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1. L4M3 (60Q) Focus Questions

CIPS level 4 (Gaborone University College of Law and Professional Studies)

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L4M3 practice questions

1. Which of the following is an advantage of using input specification?

a. Greater opportunity for innovation

b. the risk of meeting the required function by the supplier
c. The specification documentation requires less effort to produce
d. The buyer is able to determine the processes used in the delivery of the contract

2. When negotiating international contracts how should the buyer ensure ethical compliance?

a. Verify that the supplier's employees are all paid a living wage.
b. Ensure the supplier operates an equal opportunity policy
c. Insist the supplier's workforce enjoys union representation
d. Confirm that the supplier's standards comply with buyers

3. In the preparation of specifications covering social and environmental criteria for an invitation to
tender, options should be.

a. Inclusive
b. exclusive
c. Industry focused
d. cost sentitive

4. Setting key performance indicators for supplier performance should ensure.

a. reduced vendor base

b. managed supply risks
c. lowest price for products
d. earliest delivery

5. What is the Vienna Convention on Treaty on?

a. Free trade agreements in the EU

b. Protection of intellectual property rights
c. International Sales law
d. Mandates the reduction of green house gas emissions

6. What is quantum meruit?

a. an act of God
b. compensation
c. damages
d. warranty

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7. If a clause in a contract is a genuine attempt at estimating the loss in advance of a potential breach. It
is.

a. an Indemnity Clause
b. a penalty clause
c. a liquidated damages clause
d. a quatum meruit clause

8. A global automotive company wishes to create a contract for an engineering supplier to install new
car lifts in their workshops across the world. What type of model form contract would be most suitable
for this agreement?

a. NEC
b. JCT
c. RIBA
d. FIDC

9. A supplier sends a quote with their terms and conditions noted at the bottom of the quote, the buyer
then sends a pu rchase order with their terms and conditions noted at the bottom of the order. What
would best describe this scenario?

a. Exchange of terms
b. Battle of forms
c. Dispute of conditions
d. Variation of contract

10. Which of the following is a disadvantage of using performance specification?

a. They are costly to prepare

b. They limit the number of supplier who can quote
c. Difficult to assess the suitability of each quotation
d. Not allowed for use in public procurement

11. Which of the below is part of a conformance specification?

a. Materials dimensions, tolerances and dimensions

b. Material, innovation, performance and descriptions
c. Ideas, dimensions, tolerances and output
d. Ideas, innovation, tolerances and descriptions

12. An effective key performance indicator should be :

a. Standardized, meaningful, achievable, realistic, typical

b. Sustainable, measurable, analysed, realistic, timely
c. Specific, measurable, achievable, realistic, timely
d. Specific, meaningful, analysed, realistic, typical

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13. Electro Systems PLC, are a Public Sector manufacturer of highly technical solutions to the
telecommunications industry. The market in which it operates is fact paced, and ever changing with
latest inventions and developments.

The products it procures are high cost, and can be subject to lengthy lead times. Michael Jones, the
procurement Director believes that establishing framework Agreements would be beneficial to the
tendering process. How could this assist them?

a. Improve supplier lead time

b. Enable the use of mini-competitions
c. Improve supplier product quality
d. Enable the use of e-tendering

14. Key performance indicators are used to.

a. Measure suppliers progress and achievement

b. Measure the quality of a tender submission
c. collect data about suppliers to inform future specifications
d. measure the risks identified with the contract

15. The common law principle Caveat Emptor is Latin for

a. Try before you buy

b. No returns acceptable
c. Purchase with care
d. Let the buyer beware

16.XTC LTD is developing a new product to improve it's competitive advantage. They are looking for
suppliers to use their expertise and innovation to assist with the development of a new component.
What is the most appropriate form of specification to use?

a. Service level specification

b. Conformance specification
c. Performance specification
d. Output bases specification

17. What are the five essential elements of a legally binding contract?

a. Offer, acceptance, consideration, capacity, correct form

b. offer, agreement, consensus, capacity, correct form
c. offer, acceptance, compensation, ability, correct form
d. Offer, acceptance, mediation, capacity, contract

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18. A construction company wishes to place the contract for the building of new hotel to a principal
contractor using a model form contract. What is an advantage of using a model form contract?

a. It avoids the requirement to create complex contracts each time but can be adapted to suit practical
circumstances.
b. That incentive payment terms can be included to reward the supplier for attainment of cost savings
c. Legal advice is still required if significant amendments or variations are to be made to the contract
d. Formula or indices can be included to assess any additional supplier's claims for contract price
adjustment.

19. Which of these statements is the correct definition of a contract?

a. A promise made by a supplier to supply goods or services

b. An agreement enforceable by law made between two or more people
c. An offer and acceptance has taken place
d. A promise made by the buyer or place an order

20. Swift LTD wishes to issue an invitation for a range of components to a wide range of suppliers. They
do not wish to limit the number of suppliers who can respond. Which form of tender process is the
best one to use?

a. Restricted open tender

b. Selective tender
c. selective closed tender
d. Open tender

21. ETC Co LTD is seeking to improve it's competitiveness in the marketplace. To achieve this, they want
to encourage their suppliers to identify and deliver costs savings in the contracts with them. Which of
the following pricing schedule would help?

a. Fixed price schedule agreement

b. Incentives for price reduction
c. Agreements on pricing instalments
d. Cost-Reimbursable agreement

22. A procurement manager decided to use a conformance specification in an RFQ for the
manufacturing of a specialist item designed by their company. The company does not have the
capability to manufacture the item in-house but requires the item to be made to their detailed
specification. Was this the correct thing to do?

a. Yes, as it means that the company will be able to get the most cost effective price for the item from
the chosen supplier
b. No, as it means that the chosen supplier will not be able to use their expertise and knowledge to
manufacture the item
c. Yes, as it means that the company will get exactly what it has specified and meets it's specific
requirements.
d. No. as the item will be of non standard construction and will not be able to be used by other
competitors

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23. A procurement manager has been approached by a key supplier requesting that the current 60 day
payment terms between the companies be reduced to 45 days due to cash flow problems.

After consideration, the procurement manager agrees to it but requires an additional 5% discount on
the supplier's price for doing so. Is this the correct thing to do?

a. Yes, as the procurement manager is helping the supplier. So the supplier should help the purchasing
manager by reducing its costs.
b. No, as the procurement manager is taking unfair advantage of the supplier's financial position to gain
an advantage
c. No, the payment terms in the contract is 60 days and the procurement manager should insist that the
supplier accepts this position.
d. Yes, the procurement manager has a cost saving target to achieve and looks on the supplier's financial
position as an opportunity to achieve this target.

24. In a request for quotation (RFQ), a buyer requests that the response to the RFQ include a pricing
schedule on a cost plus basis for research project. Is this a good approach for a buyer to take?

a. No, because if you have a strict budget, cost plus contracts are a poor choice due to the greater cost
uncertainty that fixed price contracts
b. Yes, as it means that the buyer will know what the cost will be at the beginning of the project and can
allow for this in their project budget.
c. No, there may be more of an incentive for the supplier to complete the project in an efficient and
effective manner and make more money.
d. Yes. as it means that the buyer does not have to review the supplier costs on a regular basis to ensure
compliance with the project budget.

25. A fixed pricing arrangement may be beneficial to use in the following circumstances?

1. Where the accuracy and reliability of the project scope information is known
2. Where the supplier undertaking the project is inexperienced in the activity
3. Where the estimates for the labour, material and associated costs are known
4. Where the contractor will be able to obtain incentives or early completion

a. 3 and 4 only
b. 1 and 3 only
d. 2 and 3 only
c. 1 and 4 only

26. In order for a contractor to exist and be legally binding, there needs to be certain elements present.
Select the three that apply.

a. There must be an agreement in the form of offer and acceptance

b. There has to be money transferred at the time of the contract
c. There must be an intention to create legal relations
d. All parties must have contractual capacity
e. The request for quotation must be received at the correct time
f. There must be the opportunity to counter offer.

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27. Key performance indicators (KPIs) are used to measure supplier performance. Select three KPIs that
may be used.

a. Cost management
b. Employee attendance
c. Timeliness of delivery
d. Style of negotiation
e. Quality conformance
f. Contract standardization

28. In a standard or negotiated agreement, a pricing schedule will include details of a number of
elements. Select two that apply

a. Key elements the calculated price does not include

b. Suppliers schedule of prices, fees and charges
c. The mechanism used to calculate the price
d. A model form of contract schedules that has been used
e. The remedies available should the contract fail

29. In the creation of contract, identify two types of contract term that will always form part of the
contract

a. A special term
b. A representative term
c. An Express term
d. An implied term
e. A model form term

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30. Capital construction were contracted by Parker Holdings LTD to construct new premises for it's
business. The agreement stated that building works would take 6 months to complete.

Throughout the project a number of issues arose which delayed building works, all of which were due to
the inability of Capital Construction to secure adequate labour to complete the work.

The building work was finally completed three months late, although there are ongoing snagging issues
to be resolved. Parker is looking to recover the losses it's business has incurred. It has reviewed the
contract and has noted the following clause:

Capital Construction shall pay to Parker a sum equal to 3% of the total contract value for each calendar
month where completion occurs after the agreed project completion date

Penalties for late delivery

Parker has requested a 9% repayment of the Contract value in accordance with the above clause. If
Capital Construction pay the claim, it is likely to jeopardize the future of it's business.

Are capital Construction contractually obliged to make this payment to Parker?

a. No the amount claimed is excessive and could put Capital out of business so is not legally enforceable
b. No, the payment is clearly entitled as penalty in the agreement which is not a legally enforceable
clause.
c. No, Capital have continued to undertake the snagging works as it's own costs and it should be
reimbursed as such
d. Yes although entitled Penalty is a liquidated damages clause as it is a fixed sum and a genuine attempt
at estimating the loss

31. How should a key performance indicator be used in commercial contracting?

1. As a price negotiation tool pre-contract

2. A metric for managing performance
3. To focus on getting the important things right
4. To maintain a library of subjective data

a. 1 and 3 only
b. 2 and 3 only
c. 1 and 2 only
d. 3 and 4 only

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32. Expert Computing is a computer hardware stockist and distributor.

It offers a next day carriage services to all of it's customers which is unique in the industry and gives
them competitive advantage over their competitors.

Efficient management of it's inventory is key in order to meet customer expectations and to maintain
profitability.

It is experiencing some issues with transportation of goods and is looking to develop some key
performance indicators with it's suppliers. Which of the following would help?

a. The total number of supplier purchase orders each month.

b. The total quantity of supplier parts ordered each month
c. The total cost of supplier parts ordered each month
d. The total number of late supplier deliveries each month

33. John is a new procurement manager who has recently joined Smiths Facilities Management LTD. The
company provides maintenance services through the utilisation of subcontractors.

It is experiencing a number of issues with it's supply chain which has resulted in customer complaints,
and John would like to introduce Service Level Agreements to some of it's key providers.

Which of the following should be included?

1. How often the service will be provided

2. The procedures to be followed to resolve disputes
3. The qualifications needed by staff providing the service
4. The stock maintained by the subcontractor

a. 1, 3 and 4 only
b. 2,3 and 4 only
c. 1,2 and 4 only
d. 1,2 and 3 only

34. Quick fast Delivery LTD are a national provider of parcel delivery services.

A high proportion of the services it provides are undertaken through a Subcontracting network of
delivery drivers.

It is presently renegotiating all of it's subcontracted services and is looking to develop Service Level
Agreements with it's providers. Which of the following should form part of the SLA document?

a. The geographic area covered by the subcontractor

b. The percentage of company policies adhered to
c. The total number of completed deliveries each month
d. The actual percentage against target of 99% on time delivery

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35. You are a Procurement manager for a successful electrical component reseller and distributor.

The company presently carries stock of over fifty thousand fifty different items. Some of which may be
variances of the same product or similar product from different manufacturers. The managing director of
the business is looking to increase the margin of products sold and has asked for your support. It is a
competitive industry with a customer base that will be resistant to price increase. Which of the following
could support this request?

a. Improve the quality of products purchased

b. Increase the range of products sold
c. Standardize the products purchased
d. Reduce the range of products purchased

36. You are a buyer working in a busy procurement office.

A colleague from another department would like to procure some new electrical equipment which is
essential to their operation.

They are specifying a branded version which is almost double the cost of some acceptable alternatives
available in the market. You are Keen to ensure that their preferred product represents best value.
What are your consideration?

1. The inspection cost of the alternative product

2. The overall cost of the purchase
3. The quality of the branded product
4. The validity of the branded product

a. 1 and 3 only
b. 3 and 4 only
c. 2 and 4 only
d. 1 and 2 only

37. Offer and acceptance are essential elements of a legally binding contract, which of the following
activities are likely to be considered as an offer in the transaction between the buyer and seller?

1. The buyer dispatches a request for quotation to the supplier to complete and return
2. The supplier returns a duly completed request for quotation
3. The buyer submits a bid for an item on the online auction site
4. The supplier sends an email copy of the dispatch advice

a. 1 and 2 only
b. 1 and 3 only
c. 2 and 3 only
d. 2 and 4 only

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38. The design department has submitted to the buyer a detailed technical drawing which should be
attached to the request for quotation forms going out to suppliers.

Is the buyer correct in this action?

The buyer has classified this drawing as a functional specification for subsequent sourcing proceeses

a. Yes because functional specification are highly technical and require time and skill
b. Yes because functional drawings relate to the function of the required item
c. No because the supplier does not need to understand the function of the drawn requirement
d. No because it is more cost effective to avoid using functioning specifications

39. The requirement to adhere to which of the following international standards relates to
environmental considerations in specification?

a. ISO 9001
b. ISO 14001
c. ISO 18001
d. ISO 44001

40. The costs in a cost reimbursable contract are described as?

a.Fixed costs
b. variable costs
c. Indirect costs
d. actual costs

41. Buyer O has placed an order for the support and installation of six new servers for a total amount of
£600,000 from Supplier A. Which of the following could potentially be treated as examples of liquidated
damages clause within the contract for the Supply of the servers.

1. If the supplier delivers any of the servers late £1000 per servers will be deducted from the order per
day.
2. This contract is subject to delay remedies of £X- the amount to be agreed by both parties during
delivery
4. If the performance of any of the server's degrades within five years, a full refund of £600,000 will be
provided
3. The sum for breach of the completion date for the order is £40,000 per day up to a maximum of 50%
of the contract price

a 1 and 2 only
b. 2 and 4 only
c. 1 and 3 only
d. 2 and 4 only

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42. Where a supplier is incentivised to deliver improvements that create added value for the buyer, this
is described as what type of outcome?

a. Lose-lose
b. Lose-win
c win-lose
d. Win-win

43. A service contract for cleaning is due for expiry after a five year duration. Which of the following are
good sources of data to create a specification for the new invitation to tender?

1. Incumbent supplier
2. Maintenance Services
3. Alternative suppliers
4. Management information

a. 1, 2 and 3 only
b. 2,3 and 4 only
c. 1,3 and 4 only
d. 1,2 and 4 only

44. A purchase order has been raised for £5000.

It allows the user department to order items of a £50 value when they need them. This is an example of
what type of order?

a. Shut-off
b. Stand-off
c. Straight-off
d. Call-off

45. Denny is putting together the final version of a contract to send out to a supplier. He places certain
documentation into additional contract schedules at the end of the main contract.

Which of the following would be suitable inclusions to the additional schedules?

Select two that apply

a financial statements
b. Health and safety commitments
c. Suppliers references
d. Non disclosure agreements
e. A blank RFQ form

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46. Mable sees a coat displayed in a shop window with a price tag of £100 in it.

When Mable goes into the shop to buy it, the shop owner says the window display had an incorrect
price on and the coat is actually £120.

Mable argues that the shop has to honour the £100 - is she correct? But different format

a. Yes, the coat was advertised at £100 so the shop is legally bound to honour it.
d. No, the shop will make a loss on the coat so should not have to sell at £100
b. No, the display is an invitation to treat so the shop can legally amend the price
c. Yes, the display is an invitation to treat and therefore the shop is bound to sell for £100

47. Which of the following should be steps in the preparation of an invitation to tender?

Select two that apply

a. Re-writing a model form contract

b. Creating a detailed specification
c. Learning international standards
d. Advertising the requirement
e Publishing your company's financial reports

48. Which of these are remedies for misrepresentation?

1. The contract is void

2. Recission of the contract
3. Caveat emptor
4. Damages

a. 1 and 2 only
b. 2 and 3 only
c. 1 and 3 only
d. 2 and 4 only

49. Curnoe LTD supplied tyres to Garage LTD. Garage LTD agreed in the contract that for any specified
breaches of contract

It would pay Curnoe LTD £5 per tyre sold in breach. It subsequently sold tyres at below the listed price

which was one of the breaches mentioned in the contract. What is the £5 per tyre provision an example
of?

a. Liquidated damages
b. Exclusion clause
c. Quantum meruit
d. Unliquidated damages

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50. Which of these key performance indicators are qualitative? Select two that apply

a. Cost savings achieved

b. Effectiveness of the supplier's staff
c. Responsiveness of the supplier
d. Number of customers complaints
e. Employee satisfaction score

51. Whilst it is recognised that longer term contracts have the potential to drive significant benefits for
the organisation, a number of situations are more suited to making one-off purchase. Which of the
below situations is likely to be more suited to a one off purchase?

a. The ordering of equipment for a special project

b. A requirement for the maintenance of a building
c. The purchase of compatible IT infrastructure equipment
d. The purchase of internal and external audit services

52. Which of these describes the function of a non disclosure agreement?

a. Defines what compromises confidential information

b Sets out what is not required under the contract
c. Determines the scope of the specification
d. Identifies all the parties to the agreement

53. In the creation of a contract with an overseas supplier, a procurement manager insists that the
suppliers adhere to the CIPS Corporate Code of Conduct and to conduct all business relationship with
respect, honesty and integrity and avoid causing harm to others as a result of business decisions.

Was this the correct thing to do?

a. No, as the overseas suppliers should be free to conduct business in whatever way they wish with no
regards in ethical practices
b. Yes as the procurement managers role will be to protect the company from potential reputation risk
from dealing with unethical suppliers
c. Yes as it means they can be delivering a value for money solution to the company by potentially
purchasing items at the cheapest price.
d. No as the procurement manager could be missing out on cost savings by not using the cheapest
source for the items.

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54. When providing a conformance specification, the buyer details exactly what the required product or
item must consist of .

The supplier may not know in detail, or even it all.

What purpose the item will play in the buyer's business.
The supplier is expected to strictly conform to the buyer's specification.
The buyer therefore bears the greatest risk if the specification fails.
Which of the following might describe a conformance specification?

a. The details of how the item is required to interface with the other elements of the process
b. Required safety levels and controls, including the any relevant standards that apply
c. Identification and emphasis on a brand name and model name or model number
d. The criteria is methods to be used in measuring whether the item has achieved it's purpose

55. Which of the following might be considered as advantages to the supplier of key performance
indicators? Select two that apply?

a. They help the suppliers to focus on specific critical success factors and maximise on effectiveness
b. They help the suppliers to achieve higher productivity by cutting down on other aspects like quality
c. They help the suppliers to avoid confusion arising from unclear expectation from buyers
d. They help the suppliers to share their best cost saving systems with their competitors
e. They help the suppliers to ensure that they do not exceed the target performance levels

56. Standards are documents that stipulate or recommend minimum levels of performance and quality
levels of goods and services
The government is the only source of any standards that applied in business in Nations.

Is this correct?

a. Yes because a country has a national body that regulates standards within the nation
b. Yes, the only other possible source is through international initiative such as ISO
c. No the governments only create standards for products related to national security
d. No, standards can be generated internally by other organizations beside the government and ISO

57. You are a buyer who is presently collating the necessary data and information for a forthcoming
tender.

The project is for the Supply and installation of numerous car park barriers and related equipment.

It will also need to include the provision of spare parts to support the maintenance provision for an
ongoing period.

Which of the following would be an appropriate price arrangement?

a Cost plus
b. Pricing schedule

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c. Cost reimbursement
d. Fixed price

58. You are a senior buyer in a large manufacturing company.

The engineering team are looking for a product that will assist them in a new innovation project.

The technology is evolving and the product supplied is likely to be bespoke to the supplier

You are suggesting the use of a performance specification as part of the tender.

What is the main reason for this?

a. The cost of the product is likely to be cheaper

b. This places the responsibility for success with the supplier
c. The tender process is likely to be faster
d. This will allow a comprehensive description of the product

59. The exclusion of liability is resticted by statute for which of the following. Select two that apply

a. Negligence
b. Legal capacity
c. Breach of implied terms
d. Non payment
e. Caveat emptor

60. Is a verbal contract legally enforceable

a. Yes, a verbal contract is just as legally enforceable as a written one

b. Yes but only if you have a witness at the time the verbal agreement was made
c. No only contracts in writing will be legally enforceable
d. No verbal contracts are never legally enforceable

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ANSWERS

1. D 2. D 3. A 4. B 5. C 6. B 7. C 8. A 9. B 10. C
11. A 12. C 13. B 14. A 15. D 16. C 17. A 18. A 19. B 20. D
21. B 22. C 23. B 24. A 25. B 26. A, 27. A, 28. B, C 29 C, D 30 D
C, D C, E
31 B 32 D 33. D 34 A 35 C 36D 37 C 38 C 39 B 40 D
41. C 42. D 43. C 44. D 45. B, D 46.B 47.B, D 48. 2 49. A 50. B, C
and 4
51.A 52. A 53. B 54.C 55.A, C 56. D 57.B 58.B 59.A, C 60.A

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