Test Online Free CIPS L4M3 Exam Questions and Answers
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Which of the following are always included within a framework agreement? Select TWO that apply:
Answer: Explanation:
A framework agreement will set out the following:
- How call offs can be made - whether a mini-competition is required or a direct call off can be made
- How price is calculated
- The specification - this may have various options to cater for different needs
- The duration of the agreement
- Who can access the agreement
- Any limitations
- The main terms to be included in the contract or the form of contract to be used, where
this is intended to be a standard form.
Reference: CIPS study guide 60-62
LO 1, AC 1.3
Question 17Selectable Answer
Which of the following is the term that describes an item bought for a single and non-recurring use or purpose?
Answer: Explanation:
Ad-hoc purchase is the item bought for a single and non-recurring use or purpose.
A call-off contract, also known as a blanket order, is a purchase order which enables bulk orders over a period of time.
Operational procurement refers to the procurement of goods and services that are required to sustain an organization’s day-to-day business operations.
Reference: CIPS study guide page 58
LO 1, AC 1.3
Question 18Selectable Answer
Which of the following encourages social and environmental criteria in public sector contracting in the UK?
Answer: Explanation:
Social and environmental criteria are increasingly encouraged in public sector contracting. In the UK, The Public Services (Social Value) Act 2012 encourages public organising to apply social and environmental criteria in contract.
Reference: CIPS study guide page 98-99
LO 2, AC 2.1
Question 19Selectable Answer
Which of the following is regulated by standard ISO 14001?
Answer: Explanation:
ISO has about 22,000 international standards covering a vast range of aspects of product or service quality.
Below are some of the most common ISO standards:
- ISO 9001: Quality management system
- ISO 27001: Information security management
- ISO 5001: Energy management
- ISO 14001: Environmental management
Reference:
- ISO 14001:2015 Environmental management systems ― Requirements with guidance for use
- CIPS study guide page 86
LO 2, AC 2.1
Question 20Selectable Answer
Which of the following is the type of insurance that cover the liabilities of service provider such as legal advice, accountancy, technical designs, etc?
Answer: Explanation:
The most usual forms of insurance cover are as below:
- Employer's liability: Employers' liability insurance, sometimes known as employment practices liability insurance (EPLI), protects employers from financial loss if a worker has a job-related injury or illness not covered by workers' compensation. Employers' liability insurance can be packaged with workers' compensation insurance to further protect companies against the costs associated with workplace injuries, illnesses, and deaths. Employers' liability insurance is also called “part 2” of a workers’ compensation policy.
- Public/product liability: Public liability insurance covers you against any claims made against your business C for example if you were held legally liable for personal injury, or for damage done to property. The insurance will also cover you for any legal costs associated with defending claims against your business.
- Professional indemnity insurance (PII): Professional indemnity or liability insurance offers
such coverage to professional advice or service providing individuals and companies ensuring protection against any legal costs and damages awarded as a result of claims relating to negligence. Whereas more general forms of liability insurance focus on direct forms of harm such as sustaining injuries, professional indemnity insurance provides a far more detailed and comprehensive form of coverage. The cover protects a firm or individual's liability relating to any financial loss caused by errors or omissions in the service provided as well as any alleged failure to perform on behalf of a client.
- Goods in transit coverage: Goods in transit insurance, sometimes referred to as GIT, covers goods against loss or damage while being moved from one place to another. These goods can be being carried by individuals in their own vehicle, self employed drivers or
contractors or by third party carriers. The insurance can cover both domestic and
international trips, with specific add-ons available for insurance within Europe.
Reference: CIPS study guide page 151-152
LO 3, AC 3.2
Question 21Selectable Answer
Which of the following is most likely to reduce ITT preparation time while maintaining the clarity of tendering documents?
Answer: Explanation:
One of the major disadvantages of tendering process is that it is lengthy, bureaucratic and slow.
To reduce the preparation time, buying organisation can:
- Plan forward
- Standardise tendering documents (such as notices, terms and conditions,...) whenever possible
- Train procurement staff
- Write down policies for tender-waiver
Buying organisation should not eliminate the pre-qualification stage from all tendering processes. This stage is used as a filter to select the most competent suppliers for next stage in restricted tendering. To save time in this process, you can design a model questionnaire.
Reference: CIPS study guide page 5
LO 1, AC 1.1
Question 22Selectable Answer
CORRECT TEXT
Which of the following are commonly used as model forms of contracts in construction in the UK?
Answer: Explanation:
- NEC: New Engineering Contract - a family of standard contracts primarily used in construction in the UK; includes works, consultants, services
- JCT: Joint Contracts Tribunal - a family of standard contracts used in construction in the UK; includes works, consultants. subcontracts, services
- AS: Australian Standards contracts - different contracts for a range of purchase types including constructions, consultancy, periodic supply of goods
- IET: Institution of Engineering and Technology which issue jointly agreed model forms covering the design, supply and installation of electrical, electronic and mechanical plant 'including special conditions for the ancillary development of software'
- CIPS: Chartered Institute of Procurement and Supply - CIPS has developed its own suites of standard forms of contract for IT functions including: supply and installation of computer equipment, support and maintenance of bespoke software, servicing of computer equipment.
Question 23Selectable Answer
Service credits
Answer: Explanation:
Service level agreement often sets out the minimum quality standards of the services provided, remedies if that standards are not met, consequences if the targets are exceeded. Penalty clauses and service credits are remedies that are often used in conjunction with service level agreement to ensure the performance and to compensate the purchaser if targets are not met.
Reference: CIPS study guide page 110
LO 2, AC 2.2
Question 24Selectable Answer
Which of the following are driving forces for increasing use of social and environmental criteria in specifications? Select TWO that apply.,
Answer: Explanation:
Reasons for including social and environmental criteria may include the following:
- Expected Cost Savings and Financial Motives
- Management Support and Commitment
- Employees
- Altruistic Values
- Power Imbalances along the supply chain
- Image and Reputation
- Government Regulations
- Customers
- Competitors
Management, employees, government, customers and competitors are among the stakeholders that make pressures to the organisation on social and environmental criteria.
Reference:
- Drivers and Barriers to the Adoption of Sustainable Procurement in SMEs
- CIPS study guide page 95-96
LO 2, AC 2.1
Question 25Selectable Answer
ABC Ltd is a UK based company. It plans to enter into a contract with XYZ Ltd which is based in Singapore.
Which of the following are the mandatory elements for the contract between ABC Ltd and XYZ Ltd to be legally binding? Select THREE that apply.
Answer: Explanation:
The formation of the contract is where the contractual journey begins; if no contract is formed, neither of the parties can be under any obligations. Therefore, it is very important to have an understanding of each part of a contract’s formation.
In order for a legally binding agreement to be formed, there are four basic requirements to be met:
Question 26Selectable Answer
Which of the following will be always automatically deemed as a consideration?
Answer: Explanation:
Consideration only appears in common law countries. Below are some examples of what is and what is not consideration:
- Past consideration is something that has already been done or given. This cannot act as consideration
- Implied consideration: if the detail of a promise to pay is expressed after the provision of goods or services, but there is an implication that such promise would be forthcoming, this may (depending on the facts) be valid consideration.
- A promise given to a third party: this is not normally consideration, and is based on a concept known as privity of contract. Anyone who is not a party to the contract, even if they are beneficiary of it, cannot sue if the terms of the contract are breached.
- A promise to perform over and above an existing obligation: This is always consideration
Reference:
- Consideration & Promissory Estoppel
- CIPS study guide page 36-40
LO 1, AC 1.2
Question 27Selectable Answer
Under English law's general legal principles of contract formation, which of the following are likely to be offers? Select TWO that apply.
Answer: Explanation:
An offer is a full statement of what the offeror is willing to provide and the terms by which they are willing to provide it.
There are some statements that are not offers:
- Invitation to treat: this states that a person or organisation is willing to enter into discussions about the possibility of a deal, but does not confirm a willingness to be bound by any terms mentioned. Catalogues, goods on display and ITTs are invitation to treat. Civil law countries may have different perspective on this matter. Article 2:201 (3) of The Principles of European Contract Law states: 'A proposal to supply goods or services at stated prices made by a professional supplier in a public advertisement or a catalogue, or by a display of goods, is presumed to be an offer to sell or supply at that price until the stock of goods, or the supplier's capacity to supply the service, is exhausted.' Learners are advised to look at their countries' legislation for more information on offer and acceptance.
- Declaration of intention: this is defined as an aim or a plan.
- A 'mere puff' (or boast): this is anything which is not intended to be taken literally or seriously, such as many advertisement.
- Provision of information: merely provides information, but provider does not confirm willingness to be bound.
Reference: CIPS study guide page 29-30
LO 1, AC 1.2
Question 28Selectable Answer
Carillion Ltd is a major construction contractor in the UK. The company commits to continuous improvement and sets out a performance management program that is integrated across the organisational, individual, and supplier levels. To ensure that the suppliers acknowledge the program, every time negotiating the contract terms with suppliers, the procurement team of Carillion appends a performance management framework to the draft document as a schedule.
Is the action of procurement team appropriate?
Answer: Explanation:
Performance management framework often consists of KPIs, targets and consequences that arise from achieved scores. To ensure that the framework has binding effect on contracting parties, it should be developed, appended to the main contract document and agreed by both parties. So the answer should be "Yes, because the framework should have legal standing as a part of contract".
Reference: CIPS study guide page 11-14
LO 1, AC 1.1
Question 29Selectable Answer
Which of the following indicates the ratio between profit and costs?
Answer: Explanation:
Mark up is the profit as a percentage of total costs.
LO 3, AC 3.3
Question 30Selectable Answer
Which of the following statements is true about model form of contract?
Answer: Explanation:
Model forms of contract are published by some industry or professional organisations such as FIDIC, ITC, CIPS,... These forms are often carefully prepared by legal professionals, with correct legal terminology. The standard clauses within these forms are based on fair and balanced risk/reward allocation between the contracting parties. The model contract forms also include standard clauses to be selected or deleted on an as required basis. Despite being standardised to be used in any jurisdiction, legal advice may be required if the users decide to make variations to the forms.
The correct answer should be "Model contract form's standard clauses often contain correct legal terminology without recourse to third party experts."
Reference: CIPS study guide page 144-147
LO 3, AC 3.1
