CPPC Contracts

Submitted by crokiski on Wed, 12/30/2015 - 04:12

This comes from Project Management Professional (PMP) Exam Bank (sites.google)

 

292. Cost Plus Percentage of Cost (CPPC) contracts provide:

A.    A reimbursement of allowable cost of services performed plus an agreed upon percentage of the estimated cost as profit.

B.    A reimbursement of allowable costs plus a fixed fee which is paid proportionately as the contract progresses.

C.    The supplier with a fixed price for a delivered performance plus a predetermined fee for superior performance.

D.    None of the above.

Listed correct answer is A

I don't understand the answer that is listed as "A". Answer A says that the Percentage of Cost is the "...agreed upon percentage of the estimated costs as profit."  Shouldn't the correct wording be "percentage of ACTUAL costs" and not percentage of estimated costs. Otherwise, this would be a CPFF as the CPFF has a fee based on the "percentage of the initial estimated project costs" according to PMBOK.

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Reena123

Thu, 01/21/2016 - 01:32

 

Can you please help me with the follwing question?

A company has assigned a project manager to manage an integration project due to his experience managing suppliers. The sponsor is worried about the seller deriving extra profit on the cost plus fixed fee (CPFF) contract. Each month he requires the project manager to submit CPI calculations and an analysis of the cost to complete. The project manager explains to the sponsor that extra profits should not be a worry on this project because:

A. The team is making sure the seller does not cut scope.

B. There can only be a maximum 10 percent increase if there is an unexpected cost overrun.

C. The fee is only received by the seller when the project is completed.

D. All costs invoiced are being audited.