Procurement question: Type of contracts
Submitted by aaron on Tue, 06/28/2011 - 18:38
A project manager is negotiating with a contractor. Neither has a good idea of how long the project will take, or how much the materials will cost. Which contract type is MOST appropriate for this project?
A) Cost plus fixed fee (CPFF)
B) Time and Materials (T&M)
C) Cost plus award fee (CPAF)
D) Firm fixed price (FFP)
The question is from HeadFirst question bank. I will write the correct answer later. I am not satisfied with their explanation and I had picked incorrect answer (per them). I would like to know what you views are on this question and the approach. Please provide your inputs.
Forums:
PMPBOY
Tue, 06/28/2011 - 18:46
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My bet is on Cost plus Award Fee (CPAF)
my bet is on 'C' since not known howlong project will last.
pmpSGI
Tue, 06/28/2011 - 19:57
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I will go with 'C' as well.
I will go with 'C' as well. CPAF sounds best to me.
aaron
Tue, 06/28/2011 - 20:18
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I went for choice C too but
I went for choice C too but the HeadFirst Qbank selected B as the right answer w/ following explanation which actually does not seem to justify the answer.
Time and Materials (T&M) contracts are used in labor contracts. In a T&M contract, the seller pays a rate for each of the people working on the team plus their material costs. The “Time” part means that the buyer pays a fixed rate for labor - usually a certain number of dollars per hour. And the “Materials” part means that the buyer also pays for materials, equipment, office space, administrative overhead costs, and anything else that has to be paid for.
Akshay Singh
Wed, 07/20/2011 - 14:55
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It should be B Time and
It should be B Time and Materials(T&M).
Here scope, timelines and resources can not be estimated.In this scenario time and material based contract is defined. CPAF is generally used when scope can be defined upto a level and performance can be set for award.
Brgds
Akshay Singh
akshay@emensuslearning.com
www.emensuslearning.com