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PMP Practice QuestionsProcurement Management
Process Domain

Procurement Management PMP Practice Questions

Test yourself with 8 free, scenario-based PMP practice questions on procurement management, drawn from the Process domain of the exam and aligned to PMBOK 8. Work through each scenario before revealing the answer — every question includes an explanation of why the correct choice is right. For randomized, interactive practice across all topics, use the practice question tool.

Question 1 of 8

You are selecting a vendor for a complex software development engagement where requirements are not fully defined. Which contract type best protects the buyer while still incentivizing the vendor?

  1. A.Fixed-price lump sum contract
  2. B.Time-and-materials contract with a not-to-exceed ceiling
  3. C.Cost-plus-incentive-fee contract
  4. D.Cost-plus-fixed-fee contract
Show answer and explanation

Correct answer: C

A cost-plus-incentive-fee (CPIF) contract reimburses allowable costs and adds a fee that increases when performance targets are met — aligning vendor incentives with buyer outcomes. Fixed-price is risky when requirements are unclear, as vendors will price in uncertainty or fight scope changes. T&M with ceiling protects cost but provides no performance incentive. CPFF reimburses costs plus a fixed fee regardless of performance.

Question 2 of 8

A project manager is procuring a vendor for routine support services where the scope is clear and the price should be competitive. Which contract type is MOST appropriate?

  1. A.Cost-plus-fixed-fee (CPFF)
  2. B.Time-and-materials (T&M)
  3. C.Firm-fixed-price (FFP)
  4. D.Cost-plus-incentive-fee (CPIF)
Show answer and explanation

Correct answer: C

When scope is well-defined and work is routine, a Firm-Fixed-Price (FFP) contract is ideal. The buyer knows the exact cost upfront; the vendor assumes all cost risk and is incentivized to perform efficiently since they keep any savings. CPFF and CPIF are appropriate when scope is uncertain — they shift cost risk to the buyer. T&M is best for small, short-duration work where scope cannot be fully defined in advance. Well-defined scope + competitive market = FFP.

Question 3 of 8

A project manager receives a Request for Proposal (RFP) response from a vendor. The vendor's proposal price is 40% lower than the next lowest bidder. What should the project manager do?

  1. A.Award the contract now — the lowest price saves the project budget
  2. B.Disqualify the low bidder automatically for not meeting market rate standards
  3. C.Ask all vendors to rebid, using the low bid as the new benchmark
  4. D.Investigate the anomalously low bid for accuracy, completeness, and potential risk before making a decision
Show answer and explanation

Correct answer: D

An abnormally low bid is a red flag that warrants investigation. The vendor may have misunderstood the scope, made errors, planned to use substandard materials, or intends to recover costs through change orders. Awarding without scrutiny risks project failure if the vendor cannot deliver. Automatic disqualification may eliminate a legitimately efficient vendor. Asking all vendors to rebid is unethical and may violate procurement policy.

Question 4 of 8

The project team is preparing procurement documentation to solicit qualified vendors to compete for a complex professional services contract. Which document provides the detailed requirements against which vendors will prepare proposals?

  1. A.Request for Proposal (RFP)
  2. B.Request for Information (RFI)
  3. C.Request for Quotation (RFQ)
  4. D.Statement of Work (SOW)
Show answer and explanation

Correct answer: A

An RFP is used for complex professional services where the buyer wants the vendor to propose how they will meet the requirements — it solicits proposals including technical approach, qualifications, and price. RFI is used early to gather market information, not to solicit bids. RFQ is used when price is the primary selection criterion and scope is clearly defined. The SOW describes the work to be performed and is typically included within the RFP package, but is not itself the solicitation document.

Question 5 of 8

A project is using a time-and-materials contract for software consulting services. The project manager notices the vendor's billing hours have been increasing each month even though scope has not changed. What is the PRIMARY risk of T&M contracts that this illustrates?

  1. A.The vendor is incentivized to complete work quickly — T&M contracts create time pressure because the vendor's total revenue is constrained by the project's available budget ceiling.
  2. B.The buyer bears cost risk — there is no incentive for the vendor to control hours, as more hours mean more revenue.
  3. C.T&M contracts require competitive bidding each billing cycle — periodic re-bidding ensures the buyer continues to receive market-competitive rates for ongoing work throughout the project.
  4. D.The buyer cannot terminate a T&M contract without significant financial penalties — the open-ended structure creates contractual obligations that are costly and complex to exit early.
Show answer and explanation

Correct answer: B

The primary risk of T&M contracts is that they create a perverse incentive: the more hours the vendor bills, the more revenue they earn. This can lead to scope expansion, inefficiency, or billing padding. The buyer bears essentially unlimited cost risk unless a Not-to-Exceed (NTE) ceiling is added. This is why T&M contracts should be used only for short-duration work or when an NTE cap is in place. FFP and CPIF contracts better control this risk.

Question 6 of 8

A vendor is performing under a CPIF contract with a target cost of $500,000, target fee of $50,000, and a 70/30 sharing ratio (buyer/seller). The vendor completes the work for an actual cost of $440,000. What is the vendor's final fee?

  1. A.$50,000 — the fee is fixed regardless of performance
  2. B.$32,000 — the vendor shares in the savings but the buyer keeps the majority
  3. C.$68,000 — the vendor earns an additional fee for the $60,000 cost savings
  4. D.$80,000 — the vendor earns 30% of total costs as the fee
Show answer and explanation

Correct answer: C

Under a CPIF contract, cost savings are shared per the agreed ratio. Cost savings = Target Cost - Actual Cost = $500,000 - $440,000 = $60,000. Seller's share of savings = 30% × $60,000 = $18,000. Final fee = Target fee + Seller's share = $50,000 + $18,000 = $68,000. Total payment to vendor = AC + Final fee = $440,000 + $68,000 = $508,000. The buyer saves: $550,000 (target total) - $508,000 = $42,000, which is 70% of $60,000 = $42,000. The sharing ratio works correctly.

Question 7 of 8

During contract close-out on a construction project, the project manager must formally verify that the vendor completed all contractual obligations. What document provides the BEST basis for this verification?

  1. A.The final invoice submitted by the vendor
  2. B.The vendor's project manager's completion declaration
  3. C.The project risk register, showing all procurement risks as closed
  4. D.The original Statement of Work (SOW) and the procurement audit findings
Show answer and explanation

Correct answer: D

Contract closeout requires verifying that all contracted deliverables were completed per the SOW, which defines the agreed scope. A procurement audit conducted during closeout compares what was contracted against what was actually delivered. The vendor's invoice shows what they billed but not whether deliverables were accepted. The vendor's own declaration is not independent. The risk register tracks risks, not contractual obligations.

Question 8 of 8

A project manager needs to procure specialized equipment but has only three approved vendors in the organization's vendor list, and none have delivered this equipment type before. What should the project manager do?

  1. A.Select the vendor with the lowest price from the approved list — minimizing cost on pre-qualified vendors is the safest procurement approach, and all three have already passed organizational qualification standards.
  2. B.Issue a Request for Information (RFI) to all three vendors and potentially qualify new vendors through the organization's vendor qualification process.
  3. C.Manufacture the equipment internally to avoid procurement risk — if the existing vendor list cannot meet requirements, bringing production in-house eliminates all external supply chain uncertainty.
  4. D.Award the contract to any vendor on the current approved list and accept the capability mismatch — working with a qualified-but-imperfect vendor is preferable to the delay of opening new procurement channels.
Show answer and explanation

Correct answer: B

When existing vendors lack the required capability, the project manager should first gather market information via an RFI to understand vendor capabilities, then work through the organization's vendor qualification process to add capable vendors if needed. An RFI is a market intelligence tool — not a solicitation for bids — that helps assess supplier landscape before committing to a procurement approach. Awarding to an unqualified vendor (A, D) risks performance failure. Internal manufacturing is a make-or-buy decision requiring formal analysis.

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