Answers to Review Questions

1. D. Make-or-buy analysis is determining whether it’s more cost effective to purchase the goods or services needed for the project or more cost effective for the organization to produce them internally.

2. C. Firm fixed-price contracts have the highest risk to the seller and the least amount of risk to the buyer. However, the price the vendor charges for the product or service will compensate for the amount of risk they’re assuming.

3. B. Either the buyer or the seller can write the SOW. Sometimes the buyer will write the SOW and the seller might modify it and send it back to the buyer for verification and approval.

4. A. The cost plus incentive fee contract reimburses the seller for the seller’s allowable costs and includes an incentive or bonus for exceeding the performance criteria laid out in the contract.