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Strategic Programme Leadership
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1.Which of the following is true about Engineering, Procurement, and Construction
(EPC) Contracts? (Select all that apply.)
EPC contracts, commonly referred to as Turnkey Projects, are widely used in
construction and infrastructure projects. These contracts require the contractor to
design, procure materials, and construct the project to deliver a complete and
operational facility to the client. Answer Options:
A. The contractor is responsible for the design aspect of the construction
B. The contractor may operate the building for a certain period after completion
C. These contracts are commonly known as Turnkey Projects
D. These contracts are sometimes referred to as Design and Build Contracts
E. These contracts are used when forming a partnership between a private and public
organization
Answer: A, C, D
Explanation:
The correct answers are 1, 3, and 4 (p.8). Option 2 is incorrect as it describes a DBO
(Design-Build-Operate) contract rather than an EPC contract. Option 5 is incorrect
because it describes a PPP (Public-Private Partnership) contract, not an EPC
contract. [P.8]
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2.Salvador Ltd is a manufacturer of batteries for domestic appliances and hand tools.
The company recently expanded due to excellent sales and introduced new
machinery for producing solar-powered batteries.
They contracted Sunshine Ltd to build and install the machinery.
The contract specified that the machine must produce 5 batteries per hour, but
currently, it is producing only 4 batteries per hour.
Salvador Ltd has agreed to work with Sunshine Ltd to resolve the issue within one
month before liquidated damages apply.
Q: What stage is the project at? Answer Options:
A. Mechanical completion
B. Performance testing
C. Provisional acceptance
D. Commercial operation
Answer: C
Explanation:
This is provisional acceptance (p.11). Salvador Ltd has accepted the machinery
provisionally while Sunshine Ltd works on increasing capacity within the agreed
timeframe. It is not at mechanical completion because further adjustments are
needed. It is also not at performance testing since the machinery is not being tested
at full capacity. Commercial operation would indicate that the project is fully
completed, which it is not. [P.10-11]
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3.Which of the following is an advantage to the contractor in an EPC contract
arrangement?
EPC contracts provide several benefits to contractors, such as clear project scope,
reduced risks, and better project management.
Answer Options:
A. The scope is clearly defined by the client
B. There is an early completion bonus
C. There are no subcontractors to manage
D. The client assumes all risks for the construction
Answer: A
Explanation:
The correct answer is 1 (p.13). The scope is clearly defined by the client, making it
easier for the contractor to plan and execute the project efficiently. Option 2 is
incorrect because not all EPC contracts offer an early completion bonus. Option 3 is
incorrect because EPC contracts can include subcontractors. Option 4 is incorrect
because risks are shared between the client and contractor. [P.13]
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4.Jerry is responsible for starting a new construction project.
His company wants to build a new Water Park on the outskirts of town.
He has prepared a Statement of Need, outlining requirements and benefits.
Senior Management has approved the project to move forward.
Q: What should be Jerry's next task? Answer Options:
A. Concept design C outlining how the water park would look and operate
B. Feasibility study C looking in-depth at options available
C. Project brief C creating a list of technical requirements
D. Appointment of a construction manager to manage the project
Answer: B
Explanation:
The next stage after a business justification is a Feasibility Study (p.18-19). This
assesses financial viability and risks before moving forward. Concept design and
project brief come after feasibility, and the construction manager is appointed much
later in the process. [P.18-19]
5.Which of the following is NOT a benefit or function of a professional body?
Professional bodies are established organizations that promote industry standards,
ethical conduct,
and professional development.
Answer Options:
A. Governance and ethical standards
B. Ensuring prices remain low
C. Raising productivity
D. Creating international networks
Answer: B
Explanation:
Professional bodies do NOT control pricing in the industry, as this would be market
interference. Governance, productivity improvements, and networking are valid
functions. [P.31]
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6.Joey is preparing an NEC contract for the construction of a new school.
He includes a lump-sum price of £5 million.
The contractor receives payment upon completion of specific milestones.
Q: In which section of the contract should this be detailed? Answer Options:
A. Option A
B. Z Clause
C. W1 Option
D. X Clause
Answer: A
Explanation:
In NEC contracts, pricing mechanisms are detailed in Options A-F (p.36). W clauses
handle dispute resolution, X clauses cover secondary options, and Z clauses are
additional conditions. [P.36]
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7.Robyn has created a contract for a construction project and has used "The Red
Book."
Q: Which professional organization is responsible for creating this contract? Answer
Options:
A. JCT
B. NEC
C. CIPS
D. FIDIC
Answer: D
Explanation:
The Red Book is part of the FIDIC "Rainbow Suite" of contracts (p.40). FIDIC
contracts are categorized by color, each serving a specific purpose in construction
and engineering projects. [P.40]
8.In a fixed lump sum contract, this pricing mechanism does not allow for any
changes in price. Is this statement TRUE?
Fixed lump sum contracts are widely used in construction and infrastructure projects.
Answer Options:
A. Yes C the price is fixed before the contract is signed
B. Yes C the contractor assumes all risks should they exceed the budget
C. No C price changes are allowed as it is impossible to predict prices concretely in
advance
D. No C price variations are permitted if they are written into the contract
Answer: D
Explanation:
Fixed Lump Sum contracts allow limited price changes under specific conditions
(p.55), such as client variation requests, force majeure, or inflation adjustments. Firm
Fixed Price contracts, however, do not allow any changes. [P.55]
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9.Joanne is preparing a contract for the construction of a large shopping center.
The project includes 52 retail units, several restaurants, and a parking facility.
Joanne's company has contracted Construct Ltd under a Turnkey project.
She is using a Gantt chart as a schedule in the contract.
Q: What type of payment mechanism is being used in this contract? Answer Options:
A. Fixed Lump Sum
B. Bill of Quantity
C. Activity Schedule
D. Cost Reimbursable
Answer: C
Explanation:
The correct answer is Activity Schedule (p.60). A Gantt chart is a time-based project
planning tool, typically used in Activity Schedule contracts, where payments are tied
to the completion of specific tasks. Other payment methods, such as Fixed Lump
Sum and Bill of Quantity, do not rely on this approach. [P.60]
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10.In which scenario would a Cost Reimbursable contract be most suitable?
Answer Options:
A. A research project where the exact scope of work is unknown at the onset
B. A construction project where raw material prices may fluctuate
C. The creation of a new product, where time is critical, and the client wishes to
reward the contractor for speedy delivery
D. The manufacturing of food items, where the client may return raw materials that do
not meet specifications
Answer: A
Explanation:
Cost Reimbursable contracts are widely used in research projects where the exact
scope is uncertain (p.69). These contracts allow for flexibility in cost adjustments
based on project progress. Option B describes a contract using cost-plus pricing, and
Options C and D do not fit this contract model. [P.69]
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11.At what stage in a program’s lifecycle is an Investment Appraisal conducted?
Answer Options:
A. Before contracting C to ensure the program is viable
B. At the initiation stage C to decide which contractor to hire
C. During the project C to ensure that money is being well spent and the program will
be delivered to schedule
D. After completion C to assess whether money was invested wisely
Answer: A
Explanation:
Investment Appraisal is performed before a program is approved (p.69). It evaluates
whether the project is financially viable and likely to provide a return on investment.
Option B relates to procurement, and Options C and D are post-implementation
assessments. [P.69]
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12.Fred is comparing two possible projects that will last for different durations.
His company can only select one project due to financial constraints.
He needs a method to compare the financial benefits of both projects.
Q: Is a payback analysis a useful tool for Fred to use? Answer Options:
A. Yes C this will account for the difference in duration of the two projects
B. No C this will not account for the difference in duration of the two projects
C. Yes C this will provide Fred with a rate of return that is useful to accurately forecast
profits
D. No C there is no formula to calculate this, and a discount factor must be used
Answer: A
Explanation:
A Payback Analysis (p.72) calculates how long it takes for a project to recover its
initial investment. It accounts for project duration but does not provide a rate of return
(Option C). Discount factors (Option D) are used in Net Present Value (NPV) analysis,
not Payback Analysis. [P.72]
13.Which of the following statements about investment appraisal techniques are true?
(Select all that apply.)
Answer Options:
A. Non-discounted cash flow methods focus on profit maximization
B. Return on Capital Employed (ROCE) is expressed as a percentage of the value of
assets used to generate profit
C. Payback analysis ignores cash flow after the business recovers its costs
D. Internal Rate of Return (IRR) can be used with Net Present Value (NPV)
Answer: B, C, D
Explanation:
Option B is correct C ROCE is expressed as a percentage (p.87).
Option C is correct C Payback Analysis only considers the break-even point (p.83).
Option D is correct C IRR and NPV are often used together (p.82).
Option A is incorrect C Profit maximization is not the primary focus of non-discounted
cash flow methods. [P.82-87]
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14.When is a cost-plus pricing arrangement most likely to be used?
Answer Options:
A. In low-risk, low-value purchases
B. Where there is a low level of trust between supplier and buyer
C. In high-risk environments
D. In international transactions
Answer: C
Explanation:
Cost-plus pricing is best suited for high-risk environments (p.93), such as fluctuating
commodity markets. It reduces risk for suppliers by allowing cost adjustments based
on actual expenses plus a margin. Option A is incorrect because low-risk projects
favor fixed pricing. [P.93]
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15.Casper is conducting a Variance Analysis of the company’s budget.
What is its main purpose?
Answer Options:
A. To identify which departments have overspent
B. To identify where cost savings can be made
C. To minimize inefficiencies
D. To analyze whether costs are fixed or variable
Answer: C
Explanation:
A Variance Analysis (p.95) compares planned vs. actual budget and identifies
inefficiencies to enhance financial performance. Option A focuses only on
overspending, B on cost-cutting, and D on categorizing costs rather than improving
efficiency. [P.95]
16.Spaceman Ltd’s R&D team has a strong relationship with its supplier of spaceship
parts.
The space exploration industry is becoming highly competitive.
The team is looking for ways to enhance profits and market share.
Q: What strategy should Spaceman Ltd use? Answer Options:
A. Variance Analysis
B. Value Engineering
C. Consortium-Based Procurement
D. Open-Book Costing
Answer: B
Explanation:
Value Engineering (p.100) is used to optimize costs and improve profitability in
competitive industries. It leverages supplier relationships to cut costs and increase
value. Variance Analysis (A) is for budgeting, and Consortium Procurement (C)
relates to bulk purchasing, which is not the issue here. [P.100]
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17.What is Earned Value Analysis (EVA) in project management?
Answer Options:
A. A comparison of where the project is up to vs. where it is forecasted to be
B. The profit or loss generated by the project thus far
C. The value of a project, expressed as a percentage of money invested
D. The amount of resources allocated to a project vs. resources available
Answer: A
Explanation:
EVA compares planned vs. actual project progress (p.112). It ensures projects stay
on track by measuring deviations from expectations. Option B relates to financial
performance, C describes ROI, and D refers to resource allocation. [P.112]
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18.What is the purpose of Cybernetic Control within Project Management?
Answer Options:
A. To assign resources
B. To reduce errors
C. To increase value
D. To monitor progress
Answer: B
Explanation:
Cybernetic Control reduces errors by monitoring distortions in a project (p.112-113). It
uses automated tracking systems to signal when deviations occur, enabling quick
corrective actions. Option A relates to resource planning, C to project valuation, and D
to general tracking, but not specifically error reduction. [P.112-113]
19.Cyril Engineering entered into a contract with Dojo Ltd for electrical engineering
services to a power station.
The contract was successful for two years, but Cyril Engineering failed to fulfill
obligations recently.
Q: What is this situation known as? Answer Options:
A. Consequential Loss
B. Damages
C. Default
D. Direct Loss
Answer: C
Explanation:
Failure to meet contractual obligations is classified as Default (p.123).
Consequential Loss (A) refers to indirect financial loss due to contract failure.
Damages (B) are legal remedies for breaches.
Direct Loss (D) relates to immediate financial impact, but default is the correct term
for a failure to meet obligations. [P.123]
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20.Mustard Ltd contracted Red Ltd for IT services, requiring 98% internet
connectivity.
Red Ltd has only achieved 90% connectivity despite multiple meetings.
Mustard Ltd now seeks to terminate the contract.
Q: Can Mustard Ltd terminate the contract? Answer Options:
A. Yes C connectivity was written into the contract, and Red Ltd is failing to deliver
B. Yes C since previous meetings have failed to resolve the issue, termination is
justified
C. No C Red Ltd should be given more time to fix the issue
D. No C the contract would not allow for termination
Answer: D
Explanation:
Connectivity is listed as a warranty, not a condition (p.125).
Warranty breaches allow for damages but do not permit contract termination.
If it were a "condition" instead of a warranty, termination would be allowed. [P.125]
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21.Jennifer is drafting a contract with a "termination for convenience" clause. Q: What
obligations should be included in this clause? (Select all that apply.)
A. The return of any advance payments
B. The destruction of confidential information
C. The smooth transition of services to a new supplier
Answer: ABC
Explanation:
A termination for convenience clause outlines the responsibilities when a contract is
ended early by mutual agreement (p.135).
Returning advance payments ensures fairness.
Destroying confidential data prevents misuse.
Smooth service transition minimizes disruptions.
A review meeting is not mandatory, so it is incorrect. [P.135]
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22.What is the purpose of a Project Audit? Answer Options:
A. To ensure the budget is managed effectively
B. To assess project requirements
C. To present findings to senior leadership
D. To review financial and performance status after completion
Answer: D
Explanation:
A Project Audit (p.141) occurs post-completion to assess:
Financial health
Performance evaluation
Lessons learned
It is not a planning tool (Option B), nor is it for active budget management (A) or solely
for senior leadership (C). [P.141]
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23.Which project management methodology outlines a process for closing a project?
Answer Options:
A. Monte Carlo
B. Critical Path
C. MRP
D. Prince2
Answer: D
Explanation:
Prince2 has a defined "Closing a Project" phase (p.136).
Monte Carlo (A) relates to risk analysis.
Critical Path (B) maps dependencies but does not specify closure.
MRP (C) is used for inventory planning. [P.136]
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24.When is the best time to define acceptance criteria for a project?
Answer Options:
A. Upon completion
B. During each milestone
C. When writing the Project Initiation Document
D. As part of the Project Audit
Answer: C
Explanation:
Acceptance Criteria should be set before the project starts in the Project Initiation
Document (PID) (p.137).
Option A is too late, as the project is already completed.
Option B is iterative, but criteria should be predefined.
Option D is for evaluation, not definition. [P.137]
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