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Summer 2013
Master of Business Administration-MBA Semester 4
PM 0018-Contracts management in projects
Q1. Fixed price contracts have a pre-set price that the vendor must adhere to in performing the work and in
providing materials. There are different types of fixed price contracts. Explain them.
(5 fixed price contracts X 2 marks =10 marks) 10 marks
Answer : Types of fixed price contracts :
1. Firm-fixed-price contracts.
A firm-fixed-price contract provides for a price that is not subject to any adjustment on the basis of the contractor’s
cost experience in performing the contract. This contract type places upon the contractor maximum risk and full
responsibility for all costs and resulting profit or loss. It provides maximum incentive for the contractor to control
costs and perform effectively and imposes a minimum administrative burden upon the contracting parties. The
contracting officer may use a firm-fixed-price contract in conjunction with an award-fee incentive and
performance or delivery incentives when the award fee or
Q2. Direct contracting is another procurement method that is used under a limited number of exceptional
circumstances. Explain the Conditions for adopting direct contracting, requirements and steps for direct
contracting .
(Conditions for adopting direct contracting-6 marks; Requirements – 2 marks and Steps for direct contracting – 2
marks) 10 marks
Answer : Conditions for adopting direct contracting :
Direct contracting without competition (single source) may be an appropriate method under the following
circumstances:
(a) An existing contract for goods or works, awarded in accordance with procedures acceptable to the Bank, may be
extended for additional goods or works of a similar nature. The Bank shall be satisfied in such cases that no
advantage could be obtained by further
Q3. Write short notes on Cost Plus Fee Contracts.

2. (Explanation of Cost Plus Fee Contracts – 1 mark, Features – 3 marks , Conditions for adopting – 3 marks;
Advantages and disadvantages- 3 marks) 10 marks
Answer : Cost plus fee contract :
A cost-plus-contract refers to a contract when the contractor gets paid for all construction related expenses as
previously agreed. Some cost-plus-contract can be drafted to set a limit that will be used to restraint the contractor
on not to exceed that specified amount
Features of cost plus fee contract :
Q4. The methods of selecting a consultant are designed to achieve the objectives of quality, efficiency, fairness
and transparency in the selection process and to encourage competition. Discuss any 2 methods of selecting
consultants.
(explanation – total 2 marks, where appropriate – total 4 marks, Type of assignments for which this method of
selection is adopted – total 4 marks) 10 marks
Answer : Methods of selecting consultants :
1. Quality-Based Selection (QBS)
QBS is appropriate for the following types of assignments:
(a) complex or highly specialized assignments for which it is difficult to define precise TOR and the required input
from the consultants, and for which the client expects the consultants to demonstrate innovation in their proposals
(for example, country economic or sector studies, multispectral feasibility studies, design of a hazardous waste
remediation plant or of an urban master plan, financial sector reforms);
Q5. The contract control process commences right at the beginning stage of bid document preparation inviting
contractors to bid, and proceeds through the contract negotiation, contractor selection, monitoring and
controlling of the contractor’s work and terminating the contract. Explain the areas that need attention for
effective control of the contracts in a project.
(Core competence of the project manager – 3 marks ; Requirements of the working system – 3 marks ; Use of
Work Breakdown Structure (WBS) – 3 marks; Recognizing the limitations with flexibility – 1 mark)
Answer : Areas that need attention for effective control of contract in a project :
1. Core competence of project manager :
The project management competency IS the capability to manage projects professionally, by applying best
practices regarding the design of the project management process, and the application of project management
methods. Here are some core competence qualities which a project manager must have :
- Planning & creation of a good WBS
- Good Scheduling skills
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