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PMP Practice: Manage suppliers/contracts

Question 1 of 1 in Plan and Manage Procurement

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Ocean Tanaka is managing a digital transformation project for Bright Ridge Labs, a pharmaceutical research company. The project includes two main components: migrating legacy compliance databases to a new cloud platform (fixed regulatory requirements, strict audit trail needed) and developing a custom analytics dashboard for research teams (evolving user needs, frequent feedback loops desired). The project sponsor has approved a hybrid approach. Ocean is now working with the procurement team to acquire vendor support. The compliance database vendor requires a detailed statement of work with fixed milestones and deliverables before providing a quote. The analytics dashboard vendor prefers working in two-week iterations with a time-and-materials arrangement. Ocean's procurement manager insists on using a single contract type for both vendors to simplify administration. What should Ocean do?
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Correct answer: Recommend using separate contract types aligned to each component's delivery approach, explaining that the hybrid nature of the project requires different procurement strategies for different work streams

Explanation

In a hybrid project where different components legitimately require different delivery approaches, procurement strategies should align with how each work stream will be executed. The compliance database migration has fixed requirements and regulatory constraints that suit a predictive approach with a fixed-price or firm-fixed-price contract. The analytics dashboard has evolving requirements and benefits from an adaptive approach with a time-and-materials contract allowing iterative delivery. The project manager should educate the procurement manager on why the hybrid approach necessitates different contract types for different components, emphasizing that forcing a single contract type would create risk in at least one work stream. The scenario explicitly states the project uses a hybrid approach and that each vendor naturally aligns with different contract structures, making this the most appropriate solution.

**Why not A:** Using fixed-price contracts for both vendors forces the analytics dashboard work into a rigid structure despite its evolving requirements. The analytics vendor prefers iterative delivery because user needs are changing, and a fixed-price contract would either lock in uncertain requirements or create costly change orders.

**Why not C:** Using time-and-materials contracts for both vendors exposes the compliance database work to unnecessary cost uncertainty. The compliance migration has fixed regulatory requirements and well-defined deliverables, making a fixed-price contract more appropriate for controlling costs and ensuring accountability for that component.

**Why not D:** Escalating to the sponsor to override the procurement manager is unnecessarily adversarial. The PM should first educate the procurement manager on why the hybrid project requires different contract types, addressing the concern about administrative complexity while protecting the project's interests through collaboration, not authority.

Key Concept

This question covers Manage suppliers/contracts under Plan and Manage Procurement (Process).

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