PMI Scheduling Professional Certification (PMI-SP) Practice Exam

What are the three main types of contract structures in project management?

1. Time and materials, fixed price, benefits:

2. Fixed price, cost-reimbursable, performance-based

3. Fixed price, time and materials, cost-reimbursable

4. Cost-reimbursable, time-limited, open-ended

The correct answer is: Fixed price, time and materials, cost-reimbursable

The three main types of contract structures in project management are fixed price, time and materials, and cost-reimbursable. Fixed price contracts involve a set payment amount agreed upon before the project begins, which provides clarity on the costs. This type of contract is beneficial when the scope of work is well-defined since it places the risk of cost overruns on the contractor. Time and materials contracts are based on the actual cost of labor and materials used plus an agreed-upon markup. This structure is typically used when project scopes are uncertain or prone to changes, allowing for flexibility but requiring careful tracking of time and materials to manage costs effectively. Cost-reimbursable contracts allow the contractor to be reimbursed for their allowable costs incurred during the project, plus a fee that serves as profit. This type is useful when the project scope is unclear or may evolve, transferring some risk to the client who agrees to pay for actual expenditures. Understanding these three contract types is essential in project management as they dictate how risks, costs, and responsibilities are shared between the parties involved, influencing project planning, execution, and financial management.