Free PMI Project Management Professional (PMP) Practice Question

In a cost-plus incentive fee contract, if the actual cost exceeds the Point of Total Assumption (PTA), the buyer bears all additional costs beyond this point.

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The correct answer is False. The Point of Total Assumption (PTA) is the cost at which the seller assumes all additional costs beyond this point, not the buyer. When the actual cost exceeds the PTA, the seller's profit is reduced by the full amount of any additional costs. This is a crucial concept in cost-plus contracts as it represents the point where the risk shifts entirely to the seller. Understanding the PTA helps project managers and contractors better assess and manage financial risks in these types of contracts.

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