TOPIC: Free PMP® Exam Sample Question

You are leading a project to build an oil pipeline in a foreign country. You want to outsource some of the construction work to local contractors and are in the process of preparing the bid package for prospective sellers.

Which of the following documents would you leave out of the package??

A. Request for proposal
B. Statement of work
C. Independent cost estimates
D. Bid documents

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HINT: To answer this question correctly, you need to consider the flow of information between the buyer and prospective sellers before the procurement selections are made.

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Answer and Explanation
The correct answer is C

Preparing the bid package for prospective sellers implies you are carrying out the Plan Procurement Management process. Bid documents along with the request for proposal (RFP), procurement statement of work (SOW), source selection criteria, independent cost estimates are among the outputs of this process. These documents are also among the inputs to the Conduct Procurements process. However, not all of these documents are provided by the buyer to the prospective sellers. Sometimes, to benchmark procurements, the buying organization develops independent cost estimates either internally or using external resources such as a professional estimator. Buyers do not usually provide these estimates to the prospective sellers since a benchmark range may prejudice the sellers into proposing prices that do not work well with their business model and resources. The buyer uses these benchmark estimates principally to verify if bids are reasonable, or if a large number of outliers indicate an issue with procurement processes or communications. Thus, of the choices provided, leaving the independent cost estimates out of the bid package makes the most sense and is, therefore, the best answer to the question asked.

Details for each option:

A. Request for proposal
Incorrect. The RFP, along with the request for information (RFI), and request for quotation (RFQ) are all bid documents that directly invite prospective sellers to bid for the project so that they may be included in the selection analysis. One of these types of documents should be in the bid package.

B. Statement of work
Incorrect. The SOW describes in detail the required products, services, or results. Without such detail, prospective sellers may not be able to determine if they can fulfill the requirements. The SOW or similar document and the terms of reference (TOR), should be in the bid package.

C. Independent cost estimates
Correct. The buying organization develops independent cost estimates either internally or using external resources such as a professional estimator. Buyers do not usually provide these estimates to the prospective sellers, because they are primarily for internal benchmarking purposes.

D. Bid documents
Incorrect. Bid documents are used to solicit proposals from prospective sellers. 'Bid documents' is a broad term that may include a request for information (RFI), request for quotation (RFQ), request for proposal (RFP), or other appropriate procurement documents. Leaving bid documents out of the package sent to the sellers makes little sense since bid documents serve as a basis for the sellers to respond to the buyer. Therefore, bid documents should be in the package.

Reference: A Guide to the Project Management Body of Knowledge (PMBOK^® Guide) – Sixth Edition, Project Management Institute Inc., 2017, Page(s) 477-479, 485