Question

Your construction firm is executing a predictive $50M hospital expansion project. You've identified that specialized medical imaging equipment with 14-month lead times represents a critical path constraint. During procurement planning, your lead structural engineer discovers that the selected equipment manufacturer is involved in ongoing patent litigation that could result in an injunction preventing equipment sales in your country. The litigation outcome is expected in 8-10 months, and your procurement must be initiated within 60 days to meet the project schedule. An alternative manufacturer exists but their equipment requires significant design modifications, adding $2.8M and 4 months to the project. Your company's legal counsel assesses a 40% probability of an adverse litigation outcome. What approach BEST manages this business environment risk?

Accepted Answer

Quantify the expected monetary value of both scenarios, evaluate the risk-adjusted cost and schedule impacts, and present a decision analysis to the project sponsor with a recommendation based on the organization's risk tolerance and the client's schedule flexibility

Answer

Proceed with the preferred manufacturer since they currently have the legal right to sell the equipment, while establishing a contingency plan to switch to the alternative manufacturer if the litigation ruling is adverse

Answer

Negotiate a contract provision with the preferred manufacturer requiring them to provide alternative solutions at no cost if the litigation prevents equipment delivery, transferring the risk to the supplier

Answer

Select the alternative manufacturer immediately to eliminate the litigation risk, even though it increases cost and schedule, since risk avoidance is appropriate for critical path items

PMP Practice Question: Business Environment — Predictive, Hard

More Business Environment Questions