What gets measured, gets …’?
- A . Measured
- B . Procured
- C . Managed
- D . Lost
C
Explanation:
Managed.
This an old management adage, which is intended to encourage managers to measure helpful indica-tors (not everything!).
Revenue-earning possibilities which are foregone as a result of implementing a plan; the cost of not doing something else.
- A . Opportunity cost
- B . Absorption cost
- C . Indirect cost
- D . Overhead cost
A
Explanation:
An opportunity cost is the cost of not being able to do something else.
For example, if a firm opts to build a new factory, it may not be able to create ten new retail outlets which was another option open to it, in spending these particular funds. Or if you buy a holiday, you may not be able to buy a new television. The television is the opportunity cost of the holiday ie the benefit foregone.
The other types of cost shown are methods of classifying actual (real) costs. Opportunity costs are, in a sense, not real; they are hypothesized and therefore do not show in the balance sheet or profit and loss account of a business.
Contracts published by third party experts such as trade associations or professional bodies, widely regarded as favouring neither buyer nor seller, are called:
- A . Uni form
- B . Model form
- C . Paper form
- D . Trans form
- E . Good form
B
Explanation:
These are ‘model form’ contracts. Industry standard templates eg NEC (‘New Engineering Con-tract’); or FIDIC model form contracts. You will find some examples produced by CIPS on the CIPS website eg for IT procurements.
Win-win negotiations can be described as expanding the:
- A . Pie
- B . Sky
- C . Tie
- D . Dye
A
Explanation:
This is the idea that negotiations can be of the sort which shares the (apple) pie, often aggressively and not 50/50 (win-lose); or it can seek to create additional value – expand the pie (win-win).
Johnson, Scholes and Whittington suggested three key criteria for options which can be used in the evaluation of a business case.
Which word was not one of these three key criteria?
- A . Transferability
- B . Feasibility
- C . Acceptability
- D . Suitability
A
Explanation:
‘Is it acceptable, feasible and suitable?’ are the tests.
Key players have a:
- A . High level of interest but little influence
- B . High level of interest and little power
- C . High level of power and a high level of interest
- D . High level of power but little interest
C
Explanation:
High level of power and a high level of interest.
You should hope that in your exam you get such an easy QUESTION NO: !
Under a XXXX contract, the buyer does commit to purchase a given quantity over a given period of time, but the precise number of orders and their quantities is unknown at the start of the period.
What expression has been replaced by XXXX?
- A . Call-off
- B . Framework
- C . Oral
- D . Term
A
Explanation:
The fact that the time period and the total quantity is known means it is a ‘call-off’ contract. The volumes of product are ‘called off’ from the contract as required by the buying organisation.
Make sure you understand the difference between a call-off contract and a framework arrangement.
Under a framework arrangement, there is no obligation on the part of the buyer to use the goods / services specified.
A ‘cause and effect’ or ‘fishbone’ diagram is also commonly known as:
- A . A Murakami diagram
- B . A Fukushima diagram
- C . An Ishiguro diagram
- D . An Ishikawa diagram
D
Explanation:
The answer is an Ishikawa Diagram.
Can be used in addressing quality problems, problems of under-performance, etc.
The other Japanese-sounding names shown as possible answers are spurious – two are novelists, and Fukushima was a serious environmental radioactive leak at a nuclear power station on the coast of Japan.
‘A purchasing procedure whereby potential suppliers are invited to make a firm and unequivocal offer of the price and terms on which they will supply specified goods or services which, on ac-ceptance, shall be the basis of the subsequent contract’
- A . Competitive dialogue
- B . Request for information
- C . Invitation to tender
- D . Expression of interest
C
Explanation:
The ‘firm and unequivocal offer’ and ‘the basis of a contract’ indicate the reference to a formal and binding tender procedure. The answer is therefore ‘invitation to tender’.
What is a contract?
- A . An agreement between two or more parties which is intended to be enforceable by any means feasible.
- B . An agreement between two or more parties which is enforceable in law.
- C . An agreement between two or more parties which is intended to be honoured.
- D . An agreement between two or more parties which, all other things being equal, is in-tended to be enforceable by law.
B
Explanation:
An agreement between two or more parties which is enforceable in law.
This definition separates a contract from a social or domestic arrangement, in that contracts are in-tended to be enforceable at law. The other answers shown here dilute the concept, and so are unac-ceptable as answers to the question.
Transfer of the rights and obligations of a contract onto a third party, is called:
- A . Assignment
- B . Association
- C . Acceptance
- D . Assignation
A
Explanation:
Essentially the contract is now between two different parties because one party has assigned the contract to someone else.
It’s always a good idea to check whether this is permitted under a contract, otherwise you might finish up doing business with someone you didn’t plan to do business with.
Which of the following are internal factors in supplier decision-making? Choose two.
- A . Extent of competition in the marketplace
- B . Cost of production
- C . Shareholder and managerial expectations of profit
- D . Customer perceptions of value
B, C
Explanation:
Cost of production, and shareholder and managerial expectations of profit, are both internal factors in decision-making. Although shareholders may be outside the firm, management will condition shareholders’ expectations. Customer perception of value and the extent of marketplace competition are significantly outwith the control of the company.
Which of the following would not normally be part of data required by the buying organisation’s contract manager?
- A . Other customer data
- B . Technical data
- C . Financial data
- D . Performance data
A
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.
A justification of an action (expenditure) that is to be taken by an organisation.
- A . Project management
- B . Competitive tender
- C . Business case
- D . Cost analysis
C
Explanation:
The business case will justify the expenditure.
Of the other answers offered, the only one which needs explanation presumably is ‘cost analysis’.
This needs to be distinguished from ‘price analysis’.
Looking specifically at how a quoted price compares to the cost of production is called:
- A . Factor analysis
- B . Price analysis
- C . Psycho analysis
- D . Cost analysis
D
Explanation:
Comparison of prices across different suppliers would be called ‘price analysis’; drilling down into costs of making or doing something would be called ‘cost analysis’.
If your organisation takes out insurance cover to address various risks, which one of the following risk management strategies is it adopting?
- A . Treat
- B . Terminate
- C . Tolerate
- D . Transfer
D
Explanation:
Transfer.
Some of the risk has been transferred to the insurance company.
How many ‘Whys’?
- A . Five
- B . Four
- C . Three
- D . Six
A
Explanation:
‘Five-Why Analysis’ or ‘Why-Why Analysis’ is an approach to trying to determine the cause of an event. It can be used to link to / in conjunction with an Ishikawa diagram. The principle is that one repeatedly (as often as necessary, not necessarily limited to five) asks ‘why?’, and eventually an un-derlying reason will emerge, which if addressed effectively, will successfully resolve the problem. This is something which can often be observed naturally in small children. ‘Why, Daddy?’. ‘But why, Daddy?. Etc. (Or Mummy)
Which one of the following is not an ‘E’ from STEEPLE?
- A . Economic
- B . Ethical
- C . Environmental
- D . Epistemological
D
Explanation:
Even if you don’t know what ‘Epistemological’ means, you should know it’s the odd one out.
It relates to the philosophical study of knowledge.
Which one of the following could not be classed as a form of performance specification?
- A . Functional
- B . Outcome-focused
- C . Output-based
- D . Input-driven
D
Explanation:
Since performance specifications are all to do with outputs, ‘input-driven’ leaps out as being the correct answer here.
In which quadrant of a SWOT analysis would ‘well-developed management skills, unique intellectual property rights and sound financial backing’ appear?
- A . T
- B . W
- C . S
- D . O
C
Explanation:
Strengths.
Goods or services which must be used together are called:
- A . Compliments
- B . Condiments
- C . Complements
- D . Substitutes
C
Explanation:
The items are complementary. Complements.
For example, a Tesla car and a Tesla charging point.
‘Profit is not a cost’. True or false?
- A . True
- B . False
A
Explanation:
This is true. Profit is what is left over after you’ve covered all your costs. In simple terms.
Which of the following would be unethical? Choose two.
- A . To place business with a company in which your sister works, having been instructed in writing to do so by your line manager
- B . To negotiate with suppliers
- C . To request quotations if the buyer has no intention to purchase
- D . To request quotations from several suppliers if the buyer has already decided where the contract will be awarded
C, D
Explanation:
Taking up suppliers’ time if there is no intention to purchase from them is unethical.
Negotiating with suppliers is to be encouraged; following your line manager’s instructions is general-ly regarded as being a good thing, although regarding ethical issues, one is encouraged to query.
In the written presentation of a business case, a brief explanation of everything in the case, including the ultimate recommendation, aimed at people (eg senior managers) who have little time to plough through the details.
- A . Background
- B . Cost-benefit analysis
- C . Introduction
- D . Executive summary
D
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 include 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.
Which STEEPLE factor deals with issues of waste management, pollution and recycling?
- A . Technological
- B . Environmental
- C . Socio-cultural
- D . Ethical
B
Explanation:
The answer is ‘environmental’.
Periodic progress reports may be required by a contract manager. Part of this could include reporting actual progress against planned progress. In many cases, achievement of planned stages would result in (part-) payment(s) being released to the contractor.
Which one of the following terms might be the most appropriate title for a plan underpinning this approach, to ensure value for money, and payment linked to actual progress?
- A . Part-payment plan
- B . Milestone / gateway plan
- C . Stage or staged plan
- D . Roadmap or road sign plan
B
Explanation:
Milestone plan.
This is difficult, and if you opted for ‘staged’, that is understandable. ‘Milestone’ or ‘gateway’ are terms often used to describe a situation in which a particular point must be reached on a project, prior to release of funds. By this means, a close linkage can be made between outputs achieved and payments made. The idea of stages goes towards this, and ‘progress payments’ ie payment based on alleged progress or simply time, have been shown in many cases, to be ineffective in achieving value for money.
In legal parlance, in discussing / negotiating contract terms, something which is ‘less than an offer’, might be:
- A . Invitation to tea
- B . Invitation to treat
- C . Consideration
- D . Invitation to accept
B
Explanation:
‘Invitation to treat’ is less than an offer ie it is not capable of being accepted in any contractual sense.
A common example given of an invitation to treat are goods on display in a shop window.
Conducting individual and group-based (focus groups) in-depth interviews.
Is this quantitative or qualitative data gathering?
- A . Qualitative
- B . Quantitative
A
Explanation:
The benefit of in-depth interviews is that one may unearth deeper thoughts, ideas or concerns than through a larger quantitative exercise. Qualitative exercises lend themselves to more freedom to explore interesting issues.
In legal circles, ownership of something is often called:
- A . Tithe
- B . Tittle-tattle
- C . Title
- D . Total
C
Explanation:
Title. In order to be sure you own something, you have to make sure you have acquired ‘good title’.
Tolerate, transfer, terminate or …?
- A . Take
- B . Try
- C . Test
- D . Treat
D
Explanation:
This is about risk, and the answer is ‘treat’.
Risk management strategies can be classified into ‘the 4 T’s’, which you need to know for your ex-am.
Treating the risk is essentially seeking to minimise the likelihood or impact of the risk. An example might be to carefully monitor key suppliers’ ongoing financial performance to minimise the likelihood of their going into liquidation during the course of a contract with us. Etc.
Which of the following statements is untrue? Select two.
- A . The framework arrangement establishes the basic terms and conditions that will apply to subsequent orders
- B . A framework arrangement cannot be used for consultancy services, although it can be used for construction work.
- C . There is an obligation to buy under a framework arrangement
- D . In most cases, a framework arrangement is not itself a contract.
B, C
Explanation:
There is no obligation to buy under a framework arrangement; and a framework can be used for consultancy services.
Contribution is equivalent to:
- A . Selling price minus total costs
- B . Selling price
- C . Selling price minus fixed costs
- D . Selling price minus variable costs
D
Explanation:
Selling price minus variable costs = contribution., or more accurately ‘contribution towards fixed costs and making a profit’. I find this longer term for ‘fixed costs’ to be quite helpful in clarifying exactly what we are talking about here.
A contract clause indicating damages to be recovered in the event of under-performance, with the proposed damages being a genuine pre-estimate of loss, is called a:
- A . Punitive damages clause
- B . Liquidated damages clause
- C . Penalty clause
- D . Unliquidated damages clause
B
Explanation:
Liquidated damages clause.
The QUESTION is pretty much a definition of a liquidated damages clause.
Win-win style negotiations are said to be:
- A . Collaborative
- B . Cohesive
- C . Coherent
- D . Conducive
A
Explanation:
Win-win negotiations require a collaborative approach.
Which one of the following is least likely to be a barrier to free trade?
- A . Exchange controls
- B . Subsidies for exporters and internal producers of products
- C . Trading blocs
- D . Embargoes
C
Explanation:
Trading blocs eg EU, EFTA, ASEAN aim to free up trade within the bloc; the other answers offered will negatively affect free trade.