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CIPS
CIPS Level 3 Advanced Certificate in Procurement and Supply Operations
L3M3
Contract Administration Questions and Answers

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Questions # 11:

‘When the supplier delivers the goods as ordered, two further documents are created.

a) The supplier’s XXX XXX, included with the goods

b) The buyer’s YYY YYY YYY’

Choose the correct replacement words.

Options:

Delivery note, goods received note

Purchase order, goods received note

Formal quotation, terms and conditions

Delivery note, service level agreement

Answer

Explanation

If it's included with the goods, it's likely to be a delivery note; and the buyer's equivalent would be a goods received note.

Questions # 12:

What do we call the point when the supply firm makes neither a profit nor a loss ie where all costs are covered yet no profit is made?

Options:

Breakeven point

Trig point

Point of no return

Tipping point

Answer

Explanation

Breakeven point. The firm breaks even: covers all of its fixed costs. At this point the firm has made neither a profit nor a loss, and hopefully is about to enter profitability.

Questions # 13:

Which of the following risks, which could severely impact on a business, is least likely to occur, in your judgment?

Options:

Liquidation of a supplier’s business because of financial weakness

Sinking of cargo ship in a storm in the English Channel

Airport workers’ strike in country of export

Global virus pandemic affecting all countries, and resulting in millions of deaths

Answer

Explanation

Supplier liquidations are to be expected; workers' strikes likewise.

Cargo ships do sink, and your course creator has had cargo in at least two ships which have sunk on the high seas, one of them in The English Channel.

A global pandemic (Covid-19) was highly unlikely (2019), but arrived with devastating conse-quences for commerce and people. Low likelihood, huge impact.

Just because it seems unlikely doesn't mean it's not going to happen.

If you're seriously interested on the effect of apparently chance happenings in our lives, read Nassim Nicholas Taleb - you'll either love him or hate him.

Questions # 14:

In this course, the acronym ‘CPA’ stands for:

Options:

Cost price adjustment

Certified price assessor

Critical path analysis

Contract price adjustment

Answer

Explanation

Contract price adjustment.

A contract may contain a contract price adjustment clause if the parties feel that costs may move significantly over the contract period. For example, in respect of commodities, metals, currencies or even sometimes, labour. Normally reference would be made to an index or indices which would help determine the direction and extent of adjustment in a minimally controversial way. An example of a widely-used index / formula in the UK is the BEAMA formula.

Questions # 15:

Which one of the following could not be classed as a form of performance specification?

Options:

Functional

Outcome-focused

Output-based

Input-driven

Answer

Explanation

Since performance specifications are all to do with outputs, 'input-driven' leaps out as being the cor-rect answer here.

Questions # 16:

Which of the following would not normally be part of data required by the buying organisation’s contract manager?

Options:

Other customer data

Technical data

Financial data

Performance data

Answer

Explanation

Other customer data.

It would, I think, be very unusual for a contract manager to feel it appropriate to ask for information from a supplier representative about other customers. Business partners normally want their dealings to be private. However, in informal discussions, in the normal course of conversation, information is often transferred in a benign manner.

Questions # 17:

Which of the following are external factors in supplier decision-making? Choose two.

Options:

The selling firm’s financial position

Market conditions, determining demand and supply

Customer perceptions of value

How badly the seller needs the business

Answer

B, C

Explanation

Market conditions, determining demand and supply, and customer perceptions of value are external factors. One could argue that customer perceptions of value can be altered by the selling company, but in the short-term this is clearly external.

Questions # 18:

Which two of the following constitute part of a common risk assessment or risk evaluation formula?

Options:

Contingency

Likelihood

Impact

Prevention

Answer

B, C

Explanation

What is the likelihood of an event occurring?

What will be the impact of that event occurring?

This is the basis of almost all modern risk management.

CIPS has good content at Advanced Diploma level on the subject of Risk Management, and I have prepared tests for the two subjects in this area. :)

Sadgrove's book on business risk, in my view, is excellent; and NN Taleb's work (eg 'Antifragile') on risk, although difficult is, in my opinion, fascinating.

Questions # 19:

In a reverse online auction:

Options:

The highest bid wins

The seller sets up the auction

The lowest bid wins

No bid wins

Answer

Explanation

Bidders compete against each other, reducing bid prices until one winner is found - this is the sub-mission of the lowest-priced bid (unless stated otherwise in the auction documentation).

Questions # 20:

In the written presentation of a business case, a brief explanation of everything in the case, includ-ing the ultimate recommendation, aimed at people (eg senior managers) who have little time to plough through the details.

Options:

Background

Cost-benefit analysis

Introduction

Executive summary

Answer

Explanation

The Executive Summary summarises the situation for busy executives to save them working all the way through the detail.

The summary needs to be very well written, accurately reflective of the entire document, and in-clude the key points needed to make a balanced decision.

The executive summary should be written last of all the sections, and is often the only part of a document which will be read.

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