PMP Practice Questions #106
You are managing a project using an adaptive (agile) lifecycle. The project includes developing a specialized software module that is well-understood, yet you anticipate potential changes due to evolving project needs. You plan to outsource this module’s development. Given the agile nature of your project and the likelihood of changes, what is the most appropriate approach for creating a procurement contract with the vendor?
A. Opt for a fixed-price contract to control costs, after obtaining approval from stakeholders on the Procurement Statement of Work.
B. Choose a Time and Material (T&M) contract, including a cap on budget and delivery performance parameters.
C. Develop a Cost-Plus contract, providing flexibility for changes.
D. Avoid outsourcing this work, as it could create confusion within the adaptive project framework.
Analysis:
The challenge here involves choosing a contractual strategy for a software module’s development within an adaptive project environment. This scenario presents a unique juxtaposition: the project is progressing under an agile methodology, promising flexibility and responsiveness, yet the development work, although well-defined, may undergo adjustments due to evolving needs. The task at hand for the project manager is to find a contractual approach that not only embraces the potential for changes inherent in agile projects but also ensures that the outsourcing of this critical module aligns seamlessly with these dynamic project conditions.
Option A: Opt for a fixed-price contract to control costs, after obtaining approval from stakeholders on the Procurement Statement of Work. This choice suggests a fixed-price contract based on a detailed Statement of Work, necessitating stakeholder approval for cost control. While this approach appears to offer a solution for managing the budget with clarity, it carries inherent risks in an adaptive project environment that values flexibility. Yes, utilizing a flexible contract change management process can ease adjustments, but there could be a more suitable option given the anticipated need for adaptability. This method might restrict the project’s ability to respond to changes effectively, as it doesn’t explicitly include provisions for managing the expected changes, highlighting the need for a more balanced approach.
Option B: Choose a Time and Material (T&M) contract, including a cap on budget and delivery performance parameters. This option advocates for a Time and Material contract enhanced by a budget cap and defined delivery performance parameters. It represents a balanced approach, merging the need for flexibility in adapting to project changes with essential checks on budget and performance. This seems to be a pragmatic approach to managing evolving scopes within defined financial and qualitative boundaries.
Option C: Develop a Cost-Plus contract, providing flexibility for changes. This contract type is particularly useful in projects where the scope is not clearly defined and could change, allowing for adjustments in project costs as the work progresses. It offers the flexibility needed for projects with evolving requirements and when you rely on the vendor’s expertise to help define the scope based on your project goals. However, it comes with the challenge of managing and controlling costs, as there is an inherent risk of budget overruns if not carefully monitored. Balancing the need for flexibility with effective cost control measures is essential to leveraging the benefits of this contract type.
Option D: Avoid outsourcing this work, as it could create confusion within the adaptive project framework Avoiding outsourcing due to concerns it might conflict with the agile framework underestimates the potential for well-structured contracts to support agile methodologies. This choice might unnecessarily limit resource options and project scalability.
Conclusion: Considering the agile project environment and the need for flexibility combined with control, Option B emerges as the most suitable approach. It acknowledges the agile project’s dynamic nature while introducing mechanisms (like a cap on budget and specific delivery parameters) to mitigate risks associated with time and material contracts. This option allows for adaptability and iterative development without compromising budgetary control and project delivery standards.
PMP Exam Content Outline Mapping
| Domain | Task |
|---|---|
| Process | Task 11: Plan and manage procurement |
Topics Covered
- Contract Types
