PMP Self Test Project Procurement Management

Self Test

1.	Which of the following may be used as a risk mitigation tool? Vendor proposal Contract Quotation Project requirements
2.	A contract cannot have provisions for which one of the following? A deadline for the completion of the work Illegal activities Subcontracting the work Penalties and fines for disclosure of intellectual rights
3.	You are the project manager for the 89A Project. You have created a contract for your customer. The contract must have what two things? Offer and consideration Signatures and the stamp of a notary public Value and worth of the procured item Start date and acceptance of start date
4.	The product description of a project can help a project manager create procurement details. Which one of the following best describes this process? A. The product description defines the contracted work. B. The product description defines the requirements for the contract work. C. The product description defines the contracted work, which must support the requirements of the project customer. D. Both parties must have and retain their own copy of the product description.
5.	Yolanda has outsourced a portion of the project to a vendor. The vendor has discovered some issues that will influence the cost and schedule of its portion of the project. How must the vendor update the agreement? As a new contract signed by Yolanda and the vendor. As a contract addendum signed by Yolanda and the vendor. As a memo and SOW signed by Yolanda and the vendor. Project Management contracts have clauses that allow vendors to adjust their work according to unknowns.
6.	The United States backs all contracts through which of the following? Federal law State law Court system Lawyers
7.	Terry is the project manager of the MVB Project. She needs to purchase a piece of equipment for her project. The Accounting department has informed Terry she needs a unilateral form of contract. Accounting is referring to which of the following? SOW Legal binding contract Purchase Order Invoice from the vendor
8.	Bonnie is the project manager for the HGH Construction Project. She has contracted a portion of the project to the ABC Construction Company. Bonnie has offered a bonus to ABC if they complete their portion of the work by August 30. This is an example of which one of the following? Project requirement Project incentive Project goal Fixed-price contract
9.	The purpose of a contract is to distribute between the buyer and seller a reasonable amount of which of the following: Responsibility Risk Reward Accountability
10.	Privity is what? Relationship between the project manager and a known vendor Relationship between the project manager and an unknown vendor Contractual, confidential information between customer and vendor Professional information regarding the sale between customer and vendor
11.	Sammy is the project manager of the DSA Project. He is considering proposals and contracts presented by vendors for a portion of the project work. Of the following, which contract is least dangerous to the DSA Project? Cost plus fixed fee Cost plus percentage of cost Cost plus incentive fee Fixed-price
12.	In the following contract types, which one requires the seller to assume the risk of cost overruns? Cost plus fixed fee Cost plus incentive fee Lump sum Time and materials
13.	Benji is the project manager of PLP Project. He has hired an independent contractor for a portion of the project work. The contractor is billing the project $120 per hour, plus materials. This is an example of which one of the following? Cost plus fixed fee Time and materials Unit-price Lump sum
14.	Mary is the project manager of JHG Project. She has created a Statement of Work (SOW) for a vendor. For Mary’s SOW to be a legal contract, what must be included? Affidavit of agreement Signatures of both parties agreeing to SOW Signature of vendor Signature of Mary
15.	You are the project manager for a software development project for an accounting system that will operate over the Internet. Based on your research, you have discovered it will cost you $25,000 to write your own code. Once the code is written you estimate you’ll spend $3,000 per month updating the software with client information, government regulations, and maintenance. A vendor has proposed to write the code for your company and charge a fee based on the number of clients using the program every month. The vendor will charge you $5 per month per user of the web-based accounting system. You will have roughly 1,200 clients using the system per month. However, you’ll need an in-house accountant to manage the time and billing of the system, so this will cost you an extra $1,200 per month. How many months will you have to use the system before it is better to write your own code than to hire the vendor? 3 months 4 months 6 month 15 months
16.	You are completing the closeout of a project to design a warehouse in Columbus, Ohio. The contract is a Cost Plus Incentive Fee contract. The target costs are $300,000, with a 10 percent target profit. However, the project came in at $275,000. The incentive split is 80/20. How much is the total contract cost?? $300,000 $275,000 $310,000 $330,000
17.	A contract between an organization and a vendor may include a clause that penalizes the vendor if the project is late. The lateness of a project has a monetary penalty; penalty should be enforced or waived based on which one of the following? If the project manager could have anticipated the delay If the project manager knew the delay was likely Whether the delay was because of an unseen risk Who caused the delay and the reason why
18.	A single source seller means what? There is only one qualified seller. There is only one seller the company wants to do business with. There is a seller that can provide all aspects of the project procurement needs. There is only one seller in the market.
19.	Which one of the following is not a valid evaluation criterion for source selection? Age of the contact person at the seller Technical ability of the seller Contract requirements Price
20.	Henry has sent the ABN Contracting Company a letter of intent. This means which one of the following? Henry intends to sue the ABN Contracting Company. Henry intends to buy from the ABN Contracting Company. Henry intends to bid on a job from the ABN Contracting Company. Henry intends to fire the ABN Contracting Company.
21.	Martha is the project manager of the MNB Project. She wants a vendor to offer her one price to do all of the detailed work. Martha is looking for which type of document? RFP RFI Proposal IFB
22.	Which one of the following is true about procurement documents? They offer no room for bidders to suggest changes. They ensure receipt of complete proposals. They inform the performing organization why the bid is being created. The project manager creates and selects the bid.
23.	In what process group does source selection happen? Initiating Planning Executing Closing
24.	You have an emergency on your project. You have hired a vendor that is to start work immediately. What contract is needed now? T&M Fixed fee Letter contract Incentive contract
25.	You are the project manager for a seller. You are managing another company’s project. Things have gone well on the project, and the work is nearly complete. There is still a significant amount of funds in the project budget. The buyer’s representative approaches you and asks that you complete some optional requirements to use up the remaining budget. You should do which one of the following? Negotiate a change in the contract to take on the additional work. Complete a contract change for the additional work. Gain the approval of the project stakeholder for the requested work. Deny the change because it was not in the original contract.

Answers

1.	þ 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. ý A, C, and D are all incorrect. A vendor proposal, a quotation, and project requirements do nothing to serve as a risk mitigation tool.
2.	þ B. A contract cannot contain illegal activities. ý A is incorrect, as a contract can stipulate a deadline for the project work. C is incorrect; contracts can specify rules for subcontracting the work. D is also incorrect; a contract can assess a penalty and fines for disclosing intellectual rights and secret information.
3.	þ A. Of all choices presented, A is the best choice. Contracts have an offer and a consideration. ý 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.
4.	þ C. The product description defines the details and requirements for acceptance of the project. This information also serves as a valuable input to the process of determining what needs to be procured. The product description defines what the end result of the project will be. When dealing with vendors to procure a portion of the project, the work to be procured must support the requirements of the project’s customer. ý A is incorrect because the product description defines the product as a whole, not just the contracted work, which may be just a portion of the project. B is incorrect; the product description 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..
5.	þ B is the best answer of all the choices presented. Because the question is asking for the vendor to update the agreement, B is the best choice. ý 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, re-approved, and so on. C and D are not viable answers.
6.	þ C. All contracts in the United States are backed by the US court systems. ý A, B, and D are not correct answers.
7.	þ C. A unilateral form of a contract is simply a purchase order. ý A, B, and D are all incorrect choices. A SOW is a statement of work. A legal binding contract does not fully answer the question. D, an invoice from the vendor, is not what the purchasing department is requesting.
8.	þ B. A bonus to complete the work by August 30 is an incentive. ý A is incorrect, as the question does not specify August 30 as a deadline. C is incorrect, as “project goal” does not fully answer the question. D is incorrect because the contract details are not disclosed in this question.
9.	þ B. A fair contract shares a reasonable amount of risk between the buyer and the seller. ý 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.
10.	þ C. Privity is a confidential agreement between the buyer and seller. ý A, B, and D are incorrect choices, as these choices do not fully answer the question.
11.	þ D. A Fixed-Price contract contains the least amount of risk for a project. The seller assumes all of the risk. ý A, B, C are incorrect, because these contract types carry the risk of cost overruns being assumed by the buyer.
12.	þ C. A Lump Sum is a fixed fee to complete the contract; the seller absorbs any cost overruns. ý A and B are incorrect because these contracts require the seller to carry the risk of cost overruns. D is incorrect because Time and Materials contracts require the buyer to pay for cost overruns on the materials and the time invested in the project work.
13.	þ B. The contractor’s rate of $120 per hour plus the cost of the materials is an example of a Time and Materials contract. ý A is incorrect; a Cost Plus Fixed Fee 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 has a set price for each unit installed on the project. D is also incorrect, as a Lump Sum does not break down the time and materials.
14.	þ B. An SOW can be a contract if both parties agree to the SOW and sign the document as a contract. ý A, C, and D are incorrect. A is incorrect as it does not fully answer the question. C and D are incorrect; individuals with the authority from both parties need to sign the SOW.
15.	þ 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, and 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, six months, is the best choice. ý A, B, and D are all incorrect as they do not answer the question.
16.	þ C. The total contract cost is $310,000. Here’s how the answer is calculated: target cost is $300,000. The ten percent profit is $30,000. The finished cost was $275,000, a difference of $25,000 between the target and the actual. The contract calls for an 80/20 split if the contract comes in under budget. The formula reads finished costs + profit margin + (.20 X under budget amount). ý A, B, and D are all incorrect as these choices do not reflect the amount of the contract.
17.	þ D. The party that caused the delay is typically the party responsible for the delay. It would not be acceptable for the project manager to willingly cause a delay and then penalize the contractor because the project was late. ý A, B, and C are all incorrect. D is the best answer as it answers the question fully.
18.	þ B. A single source seller means there is only one seller the company wants to do business with. ý A describes a “sole source” seller. C is incorrect; there may be multiple sellers that can satisfy the project needs. D is also incorrect; just because there is only one seller in the market does not mean the seller can adequately and fully fill the project needs.
19.	þ A. The age of the contact at the seller should not influence the source selection. The experience of the person doing the work, however, can. ý B, C, and D are all incorrect, as technical ability, objective requirements (such as qualifications and certifications), and price can be valid evaluation criteria.
20.	þ B. Henry intends to buy from the ABN Contracting Company. ý A, C, and D are all incorrect; these choices do not adequately describe the purpose of the letter of intent.
21.	þ D. An IFB is typically a request for a sealed document that lists the seller’s firm price to complete the detailed work. ý 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.
22.	þ B. Procurement documents detail the requirements for the work to ensure complete proposals from sellers. ý 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 on why the bid is being created is not the purpose of the procurement documents. D is not realistic.
23.	þ C. Source selection happens during the Execution process group. ý A, B, and D are all incorrect, as these process groups do not include source selection.
24.	þ 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. ý Choices 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.
25.	þ C. Any additional work is a change in the project scope. Changes to project scope should be approved by the mechanisms in the change control system. The stakeholder needs to approve the changes to the project scope. ý A, B, and D are not realistic expectations of the project. This questions border 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.

PMP Self Test Project Risk Management

Self Test

1.	Which of the following is not an input to risk management planning? The project charter Risk identification Defined roles and responsibilities WBS
2.	Frances is the project manager of the LKJ Project. Which of the following techniques will she use to create the risk management plan? Risk tolerance Status meetings Planning meetings Variance meetings
3.	Which of the following is the output of risk management planning? Roles and responsibilities Operational transfer issues Risk response plan Risk management plan
4.	You are the project manager of the GHK Project. You and the manufacturer have agreed to substitute the type of plastic used in the product to a slightly thicker grade should there be more than a seven percent error in production. The thicker plastic will cost more and require the production to slow, but the errors should diminish. This is an example of which of the following? Threshold Tracking Budgeting JIT manufacturing
5.	A person's willingness to tolerate risk is known as ________________. The utility function Herzberg's Theory of Motivation Risk acceptance The risk-reward ratio
6.	A risk trigger is also called which of the following? A warning sign A delay A cost increase An incremental advancement of risk
7.	The customers of the project have requested additions to the project scope. The project manager brings notice that additional risk planning will need to be added to the project schedule. Why? The risk planning should always be the same amount of time as the activities required by the scope change. Risk planning should always occur whenever the scope is adjusted. Risk planning should only occur at the project manager's discretion. The project manager is incorrect; risk planning does not need to happen at every change in the project.
8.	The risks of financial gain or loss are called _________________. Business risks Financial risks Organizational risks Functional risks
9.	_______________ include(s) fire, theft, or injury, and offer(s) no chance for gain. Business risks Pure risks Risk acceptance Life risks
10.	Complete this sentence: a risk is a(n )_____________ occurrence that can affect the project for good or bad. Known Potential Uncertain Known unknown
11.	When should risk identification happen? As early as possible in the initiation process As early as possible in the planning process As early as possible in the controlling process As early as possible in the execution process
12.	You are the project manager of the KLJH Project. This project will last two years and has 30 stakeholders. How often should risk identification take place? Once at the beginning of the project Throughout the execution processes Throughout the project Once per project phase
13.	Risk identification is considered to be ___________________. (Choose the best answer.) Iterative Self-led Mandatory Optional
14.	You are the project manager for a project that will create a new and improved web site for your company. Currently, your company has over eight million users around the globe. You would like to poll experts within your organization with a simple, anonymous form asking for any foreseeable risks with the design, structure, and intent of the web site. With the collected information, subsequent anonymous polls are submitted to the group of experts. This is an example of ___________________. Risk identification A trigger An anonymous trigger The Delphi Technique
15.	Which of the following describes SWOT? Analysis of strengths, weakness, options, and timing Analysis of strengths, weakness, opportunities, and threats An elite project team that comes in and fixes project risks and threats Ratings of 1 to 100
16.	Which risk analysis provides the project manager with a risk ranking? Quantifiable Qualitative The utility function SWOT analysis
17.	A table of risks, their probability, impact, and a number representing the overall risk score is called a ________________. Risk table Risk matrix Quantitative matrix Qualitative matrix
18.	You are presented with the following table: Risk Event Probability Impact Cost/Benefit Ex$V 1 .20 -4000 2 .50 5000 3 .45 -300 4 .22 500 5 .35 -4500 What is the Ex$V for Risk Event 3? $135 -$300 $45 -$135
19.	You are presented with the following table: Risk Event Probability Impact Cost/Benefit Ex$V 1 .35 -4000 2 .40 50000 3 .45 -300000 4 .30 50000 5 .35 -45000 Based on the preceding table, what is the amount needed for the contingency fund? Unknown with this information 249,000 117,150 15750
20.	The water sanitation project manager has determined the risks associated with handling certain chemicals are too high. He has decided to allow someone else to complete this portion of the project, and so has outsourced the handling and installation of the chemicals and filter equipment to an experienced contractor. This is an example of which of the following? Avoidance Acceptance Mitigation Transference
21.	A project manager and the project team are actively monitoring the pressure gauge on a piece of equipment. Sarah, the engineer, recommends a series of steps to be implemented should the pressure rise above 80 percent. The 80-percent mark represents what? An upper control limit The threshold Mitigation A workaround
22.	You are presented with the following table: Risk Event Probability Impact Cost/Benefit Ex$V 1 .20 -4000 2 .50 5000 3 .45 -300 4 .22 500 5 .35 -4500 6 Complete Risk 6 based on the following information: Marty is 60 percent certain that he can get the facility needed for $45,000, which is $7000 less than what was planned for. .60, 45,000, 27,000 .60, 52,000, 31,200 .60, 7,000, 4200 .60, -7,000, -4200
23.	How can a project manager determine whether it is better to make or buy a product? Decision Tree Analysis Fishbone model Ishikawa diagram ROI Analysis
24.	Which of the following can determine multiple scenarios with risk and probability of impact? Decision trees Monte Carlo simulations Pareto charts Gantt charts
25.	A project can have many risks with high-risk impact scores, but have an overall low risk score. How is this possible? The risk scores are graded on a bell curve. The probability of each risk is low. The impact of each risk is not accounted for until it comes to fruition. The risks are rated HML.

Answers

1.	þ B. Risk identification is not an input to risk management planning. ý A, C, and D are all incorrect. The project charter, defined roles and responsibilities, and the WBS are all inputs to risk management planning.
2.	þ C. Planning meetings are used to create the risk management plan. The project manager, project team leaders, key stakeholders, and other individuals with the power to make decisions regarding risk management attend the meetings. ý Choices A, B, and D are incorrect as these choices do not fully answer the question.
3.	þ D. The only output of risk management planning is the risk management plan. ý A is incorrect; roles and responsibilities are an input to the risk management planning process. B, operational transfer issues, may have associated risks, but they are not an output of the risk management planning process. C, the risk response plan, is not an output of risk management planning. It is an output of risk response planning.
4.	þ A. An error value of seven percent represents the threshold the project is allowed to operate under. Should the number of errors increase beyond seven percent, the current plastic will be substituted. ý B is incorrect since tracking is the documentation of a process through a system or workflow, or the documentation of events through the process. C, budgeting, is incorrect. D, JIT manufacturing, is a scheduling approach to ordering the materials only when they are needed in order to keep inventory costs down.
5.	þ A. The utility function describes a person's willingness to tolerate risk. ý B, is incorrect; Herzberg's Theory of Motivation is an HR theory that describes motivating agents for workers. C is also incorrect; risk acceptance describes the action of allowing a risk to exist because it is deemed low in impact, low in probability, or both. D, the risk-reward ratio, is incorrect. This describes the potential reward for taking a risk in the project.
6.	þ A. Risk triggers can also be known as warning signs. Triggers signal that a risk is about to happen or has happened. ý B, C, and D are all incorrect, as these answers do not properly describer a risk trigger.
7.	þ B. When the scope has been changed, the project manager should require risk planning to analyze the additions for risks to the project success. ý A is incorrect; the scope changes may not require the same amount of time as the activities needed to complete the project changes. C is incorrect because risk planning should not occur at the project manager's discretion, but instead should be based on evidence within the project and the policies adopted in the risk management plan. D is also incorrect; when changes are added to the project scope, risk planning should occur.
8.	þ A. Business gains are directly tied to the risk of financial gains or loss. ý Choices B, C, and D are not relevant terms.
9.	þ B. Pure risks are the risks that could threaten the safety of the individuals on the project. ý Choice A is incorrect because business risks affect the financial gains or loss of a project. C and D are incorrect since these terms are not relevant.
10.	þ C. Risks are not planned, they are left to chance. The accommodation and the reaction to a risk can be planned, but the event itself is not planned. If risks could be planned, Las Vegas would be out of business. ý A, B, and D are all incorrect since these terms do not accurately complete the sentence.
11.	þ B. Risk identification is a planning process and should happen as early as possible to allot adequate time for risk reaction planning. ý A, C, and D are all incorrect because risk identification does not happen as part of the initiation, controlling, or execution processes.
12.	þ C. Risk identification happens throughout the project. Recall that planning is iterative; as the project moves towards completion, new risks may surface that call for identification and planned responses. ý A is incorrect; risk identification should happen throughout the project, not just at the beginning. B is incorrect because risk identification is part of planning. D is incorrect because the nature of the project phase may require and reveal more than one opportunity for risk identification.
13.	þ A. Risk identification is an iterative process that should happen throughout the project life. ý B is incorrect since risk identification often requires intense analysis, team involvement, and experts to lead the process. C is incorrect; while risk identification may be considered mandatory, iterative is a better description because risk identification happens over and over. D is incorrect; risk identification is not optional.
14.	þ D. An anonymous poll allowing experts to freely submit their opinion without fear of backlash is an example of the Delphi Technique. ý A, B, and C are incorrect; these choices do not accurately answer the question.
15.	þ B. SWOT analysis is part of risk identification and examines the strengths, weakness, opportunities, and threats of the project to make certain all possibilities for risk identification are covered. ý A is incorrect because SWOT examines all four perspectives. C and D are incorrect because these ratings are part of quantitative-qualitative risk analysis.
16.	þ B. The risk ranking is based on the very high, high, medium, low, and very low attributes of the identified risks. ý A is incorrect because it is not relevant to the questions. C is incorrect; utility function describes an organization's tolerance for risk. D, SWOT analysis, is part of risk identification.
17.	þ B. A table of risks, their probability, and impact equate to a risk score in a risk matrix. ý A is incorrect since it does not fully answer the questions. C and D are incorrect because a risk matrix can be used in both quantitative and qualitative risk analysis.
18.	þ D. Risk Event 3 has a probability of 45 percent and an impact cost of -$300, which equates to -$135. ý A, B, and C are all wrong because the values are incorrect answers for the formula.
19.	þ C. The calculated amount for each of the risk events is shown in the following table: Risk Event Probability Impact Cost/Benefit Ex$V 1 0.35 -4000 -1400 2 0.4 50000 20000 3 0.45 -300000 -135000 4 0.3 50000 15000 5 0.35 -45000 -15750 -117150 ý A, B, and D are incorrect answers because they do not reflect the contingency amount needed for the project based on the preceding table.
20.	þ D. Because the risk is not eliminated but transferred to someone else or another entity, it is considered transference. ý A is incorrect because the risk still exists, but it is handled by another entity. B is incorrect because the project manager has not accepted the risk, deciding instead to allow another entity to deal with it. C is incorrect; the risk has not been mitigated in the project.
21.	þ B. The 80-percent mark is a threshold. ý A is incorrect; an upper control limit is a boundary for quality in a control chart. C is incorrect; mitigation is a planned response should a risk event happen. D is incorrect; a workaround is an action to bypass the risk event.
22.	þ C. Marty is 60 percent certain he can save the project $7000. The $4200 represents the 60-percent certainty of the savings. ý A, B, and D are all incorrect since these values do not reflect the potential savings of the project.
23.	þ A. A decision tree model can separate the pros and cons of buying versus building. ý B and C are incorrect; a fishbone diagram and an Ishikawa diagram show cause and effect. D is incorrect; ROI analysis does not answer the question as fully as a decision tree.
24.	þ B. Monte Carlo simulations can reveal multiple scenarios and examine the risks and probability of impact. ý A, decision trees, help guide the decision making process. C, a Pareto chart, helps identify the leading problems in a situation. D, Gantt charts, compare the lengths of activities against a calendar in a bar chart format.
25.	þ B. A risk can have a very high impact on the project, but inversely have an extremely low probability score. ý A is incorrect and not relevant to the scenario. C is not a true statement. D is also incorrect; a model using high, medium, low versus a numbering system would not alter the overall high or low risk score of the project.