PMI-RMP · Question #366
The risk manager evaluates two contractors, contractor A and contractor B, for a project with a finish date of 15 December. The contractors' bids are the same, including the cost. After performing a…
The correct answer is B. Contractor B, based on the probability and confidence levels, as there is a higher cumulative. Contractor B is the superior choice on both key dimensions: cost and confidence. Contractor B costs US$150,000 less than Contractor A ($600K vs. $750K) and additionally provides a 10% increase in the confidence level of meeting the finish date. Contractor A costs more and…
Question
The risk manager evaluates two contractors, contractor A and contractor B, for a project with a finish date of 15 December. The contractors' bids are the same, including the cost. After performing a Monte Carlo assessment on the contractors' schedules, the risk manager returns the following information:
In order for contractor A to meet the finish date of 15 December, it will cost an additional US$750,000, and will not change the confidence level. In order for contractor B to meet the finish date of 15 December, it will cost an additional US$600,000, and will increase the confidence level by 10%. Which contractor should the risk manager select?
Exhibit
Options
- AContractor A, based on the probability and confidence levels, as there is a higher cumulative
- BContractor B, based on the probability and confidence levels, as there is a higher cumulative
- CContractor B, based on costing US$150,000 less than contractor A.
- DContractor A, based on the confidence level.
How the community answered
(54 responses)- A19% (10)
- B70% (38)
- C4% (2)
- D7% (4)
Explanation
Contractor B is the superior choice on both key dimensions: cost and confidence. Contractor B costs US$150,000 less than Contractor A ($600K vs. $750K) and additionally provides a 10% increase in the confidence level of meeting the finish date. Contractor A costs more and offers no improvement in confidence. In Monte Carlo analysis, a higher confidence level means a higher probability of achieving the target date. Selecting Contractor B delivers better schedule assurance at lower cost - a dominant strategy that wins on both criteria simultaneously.
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