ExpertHard1 markMultiple Choice
Task 3: Evaluate and address external business environment changesBusiness EnvironmentExternal EnvironmentTask 3Procurement
PMP · Question 43 · Task 3: Evaluate and address external business environment changes
A project manager observes that the inflation rate has increased significantly, raising the cost of raw materials. The project is a fixed-price contract with a client.<br/><br/>Who bears the risk of this external environmental change?
A project manager observes that the inflation rate has increased significantly, raising the cost of raw materials. The project is a fixed-price contract with a client.<br/><br/>Who bears the risk of this external environmental change?
Answer options:
A.
The Seller (Project Team/Organization)
B.
The Buyer (Client)
C.
Both parties equally
D.
The Government
How to approach this question
Contract Theory. Fixed Price = Seller Risk. Cost Reimbursable = Buyer Risk.
Full Answer
A.The Seller (Project Team/Organization)✓ Correct
A
Economic factors (Inflation) impact contracts differently. In a Fixed Price contract, the seller is obligated to deliver at the agreed price, regardless of their own cost increases. Thus, the seller bears the risk of inflation.
Common mistakes
Thinking risks are always shared.
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