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Project Management Workbook And PMP/CAPM Exam Study Guide 12th Edition Harold R. Kerzner , Frank P. Saladis - Solutions
You want indirect control to minimize risks.☐☐ Make☐☐ Buy
The preferred suppliers have superior skills.☐☐ Make☐☐ Buy
You want to augment the existing labor force.☐☐ Make☐☐ Buy
Your in-house capacity is limited.☐☐ Make☐☐ Buy
The product has proprietary knowledge in it.☐☐ Make☐☐ Buy
You prefer direct control over quality and cost.☐☐ Make☐☐ Buy
Your needs are one-of-a-kind and low volume.☐☐ Make☐☐ Buy
Management wants to stabilize the workforce.☐☐ Make☐☐ Buy
Some suppliers can do it cheaper than you can.☐☐ Make☐☐ Buy
Your company had decided to manufacture all of the goods in-house. However, you have just won a large contract that may necessitate that the remaining portion of the production be outsourced so that manufacturing capability will exist for the new project. The most likely option selected would be
Your company maintains a list of preferred suppliers, all of whom could individually satisfy your production requirements. However, one supplier has continuously tried to keep costs down for the benefit of both you and the supplier. The most likely option would be option .
You have performed a make-buy analysis and discovered that it is more economical for you to manufacture the product yourself. The most likely option would be option .
The demand for your product has exceeded expectations and you have decided to outsource all of the work. To minimize your dependency (i.e., risk) with using one contractor who might eventually “hold you hostage,” you would most likely select option .
You have the capability to produce a product. If the marketplace likes your product and demand increases sharply, the demand will most likely exceed your manufacturing capability. To minimize future risks, you decide to select one supplier as a backup and give them a small portion of the production
Now it’s your turn. Assume that each of the four choices below is the seller’s actual cost for performing the work. How much will the seller receive from the buyer at the completion of the contract?a. $300,000b. $260,000c. $250,000d. $240,000
Now it’s your turn. For each of the four situations below, and using the same data from the above problem, calculate the amount of money reimbursed to the seller if the seller’s actual cost was:a. $260,000b. $230,000c. $180,000d. $140,000
Fixed-price incentive fee contract Target cost $150,000 Target fee $25,000 Target price $175,000 Sharing ratio 60/40 (60% to buyer, 40% to seller)Ceiling price $185,000 Actual cost $180,000 Additional fee =Total fee paid =Total project price =
Fixed-price incentive fee contract Target cost $150,000 Target fee $25,000 Target price $175,000 Sharing ratio 60/40(60% to buyer, 40% to seller)Ceiling price $180,000 Actual cost $145,000 Additional fee =Total fee paid =Total project price =
Your turn: Cost plus incentive fee contract Target cost $150,000 Target fee $25,000 Target price $175,000 Sharing ratio 80/20 (80% to buyer, 20% to seller)Actual cost $140,000 Additional fee =Total fee paid =Total project price =
The cost plus percentage of cost contract (CPPC) reduces the motivation of the to complete the contract and may result in enormous cost to the
In the cost reimbursable type contract, who generally has the greatest risk?
In a cost plus fixed fee contract, who pays for all project costs?
Who has the potential to benefit from a cost plus incentive fee contract?
Who has the greatest risk in a cost plus type of contract?
Who has the greatest risk in a firm fixed-price or lump sum contract?
If work must begin before the contract has been through the complete approval and acceptance process to avoid late acquisition of resources (i.e., long-lead items) or to avoid potential environmental problems, a contract may be approved to allow work to begin while the formal approval process
The final contract when agreed upon and signed is known as the contract.
If a contract specifies a level of effort that must be performed over a period of time and is based on skill sets and person hours the contract is known as a contract.
When a contractor is required to deliver a definitive end product the contract is known as a contract.
Describe the typical source selection criteria used by a buyer to determine which contractors or sellers will be used.
Which of the following items are considered to be hygiene factors when preparing for a contract negotiations meeting?a. Meeting room size and shapeb. Contract documentsc. Shape of conference tabled. Room temperaturee. Time of dayf. Specific people attending the meeting g. Seating location of
The contractor has the ability to actually perform the required work.
The agreement constitutes a recognized business or specifically stated reason.e. Form provided by law
Offer and acceptanced. Legal purpose
Disputes may be remedied in courtc. Contract capability
Must be a paymentb. Consideration
The basic elements of a contract: match each term on the left with the number of its explanation on the right:a. Mutual agreement
PM Quick Check: A major factor in the negotiations process is the willingness and ability to compromise.☐☐ True☐☐ False
PM Quick Check: Before negotiations begin, it is a good idea to determine what motivates the other party.☐☐ True☐☐ False
To ensure that no contractor has more knowledge about a request for a proposal, the buyer schedules a to provide an opportunity for all potential contractors to ask questions about the proposal and provide the same information to all interested parties.a. Seller auditb. Bidder’s conferencec.
Your turn: Consider the following situation: You have the option to rent a piece of equipment for $200 per day. You can also lease the equipment for $70 per day plus a one-time cost of $8,000. You need the equipment for 75 days. Should you rent or lease?a. Rent Leaseb. What is the breakeven point
For each factor listed, indicate whether it influcences the make decision or the buy decision.Factor: Make or Buy Decision?a. Less costlyb. Easy integration of operationsc. Utilize skills of suppliersd. Utilize existing capacity that may be idlee. Maintain direct controlf. Small volume requirement
Place each of the terms below with its correct definition. Design specifications■■ Performance specifications■■ Functional specificationa. This is when the seller describes the end use of the item to stimulate competition among commercial items, at a lower overall cost. This is a subset of
What is a procurement statement of work?
Match each of the terms below with its correct definition.Presales activity Contract administration Bid proposal preparation Contract negotiation and formation Bid/no-bid decision makinga. The process of identifying prospective and current customers, determining customer’s needs and plans, and
Which of the following are considered to be enterprise environmental factors in the plan procurement process?a. Marketplace conditionsb. Unique local requirementsc. Contract management systemsd. Financial accounting and payment systems
The learning curve does not continue forever. The percentage decline in hours/dollars diminishes over time.☐☐ True☐☐ False
The “slope” of the learning curve is related to the rate of learning.☐☐ True☐☐ False
The learning curve concept indicates that people will exhibit improvement in performance as a task is repeated a number of times.☐☐ True☐☐ False
The learning curve concept suggests that productivity will improve consistently and significantly as work activities are repeated.☐☐ True☐☐ False
Complete the following statement: The risk for an event can be defined as
What is sensitivity analysis and how is it typically displayed?
What is the difference between a risk and an issue?
Why is risk management a key part of overall project management planning?
Consider the following project information provided by a functional manager:Optimistic time for completion of the project is 12 weeks. Pessimistic time is 40 weeks.Most likely time is 25 weeks. Using the weighted average formula, what is the probability that the project will be completed between
You are the project manager for the development of a new product. The following information has been provided to you by your analysts. There is an 80% chance of finishing on time and a 40% chance of finishing over budget. What is the probability that the project will finish on time and within
What is the sum of all probabilities that can occur in a given set of circumstances?
What is the probability of rolling a one with one die (half a pair of dice)?
Consider the following situation. Your team has assessed the probability of experiencing software errors in the development process as medium, and assigned a numerical value of .8 to the probability. The team has also determined that the impact of these errors will also be high and has assigned a
What are the typical risk responses for managing negative risks and project threats?
Probability × Impact = Expected value☐☐ True☐☐ False
Utility is a measurement of risk tolerance.☐☐ True☐☐ False
Bad weather is an example of insurable risk.☐☐ True☐☐ False
Inflation is an example of a business risk.☐☐ True☐☐ False
A company with strong assets and a very aggressive approach to risk taking is most likely to be associated with the:a. Maximin or Wald criterionb. Maximax or Hurwitz criterion
If you were asked to make a decision about how to respond to a project situation and you needed the opinions of several subject matter experts to review before you made a decision, which of the following techniques would be most effective if you wanted to keep the identities of each of the subject
Here’s an effective tool for the project manager’s toolbox. The project plan is actually an integrated plan that includes elements of all 10 knowledge areas of the PMBOK® Guide. Create a checklist for managing risk by listing all ten knowledge areas and then, working with the project team,
Triggers are early warning signs that a potential risk might be materializing.☐☐ True☐☐ False
“Traffic light” or “dashboard” identification of risks is a quantitative risk assessment method.☐☐ True☐☐ False
The major difference between types of contract is the sharing of risk between the buyer and the seller.☐☐ True☐☐ False
Risk and knowledge are inversely related.☐☐ True☐☐ False
Planning is based upon history, whereas risk management focuses on the future.☐☐ True☐☐ False
Expected value calculations are examples of quantitative risk assessment.☐☐ True☐☐ False
The Delphi technique is a risk mitigation strategy whereby a group of subject matter experts work closely together in a two-day meeting to identify and solve risk problems.☐☐ True☐☐ False
A PI (probability impact) matrix can be used for either quantitative or qualitative assessment of risks.☐☐ True☐☐ False
A risk management plan should provide some guidance on how to respond or contain the risk event, if possible.☐☐ True☐☐ False
Risk management is designed to focus only on the potential negative situations and project threats that have been identified by the project team.☐☐ True☐☐ False
The best way to classify risks is according to their probability of occurrence.☐☐ True☐☐ False
All risk response mechanisms transfer all or part of the risk to a potential contractor.☐☐ True☐☐ False
Risk management is designed to provide an early warning system that will be useful throughout the project life cycle.☐☐ True☐☐ False
Risk management is expensive and should be done only on large projects or those of strategic importance.☐☐ True☐☐ False
One of the purposes of risk management is to create an understanding of the potential risks and their effects.☐☐ True☐☐ False
Manufacturing risks: For the design and development of a new plane, Boeing identifies four categories of risks, which are listed below (27–30). Options a through d are four possible mitigation strategies for the four categories of risks. Select one and only one of these mitigation strategies from
Technical risks: For the design and development of a new plane, Boeing identifies four categories of risks, which are listed below (27–30). Options a through d are four possible mitigation strategies for the four categories of risks. Select one and only one of these mitigation strategies from the
Marketing risks: For the design and development of a new plane, Boeing identifies four categories of risks, which are listed below (27–30). Options a through d are four possible mitigation strategies for the four categories of risks. Select one and only one of these mitigation strategies from the
Financial risks: For the design and development of a new plane, Boeing identifies four categories of risks, which are listed below (27–30). Options a through d are four possible mitigation strategies for the four categories of risks. Select one and only one of these mitigation strategies from the
Cost sharing: Every contract type can be viewed as a sharing of risks between the buyer and the seller. For each type of contract identified below, indicate who has the greater degree of risk: the buyer or the seller.
Firm fixed price: Every contract type can be viewed as a sharing of risks between the buyer and the seller. For each type of contract identified below, indicate who has the greater degree of risk: the buyer or the seller.
Cost plus award fee (fee is a % of a dollar pool): Every contract type can be viewed as a sharing of risks between the buyer and the seller. For each type of contract identified below, indicate who has the greater degree of risk: the buyer or the seller.
Cost plus fixed fee (fee fixed in $, not %): Every contract type can be viewed as a sharing of risks between the buyer and the seller. For each type of contract identified below, indicate who has the greater degree of risk: the buyer or the seller.
Time and materials not to exceed a certain amount: Every contract type can be viewed as a sharing of risks between the buyer and the seller. For each type of contract identified below, indicate who has the greater degree of risk: the buyer or the seller.
Cost plus incentive fee: Every contract type can be viewed as a sharing of risks between the buyer and the seller. For each type of contract identified below, indicate who has the greater degree of risk: the buyer or the seller.
Fixed price incentive fee: Every contract type can be viewed as a sharing of risks between the buyer and the seller. For each type of contract identified below, indicate who has the greater degree of risk: the buyer or the seller.
Fixed price with economic price adjustments: Every contract type can be viewed as a sharing of risks between the buyer and the seller. For each type of contract identified below, indicate who has the greater degree of risk: the buyer or the seller.
Cost plus percentage of cost: Every contract type can be viewed as a sharing of risks between the buyer and the seller. For each type of contract identified below, indicate who has the greater degree of risk: the buyer or the seller.
“We have assessed the risk and are aware that it may occur within the next phase of the project. We have developed a contingency to manage the risk if it occurs.”Response mode
“I have arranged for an insurance company to handle any direct property damage and any worker injuries during the project.” Response mode
“There is a strong possibility that one of my team members may leave the project for a better-paying job assignment, so I have added an end-of-project bonus to retain the employee.” Response mode
“I have set up a management reserve just in case there are escalations in the costs of the raw materials we must purchase.” Response mode:
“I know we can manufacture the product ourselves, but there are a number of potential risks to consider. I would rather award a fixed-price contract to Alpha Company and have them do the manufacturing instead. They have a strong record of success in this area.” Response mode:
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