Practice Quiz

PgMP Program Manager Exam Prep

Category - Program Management

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Boris is the manager of the Yes I Read book-publishing program. He has decided to procure book cover images from a digital design company for the next fiscal year. Currently Boris has no idea how many books he will publish in the year. What type of contract is most suitable for Boris to use when he signs with the digital design company?
  1. Fixed price
  2. Time and material
  3. Cost plus fee
  4. Lump sum
Explanation
Answer - B - A time and material contract is most suitable.

Key Takeaway: Time-and-material, or T&M, contracts contain some aspects of fixed-price contracts and some aspects of cost-reimbursable contracts. T&M contracts are especially useful when you do not know the quantity of the items being procured. In this case, since Boris does not know the exact number of books he will publish within the year a time and material contract is most suitable for him to sign with the digital design company. This type of contract is high-risk for the buyer because he or she agrees to pay for the total time the seller takes to produce the deliverable goods.
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