PMP Exam Question 68

Aligned with PMBOK 6th EditionĀ®.

Cost plus Fee Contracts

You have been hired as project manager in the development of a new robot. You are now reviewing the contract of one seller. He will share the extra costs with the buyer (50% – 50%) if the final cost is greater than the original estimated costs. Which type of contract is the one signed?

A. Cost plus fixed fee (CPFF).
B. Cost plus incentive fee (CPIF).
C. Cost plus award fee (CPAF).
D. Cost plus extra fee (CPEF).

February 16, 2020

4 responses on "PMP Exam Question 68"

  1. PMP Solution 68

    Cost-reimbursable contracts. This category of contract involves payments (cost reimbursements) to the seller for all legitimate actual costs incurred for completed work, plus a fee representing seller profit. Variations can include:
    -Cost plus fixed fee (CPFF). The seller is reimbursed for all allowable costs for performing the contract work and receives a fixed-fee payment calculated as a percentage of the initial estimated project costs.
    -Cost plus incentive fee (CPIF). The seller is reimbursed for all allowable costs for performing the contract work and receives a predetermined incentive fee based on achieving certain performance objectives as set forth in the contract.In CPIF contracts, if the final costs are less or greater than the original estimated costs, then both the buyer and seller share costs from the departures based upon a prenegotiated cost-sharing formula.
    -Cost plus award fee (CPAF). The seller is reimbursed for all legitimate costs, but the majority of the fee is earned based on the satisfaction of certain broad subjective performance criteria that are defined and incorporated into the contract.. Therefore, the right choice for this question is B. [PMBOK 6th edition, Page 472] [Project Procurement Management]

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