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PMP Practice Questions #47

You are the project manager for a crucial project in your organization. After assessing multiple vendors, you’ve identified a vendor who offers the best solution for your needs. However, the vendor’s price is slightly above your budget. What should you do next?

A) Insist the vendor reduces the price since your company always pays the lowest possible price.
B) Insist your company selects this vendor, overlooking the price difference.
C) Explore alternative benefits, allowing the vendor to potentially reduce the price.
D) Ask more vendors to provide solution proposals so you may find one which meets both technical expectations and price.

Analysis

 The question centres on a scenario where, as a project manager, you’ve identified an ideal vendor for a crucial project, but their pricing is slightly above budget. The question assesses your ability to handle procurement negotiations effectively, focusing on balancing technical needs and budget constraints.

Analysis of Options:

Option A – Insist the vendor reduces the price since your company always pays the lowest possible price. This approach involves directly requesting the vendor to lower their price, citing the company’s preference for the lowest possible price. While straightforward, this method can be perceived as rigid and may not foster a cooperative relationship with the vendor. It overlooks the value of the vendor’s solution and focuses solely on cost, potentially undermining the quality and suitability of the solution for the project.

Option B – Insist your company selects this vendor, overlooking the price difference. This option suggests advocating internally within your company to select the vendor regardless of the higher price. It emphasizes the technical suitability of the vendor over the budget constraints. However, this approach might neglect the financial aspect of the project management decision-making process and could lead to budget overruns or the need for additional approvals, delaying the project.

Option C – Explore alternative benefits, allowing the vendor to potentially reduce the price. This strategy involves negotiating with the vendor to explore other benefits or adjustments that might lead to a reduction in price. This could include discussing flexible payment terms, additional services, or future collaboration opportunities. It’s a collaborative approach that seeks a win-win solution, balancing the project’s technical requirements with budgetary constraints.

Option D – Ask more vendors to provide solution proposals so you may find one which meets both technical expectations and price. This option involves inviting more vendors to submit proposals in the hope of finding a solution that meets both technical and budgetary requirements. While this expands the pool of potential vendors, it may also extend the procurement timeline. This approach could be considered if negotiations with the current vendor are unsuccessful or if there is a significant gap between the proposed price and the budget.

Conclusion: Option C stands out as the most balanced and strategic choice. It promotes a collaborative approach to negotiation, aiming for a win-win outcome where the project’s needs are met without compromising the budget. This option aligns with the PMP exam emphasis on effective stakeholder engagement and negotiation skills, fostering a constructive and flexible dialogue with the vendor.

PMP Exam Content Outline Mapping

DomainTask
People Task 8: Negotiate project agreements

Topics Covered

  • Negotiation Strategies

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