AACE International Certified Cost Professional (CCP) Exam Questions

Productivity loss in projects, particularly in construction, can be measured using various methods. The Earned Value Management (EVM) system includes the Earned Formula to compare the work performed against the work planned.

Key Points:

Earned Formula:

This formula is used in EVM to calculate key performance indicators like the Cost Performance Index (CPI) and Schedule Performance Index (SPI), which help in understanding productivity loss.

By comparing earned value (the work actually performed) against planned value, project managers can assess whether the project is behind or ahead in terms of schedule and budget, indirectly measuring productivity loss.

Other Options:

Central Limit Theorem: This is a statistical concept, not directly used for measuring productivity loss.

Value Engineering: A process that seeks to improve the value of goods or products by using an examination of function, not directly related to measuring productivity loss.

Conclusion: The correct answer is C. Earned formula because it is directly linked to measuring productivity loss in project management through the EVM system.

In a cost reimbursable contract, the contractor is reimbursed for all allowable costs incurred during the project, plus an additional fee (which could be a fixed fee or a percentage of costs). This contract type provides several advantages but also has its limitations.

Key Points:

Advantages of Cost Reimbursable Contracts:

Simpler Proposal Evaluation: The focus is on selecting the best contractor rather than the lowest bid, making the evaluation process simpler.

Flexibility in Dealing with Changes: This contract type allows for adjustments and changes as the project progresses.

Early Start: Work can begin quickly without needing a fully defined scope since costs are reimbursed.

Owner Control:

While cost reimbursable contracts offer flexibility, they do not inherently mean that the owner controls all aspects of the work. The contractor typically manages the execution of the project, while the owner retains control over the budget and major decisions.

Conclusion: The correct answer is D. Owner controls all aspects of the work because, in cost reimbursable contracts, the contractor has significant control over how the work is performed, while the owner mainly controls costs and high-level decisions.

A target contract is a form of contract where both the owner and contractor agree on a target cost, and both parties share any cost savings or overruns. This contract type encourages efficiency but has some drawbacks.

Key Points:

Disadvantages of Target Contracts:

No Competitive Bidding for Targets: The target cost is typically negotiated rather than competitively bid, which could lead to less competitive pricing.

Other Points: While target contracts encourage timely and economical completion and allow for early start and flexibility, the lack of competitive bidding for the targets can be a significant disadvantage.

Conclusion: The correct answer is B. No opportunity to competitively bid the targets because this is a specific disadvantage associated with target contracts.

Deliberate low bidding, sometimes referred to as 'buying the job,' is a strategy where a contractor bids below cost to win a contract, with the expectation of recouping losses through change orders, future projects, or other means.

Key Points:

Reasons for Low Bidding:

Survival: Contractors might low bid to secure work during tough economic times.

Reducing Competition: A low bid can push competitors out of the market.

Detecting Errors: Identifying significant errors in the purchaser's RFQ might lead to a strategic low bid.

Backing Out of Bid Competition:

This option does not align with the strategy of low bidding. Backing out would remove the contractor from the competition entirely, which is contrary to the purpose of low bidding.

Conclusion: The correct answer is B. Backing out of the bid competition because this action is not a reason for low bidding---it is the opposite of participating in the bid.

In construction and project management, a three-party contractual relationship typically involves three key participants: the Owner, the Engineer, and the Contractor.

Key Points:

Owner:

The entity that funds and owns the project. The owner defines the project scope, objectives, and requirements and is the ultimate decision-maker.

Engineer:

Often referred to as the 'Designer' or 'Consultant,' the engineer is responsible for the technical design and specifications of the project. They ensure the project is constructed according to the owner's requirements and standards.

Contractor:

The party responsible for executing the construction work. The contractor follows the design provided by the engineer and delivers the project within the agreed terms of the contract.

Conclusion: The correct answer is C. Owner, engineer, contractor because these three parties are central to the execution and management of construction projects under a three-party contractual arrangement.