Project Management Professional PMP · Free Practice Question Medium
Question 103
Allen must start his new construction project in Florida right away as hurricane season is fast approaching, and he is on a very tight deadline. Allen needs to hire a vendor for a portion of the construction work. This part of the work should not take long to complete but needs to be completed before other activities move forward. Of the following choices, which type of contract should Allen use?
- A Cost-plus incentive fee contract
- B Time and materials contract
- C Fixed-price contract
- D Cost-reimbursable contract
Reveal correct answer
Correct answer: B
Explanation
Allen should use a time and materials contract. A time and materials contract is best for work that must begin right away. These contract types are ideal for smaller procured work, but they need a "not to exceed" clause that serves as a cap on the cost of the work. Ordinarily, Allen would want to use a fixed-price contract, but because there is such a sense of urgency, Allen needs to use a time and materials contract. A cost-reimbursable contract assigns risk to the buyer for cost overruns and is rarely used. A cost-plus incentive fee assigns the cost overruns to the buyer but does offer an incentive fee, or bonus, for conditions within the project. This type of contract might be used for larger project work, but not usually for smaller assignments as described in this question.Discussion
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