CIPS L4M3 Real Exam Questions Test Engine Dumps Training With 235 Questions
L4M3 Actual Questions Answers PDF 100% Cover Real Exam Questions
Successful completion of the CIPS Commercial Contracting course leads to the award of the CIPS level 4 management of commercial contracts (L4M3) qualification. This internationally recognized qualification is highly valued by employers looking for procurement and supply chain professionals who can manage complex commercial contracts effectively. The CIPS L4M3 qualification represents a significant achievement in a procurement professional's career and it is a clear indicator of their ability to manage commercial contracts effectively. The knowledge and skills gained through the course can be applied to a broad range of industries, including manufacturing, retail, construction, and healthcare.
NEW QUESTION # 97
What is the purpose of using key performance indicators in procurement and supply?
- A. To qualify which supplier is suitable
- B. To ease the termination process
- C. To validate the supplier's bid or tender
- D. To monitor supplier's performance
Answer: D
Explanation:
Procurement teams use key performance indicators (KPIs) to ensure vendors comply with (and hopefully exceed) the obligations outlined in a contract. They help us better understand suppliers' performance, measure their output over a long period of time, and identify areas where improvement is needed.
Put simply, it's good business sense to make sure you're actually getting what you've paid for. This might be as straightforward as confirming a product or service is delivered on time, which means the KPIs you need to use will be minimal and basic.
Reference:
- Supplier KPIs | 7 Performance Indicators You Should Be Measuring - Una
- CIPS study guide page 101-102
LO 2, AC 2.2
NEW QUESTION # 98
Which of the following KPIs is qualitative?
1. Openness and co-operation of supplier
2. Responsiveness of supplier
3. Customer satisfactory ratings
4. Cost management
5. OTIF deliveries
- A. 2 and 3 only
- B. 1 and 4 only
- C. 2 and 5 only
- D. 1 and 3 only
Answer: D
Explanation:
Qualitative KPIs are based on pure opinions about how well or otherwise the goods are performingor the service is being delivered. Most often, these will be linked to, or convertedinto, a numerical measure.
However, such satisfaction surveys often also include free fields for respondents to explain why they feel the way they do, and what they might have liked to have been different.
On the other hand, quantitative KPIs are based on numerical measure with either definite number (e.g., actual number of orders incomplete or otherwise inaccurate during the time period) or as a percentage (e.g. number of inaccurate orders as a percentage of the total number of orders).
Openness and co-operation means that supplier is open and co-operative in its relationship with purchaser, e.
g., in terms of joint problem solving. This KPI is qualitative since it is measured by individual judgement.
Responsiveness of supplier means the supplier responds rapidly to requests for information and support without having to be chased. It is measured by the number of times requests chased as a percentage of number of requests. It is a quantitative KPI.
Customer satisfactory ratings means the level of customer's satisfaction. This KPI is measured by periodic survey and it is a qualitative KPI.
Cost management is another quantitative KPI. It can be measured by comparing between the actual costs and the contractual costs.
OTIF (one-time in-full) deliveries is a quantitative KPI. It can be measured by counting the inaccurate deliveries in the period or inaccurate deliveries as a percentage of total number of deliveries for period.
Reference: CIPS study guide page 117-122
LO 2, AC 2.2
NEW QUESTION # 99
Which of the following should be used in a contract for window cleaning during the next three months?
- A. Standard schedule of rates
- B. Variable pricing arrangement
- C. Fixed pricing arrangement
- D. Cost-plus arrangement
Answer: C
Explanation:
A contract for window cleaning during the next three months is a short-term service contract in which changes of input costs (labour, tools,...) are very unlikely to happen.
Fixed pricing arrangement is useful for small to medium scope project, with short timelines, where what is delivered can be adequately specified and the likelihood of changes to the specification, scope and input costs is limited.
Reference:
LO 3, AC 3.3
NEW QUESTION # 100
Which of the following is the model form of contract for construction which is recommended by World Bank?
- A. CIPS
- B. FIDIC
- C. JCT
- D. ITC
Answer: B
Explanation:
FIDIC is the International Federation of Consulting Engineers (or Federation Internationale des Ingenieurs Conseils in French). FIDIC has produced many publications, including the model form contracts, best practice guidances, research on sustainability, integrity and risk management. FIDIC model form contracts have been developed by this organisation since 1999, now they consist of several different books which are marked by colours. Thus, FIDIC model contracts also have the nickname "Rainbow suite of contracts". Basically, the "Rainbow Suite" include the following books:
* Yellow book: Plant and Design-Build Contract (2 editions: 1999 and 2017)
* Silver book: EPC/Turnkey Contract (2 editions: 1999 and 2017)
* Red book: Construction Contracts (2 editions: 1999 and 2017)
* Emerald book: Conditions of Contract for Underground Works (1st Ed 2019)
* Blue-Green book: Dredgers Contract (2 editions: 2006 and 2016)
* Gold book: Design, Build and Operate Contract Guide
* Pink book: Construction Contract Multilateral Development Bank Harmonised Ed (2 editions: 2005 and 2010) This type of model contract is commonly used around the world because its author, International Federation of Consulting Engineers, collaborates closely with development banks such as World Bank, Africa Development Bank, Asia Development Bank, etc. Every construction project that is financed by these institutions must adopt the FIDIC contracts.
The Joint Contracts Tribunal, also known as the JCT, produces standard forms of contract for construction, guidance notes and other standard documentation for use in the construction industry in the United Kingdom. From its establishment in 1931, JCT has expanded the number of contributing organisations.
ITC (International Trade Centre) produces contracts specifically designed for small companies doing international business, covering the sale of goods, distribution, services and joint ventures. Many small companies are now engaged in international trade, but don't have access to the necessary contract forms to protect themselves. ITC and leading legal experts developed eight generic contract templates that incorporate internationally recognized standards and laws for most small business situations.
CIPS has several model forms of contract designed specifically for IT buying and servicing.
Reference:
LO 3, AC 3.1
NEW QUESTION # 101
Which of the following is always automatically considered as a contract?
- A. Call-off
- B. Performance management framework
- C. Framework arrangement
- D. Framework agreement
Answer: A
Explanation:
- A call off or a term contract is one which exists for a fixed period of time, rather than for a specific purpose
- A formal framework agreement does have some legal standing but it is not a contract, primarily because there is no consideration involved, but it is an overarching (or umbrella) agreementunder which contracts can be created (this holds true in English law but may not be right in other jurisdiction)
- A framework arrangement is a rather loose set-up, without any legal standing. It usually occurs when an organisation has decided for itself to limit the number of suppliers it is willing to work with and, through a purely internal process, sets up an approved list of such suppliers.
- A performance management framework including KPIs and targets, the assessment scheme and incentives, disincentives, bonuses and penalties. It is a schedule to a contract and only legally binding if it is referred from contract clauses.
Reference: CIPS study guide page 59-63
LO 1, AC 1.3
NEW QUESTION # 102
When a contract has been agreed on the basis of a fraudulent misrepresentation, which of the following remedies are available?
- A. An injunction only
- B. Both damages and rescission
- C. Rescission only
- D. Damages only
Answer: A
Explanation:
An untrue statement of fact or law made by Party A (or its agent) to Party B, which induces Party B to enter a contract with Party A thereby causing Party B loss. An action for misrepresentation can be brought in respect of a misrepresentation of fact or law.
There are three types of misrepresentation:
- Fraudulent misrepresentation: where a false representation has been made knowingly, or without belief in its truth, or recklessly as to its truth.
- Negligent misrepresentation: a representation made carelessly and in breach of duty owed by Party A to Party B to take reasonable care that the representation is accurate. If no "special relationship" exists, there may be a misrepresentation under section 2(1) of the Misrepresentation Act 1967 where a statement is made carelessly or without reasonable grounds for believing its truth.
- Innocent misrepresentation: a representation that is neither fraudulent nor negligent.
The remedies for misrepresentation are rescission and/or damages. For fraudulent and negligent misrepresentation, the claimant may claim rescission and damages. For innocent misrepresentation, the court has a discretion to award damages in lieu of rescission; the court cannot award both (see section 2(2) of the Misrepresentation Act 1967). For more information, see Practice note, Misrepresentation.
Reference:
- Misrepresentation
- CIPS study guide page 55
LO 1, AC 1.2
NEW QUESTION # 103
Which of the following are driving forces for increasing use of social and environmental criteria in specifications? Select TWO that apply.,
- A. Scarcity of environmentally sustainable suppliers
- B. Stakeholder pressure
- C. Process efficiencies
- D. Carbon footprint measure
- E. Insufficient financial resources
Answer: B,C
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
NEW QUESTION # 104
A senior buyer is preparing specification for the next purchase. He intends to embed social and environmental criteria that align with his organisation's overarching strategy. Which of the following provides the social and environmental objectives that an organisation pursues?
- A. Organisation's CSR policies
- B. Economic performance
- C. Economy of scale
- D. Procurement Systems and Technology
Answer: A
Explanation:
The organisation should have an overarching strategies or policies which sets out the social and environmental objectives to be pursued via procurement and the supply chain generally. Some of these will be about the specification, but that must be tied in other aspects of the sourcing strategy. These objectives, policies and strategies can be found in corporate social responsibility policy.
Reference:
LO 2, AC 2.1
NEW QUESTION # 105
In what way might a contract clause be used to stop the supplier from making unwarranted price increases during the term of the contract?
- A. The buyer deletes any contract clauses that may refer to stage payments
- B. The buyer inserts a contract clause that stipulates the invoice payment dates
- C. The buyer inserts a price adjustment clause in the contract
- D. The buyer deletes any contract clauses that may refer to price increases
Answer: C
Explanation:
A price adjustment clause, also known as a price variation or indexation clause, provides a structured method for managing potential changes in price over the contract's duration. This clause ensures that any price increase must be based on predefined and agreed-upon criteria, such as inflation rates or cost indices. This prevents arbitrary or unexpected price increases from the supplier.
Reference:CIPS L4M3 Commercial Contracting Study Guide, Chapter 4, Section 4.2.1 - Pricing schedules and contractual provisions relating to pricing.
NEW QUESTION # 106
Which of the following should be used in a contract for window cleaning during the next three months?
- A. Standard schedule of rates
- B. Variable pricing arrangement
- C. Fixed pricing arrangement
- D. Cost-plus arrangement
Answer: C
Explanation:
A contract for window cleaning during the next three months is a short-term service contract in which changes of input costs (labour, tools,...) are very unlikely to happen.
Fixed pricing arrangement is useful for small to medium scope project, with short timelines, where what is delivered can be adequately specified and the likelihood of changes to the specification, scope and input costs is limited.
Reference: CIPS study guide page 172-176
LO 3, AC 3.3
NEW QUESTION # 107
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 its supply chain which has resulted in customer complaints, and John would like to introduce service level agreements (SLAs) to some of its key providers. Which of the following should be included?
* How often the service will be provided
* The procedures to be followed to resolve disputes
* The qualifications needed by staff providing the service
* The stock maintained by the subcontractor
- A. 1, 2 and 3 only
- B. 1, 3 and 4 only
- C. 1, 2 and 4 only
- D. 2, 3 and 4 only
Answer: B
Explanation:
An SLA typically specifies:
* Service frequency (1) - how often services are delivered.
* Staff qualifications (3) - competence and skill standards.
* Stock levels (4) - inventory of parts or materials the subcontractor must maintain.
Dispute resolution procedures (2) are more appropriately included in the main contract terms, not the SLA itself.
Reference: CIPS L4M3 Commercial Contracting - Service Level Agreements and performance measures.
NEW QUESTION # 108
One of the important features in the formation of a contract is the need to have a 'consensus ad idem' between the contracting parties. 'Consensus ad idem' can be translated as meaning:
- A. A meeting of minds where all parties have the same understanding of the terms
- B. A promise to commit the contract to written form
- C. Let the buyer beware before agreeing the contract
- D. An agreement on the main item of the contract
Answer: A
Explanation:
'Consensus ad idem' is a Latin term meaning "meeting of the minds." It refers to both parties having the same understanding and intention regarding the contract's terms. This mutual agreement is essential for forming a valid and enforceable contract.
Reference:CIPS L4M3 Commercial Contracting Study Guide, Chapter 1, Section 1.1.1 - Essential elements of a valid contract.
NEW QUESTION # 109
In order to reduce the internal cost of administration from the raising of high-volume, low-value orders such as office stationery, a procurement manager implements the use of call-off orders for such circumstances. Is this an acceptable thing to do?
- A. Yes, the use of a blanket order cuts the staff administration time and paperwork that would be involved in numerous small orders
- B. Yes, as the procurement manager will be able to track more easily the volume of small orders and where the spend is occurring
- C. No, the procurement manager fears that they will lose staff and prefers to keep the administration costs high
- D. No, as the role of the administration staff is to keep a check on the items being ordered and they would lose this ability
Answer: A
Explanation:
Call-off or blanket orders are common procurement tools used to streamline the acquisition of routine, low- value items. This reduces the administrative workload and simplifies the process, allowing multiple deliveries under a single contract, thereby increasing efficiency and control.
Reference:CIPS L4M3 Commercial Contracting Study Guide, Chapter 4, Section 4.1.2 - Use of call-off and framework agreements.
NEW QUESTION # 110
Which of the following is an invitation to treat?
- A. Price list
- B. Invoice
- C. Tender bid
- D. Purchase order
Answer: A
Explanation:
An invitation to treat is an action inviting other parties to make an offer to form a contract. These actions may sometimes appear to be offers themselves, and the difference can sometimes be difficult to determine. The distinction is important because accepting an offer creates a binding contract while "accepting" an invitation to treat is actually making an offer.
One simple test to distinguish an offer and an invitation to treat is to ask what this statement will become when it is accepted. Now we apply this test to four options:
- Tender bid: Tender bid is submitted by a supplier to an invitation to tender from the buyer. It states the specific quantity, price and other elements. If buyer accepts the bid, there will be a contractbetween them.
Therefore, a tender bid is an offer.
- Purchase order: Purchase order which is sent by a buyer will state the items, the quantity, the price and terms and conditions. If supplier accepts the purchase order, there will also be a contract between two parties. It is also an offer.
- Price list: Price list is prepared by a supplier. The price list often states the items and unit price. If a buyer accepts it, the contract has not yet been formed since the contract scope has not yet been decided. It is an invitation to treat.
- Invoice: Invoice is often sent after a contract is formed. It is in fact a request for payment, neither offer nor invitation to treat.
Reference:
- CIPS study guide page 29-32
- What Is an Invitation to Treat?
LO 1, AC 1.1
NEW QUESTION # 111
The pricing arrangement in which markup is added into cost base to calculate the final price is known as...?
- A. Market based approach
- B. Price indices
- C. Fixed Price approach
- D. Cost plus pricing
Answer: D
Explanation:
The market approach is a method of determining the value of an asset based on the selling price of similar assets.
A fixed-price strategy means you set a price and keep it constant for an extended period of time.
Cost-plus pricing is also known as markup pricing. It's a pricing method where a fixed percentage is added on top of the cost to produce A price index (PI) is a measure of how prices change over a period of time, or in other words, it is a way to measure inflation. There are multiple methods on how to calculate inflation (or deflation).
Reference: CIPS study guide page 176-179
LO 3, AC 3.3
NEW QUESTION # 112
Which of the following would be useful tools to incentivise supplier innovation over the duration of the contract?
1. Gainshare arrangement
2. Liquidated damages
3. Service credits
4. Fixed bonus payments
- A. 1 and 3 only
- B. 1 and 4 only
- C. 3 and 4 only
- D. 2 and 4 only
Answer: B
Explanation:
Gainshare is an incentive for cost control
Liquidated damage is common type of disincentive for late completion
Service credit is a remedy for not achieving targets set out in an SLA
Fixed bonus payment is an incentive for early completion
Reference:
LO 3, AC 3.3
NEW QUESTION # 113
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