Procurements Management question

 






An organization is considering various contract types in order to motivate sellers and to ensure preferential treatment. What should they consider before deciding to use an award fee contract?

83

o

Payment of an award fee would be linked to the achievement of objective performance criteria.

o

Any unresolved dispute over the payment of an award fee would be subject to remedy in court.

o

Payment of an award fee would be agreed upon by both the customer and the contractor.

o

Payment of an award fee is decided upon by the customer based on the degree of satisfaction.

 


 


This is a question from Olivier Lehman...


As per Olivier lehamn ,answer is 4 ; howeve answer # 1 makes more sense to me ...could anyone guide me please,


what is the right answer and why ?


Thank you in davnce for your time to reply,


Tareq

Thank you  amol_joshi ;link you posted is really helpful

 In CPIF contract, Seller fee (Incentive fee) is determined objectively meaning some mathematical calculations are involved. We have formula to calculate this incentive

 
In CPAF contract, Seller fee (Award fee) is determined subjectively meaning customer can give if they are satisfied, irrespective of the performance, cannot be disputed
 
You can even simply google whats the difference between Objective/Subjective..it may help

 Thank you Geethika,appreciated

This is a direct question from the PMBOK Guide. Option 4 is the correct answer.
To understand more about Procurements Management you can read the following articles -
https://www.pmbypm.com/different-types-of-contract/
https://www.pmbypm.com/contract-types-for-pmp-exam/
https://www.pmbypm.com/pmp-formulas-contract-types/