You have a cost plus fee (CPF) contract with the customer and an arrangement with your manager whereby you will receive 10 percent of the contract amount as your payment for services. While completing the project, you discover the actual cost will be lower than expected, thus decreasing your fee. What should you do?

Notify the project sponsor of the probable decreased cost

Purchase more expensive equipment

Expand the critical path activities so they cost more

Find ways to add activities to the project that provide more customer benefits and increase costs

Explanation

This situation tests ethics. Adding activities that provide additional, but non-essential, benefits is gold plating and should not be done without the customer's approval. Expanding the critical path is even worse, because it provides no additional benefit to the customer. Purchasing more expensive equipment, in theory, provides benefit to the customer if the more expensive equipment provides value, but it should not be done without customer approval. The best thing to do is to notify the sponsor of the anticipated decrease in cost.