Dpm Spring 2016 Midterm

Explanation
When the owner recognizes a change as a contract change, it means that the change was specifically requested or directed by the owner. This indicates that the owner has actively initiated the change and has given instructions or directives for it to be implemented. Therefore, the correct answer is "Directed."

Explanation
A revenue budget comprises a cost budget and margin. The cost budget includes all the expenses and costs associated with generating revenue, such as production costs, overhead costs, and operating expenses. The margin represents the profit or revenue generated after deducting the cost budget from the total revenue. Therefore, the correct answer is cost budget + margin.

Explanation
Typical triggers for change in a project can include suspension of work, extra scope, eliminated scope, and differing site conditions. Suspension of work refers to a temporary halt in project activities, which may necessitate changes in the project plan. Extra scope refers to additional requirements or tasks that are added to the project, leading to changes in the project scope. Eliminated scope refers to the removal of certain requirements or tasks from the project, resulting in changes to the project plan. Differing site conditions refer to unexpected conditions or circumstances at the project site that require modifications to the project plan.

Explanation
Understanding the client's procedures for addressing change is important because it allows the service provider to align their own processes with the client's, ensuring smooth communication and collaboration. This understanding helps in effectively managing and implementing any changes requested by the client, minimizing disruptions and potential conflicts. It also helps in maintaining a good working relationship with the client by demonstrating a willingness to adapt and meet their specific needs. Overall, having knowledge of the client's change procedures enables a more efficient and successful project or service delivery.

Explanation
Margin erosion can occur even when the final margin is not negative. It refers to a situation where the profit margin of a company decreases over time due to various factors such as increased competition, rising costs, or pricing pressures. This can happen even if the final margin remains positive, as long as it is lower than the previous margin. Therefore, the statement that margin erosion only occurs when the final margin is negative is false.

Explanation
The statement is false because multiple compensation types cannot exist within the same project. Compensation types are usually mutually exclusive and are designed to address specific aspects of a project, such as cost, time, or quality. Each project typically adopts a single compensation type that aligns with its objectives and requirements. Using multiple compensation types simultaneously can introduce confusion, conflicts, and inefficiencies in project management. Therefore, it is generally recommended to choose and implement a single compensation type for a project.

Explanation
Data Query allows for four WBS Levels.

Explanation
Non-billable costs actually do affect project margin. These costs refer to expenses that are not directly invoiced to the client, such as overhead costs, administrative expenses, or internal training costs. While these costs may not be directly billable to the client, they still impact the overall profitability of the project. Therefore, non-billable costs do have an effect on project margin, making the answer "False."

Explanation
Physical % Complete should be updated monthly, at a minimum, because it provides an accurate measurement of the progress made on a project. By updating the physical % complete regularly, project managers can track the actual work completed against the planned work and identify any discrepancies or delays. This allows for better decision-making and adjustments to be made to keep the project on track. Regular updates also help in identifying potential issues or risks early on, enabling proactive measures to be taken. Therefore, updating physical % complete monthly or more frequently is essential for effective project management.

Explanation
Earned Value is a measure used in project management to assess the progress and performance of a project. It is calculated by multiplying the physical percentage complete (the actual progress made on the project) by the cost budget (the planned cost for the project). This calculation helps determine how much value has been earned or accomplished in relation to the planned budget. By multiplying these two factors, the earned value provides a quantitative measure of the work completed and the corresponding cost associated with it.

Explanation
Earned Value is a project management technique that measures the progress of a project in terms of the budgeted cost of work performed. It compares the actual work completed with the planned work and provides an objective assessment of project performance. In order to accurately measure the progress, Earned Value should be based on the project schedule. This means that the work completed should be compared to the planned schedule to determine if the project is ahead of schedule, on schedule, or behind schedule. Therefore, the statement "Earned Value should be based on schedule" is true.

Explanation
The Area Manager can authorize project work to continue in advance of an executed contract modification. This implies that the Area Manager has the authority to make decisions regarding the project and has the power to give the go-ahead for work to proceed even without a formal contract modification. The Principal-In-Charge, Project Manager, and Legal Department may also have certain levels of authority, but the Area Manager is specifically mentioned as the one who can authorize work to continue.

Explanation
The explanation for the given answer (False) is that Cost to Completion is not simply the contract value minus the cost already spent. Cost to Completion refers to the estimated cost required to complete a project or contract, taking into account the work that still needs to be done and the resources required for it. It is not just the difference between the contract value and the cost already incurred, as it also considers the projected expenses for the remaining work.

Explanation
The Management Reserve is not to be spent at the PM's discretion. The Management Reserve is a portion of the project budget that is set aside for unforeseen risks or changes that may occur during the project. It is intended to be used for approved changes or risks that were not initially accounted for in the project plan. The spending of the Management Reserve should be governed by the established change control process and approved by the appropriate stakeholders, rather than solely at the discretion of the project manager.

Explanation
For a fixed price contract, the client is invoiced a predetermined fixed amount for the completion of the work, regardless of the number of hours actually expended. In this case, the correct answer is False, as PB invoices the client for the fixed price agreed upon, not for the number of hours expended.