PMP Notes - Judgment Skills for Contract Type Selection in the PMP Exam
The purpose of contract type selection: to reasonably allocate risks to buyers and sellers according to project characteristics, and to maximize incentives for sellers.
When selecting a contract type:
- The scope is clear and unclear. If the scope of assumption is clear, the total price category is usually selected; if the scope of assumption is not clear, the category of cost compensation or quantity contract is usually selected;
- The identity is the buyer or the seller. Choose contracts with relatively low risk. If it is the buyer, the fixed total price contract in the total price category has the least risk of FFP; the cost plus fixed fee CPFF has the least risk in the cost compensation category.
- Time is not urgent. For projects that are generally time-critical, a quantity contract is selected.
- Need to increase staff, hire experts, and seek other external support. Quantity contracts are generally selected for projects that require additional personnel, hire of experts, and other external support. Quantity contracts are generally suitable for short-term and small-value projects, not long-term projects.
example:
When the buyer knows exactly what needs to be done, choose a fixed price contract;
when the buyer wants the seller to start work immediately, choose a quantity contract;
when the scope of work cannot be precisely defined at the beginning, choose a cost compensation contract;
the buyer needs to import from the outside For new employees, select Quantity Contract.
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