"Surprising" Phenomenon
Why are cost overruns more common in the fixed-profit kind of “cost-plus” contract than in the fixed-percentage kind of “cost-plus” contract, even though under the fixed-percentage kind higher costs would lead to higher profits for the contractor?
Objective
The correct answer should tell us about a difference between the fixed-profit and fixed-percentage kinds of “cost-plus” contract that would lead to a higher likelihood of cost overruns for the fixed-profit kind.
A
Clients are much less likely to agree to a fixed-profit type of cost-plus contract when it is understood that under certain conditions the project will be scuttled than they are when there is no such understanding.
This tells us about likelihood of accepting a fixed-profit contract when there are conditions that would lead to the end of the project. But this doesn’t impact the costs incurred on a project or why those costs more commonly go over expected costs for fixed-profits contracts.
B
On long-term contracts, cost projections take future inflation into account, but since the figures used are provided by the government, they are usually underestimates.
This doesn’t differentiate between fixed-profit and fixed-percentage contracts, so it’s not going to explain why cost overruns are more common for fixed-profit contracts.
C
On any sizable construction project, the contractor bills the client monthly or quarterly, so any tendency for original cost estimates to be exceeded can be detected early.
This doesn’t differentiate between fixed-profit and fixed-percentage contracts, so it’s not going to explain why cost overruns are more common for fixed-profit contracts.
D
Clients billed under a cost-plus contract are free to review individual billings in order to uncover wasteful expenditures, but they do so only when the contractor’s profit varies with cost.
If clients review for wasteful expenditures only when profit varies with cost, that means they don’t review for wasteful expenditures on fixed-profit contracts (where profit doesn’t vary with cost). This could be why cost overruns are more common for this kind of contract.
E
The practice of submitting deliberately exaggerated cost estimates is most common in the case of fixed-profit contracts, because it makes the profit, as a percentage of estimated cost, appear modest.
Cost overruns involve the excess cost over the estimated cost. If fixed-profit contracts more often involve exaggerated estimates, that should lead us to expect fewer cost overruns for these contracts, since the initial estimate would be higher than the actual expected costs.
Summarize Argument
The argument concludes that the high resale prices of several artworks sold off by a museum settle the issue of whether the artworks were of high or low quality. According to the argument, the prices prove that critics were correct that the artworks were first-rate pieces.
Identify and Describe Flaw
The argument uses the increased resale prices of the artworks as definitive evidence that the artworks were truly of high quality. However, this doesn’t account for the relevant circumstances of the resale compared to when the works were first sold. The first sale was “discreet,” while the resale followed the critics’ public outcry about how great the pieces were. This could easily have affected the prices.
A
It concludes that a certain opinion is correct on the grounds that it is held by more people than hold the opposing view.
The argument doesn’t use the number of people who think the artworks are high-quality as evidence.
B
It rejects the judgment of the experts in an area in which there is no better guide to the truth than expert judgment.
The argument doesn’t reject the judgment of experts. It’s merely siding with one group of experts, the critics, over another expert, the museum director.
C
It rejects a proven means of accomplishing an objective without offering any alternative means of accomplishing that objective.
The argument isn’t concerned with how to accomplish any objective.
D
It bases a firm conclusion about a state of affairs in the present on somewhat speculative claims about a future state of affairs.
The argument doesn’t make any claims about any future state of affairs.
E
It bases its conclusion on facts that could, in the given situation, have resulted from causes other than those presupposed by the argument.
The argument’s conclusion is based on the fact that the artworks resold for high prices. The supposed cause is that the artworks were of high quality. However, the high prices could also have resulted from the publicity of the critics’ public outcry about the artworks.
Summary
The author concludes that accidents that result from cars going around railroad crossing gates are not the fault of the railroad company. This is because the drivers of those cars are adults who should know that they shouldn’t go around railroad crossing gates.
Note that it’s important to translate the conclusion — “this is a mistake” — into “the railroad company is not (at all) at fault.” If you don’t realize that the conclusion is asserting that the railroad company is 0% at fault, you’ll struggle with this question.
Note that it’s important to translate the conclusion — “this is a mistake” — into “the railroad company is not (at all) at fault.” If you don’t realize that the conclusion is asserting that the railroad company is 0% at fault, you’ll struggle with this question.
Missing Connection
We’re trying to prove that the railroad company is not at fault — not even partially at fault. But the premise doesn’t establish anything about who is or isn’t at fault. So, at a minimum, we want an answer that mentions something about fault.
Moreover, the answer, in connection with the premises, must establish that the railroad company bears no fault at all. If the answer allows the railroad company to possibly bear partial fault, it’s not correct.
Here’s an example answer that could make the argument valid:
If an accident could have been avoided by an adult who should know better than to act in a way that led to the accident, then nobody else is at fault except the adult.
Moreover, the answer, in connection with the premises, must establish that the railroad company bears no fault at all. If the answer allows the railroad company to possibly bear partial fault, it’s not correct.
Here’s an example answer that could make the argument valid:
If an accident could have been avoided by an adult who should know better than to act in a way that led to the accident, then nobody else is at fault except the adult.
A
The gates could be made larger, yet irresponsible drivers might still be able to go around them onto the tracks.
(A) doesn’t provide any way to assign fault/blame/responsibility away from the railroad company. Are railroad companies at fault for irresponsible drivers going onto the tracks? Maybe; we don’t know.
B
Capable adults have a responsibility to take some measures to ensure their own safety.
(B) might support a claim that the adult drivers who go around railroad crossing gates bear some responsibility for their actions. But (B) doesn’t completely absolve railroad companies from responsibility. Under (B), railroad companies might still be partially at fault.
C
When the warnings of companies are disregarded by capable adults, the adults are fully responsible for any resulting accidents.
(C) establishes that the adults who go around railroad crossing gates, which we know give warnings about trains, bear “full” responsibility for resulting accidents. If the adults are fully responsible, then the railroad company bears no responsibility.
D
Small children are not involved in accidents resulting from drivers going around the gates.
(D) doesn’t provide any way to assign fault/blame/responsibility away from the railroad company. Are railroad companies at fault for irresponsible drivers going onto the tracks? Maybe; we don’t know.
E
Any company’s responsibility to promote public safety is not unlimited.
(E) limits the extent of a railroad company’s responsibility to promote public safety. But it doesn’t guarantee, with respect to the issue of people going around gates at railroad crossing, that railroad companies aren’t at fault for resulting accidents.