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