Guide: Contract Types in Procurement Planning
Contract Types are a crucial component in Project Management Procurement Planning as outlined in the PMBOK Guide Seventh Edition. Understanding contract types, their benefits, limitations and best time of application is essential.
Why it is important: Having detailed knowledge of contract types helps in choosing the most suitable one for different scenarios, which can influence project risk, cost, and control.
What it is: Contract types in Project Management are essentially agreements where terms and conditions are defined between the project organization and a vendor for the provision of specific services or products.
How it works: Contract types can be broadly categorized into Fixed Price, Cost Reimbursable and Time & Material Contracts. Each type has its own benefits, drawbacks, and rules.
Exam Tips: Answering Questions on Contract Types
1. Understand the key characteristics and differences between different contract types.
2. Be aware of the risks associated with different contract types.
3. Apply knowledge of contract types to different scenarios to choose the most suitable type.
4. Remember, there is usually a 'best' type of contract to use depending on the situation and conditions ppresented in the question.
5. Refresh knowledge on PMBOK Guide's stance on different contract types.
Go Premium
Project Management Professional Preparation Package (2024)
- Earn 35 PDUs needed for your PMP certification
- 10928 Superior-grade Project Management Professional practice questions.
- Accelerated Mastery: Deep dive into critical topics to fast-track your mastery.
- Unlock Effortless PMP preparation: 5 full exams.
- 100% Satisfaction Guaranteed: Full refund with no questions if unsatisfied.
- Bonus: If you upgrade now you get upgraded access to all courses
- Risk-Free Decision: Start with a 7-day free trial - get premium features at no cost!
Contract Types practice test
Contract types determine the division of risk, cost, and responsibility between the purchasing organization and the supplier. Various contract types are employed in procurement projects, ranging from fixed-price contracts, where the price is agreed upon and set, to cost-reimbursable contracts, where the vendor is paid for their actual costs plus an agreed-upon fee, to time and materials contracts, where payments are based on the time the vendor spends on the project and the materials used. The chosen contract type will heavily influence the procurement planning process and should align with the project objectives, risks, and desired level of control over the vendor.
Time: 5 minutes Questions: 5
Practice more Contract Types questions
Go Premium
Project Management Professional Preparation Package (2024)
- Earn 35 PDUs needed for your PMP certification
- 10928 Superior-grade Project Management Professional practice questions.
- Accelerated Mastery: Deep dive into critical topics to fast-track your mastery.
- Unlock Effortless PMP preparation: 5 full exams.
- 100% Satisfaction Guaranteed: Full refund with no questions if unsatisfied.
- Bonus: If you upgrade now you get upgraded access to all courses
- Risk-Free Decision: Start with a 7-day free trial - get premium features at no cost!