should
be to—
a. Conduct a make-or-buy analysis
b. Conduct a market survey
c. Solicit proposals rom sellers using an RFP to deter-
mine whether you should outsource the project
d. Review your procurement department’s quali ed-seller
lists and send an RFP to selected sellers

16. Your company decided to award a contract or project

management services on a pharmaceutical research
project. Because your company is new to project manage-
ment and does not understand the ull scope o services
that may be needed under the contract, it is most appro-
priate to award a—
a. Firm- xed-price contract
b. Fixed-price-incentive contract
c. Cost-plus-a-percentage-o -cost contract
d. Time-and-materials contract

17. Requirements or ormal contract acceptance and closure

usually are de ned in the—
a. Proposal
b. Statement o work
c. Contract terms and conditions
d. Procurement audit report
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18. You plan to award a contract to provide project manage-

ment training or your company. You decide it is impor-
tant that any prospective contractor have an association
with a major university that awards master’s certi cates in
project management. This is an example o —
a. Setting up an independent evaluation
b. Preparing requirements or your statement o work
c. Establishing a weighting system
d. Establishing source selection criteria

19. All the ollowing elements must be evident in a written

contract or it to be legally en orceable EXCEPT—
a. Legal capacity
b. Mutual assent
c. Appropriate orm
d. Pricing structure

20. A purchase order is a good example o which orm

o  contracting?
a. Unilateral
b. Bilateral
c. Trilateral
d. Severable

21. You are responsible or ensuring that your seller’s

per ormance meets contractual requirements. For e ective
contract control, you should—
a. Hold a bidders’ con erence
b. Establish the appropriate contract type
c. Implement the contract change control system
d. Develop a statement o work
 Project Procurement Management  ◾  291

22. The primary bene t o contract control procurements is

to ensure that—
a. Buyers conduct per ormance reviews
b. Payment is made in a timely ashion
c. Disagreements are handled quickly and to every-
one’s satis action
d. Both parties meet contractual obligations and protect
their legal rights

23. Buyers use a variety o methods to provide incentives to

a seller to complete work early or within certain contrac-
tually speci ed time rames. One such incentive is the
use o liquidated damages. From the seller’s perspective,
liquidated damages are what orm o incentive?
a. Positive
b. Negative
c. Nominal
d. Risk-prone

24. The principal unction o a warranty is to—

a. Provide assurance o the level o quality to be provided
b. Provide a way to assert claims or late payment
c. Provide a way to allow additional time ollowing accep-
tance to correct de ciencies, without additional costs
d. Ensure that goods purchased t the purposes or
which they are to be used
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25. You have decided to award a contract to a seller that has

provided quality services to your company requently in
the past. Your current project, although somewhat di er-
ent rom previous projects, is similar to other work the
seller has per ormed. In this situation, to minimize your
risk you should award what type o contract?
a. Fixed price with economic price adjustment
b. Fixed-price-incentive ( rm target)
c. Firm- xed-price
d. Cost-plus-award- ee

26. As project manager, you need a relatively ast and in or-

mal method addressing disagreements with contractors.
One such method is to submit the issue in question to
an impartial third party or resolution. This process is
known as—
a. Alternative dispute resolution
b. Problem processing
c. Steering resolution
d. Mediation litigation

27. A no-cost settlement sometimes is used—

a. To close out a success ul contract
b. In lieu o ormal termination procedures
c. When buyer property has been urnished under
the contract
d. When such an arrangement is acceptable to one o the
parties involved
 Project Procurement Management  ◾  293

28. When writing payment terms in your xed-price sub-

contracts it is especially important to—
a. Include incentives i the seller exceeds or ails below
de ned objectives
b. Provide fexibility to redirect the seller i the scope o
work is not de ned precisely con usion
c. Link progress made to compensation paid
d. Associate the payment to a speci c time period or
more e cient accounting

29. A buyer has negotiated a xed-price-incentive- ee contract

with the seller. The contract has a target cost o $200,000,
a target pro t o $30,000, and a target price o $230,000.
The buyer also has negotiated a ceiling price o $270,000
and a share ratio o 70/30. I the seller completes the con-
tract with actual costs o $170,000, how much pro t will
the buyer pay the seller?
a. $21,000
b. $35,000
c. $39,000
d. $51,000

30. Requirements or ormal deliverable acceptance are

de ned in the—
a. Contract
b. Procurement management plan
c. Overall project management plan
d. Speci cations
294  ◾  PMP® Exam Practice Test and Study Guide

31. Payment bonds are o ten required by the contract and

require speci c actions under the stated conditions.
Payment bonds are speci cally designed to ensure that
the prime contractor provides payment o —
a. Insurance premiums
b. Weekly payrolls
c. Subcontractors, laborers, and sellers o material
d. Damages or accidents caused

32. You are working on a contract in a remote location. The

contract requires you to be on site at the o ce on a daily
basis. You were unable to get to the o ce or three days
last month because o severe blizzard conditions. Your
ailure to appear at the o ce was excused because o a
clause in the contract entitled—
a. Non compos mentis
b. Forjurer royalme
c. Force majeure
d. Force minoris dictus

33. All o the ollowing are examples o good control

procurement skills that project managers need to
exercise EXCEPT—
a. Approving invoices as the work is completed
b. Supervising the work to be done under the terms o
the contract
c. Developing contract clauses
d. Preparing and processing change requests

34. The best approach to resolve the settlement o all out-

standing contract changes, claims, and disputes is using—
a. Litigation
b. Alternative dispute resolution
c. Negotiation
d. Mediation
 Project Procurement Management  ◾  295

35. On large contracts, the contract administrator typically

has a need to resolve ambiguity in the clauses that govern
work per ormance and other issues. Assume that on your
contract there is an order o precedence clause. This
means that—
a. Inconsistencies in the solicitation o the contract shall
be resolved in a given order o procedure
b. An alternative dispute resolution process is in place
that shall be ollowed to resolve any conficts
c. Any ambiguities are generally interpreted against the
party who dra ted the document
d. Unde nitized contractual actions cannot be authorized

36. During contract negotiations on large contracts, the

negotiation process ocuses on many key issues, with
price being one o them. Separate negotiations can be
made on price, quantity, quality, and timing, which can
signi cantly lengthen the process. The negotiation process
can be shortened, however, provided that—
a. Planning is done or negotiations
b. Expertise o the project management sta in the
procurement process is at a high level
c. A request or proposal is used rather than a request
or quotation
d. There is integrity in the relationship and prior history
with the vendor

37. Contract negotiations are NOT required when—

a. A company uses sealed bids
b. There is a sole source procurement
c. A competitive range is established
d. A two-step process is used
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38. It is critical during the proposal preparation stage that—

a. The negotiation strategy is determined
b. A change management strategy is developed
c. Roles and responsibilities or the ultimate project are
determined
d. Contract terms and conditions are reviewed be ore the
proposal is submitted to the client

39. Which o the ollowing types o contracts has the least

risk to the seller?
a. Firm- xed-price
b. Cost-plus- xed- ee
c. Cost-plus-award- ee
d. Fixed-price-incentive ee

40. Assume that your company has a cost-plus- xed- ee

contract. The contract value is $110,000, which consists o
$100,000 o estimated costs with a 10-percent xed ee.
Assume that your company completes the work but only
incurs $80,000 in actual cost. What is the total cost to
the project?
a. $80,000
b. $90,000
c. $10,0000
d. $125,000