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# TOPIC: Question on CPIF contract

## Question on CPIF contract 6 years 7 months ago #12103

 Saravanan Ramakrishnan Topic Author Offline Fresh Boarder Posts: 3 Thank you received: 0 I got this question Scordo's simulator: Q) You have recently joined an organization as the procurements manager. You have just received an invoice from a contractor. Some of the items from the invoice are as follows: EV of work completed to date: \$50,000 AC of work completed to date: \$40,000 Total costs reimbursed by the buyer to date: \$35,000 If the contract between the buyer and the contractor is a CPIF contract, what is the total value payable to this contractor? (Assume that the contract allows for a 10 percent fee over net payable whenever CPI > 1). Answers) I choose the answer as \$44,000. However the solution offered says the answer as \$5,500. Surprisingly, the incentive is being calculated on the remaining payment to be made. (In this case it is \$5,000). I am really confused on this. In the case CPIF contract, the incentive is calculated on the total actual cost or the cost that is yet to be paid to the supplier. Any help is greatly appreciated. Thanks, Saravanan Your e-mail address will never be displayed on the site. Check this box to be notified of replies to this topic. Note: BBcode and smileys are still usable.

## Question on CPIF contract 6 years 7 months ago #12135

 Steven Mudrinich, PMP Offline Expert Boarder Posts: 126 Karma: 7 Thank you received: 25 Saravanan, This is a misleading question and actually really doesn't fall into the contracts portion of the exam. In reality this is an earned value management question. How I believe they came to the answer: They vaguely state that the incentive fee is 10% for the seller if the contract is fulfilled (CPI > 1). 10% of the EV (\$50000) = \$500. They then subtracted the total costs from the actual costs. \$40000 - \$35000 = \$5000. They then added the fee to the amount of money saved (\$5000) to get the answer of \$5500. Take note: using EVM is an unusual way to frame contract questions and it is very unlikely that you would see this on the PMP exam. - Steven Comprehensive PMP Study Guide: www.amazon.com/Setting-Your-Exam-Study-P...rds=steven+mudrinich Your e-mail address will never be displayed on the site. Check this box to be notified of replies to this topic. Note: BBcode and smileys are still usable. Last edit: by Steven Mudrinich, PMP.

## [email protected] 6 years 7 months ago #12143

 Anonymous Visitor Thanks a lot Steven!! Your e-mail address will never be displayed on the site. Check this box to be notified of replies to this topic. Note: BBcode and smileys are still usable.

## [email protected] 6 years 7 months ago #12158

 Stephen Hardy Offline Fresh Boarder Posts: 3 Thank you received: 0 I think Steven M provided the wrong answer. Here is my explanation: EV of \$50,000 and AC of \$40,000 means CPI >1 an so incentive of 10% is payable. Cost to date is \$40,000 Previously invoiced is \$35,000 able to invoice now = (40,000-35,000) \$5,000, plus the 10% incentive = \$5,500 Your e-mail address will never be displayed on the site. Check this box to be notified of replies to this topic. Note: BBcode and smileys are still usable.
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