51. An FFP contract is typically sought by the project manager (customer) when:
ID: 372970 • Letter: 5
Question
51. An FFP contract is typically sought by the project manager (customer) when:
Answer- (a): The risk and consequence associated with the contracted task are large.
Explanation- A Firm Fixed Price contract is a contract in which the buyer or the seller pays a fixed price for the service and does not depend on any resources. This fixed price does not vary under any circumstances. This type of contract is best suited for projects which are of high risk. The seller or service provider usually charges a high price for the work extended since the amount of risk is high. Also, in this case the buyer or the customer would prefer to transfer the risk to the service provider or the seller.
52. Which of the following could provide incentive for a contractor to make steady progress towards completion of a contract?
Answer- (e): C and D
C. Progress payments
D. A lump-sum upon successful completion of the contracted work.
Explanation- In progress payments contract, the contractor is paid in installments as the different stages of the work are completed. A lump-sum payment at the successful completion of a contract is usually provided by the buyer to ensure that the work is successfully completed before he makes any payment.
53. Which of the following contract types has the highest risk to the owner?
Answer- (d) Cost plus fixed fee (CPFF)
Explanation- CPFF type of contract has the highest risk to the owner (buyer) because in this type the seller is provided less incentive for keeping a control of the costs than with a fixed price contract. In this contract type, the buyer reimburses the contractor the costs incurred (allowable cost as mentioned in the contract) plus a fixed amount of profit (fee).
54. Which of the following is a formal invitation that requests a formal response that describes the method of work and associated compensation?
Answer- (b) Request for proposals (RFP)
A RFP is the formal invitation that contains the buyer’s scope of work and seeks a formal response from the contractor on the methods and the compensation for the work. This is in contrast to the RFQ (Request for Quotation) which is a statement of price.
55. When items to be purchased for a project are specified by performance characteristics:
Answer –(e) b and d only
B. The supplier is held liable for the operation of the item
D. The supplier is held liable for the item meeting the design, dimensions, and tolerance specifications.
Explanation- When the performance characteristics are specified for the items to be purchased for the project, then it is the supplier who is liable for the performance of the items based on the design and the tolerance specifications.
56. Standardization of purchased material:
Answer- (e) All of the above
The standardization of the purchased material is setting up of basic specifications for a set of commonly used characteristics in terms of size, shape and performance. The main aim of the standardization is to simplify the handling of inventories via inventory control, makes efficient use of the available resources and reduces the cost of storage. This will also ensure the risk of the product to become obsolete since only the optimum number is ordered and used.
Explanation / Answer
S An FFP contract is typially soughe by the project manager cusomer) when a- b. c. d. e. The risk and consequences associated with the contract task are large The project manager's company is proficient at dealing with the contracted activities Neither the contractor nor the project manager understand the scope of the task The project manager's company has excess production capacity All of the above 5 Which of the following could provide incentive for a contractor to make steady progress toward the completion of a contract? lump-sum payment at the commencement of the contracted work a A b. Identical monthly payments for the forecasted duration of the contracted worlk c. Progress payments d. A lump-sum payment upon successfual completion of the contracted work e c and d 53. Which of the following contract types has the highest risk to the owner? a. Fixed firm price (FFP) b. Time and material (T&M;) c. Cost plus fixed fee (CPFF) d. Cost plus incentive fee (CPIF e. a and b only Which of the following is a formal invitation that requests a formal response that describes the mechod of work and associated compensation? b4- a. Request for quocations (RFO) b. Request for proposals (RFP) c Request for bids (RFB) d. Invitation for bids (IFB) e. Letter of intent (LOD) 55. When items to be purchased for a project are specified by performance characteristics: a. Paperwork is greatly reduced b. The supplier is held liable for the operation of the item c. The supplier is held liable for the maincenance of the item d The supplier is held liable for the item meeting the design, dimensions, and tolerance specifications b and d only e. 56, standardization of purchased material: a. Simplifies inventory control b. Reduces the risk of obsolescence c. Redaces cost of purchasing and storage d. All of the above e. a and c only
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