Answer: B
Procurement documents are an output from the Solicitation Planning process, which follows Procurement Planning. Then the Procurement documents serve as an input to the Solicitation Process along with Quanlified seller lists.
Contract Administration only comes into play after Solicitation and Source Selection have been carried out.
PMBOK Guide 2000 Edition, p.148.
QID: 17 Project Management Professional Test #1 v5

2. An SOW is:
A.) an output from Procurement Planning.
B.) a Sales Objectives Weighting document.
C.) an input to Solicitation Planning.
D.) is a description of what is desired from a prospective seller.

Answer: A C D
An SOW, or Statement of Work, is an output from Procurement Planning and an input to Solicitation Planning. It gives enough detail to the prospective seller on the item in question to enable them to decide whether to pursue an agreement in this area.
PMBOK Guide 2000 Edition, pp.148,151.
QID: 72 Project Management Professional Test #1 v5

3. Contracts that have a fixed total price are called
A.) Lump-sum contracts.
B.) Cost-reimbursable contracts.
C.) T&M contracts.
D.) Fixed-price contracts.

Answer: A D
Contracts with a set or fixed price are called either lump-sum or fixed-price contracts.
A T&M, or Time and Material, contract has both cost-reimbursable as well as fixed-price components. A portion of the contract reimburses for certain expenses, while another part of the contract sets a fixed rate, for example, with respect to labor.
Cost-reimbursable contracts will reimburse the seller for costs incurred, and tack on a fee for seller profit. This type of contract commonly will have incentives built in for meeting specified objectives.
PMBOK Guide 2000 Edition, p.151.
QID: 74 Project Management Professional Test #1 v5

4. A contract with a unilateral origin is called a(n)
A.) RFQ.
B.) RFP.
C.) IFB.
D.) PO.

Answer: D
A Purchase Order, or PO, is sent by a company to a supplier/seller, with the expectation that the agreement will be kept automatically. This therefore is a contract with a unilateral origin.
Contracts that are bilateral in origin, since they are requested initially, are documents such as RFQs (Request for Quotation), RFPs (Request for Proposal), and IFBs (Invitation for Bid).
Adams JR, "Principles of Project Management", PMI, 1997, pp.232-233; PMBOK Guide 2000 Edition, p.156.
QID: 75 Project Management Professional Test #1 v5

5. Project Procurement Management is approached from the viewpoint of the:
A.) Buyer.
B.) Seller.
C.) Supplier.
D.) Vendor.

Answer: A
Current formal Project Management theory discusses Project Procurement Management from the viewpoint of the buyer.
Vendor and Supplier are considered to be terms synonymous with Seller.
PMBOK Guide 2000 Edition, p.147.
QID: 119 Project Management Professional Test #1 v5

6. A bidder conference has what purpose?
A.) To provide prospective sellers with answers to requirements questions.
B.) To network.
C.) To auction off project materials.
D.) To demonstrate vendor products.

Answer: A
The bidders conferences enable sellers to clarify any issues regarding requirements prior to the formal proposal, and preference should not be given to a particular seller at this point in the process.
This conference is not an auction, a show, or a social event, but rather is part of the Solicitation process.
PMBOK Guide 2000 Edition, p.154.
QID: 120 Project Management Professional Test #1 v5

7. Contract negotiation - one of the Tools & Techniques of the Source Selection process – also can be a separate process of its own - True or False?
A.) False.
B.) True.

Answer: B
In the case where contract negotiation is complex, it can become a separate process, with its own inputs and outputs.
PMBOK Guide 2000 Edition, pp.155-156.
QID: 121 Project Management Professional Test #1 v5

8. Another name for a contract is:
A.) Memorandum of Understanding.
B.) Proposal.
C.) Agreement.
D.) Purchase Order.

Answer: A C D
An agreement, purchase order, or memorandum of understanding also is considered to be a contract.
A proposal, however, is not a contract but rather an input to the Source Selection process from which a contract is derived.
PMBOK Guide 2000 Edition, pp.148,156.
QID: 122 Project Management Professional Test #1 v5

9. In a cost-plus-incentive fee contract situation, the following parameters were agreed upon: Target Cost: $500,000; Share Ratio: 75/25; Target Fee: $50,000. The actual costs were $600,000. The seller invoices for actual costs plus the fee. How much fee did the buyer end up paying?
A.) $12,500.
B.) $25,000.
C.) $50,000.
D.) $37,500.

Answer: B
The seller's costs of $600,000 were $100,000 over the target cost of $500,000. Since the seller's portion of the share ratio is 25%, then 25% of the $100,000 overrun, or $25,000, is deducted from the target fee of $50,000. This leaves $25,000 ($50,000 - $25,000) as the fee charged by the seller to the buyer, as per their agreement.
PMBOK Guide 2000 Edition, p.151.
QID: 123 Project Management Professional Test #1 v5

10. A project manager who is considering outsourcing part of the project should first:
A.) review proposals from prospective vendors.
B.) attend a bidder conference.
C.) draw up an SOW.
D.) carry out a Make-or-Buy Analysis.

Answer: D
A Make-or-Buy Analysis will help the project team decide whether it would be better to have the work done by their organization's resources, if at all possible, or whether to contract outside resources.
The other steps listed - drawing up an SOW, attending a bidder conference, and reviewing proposals from prospective vendors - all would be steps subsequent to making the decision whether or not to outsource.
PMBOK Guide 2000 Edition, pp.148,150.
QID: 124 Project Management Professional Test #1 v5

11. An example of the establishment of a screening system would be:
A.) The buyer's deciding to require that the prospective seller's project manager be a PMP as a prerequisite to source selection.
B.) A secured perimeter around the project team's offices.
C.) Having a maximum number of defects level during final inspection.
D.) Carrying out background checks on all project personnel.

Answer: A
Screening systems, one of the Tools & Techniques utilized during Source Selection, set forth certain requirements that must be met in order for the prospective seller to continue participating in the source selection process. These requirements, established on the basis of the evaluation criteria, could be one of many possibilities, such as wanting to ensure that the project manager is certified as a project management professional, or even that the project team be able to be on-site a certain number of hours per week. These criteria are then applied to the bidders.
The quality and security issues listed are not examples of how a screening system is established, but could be examples of actual screening system requirements.
PMBOK Guide 2000 Edition, p.156.
QID: 125 Project Management Professional Test #1 v5

12. Other project management processes directly related to contract administration include:
A.) Project plan execution.
B.) Change control.
C.) Quality assurance.
D.) Performance reporting.

Answer: A B D
The listed processes are applied to contract administration, as follows:
Project plan execution is needed to carry out the vendor's work at the appropriate time(s).
Performance reporting monitors the seller's performance to agreed-upon requirements.
It is Quality Control, not Quality Assurance, that is directly related to contract administration, through checking that the deliverables are acceptable.
Change control authorizes and informs of changes.
PMBOK Guide 2000 Edition, p.157.
QID: 126 Project Management Professional Test #1 v5

13. Independent estimates, obtained during Source Selection, also are called:
A.) should cost estimates.
B.) SOWs.
C.) proposals.
D.) contracts.

Answer: A
Independent estimates also are called Should Cost estimates, since they verify that the proposed pricing of the prospective seller is appropriate, by comparing it, for example, with other market prices. Inappropriate pricing could indicate a communication issue that needs to be resolved. SOWs and proposals are formulated at earlier stages of procurement management, whereas the contract is the agreement coming out of the procurement process.
PMBOK Guide 2000 Edition, pp.148,156.
QID: 127 Project Management Professional Test #1 v5

14. The output Payment Requestsf from the Contract Administration process under an internal payment system would be changed to:
A.) payments.
B.) contract changes.
C.) invoices.
D.) correspondence.

Answer: A
With an internal payment system a Payment Request step is not needed, and the payments simply are made.
Invoices are basically a Payment Request, which falls under an external payment system.Correspondence and Contract Changes are other outputs from the Contract Administration process.
PMBOK Guide 2000 Edition, pp.148,158.
QID: 128 Project Management Professional Test #1 v5