You were working on a project that consisted of five major phases: analysis, design, development, testing, and implementation. The testing phase failed to meet the project sponsor's expectations. Because of that failure, the sponsor canceled the project and you were asked to perform a closing procedure. What should you do next?

1. Ask the sponsor to reconsider and try adjusting the project scope statement
2. Make alterations and retest in the hope of meeting the sponsor's expectations
3. Settle and close any contractual claims associated with the project
4. Collect project files and documents and begin gathering Lessons Learned

Correct answer is D. I picked C, as I think that closing procedure referers to the two closing process (close procurement, close project) and the first thing to do is to close the procurement and then to close the project. Is my understanding of closing procedure wrong?

explanation is:

One of the closing procedures entails collecting and updating project files, project or phase closure documents, and historical information. This occurs as part of the Close Project or Phase process, which also transitions the final product, service, or result, although that is not the case in this question. Although it might be appropriate to ask the sponsor to reconsider, a specific mandate is required for you to perform this closing procedure. Settling any contractual claim is a procedure that is carried out as part of the Administer Procurements process, and making alterations and retesting is not a valid option.

Reference: PMBOK® Guide, 4th Ed., page 102