Procurment Calc. Question from Lehman 75Q

Submitted by Julbrown31 on Tue, 04/16/2013 - 03:25

From Lehman 75Q.. can someone pls explain how to calculate PTA (Point of Total Assumption)

 

 

16. You are running a project for a customer based on a cost-reimbursable contract with the following terms:
 
Target costs:     $ 1,000,000
Fixed fee: $ 100,000
Benefit/cost sharing: 80% / 20%
Price ceiling: $ 1,200,000

Which is the PTA (= point of total assumption, break point) of the project?

 

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sspawar

Tue, 04/16/2013 - 04:16

 1125000

Julbrown31

Tue, 04/16/2013 - 04:25

 Thx ... What equation are you using to calc?

felice821

Tue, 04/16/2013 - 09:25

 PTA = ((Ceiling Price - Target Price) / Buyer Share %) + Target Cost

= ((1,200,000 - 1,100,000) / 0.8) + 1,000,000

= 100,000 / 0.8 + 1,000,000

= 125,000 + 1,000,000

= 1,125,000

Julbrown31

Wed, 04/17/2013 - 04:29

 Thanks! Very helpful..

by the way, Rajesh Nair's notes say :

 

Point of total assumption (PTA): is the point at which the seller assumes the costs. Only applicable to FPIF contracts.
The PTA is when the seller becomes responsible for all costs. The formula uses the ceiling and target prices and the buyer's cost sharing portion. The ceiling price is the most pessimistic cost based on reasonable factors. Anything above the ceiling price is considered to be due to lack of oversight by the seller.

 

In Lehman's question... It states this is a cost reimbursable contract. Can PTA be used for both FIXED and Cost Reimbursable? 

sspawar

Tue, 04/16/2013 - 08:38

 PTA = ((Ceiling Price - Target Price) / Buyer Share %) + Target Cost

Geethika

Wed, 04/17/2013 - 06:16

PTA is in FPIF contracts..

Articles in deepfriedbrain may give more insight on PTA

 http://www.deepfriedbrainproject.com/2009/09/point-of-total-assumption-pta-fpif-pmp.html

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crushPMP

Wed, 04/17/2013 - 13:37

Cant find anything like a PTA in the PMBOK v4. Can PMI exams ask questions and concepts not in PMBOK?

jyotig

Wed, 03/25/2015 - 07:19

Yes questions related to PTA can be asked in exam

The point of total assumption (PTA) is the point above which the seller bears all the losses of an additional cost overrun on a fixed price 'incentive fee' (FPIF or FPI) contract. 
 
Knowledge Area: Procurement Management
Process Group: Planning
 
Thanks