PMP Exam Question 80

Aligned with PMBOK 6th Edition®.

Award Fee Contract

In the development of a new disruptive app, your project management organization is deciding contract types to promote good practices among some sellers as well as to give them a preferential treatment. Which of the following should be taken into account before setting an award fee contract?

A. Award fee would be a cost sharing formula if the final cost is higher than original estimated costs.
B. Award fee would be earned based on customer decision and satisfaction.
C. Award fee is generally subject to appeals.
D. Award fee would be earned based on objective performance criteria incorporated into the contract.

5 responses on "PMP Exam Question 80"

  1. PMP Solution 80

    A cost sharing formula is prenegotiated in a cost plus incentive fee model.
    In a cost plus award fee model, 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. Hence, the determination of fee is based solely on the subjective determination of seller performance by the buyer and is generally not subject to appeals. Therefore, right answer is B. [PMBOK 6th edition, Page 472] [Project Procurement Management]


  2. I believe Option D is correct. Please clarify.

  3. I agree with Tanay. The answer should be D, not B.

  4. Hi,
    I choose D but B is correct, for a Cost Plus Award Fee, based on subjective criteria. D is correct for a Cost Plus Incentive Fee contrat, the incentive being based on objective criteria.

Leave a Message


Welcome to the First OPEN Project Management Community. Forever FREE PMP Resources; Exam Simulators, PMP Progress Tracking, Weekly Exam Questions, ...

Palma de Mallorca

[email protected]

Who’s Online

Profile picture of Varun Srivastava
Profile picture of OLUSEGUN BALOGUN

© 2020 - All Rights Reserved. contains affiliate links, meaning at no additional cost to you, we will earn a commision if you click through and make a purchase.
OpenPM has never and will never compromise its integrity.