CCT CCT Contract Management & Procurement 1 — Questions and Answers
Question 1: Which contract type places the most financial risk on the contractor?
- Firm Fixed-Price (FFP) (Correct answer)
- Cost-Plus-Fixed-Fee (CPFF)
- Time and Materials (T&M)
- Cost-Plus-Incentive-Fee (CPIF)
Correct answer: Firm Fixed-Price (FFP)
A Firm Fixed-Price contract transfers maximum financial risk to the contractor because payment does not change regardless of actual costs incurred.
Question 2: What is the primary purpose of a Request for Proposal (RFP) in procurement?
- To solicit competitive bids based solely on price
- To invite vendors to propose solutions and pricing for a defined scope (Correct answer)
- To notify suppliers of an awarded contract
- To establish payment milestones for an existing contract
Correct answer: To invite vendors to propose solutions and pricing for a defined scope
An RFP invites vendors to submit technical and cost proposals so the buyer can evaluate both approach and price.
Question 3: In cost technician practice, what does 'scope creep' typically lead to?
- Reduced project duration
- Uncontrolled cost increases beyond the original budget (Correct answer)
- Improved contract terms
- Lower material procurement costs
Correct answer: Uncontrolled cost increases beyond the original budget
Scope creep refers to uncontrolled expansion of project scope, which drives unauthorized cost increases that strain the original budget.
Question 4: Which document formally authorizes a change to a contract's scope, cost, or schedule?
- Change Order (CO) (Correct answer)
- Notice to Proceed (NTP)
- Bid Bond
- Lien Waiver
Correct answer: Change Order (CO)
A Change Order is the formal contract amendment that adjusts scope, price, or schedule based on mutual agreement of both parties.
Question 5: What is the purpose of a performance bond in construction contracting?
- To guarantee the contractor will pay subcontractors
- To ensure the contractor completes the project per contract terms (Correct answer)
- To cover cost overruns on time-and-material contracts
- To reimburse the owner for design errors
Correct answer: To ensure the contractor completes the project per contract terms
A performance bond protects the project owner by guaranteeing that the surety will complete the work if the contractor defaults.
Question 6: Under a Cost-Plus-Percentage-of-Cost (CPPC) contract, what problematic incentive exists for the contractor?
- To minimize overhead charges
- To finish work ahead of schedule
- To increase costs since fee grows with spending (Correct answer)
- To reduce subcontractor markups
Correct answer: To increase costs since fee grows with spending
CPPC contracts incentivize cost inflation because the contractor's fee is calculated as a percentage of total costs, rewarding higher spending.
CCT CCT Contract Management & Procurement 1
Which contract type places the most financial risk on the contractor?