PM598 Week 8 Final Exam

PM598 Week 8 Final Exam


  1. (TCO H) What is the maximum value of a verbal contract? (Points : 5)










  1. (TCO F) Which is not part of the award phase of the contract management process? (Points : 5)

Source selection

Contract negotiation

Contract formation

Contract administration

All of the above




  1. (TCO D) What are two major types of authority applicable to a contract manager/project manager? Briefly explain each of these authorities. (Points : 16)

Answer – The two major types of authority are actual authority and apparent authority. Actual authority is authority that is granted intentionally to the contract or project manager and can be either express or implied based on their position in the company. The other type of authority is apparent authority, which is authority that is not actually granted but the contract or project manager is allowed to exercise this authority based on their position and for ensuring that they are able to complete the tasks that they are responsible for.






  1. TCO A) Describe three techniques that build trust and a lasting partnership. Give an example for each technique and how it would impact an organization. (Points : 18)

Answer –Three techniques that would help in building trust and a lasting partnership are explained below along with an example on how it would positively impact the organization


  1. Listening to the customer – It is very essential that we are able to listen to and understand what the customer wants, as this will help us understand the customers’ needs and wants, and gain clarification that would help provide the best solution. For example, if a supplier is a keen listener to a customer they would feel that they are interested and want to help them, which will help them in coming closer and providing more details as they feel they can trust the supplier


  1. Being accessible – The supplier should be accessible over a variety of communication so that the customer can reach them anytime. For example is a supplier is able to be in contact via e-mail, phone or in person and responds quickly to customer questions, then they will feel that the supplier is there for them and cares about them, which leads to building of a relationship based on trust


  1. Providing regular communication on contract, program and partnership status – The client would like to be updated about project progress, positive or negative, and if a supplier can do that, it would increase information sharing both ways, leading to formation of a long lasting relationship based on trust. For example if a supplier sends weekly updates and also shares information on how the program is progressing, the client would appreciate this and also feel happy and share information of their own, that will help in strengthening the partnership between the two companies.




  1. (TCO B) Describe the seller’s pre-award stage of the contract management process. Give an example of the activity that takes place in each step. (Points : 16)

Answer – The seller’s pre-award stage of the contract management process has three major steps, which are described with example activities –


Step 1: Presales activity – In this step the seller would try to understand needs of a customer and also evaluate the competitive landscape to come up with prospective target customers, and sales plan on how they would try and win business. Example activity in this step would be to do a SWOT analysis of each competitor to come up with a competitive analysis report


Step 2: Bid/no-bid decision making – In this step the seller makes a decision on whether they want to bid for a piece of work along with justification and business case for their decision. An example activity in this step would be doing an opportunity and risk assessment to analyse the opportunity in detail that would help in coming to a bid or no bid decision.


Step 3: Bid or proposal preparation – In this step, the seller prepares the proposal with the various things asked in the bid along with supporting documentation. They would also make an oral presentation if it is needed as part of the bid response process. One of the activities in this step would be writing out the various sections of the response such as the executive summary, solution and pricing sections.




  1. ((TCO E) Describe and explain some of the tools and techniques that should be used in source selection. For example, is negotiation the only effective tool for source selection or are there others?

a .Contract negotiation, weighing systems, screening systems, and independent estimates are all manners to select appropriate sources. Regardless of the source required, there should be a process to screen suppliers in a way to empirically select a source. This reduces personal bias and other factors from the process. Page 146 (Points : 16)

Answer – Some of the tools and techniques that should be used in source selection are described and explained below


  1. Contract negotiation – Contract negotiation is the process of clarification and mutual agreement on the structure and requirements of the contract before its signing. Here the buyer and the seller discuss, clarify, negotiation and agree on all aspects related to the contract to come up with the final agreement and scope of work that has to be done.


  1. Weighting system – In a weighting system, the buyer selects the attributes that are important for evaluation, gives importance or weights to these attributes and then compares and scores the different proposals received on this scoring system to rank the responses. Based on this the seller could be selected or shortlisted for further selection process.


  1. Screening system – In a screening system, the information about potential sources is processed. Here the buyer would read and analyse the information, apply appropriate standards, and assign scores that express how well or how poorly each proposal measures up, to finally select the better proposals for selection or for further screening or negotiations.


  1. Independent estimates – Buyers can also use independent estimates or analysis from external contractors or experts to help them validate or make the decision on what source should be selected.







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  1. (TCO C) Compare and contrast fixed price agreements with cost reimbursable agreements and with time and material agreements. Offer your opinion on which type of contract would best suit your organizational needs if you had to only select one type of agreement for all your suppliers and sub-contractors. (Points : 16)

Answer – Fixed price agreements, cost reimbursable agreements and time and materials agreements are compared and contrasted below along with suggestion on one type of agreement for all suppliers and sub-contractors.


  1. Fixed price agreements – In a fixed priced agreement, the seller agrees to supply specified goods or deliverables in a specified quantity or to render a specified service in return for a specified fixed price. The price is fixed and is not subject to change based on the seller’s actual cost, hence providing the buyer with certainty and transferring risk of price increase to the seller.


  1. CostReimbursement Agreements – Cost reimbursement agreements include an estimate of project cost, a provision for reimbursing the seller’s expenses, and a provision for paying a fee as profit. Risk of price increase and variability is retained by the buyer but this may be a good agreement to use when the work is undefined and sellers are not willing to accept fixed prices due to the amount of uncertainty involved.


  1. Time andMaterials agreement – In a time and materials agreement, the two parties negotiate hourly rates for specified types of labor and agree that the seller will be reimbursed for parts and materials at cost. This is often used for short term contracts where skilled help is required and for augmenting capacity with an organization.


From a buyer perspective, if one of the above has to be selected for all suppliers and sub-contractors, the fixed price agreements would be selected as the seller would know what they have to pay, risk of price increase is with the seller and this is a good way to get sellers into a competitive situation to get a best price.




  1. (TCO F) What is source selection, and why is it important? (Points : 16)

Answer – Source selection is the process of buyer choosing the right seller for a given requirement. It would involve many activities from identification, contact, analysis, planning, conducting a bid process, negotiations and many other steps before a source is selected. Seller selection is one of the most important decisions a buyer will make as this will have direct implications on the cost, quality, reliability and successful performance of the work that is required. Contract success or failure will depend on the skill, competence and reliability of the sellers and their team of contractors, and hence it is extremely critical that there is a proper process to solicit, analyse and select the right source for completing a given piece of work.




  1. TCO G) There are many misconceptions regarding global contract management. Describe three such misconceptions, and describe the reality of actual global contracts. (Points : 16)

Answer – Three misconceptions regarding global contract management and their reality are described below


  1. It is a misconception that commercial contracting is very different from government contracting and there are no similarities between then. However, the reality is that commercial and government contracting processes share many phases, functions, procedures, and challenges. Also, many of the differences between the two are diminishing leading to both of them becoming even more similar in the coming future.


  1. It is a misconception that all privatesector companies use the same, or similar, standard terms and conditions in their contracts for goods and services. However in reality this is not trues as there are no global set of standard terms and conditions for commercial contracts with each company developing its own standard terms and conditions and then tailoring them to meet the requirements of specific contracts.


  1. It I a misconception that contract or project managers tend to be highly trained, highly experienced, and professionally certified. However in reality, just like in any other job, contract and project managers are of different types with some of them are very skilled and certified and many not being skilled or having previous proven experience in the field.




  1. (TCO H) One of the tools and techniques used in contract closeout or termination is compliance verification, briefly describe this tool. (Points : 16)

Answer –Compliance verification is a technique and process for verifying that all tasks that are necessary or contract performance have been completed and properly close. This process is to verify that the seller has accomplished all administrative tasks such as returnof buyer-furnished property, proper disposition of intellectual property, settlement of subcontracts and fulfilment of procedural requirements of termination proceedings if applicable. Only after all these tasks are performed and completed, the compliance verification step is completed and the contract can be taken up for closure.




  1. (TCO A) State and elaborate five actions to improve your use of contract incentives. (Points : 20)

Answer –Actions that can be taken to improve the use of contract incentives, thus ensuring that they are effective and help increase seller performance and commitment, are described below


  1. Thinking creatively – The buy should give good thought on what are the key drivers for performance and what are the key things the contract should focus on and align the incentives with these key drivers or parameters


  1. Avoiding rewards for simply meeting contract requirements – Sellers should not be rewarded for just doing what they are supposed to do, and hence incentives should be given to motivate them to do more and extra than that would help enhance quality of contract performance


  1. Make all forms of performance incentives challenging yet attainable – The goals and targets that are set should be challenging which would motivate seller to try and meet them, and at the same time should be within reach, as they would not be motivated by very tough or unattainable targets


  1. Consider tying ontime delivery to cost and or quality performance criteria – The seller should meet more than one criterion of cost, scope, quality and time, and performance on two or more of these project constraints should make them eligible for incentive. This will ensure that their effort is directly related to increasing project performance and objectives of scope, time and cost


  1. Use clear, objective formulas for determining performance incentives – The incentive should be easy to visualize and calculate, which will help the seller to see what they could get in real terms, which would be a motivating factor for them to try and get that








  1. (TCO C) Describe qualitative vs. quantitative evaluation criteria. (Points : 20)

Answer –Different types of criteria are used for effectively evaluating during the source selection process. Some types of evaluation are qualitative evaluation where the evaluation can be done in generic terms, using commonly accepted knowledge or people’s expertise, level of comfort or existing relationships for determining and comparing various sellers as part of the source selection process. Evaluation could also be quantitative in nature where various quantitative criteria are defined and the sellers evaluated. Some of the quantitative criteria that could be used as size, weight, speed, mean-time-between-failure, mean-time-to-repair, and price which very objectively help in comparing and then making a judgement on which seller is better based on the parameters of interest to the buyer.








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  1. (TCO D) Performance-based contracts (PBC) contain five essential elements. (Points : 20)

Answer – The five elements of performance based contracts are given below


  1. Performance Work Statement (PWS) or Statement of Objectives (SOO)


  1. Performance standards, measures, and metrics


  1. Performance incentives (positive and negative)


  1. Quality Assurance Surveillance Plan (QASP)


  1. Appropriate pricing arrangement(s)






  1. (TCO E) It has been said that the side that does the most research and planning will often come out best in any negotiation? Do you agree with this statement? Do you disagree with this statement? Defend your position with examples and other information (Points : 20)

Answer –I completely agree with the statement that the side that does the most research and is prepared well will come out best and will also drive a value creating negotiation. In negotiations, the most important thing that would influence the outcome is the amount of information that a party has and how effectively they are able to leverage this information to ensure that the discussion is steered in a direction that is required. For being able to do this, the most important part would be to do extensive, exhaustive and 360 degree information seeking, planning and analysis as part of the preparation. Based on this preparation one would be able to better appreciate one’s position vis a vis the other party’ position, and build a strategy that would be used for the negotiation. For example, if one is going to do an negotiation with a car dealer on trading an old car and buying a new car, doing extensive research on what used cars sells at, what’s the expected value of the old car, what are some intelligent questions to ask, what is the position of the seller and how desperate are they to get a sale, what are their bargaining points etc. would help build a bank of information that can be leveraged during the negotiation. One would then be able to use this to get the best price, freebies and also ensure they have had a good deal.






  1. (TCO F) What is an indefinite delivery indefinite quantity (IDIQ)? (Points : 20)

Answer – Indefinite Delivery Indefinite Quantity Agreement (IDIQ) is an agreement that is reached between a buyer and seller which is not a contract to start with but becomes an enforceable agreement if it contains a specified minimum quantity of products or services that must be ordered within a required period of time. Once an IDIQ is in place and if the buyer decides to purchase the products or services, they can issue an orderthat, if accepted by the seller, will become a contract. The contract will then include, by previous consent as part of the IDIQ, the terms and conditions of the purchase agreement.








  1. TCO G) Describe and compare and contrast the buyer’s and seller’s post-award phase of the contract management process. Give an example for each step in the process for the buyer and for the seller. (Points : 20)

Answer –The steps in the post award phase are the same for the buyer and seller, with each of the doing their set of activities. The steps in the post award phase and various activities undertaken by the buyer and seller are given below


Buyer and Seller Step 5: Contract Administration – Contract administration is the process of ensuring compliance with contractual terms and conditions during contract performance and up to contract closeout or termination. In this, both the buyer and seller must act according to the terms and conditions of their agreement, read and understand their contract, do what it expected from them, and avoid doing what they have agreed not to do. For example, the seller at this stage would be doing the work that is in scope of the contract while the buyer may be responsible for proving the resources and equipment that is necessary or doing the task.


Buyer and Seller Step 6: Contract Closeout or Termination – This is the last step of the contract management process where the buyer and seller have completed the main elements of performance, and they must settle final administrative and legal details before closing out the contract. In addition, any price adjustments, performance evaluation, retrospectives, and creation of admin records are done before the contract is formally closed. An example activity for a buyer in this step would be that they are doing a performance evaluation of the project to score how the project has performed and if all the objectives of the project have been met. Activities on the seller side could include settling bills with their sub-contractors and presenting the final invoice to the buyer and settling the payments that have to be received.






  1. (TCO H) Describe and explain the awakening phase in the evolution of a project management organization. Explain and defend why this phase is the most important of the process. Use examples to support your ideas. (Points : 20)

Answer – The Awakening Phase is the first phase that an organization creating acompanywide program management or project management organization. This is the stage where the company is beginning to realize and appreciate the benefits it can get by implementing a project management organization and the company leadership is promoting this idea in the organization along with showing their support by putting in the initial blocks in place. The company can also do an analysis of the advantages and benefits that accrue by having a PMO and start putting together a plan on how this would be implemented. This is a very important part of the process as this is the step where the company leadership and employees get to know and realize the concept, and their support could help make rest of the stages successful leading to successful establishment of the PMO in the organization. If this step is a failure or misdirected or not done properly, then the rest of the stages would also not be done properly or people in the company may not participate fully that could lead to failure of the initiative. An example of this could be when an organization that has a functional structure but is facing many problems in project execution evaluated moving to  PMO, there being an executive sponsor who with a team evaluates and presents benefits and plan on how they can move to the PMO. The organizational leadership appreciate the concept and lend their support and financing, and provide training and orientation to all employees so that they become ready and respond positively to this major organizational change. All these tasks are extremely critical and lay a very strong foundation on which the PMO organization can be built.






  1. (TCO B) What are the unique differences between cost plus incentive fee contracts and fixed price incentive contracts?(Points : 20)

Answer –In a cost plus incentive fee contract, the buyer would reimburse the seller the costs that have been incurred as part of contract performance along with a fee or incentive based upon the accomplishment of certain objectives and targets. In this fee, the only profit that the seller is making is the additional fee and incentive that they would get on top of the costs that are reimbursed. On the other hand, in a fixed price contract preventive contract, the seller would get a fixed price once they perform their side of the contract, and would get an additional incentive upon accomplishment and achievement of incentive clauses. The unique difference between these two types of pricing options is the way the base payment is determined, how the mark-up for the seller is assumed and on what basis they would be provided the incentive.



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