Which document formalizes the engagement of external resources and outlines their compensation?

• A. Memorandum of Understanding (MOU)
• B. Contract
• C. Project Charter
• D. Deliverable

Answer: (B)

The contract is the document that formalizes the engagement of external resources and outlines their compensation. It creates a binding agreement between the organization and the external resource, detailing who will do the work, what will be delivered, the timeline, and how and when payment will occur. This formal arrangement protects both parties and provides clear terms for scope, responsibilities, and remedies if terms aren’t met.

A memorandum of understanding is typically a less formal, often non-binding statement of intent and may not specify compensation. A project charter authorizes the project at a high level and identifies major stakeholders and objectives, but it doesn’t define how external resources will be compensated. A deliverable is the actual product or output of the project, not the agreement governing resources or payment.