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Best Contract to pick

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pallav29

Best Contract to pick

Wed Apr 21, 2021 4:30 pm

Several team members have been transferred to another project, so the project manager needs additional resource support from a new supplier. The project manager is concerned about the cost risk of using a new supplier at this stage of the project.

Now, the project manager needs to work with the procurement team to establish specifications and type of contract to be used.

What should be done?

A. Recommend a fixed price incentive fee (FPIF) contract.

B. Recommend a time and material (TM) contract.

C. Recommend a cost plus incentive fee (CPIF) contract.

D. Recommend a firm fixed price (FFP) contract.

Given Answer is A and my answer is D. The question mentions that "The project manager is concerned about the cost risk of using a new supplier" , so FFP has the least risk from the buyer perspective and also keeps cost under control. The question does not mentions that performance is a concern . so FPIF (giving extra money for performance) doesn't seems right .
manishpn
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Re: Best Contract to pick

Mon May 03, 2021 12:58 am

pallav29 wrote:
Wed Apr 21, 2021 4:30 pm
Several team members have been transferred to another project, so the project manager needs additional resource support from a new supplier. The project manager is concerned about the cost risk of using a new supplier at this stage of the project.

Now, the project manager needs to work with the procurement team to establish specifications and type of contract to be used.

What should be done?

A. Recommend a fixed price incentive fee (FPIF) contract.

B. Recommend a time and material (TM) contract.

C. Recommend a cost plus incentive fee (CPIF) contract.

D. Recommend a firm fixed price (FFP) contract.

Given Answer is A and my answer is D. The question mentions that "The project manager is concerned about the cost risk of using a new supplier" , so FFP has the least risk from the buyer perspective and also keeps cost under control. The question does not mentions that performance is a concern . so FPIF (giving extra money for performance) doesn't seems right .
Information given is not sufficient to narrow down on a option with confidence,
There is mention of needing additional resources, but it does not mention that if PM is in a position to formulate a scope to be delivered by the new supplier.
I would choose T&M if only resources are needed to fill in the vacuum , if scope can be defined well then I will go with option D, I see no compelling case to incentivize the supplier, other then incentive of delivering within the agreed price which can be achieved by a FFP anyways


Last bumped by Anonymous on Mon May 03, 2021 12:58 am.
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Manish P
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