(2023) PASS L4M3 Exam Free Practice Test with 100% Accurate Answers
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CIPS L4M3 Exam Syllabus Topics:
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NEW QUESTION 76
Which of the following are typically included in an SLA? Select TWO that apply:
- A. KPI details
Correct) - B. Service definition
- C. Requirements for packaging
- D. Product's lifespan
- E. Code of conduct
Answer: A,B
Explanation:
The core elements of an SLA are set out below:
- Service definition
- Quality definition
- KPI details
- KPI management response
- Operational performance and management response
- Constraints or mitigating factors
Reference:
LO 2, AC 2.2
NEW QUESTION 77
In order to monitor supplier's performance, an organization decides to draft performance management frameworks. Which of the following are the components of a performance management framework? Select THREE that apply:
- A. Indemnity
- B. Justification
- C. KPIs
- D. Force majeure
- E. Consequences
- F. Targets
Answer: C,E,F
Explanation:
There are three key components of a performance management framework:
- Key performance indicators (KPIs) - What you are measuring
- Targets - the performance level to be achieved
- Consequences - what happens if the measures are not achieved and/or if they are exceeded Reference:
LO 1, AC 1.1
NEW QUESTION 78
A service contract is going to be expired, which data source is good to create specifications for ITT?
1. Incumbent supplier
2. Maintenance services
3. Alternative supplier
4. User's knowledge
- A. 1, 2 and 3
- B. 2, 3 and 4
- C. 1, 3 and 4
- D. 1, 2 and 4
Answer: C
Explanation:
There are a number of shortcuts that can be taken when drafting the specification. These include the following:
- The use of brand names
- The use of recognised standards
- The use of samples
- Information and knowledge from users/other buyers: Drafting a specification should naturally include those already used within the organisation itself, but also variants used by other companies in the same sector and other companies in different sectors
- Information from suppliers: suppliers will always be willing to assist in specification development, as this this one way in which they can seek to influence the design to favour their own products.
Reference:
LO 2, AC 2.1
NEW QUESTION 79
Bandpro is a reseller of branded computer products to the private and public sector. The procurement team must purchase 500 items each day solely by multiple phone calls and emails to suppliers. Due to this practice, it takes a lot of time to track and collect relevant documents. Some important documents even get lost, which makes procurement audit more burdensome. Which of the following would increase the robustness of audit trails in procurement activities?
- A. Every evidence must be recorded by paper
- B. Rectify non-compliant activities
- C. Adopt e-procurement
- D. Spend less time on auditing procurement procedures
Answer: C
Explanation:
Audit trail is a chronological record the sequence of events connected to a given transaction, such as a purchase of raw materials, payroll disbursements, or a detailed financial statement. The record includes all the source documents connected to the transaction, providing context and clarity in the event a review is required. The more comprehensive the documentation, the more effective the audit trail is when used to create financial reports, verify information, and ensure compliance while eliminating fraud.
In the scenario, the procurement team gets the quotation from phone calls and emails which have weak audit trails and lack of transparency. One solution may be increasing the use of e-procurement system.
Reference:
- What is an audit trail?
- CIPS study guide page 6-7
LO 1, AC 1.1
NEW QUESTION 80
Which of the following are reasons why a purchaser wants to embed a subcontracting clause into the main contract? Select TWO that apply:
- A. To induce the conflicts between the main contractor and subcontractors
- B. To improve supply chain transparency
- C. To condemn whole liabilities to subcontractors
- D. To reduce the main contract complexity
- E. To keep main contractor liable
Answer: E
Explanation:
There are number of reasons why the purchaser will want to control the supplier's subcontracting:
- Supply chain transparency: Normally the purchaser has invested a lot of effort into selecting the right contractor. However, the main contractor's selection of subcontractor might not be in such careful manner, which may result in poor performance. Purchaser must know who subcontractors are. Controlling the subcontracting process can help the purchaser control the outcome.
- Contract terms: the purchaser's requirements must be reflected in the subcontracts. The subcontracting clauses may require the main contractor to do this.
- Liability: the main contractor may subcontract the whole or a part of its liabilities. Subcontracting clause may bind the contractor to be liable with the work, it cannot just blame the subcontractor for any faults.
Reference:
LO 3, AC 3.2
NEW QUESTION 81
Is the government only source of industrial standards within a country?
- A. No, an organisation can also generate its own internal standards
- B. Yes, the standards must be made by legislative branch of the country
- C. No, the government can only adopt standards regarding security and defence
- D. Yes, while ISO make standards for international trade, the government standardises other facets of their country
Answer: A
Explanation:
A standard is a document that sets out requirements for a specific item, material, component, system or service, or describes in detail a particular method or procedure. Standards are established by consensus and approved by recognized standardization bodies.
There are several different types of standards. Some of the most commonly-used standards set out the requirements that a particular kind of product, service or process must fulfil, in order to establish that it is 'fit for purpose'. Other types of standard relate to methods of testing, terminology and definitions, information requirements, or the compatibility of connections.
Standards provide individuals, businesses and all kinds of organizations with a common basis for mutual understanding. They are especially useful for communication, measurement, commerce and manufacturing.
Standards make trade easier by ensuring compatibility and interoperability of components, products and services. They bring benefits to businesses and consumers in terms of reducing costs, enhancing performance and improving safety.
Standards are voluntary, which means that businesses and other organizations are not legally obliged to apply them. However, in certain cases standards may facilitate compliance with legal requirements, such as those contained in European directives and regulations.
Standards can be made by a company, a standard organisation (such as ISO or BSI) or regulatory bodies.
Reference:
- CIPS study guide page 93-94
- Standards and your business
LO 2, AC 2.1
NEW QUESTION 82
Since services are intangible, so KPIs for services must be qualitative in all circumstances. Is this statement correct?
- A. No, KPIs for services must always be quantitative so that they can be measured easily
- B. Yes, the only measure mattered to supply of services is end-users' satisfaction
- C. Yes, quantitative KPIs are limited to timeliness of supply of goods, defective rates and in-full quantities, which are applied to monitor supplier of physical goods
- D. No, some KPIs for services are measurable by means of outcome, time and space performed
Answer: D
Explanation:
KPIs are used to monitor supplier's performance. They can be qualitative or quantitative. Of course, service providers can be monitored by quantitative KPIs regarding the outcome achieved (such as uptime in IT contracts), timeliness of deliveries (such as in construction contracts)...
Reference:
LO 2, AC 2.2
NEW QUESTION 83
Which of the following are likely to be express terms in a contract?
1. Legislation
2. Custom and practice
3. Contract particulars
4. Terms and conditions
- A. 1 and 4 only
- B. 3 and 4 only
- C. 2 and 3 only
- D. 1 and 2 only
Answer: B
Explanation:
Express terms are the terms of the agreement which are expressly agreed between the parties. Ideally, they will be written down in a contract between the parties but where the contract is agreed verbally, they will be the terms discussed and agreed between the parties.
The types of express terms to be found in a contract are many and varied and will depend on the type of contract. Any term written into the contract is an express term and may refer to price, time scales, warranties and indemnities, limitations on liability, conditions precedent and so on.
Reference:
- Contracts: Express and Implied Terms
- CIPS study guide page 32
LO 1, AC 1.2
NEW QUESTION 84
Which of the following are features of performance specification?
1. Method of achieving the buyer's desired result
2. What needs to be achieved when using the product
3. Purposes of the product
4. Technical and physical characteristics of the product
- A. 1 and 4 only
- B. 2 and 4 only
- C. 2 and 3 only
- D. 1 and 2 only
Answer: C
Explanation:
There are 2 major types of specifications:
1. Performance specifications
These are Specifications that define the purpose of the goods or services in terms of how effectively it will perform. Performance is a logical extension of function. Performance specifications define the task or desired result by focusing on what is to be achieved. They do not describe the method of achieving the desired result.
2. Technical (or conformance) specifications
These are Specifications that define the technical and physical characteristics and/or measurements of a product, such as physical aspects (e.g. dimensions, colour, and surface finish), design details, material properties, energy requirements, processes, maintenance requirements and operational requirements. They are used when functional and performance characteristics are insufficient to define the requirement and are often used for engineering and information technology requirements.
Reference:
- Specification Writing
- CIPS study guide page 9-11
LO 1, AC 1.1
NEW QUESTION 85
According to rule of contract formation, which of the following is a valid acceptance?
- A. The person states that she is able to pay the offered price
- B. The person orally agrees to pay the offered price
- C. The person asks for a lower price
- D. The person says that she will think about it overnight
Answer: B
Explanation:
Once a valid acceptance takes place, a binding contract is formed. It is therefore important to know what constitutes a valid acceptance in order to establish if the parties are bound by the agreement. There are three main rules relating to acceptance:
1. The acceptance must be communicated to the offeree.
2. The terms of the acceptance must exactly match the terms of the offer.
3. The agreement must be certain.
Among the answers:
"The person says that she will think about it overnight" does not match the terms of the offer. The offeree does not assure that she will accept the offer.
"The person asks for a lower price": This is a counter-offer.
"The person states that she is able to pay the offered price" is not certain. The offeree merely provides information on her financial ability.
Reference:
- Contractual agreement - offer and acceptance
- CIPS study guide page 33-35
LO 1, AC 1.2
NEW QUESTION 86
In which of the following section of a specification, requirements for training to use the equipment will be set out?
- A. Performance
- B. Implementation
- C. Consultation requirements
- D. Issue reference
Answer: B
Explanation:
Implementation is a substantive requirement which covers the following areas:
- Will there be a need to train the staff to use the equipment?
- Are there integration requirements with other systems or processes?
- How will this work?
- What are the timescales?
- Are detailed method statements required?
Consultation requirements regards to explicitness of compliance with any national or local legal requirements Reference:
LO 2, AC 2.1
NEW QUESTION 87
Streaming Ltd is a music streaming provider based in the UK. The company is looking for extending its presence in the US. To achieve this, the company needs to outsource the data centre service to a local company. To monitor the performance, the procurement manager would like to introduce a service level agreement (SLA) to the data centre service provider. Which of the following should be included in the SLA?
1. System availability
2. The mean time to recover from system failure
3. The actual number of on-time service delivery
4. Dispute resolution procedure
- A. 1, 2 and 3 only
- B. 2, 3 and 4 only
- C. 1, 2 and 4 only
- D. 1, 3 and 4 only
Answer: C
Explanation:
A service-level agreement (SLA) defines the level of service you expect from a vendor, laying out the metrics by which service is measured, as well as remedies or penalties should agreed-on service levels not be achieved.
According to CIPS L4M3 study guide, SLA should cover the following:
- KPIs
- How the measurements convert into scores
- Any other service level standards
- Minimum acceptable standards or scores in each case
- Range of scores both above and below the minimum acceptable
- Any mitigating factors which might apply in the event of poor performance
- Any time period permitted in which to remedy a situation of poor performance
- Remedies available
- Dispute settlement
- How to deal with inconsistencies or conflicts between KPIs and any other documents.
In IT service (such as in the scenario), the SLA often covers:
- Uptime
- Call metrics
- Customer satisfaction
- Turn around time
- Quality
- Mean time to recovery
- Mean time between failure
- Backlog
- Business results
You can read the details of above indicators here.
Reference:
- CIPS study guide page 112-115
- 9 Examples of SLAs
- What is an SLA? Best practices for service-level agreements
LO 2, AC 2.2
NEW QUESTION 88
Which of the following are commonly used as model forms of contracts in construction in the UK?
- A. CIPS
- B. NEC
- C. JCT
- D. Select TWO that apply
- E. IET
- F. AS
Answer: B,C
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.
Reference:
LO3, AC 3.1
NEW QUESTION 89
Which of the following are examples of conformance specification? Select TWO that apply:
- A. Technical drawing
- B. Product sample
- C. Outcome-focused specification
- D. Statement of work
- E. Output-focused specification
Answer: A,B
Explanation:
There are two main types of specification: performance specification and conformance specification (sometimes called prescriptive or technical specifications).
A conformance specification establishes the characteristics a commodity must possess, including details of how the commodity will be manufactured; engineering plans, drawings, or blueprints may be included. The design specification states in prescriptive terms what the potential offeror must provide to the buyer.
Conformance specifications have following features:
- Focus on inputs
- Give specific method, processes and materials
- May identify specific manufacturers or components
- The 'how' as well as the 'what'
- Ties supplier to set details
Reference:
- Public Procurement Practice: SPECIFICATIONS
- CIPS study guide page 8-10
LO 1, AC 1.1
NEW QUESTION 90
Which of the following is likely to reduce risks of different rules regarding when offers and acceptance become effective between legal systems?
- A. Time lapse
- B. Letter of intent
- C. Deemed receipt protocol
- D. Withdrawal protocol
Answer: C
Explanation:
Regarding rule of offer and acceptance, there are some differences among legal system around the world. For example, mailbox rule is generally applied in common law countries such as UK, US, Australia,.. while it is ignored in civil law countries. To clarify on rule of offer and acceptance in international trade, offerors may use expressed terms in their offers. These terms known as deemed receipt protocol.
Reference:
LO 1, AC 1.2
NEW QUESTION 91
XYZ Ltd is negotiating a long-term supply contract of important parts with a supplier. Dave, procurement manager teams up with Alla, legal manager to construct a service level agreement. Dave is concerned that poor performance of supplier may cause damages to the operations of the organisation. Which of the following can be used in conjunction with SLA to compensate the buying organisation in case of supplier's poor performance?
1. Warranties
2. Force majeure clauses
3. Penalty clauses
4. Service credits
- A. 1 and 3 only
- B. 3 and 4 only
- C. 4 and 2 only
- D. 1 and 2 only
Answer: B
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:
LO 2, AC 2.2
NEW QUESTION 92
Which of the following is the reason why liquidated damage clauses are embedded into a contract?
- A. Because compensation will be awarded immediately
- B. Because liquidated damages are the only remedy
- C. To penalise the supplier for their wrongdoing
- D. To avoid argument on correct measure of damage
Answer: D
Explanation:
Liquidated damages are an amount of money, agreed upon by the parties at the time of the contract signing, that establishes the damages that can be recovered in the event a party breaches the contract. The amount is supposed to reflect the best estimate of actual damages when the parties sign the contract. These usually apply to a specific type of breach, and in construction, it is frequently the failure to complete work on time.
Liquidated damages clauses are usually written as some sort of formula, for example:
Total Contract Price - [(X amount of $ per day) x (number of days late)] Including a liquidated damages clause can provide many benefits, the most important of which is predictability. When setting a predetermined amount of damages, it allows both parties a chance to negotiate and settle on a number they both feel is fair and reasonable.
From the owner's perspective, this acts like a cheap form of insurance against your contractors. In the event of a breach, the owner can immediately calculate the damages without going through the trouble of proving actual damages. Proving actual damages can be a complicated, lengthy, and costly process.
From a contractor perspective, this allows them to analyze the level of risk involved, and schedule appropriately. It also allows them the opportunity to limit the damage claims of the owner.
Reference:
- Construction Contract Clauses: What Is a Liquidated Damages Clause?
- CIPS study guide page 158-159
LO 3, AC 3.2
NEW QUESTION 93
Which of the following are key features of standard terms and conditions? Select TWO that apply
- A. Specific to each purchase order
- B. Standard terms always comply with implied terms
- C. Non-negotiable
- D. Non-disclosure
- E. Designed to be used in repetitive transactions
Answer: C,E
Explanation:
The key features, advantages and disadvantages of standard terms are summarised below:
- Form: Concise, generic and designed to be attached to purchase or sales orders
- Non-negotiable
- Ineffective terms: may be replaced by implied terms or national legal code rules, or subject to court 'balance of interest' judgement.
- Advantages: Basic contractual protection for most common circumstances; Avoid having to create new contract for repeat business.
- User friendly
- Usage: Low value, low risk, repetitive transactions
- Coverage: Definitions, relationship to other contracts, formation of the contract, order of precedence, price, invoicing and payment, specification, legal compliance, warrantee and liability, ownership and risk, intellectual property, data management and ethics.
- Disadvantages: Does not allow for specific circumstances; Risk for creating battle of the forms; Can create contractual uncertainty if used with purchase orders under call-off contracts.
Reference:
LO 3, AC 3.1
NEW QUESTION 94
Which of the following is a key feature of liquidated damage clauses?
- A. The liquidated damages are non-negotiable
- B. Liquidated damage is a penalty
- C. The amount of liquidated damages must be exceptionally larger than the actual damages incurred
- D. The amount of damage is predetermined
Answer: D
Explanation:
Liquidated damages are presented in certain legal contracts as an estimate of otherwise intangible or hard-to-define losses to one of the parties. It is a provision that allows for the payment of a specified sum should one of the parties be in breach of contract.
Understanding Liquidated Damages
Liquidated damages are meant as a fair representation of losses in situations where actual damages are difficult to ascertain. In general, liquidated damages are meant to be fair, rather than punitive.
Liquidated damages may be referred to in a specific contract clause to cover circumstances where a party faces a loss from assets that do not have a direct monetary correlation. For example, if a party in a contract were to leak supply chain pricing information that is vital to a business, this could fall under liquidated damages.
A common example is a design phase for a new product that may involve consultation with outside suppliers and consultants in addition to a company's employees. The underlying plans or designs for a product might not have a set market value. This may be true even if the subsequent product is crucial to the progress and growth of a company. These plans may be deemed to be trade secrets of the business and highly sensitive. If the plans were exposed by a disgruntled employee or supplier, it could greatly hamper the ability to generate revenue from the release of that product. A company would have to make an estimation in advance of what such losses could cost in order to include this in a liquidated damages clause of a contract.
Limitations of Liquidated Damages
It is possible that a liquidated damages clause might not be enforced by the courts. This can occur if the monetary amount of liquidated damages cited in the clause is extraordinarily disproportional to the scope of what was affected by the breached contract.
Such limitations prevent a plaintiff from attempting to claim an unsubstantiated exorbitant amount from a defendant. For instance, a plaintiff might not be able to claim liquidated damages that amount to multiples of its gross revenue if the breach only affected a specific portion of its operations. The concept of liquidated damages is framed around compensation related to some harm and injury to the party rather than a fine imposed on the defendant.
The courts typically require that the parties involved make the most reasonable assessment possible for the liquidated damages clause at the time the contract is signed. This can provide a sense of understanding and reassurance of what is at stake if that aspect of the contract is breached. A liquidated damages clause can also give the parties involved a basis to negotiate from for an out-of-court settlement.
Reference:
- Liquidated Damages
- CIPS study guide page 158-159
LO 3, AC 3.2
NEW QUESTION 95
Which of the following regulates barriers to the provision of services between countries?
- A. CISG
- B. GATS
- C. Incoterms
- D. ADA
Answer: B
Explanation:
- The General Agreement on Trade in Services (GATS) is a treaty of the World Trade Organization (WTO) that entered into force in January 1995 as a result of the Uruguay Round negotiations. The treaty was created to extend the multilateral trading system to service sector, in the same way the General Agreement on Tariffs and Trade (GATT) provides such a system for merchandise trade.
- CISG is the Vienna Convention on Contracts for the International Sale of Goods. This is a voluntary treaty under United Nations Commission on International Trade Law (UNCITRAL). The purpose of the Vienna Convention is to set out a framework for international transactions based on a uniform approach. It establishes substantive rules that regulate the duties and obligations of both parties, including the delivery of goods, contract formation, and remedies for breach of contract.
- The Incoterms or International Commercial Terms are a series of pre-defined commercial terms published by the International Chamber of Commerce (ICC) relating to international commercial law. They are widely used in international commercial transactions or procurement processes and their use is encouraged by trade councils, courts and international lawyers. A series of three-letter trade terms related to common contractual sales practices, the Incoterms rules are intended primarily to clearly communicate the tasks, costs, and risks associated with the global or international transportation and delivery of goods. Incoterms inform sales contracts defining respective obligations, costs, and risks involved in the delivery of goods from the seller to the buyer, but they do not themselves conclude a contract, determine the price payable, currency or credit terms, govern contract law or define where title to goods transfers.
- ADA is Anti-Dumping Agreement (Implementation of Article VI of the GATT).
LO 1, AC 1.3
NEW QUESTION 96
Which of the following are likely to be implied terms in a contract? Select TWO that apply:
- A. Definition & interpretation
- B. Contract clause
- C. Contract appendix
- D. Statute
- E. Legal precedence
Answer: D,E
Explanation:
An implied term is a term which the courts imply into a contract because it has not been expressly included by the parties. This may be because the parties did not consider it, did not think that any problem would arise in relation to it or simply omitted to include it.
The courts are very reluctant to imply terms into contracts and will only do so in the following circumstances:
- terms implied under statute
- terms implied under common law
- terms implied because of custom or usage
- terms implied due to previous dealings
- terms implied 'in fact' or to reflect the parties' intentions
Reference:
- Contracts: Express and Implied Terms
- CIPS study guide page 32
LO 1, AC 1.2
NEW QUESTION 97
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