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You will outsource the production of this clothing line to a vendor. Your legal department has recommended you use a contract that reimburses the seller's allowable costs and builds in a bonus based on performance criteria they've outlined in their memo. Which of the following contract types will you use?
A. CPPC
B. CPIF
C. CPF
D. CPFF
Answer: B
Explanation:
The cost plus incentive fee contract is one that the buyer reimburses the seller for the seller's
allowable costs and includes an incentive or bonus for exceeding the performance criteria laid out
in the contract.
I would prefer to use option (B)-CPIF which will have lower risk to seller provided that performance criteria will be acceptable and reasonable.
I will follow Cost Plus Incentive Fee Contract (CPIF), because the risk is lower than the Cost Plus Fixed Fee (CPFF) and because the seller might artificially increase the cost to earn a higher profit in the Cost Plus Percentage of Cost (CPPC).
I'll have to take choice B, because it gives the seller more flexexibility and manuvaribility to do the best in marketing the product.
I would also go by CPPC, seems to be appropriate choice.
Thank you for invitation. I think A. CPPC is good answer.
Thank you for the invitation
Thanks for the information
Option B
CPPC ,Although seller will have bit advantage to earn more profit by higher the price.
------------------ A. CPPC ----------------
As a project manager, you are expected to do the followings:
1. Write out the project statement of works (SOW): This is a document that:
a. Describe the objective of the project
b. Defines the entire scope of the work to done for a vendor
c. Clarifies deliverables (project milestones), progress report etc.
d. Cost (Budget)
e. Proposed schedule, stating the commencement (Starting) and completion date of the project (Timeline)
f. The resources needed for the project including facilities, equipment.
This document is then handed over to the vendor/supplier, who accept it as it is or modify and resubmit it back to the project procurement unit for ratification, acceptance or final approval.
Note that it is not always that the vendor or supplier will make input into an SOW. A times they might just accept the SOW as it is and work with it.
2. Determine if you want to produce this new line of clothing in-house or you want to outsource. If you favour outsourcing then you have to determine the payment structure that will suit the project such as; the cost plus incentive fee (CPIF), which reimburses the vendor or supplier for its allowable costs and also add performance reward for exceeding the criteria set out in the contract.
Sorry, i have no knowledge about it.