PMP Exam Question 3

Aligned with PMBOK 6th EditionĀ®.

You are the manager of the design/build of a large manufacturing facility. With your customer, you have signed a Fixed Price Incentive Fee Contract. You recognize that in this type of contract the risk is shared between the buyer and the seller. The time at which your organization picks up all of the financial risk is called the:

a) Contract award.

b) Contract breach.

c) Contract termination.

d) Point of total assumption.

1 responses on "PMP Exam Question 3"

  1. PMP Solution 3

    Contract award is the point at which the buyer and the seller sign the contract. On the other hand, contract breach is a failure lacking legal excuse to perform a promise of the contract. Contract termination is the end of the contract with at least one of the parties still having open obligations. The point of total assumption is the point where sharing relationship changes to a share ratio of 0/100. At this point the seller assumes 100% of the cost risk. Therefore, correct answer is d). [PMBOK 6th edition, Not included, however it can appear in PMP Exam] [Project Procurement Management].

    Cheers

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