a Code of Ethics question

Submitted by danny2012 on Sat, 06/09/2012 - 13:58

You are doing a project under cost-reimbursable contract where the target price was $ 1,200,000. Your project is nearing completion and CPI is currently 1.3. You are concerned that you will be losing money by billing for less. In this context, you should:


1  Tell your buyer about the CPI as it stands today and explain the reasons for the deviation from the plan. 
2  Invoice for $ 1,500,000 because there are chances for costs being higher in a subsequent project. 
3  Tell the bad news to the buyer and suggest charging more from the customer.
4  Add some extra features to cause "customer delight". 
 
  Answer is 1 
   
Explanation: As per PMI Code of Ethics and Professional Conduct, you should assume:
a. Responsibility to maintain and satisfy the scope and objectives of professional services, unless otherwise directed by the customer


Does anybody know where this responsibility code above is from? I'm not able to find it from the current edition of PMI code of ethics. I guess it's from old edition. what do you think?

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projmanpro

Sat, 06/09/2012 - 16:06

From where did u get this question? When CPI => 1, it means the performance is good (though sometimes is also bad). In my understanding of the question, i cannot find any clarity in the question so i could say that there is wrong in the project progress or performance. The CPI value of greataer than 1 could tell, there were savings made. Unless SPI is also given, where SPI < 1, then i could say there is bad news.

I can therefore conclude that the Question is WRONG or SUBSTANTIALLY INCOMPLETE. :)

sspawar

Sun, 06/10/2012 - 02:27

 Not exactly you will find but , with a concept that - always take the high road.

Logically it is fit in this scenario. 

it can be derived from COEAPR ch2 section 2.3.1.

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while IF we talk about the authenticity or correctness of question, there would be many ifs and buts.

Questioner is not fully aware of the features of COST-REIMBURSIBLE CONTRACT.

But here that is not a matter of subject, and intent of questioner is - how to deal such situation, as per PMI Ethics, and thus option 1 is right.

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What is a Cost Reimbursible Contract in respect of asked question:

Cost may vary.

Based on invoice actual cost will be payble.

But the sellers/contractors' profit is either a %age fee over the estimated cost (BAC) (not on the actual cost), or any fixed fee or any fixed incentive or fixed award at the time of contract.

So it does not matter what is AC of deliverable.

Sellers profit (fee) is fixed based on estimated cost and will be paid on work completed. (PMBOK-p323)

In scenario of asked question, Seller should not worry if CPI is 1.3, because his fee(profit) is fixed based on %age of estimated cost and not on the actual cost.

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Questioner have framed this question with a misconception that In COST REIMBURSIBLE CONTRACT if AC < EV or BAC, then seller will earn less profit . thats why he is quoting  - You are concerned that you will be losing money by billing for less. In this context, you should: 

and then he is adding this situation with an ethical act.

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Hope it may be clear to all.

Regards

danny2012

Sun, 06/10/2012 - 19:41

Hi Guys,


Now, I'm able to confirm that the explanation references to outdated code of ethics of PMI. I saw it in a book called "The Pmp Exam: How to Pass on Your First Try" which was based on PMBOK 3 edition.


I agree with projmanpro. I think it's a invalid question, too. Information not enough to make choice.


CC sspawar : Thanks anyway. dude, I know you're trying to help and I appreciate that very much. But could you please make your  comments a bit shorter and briefer so that you comments will be more effetient and effective to thread starter, especially to those who are rushing for the exam. Thanks!

sspawar

Mon, 06/11/2012 - 00:26

I can guess your goodness and talent.

Thanks once more.