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?
Correct Answer: B
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
Question 97
Which of the following are driving forces for increasing use of social and environmental criteria in specifications? Select TWO that apply.,
Correct Answer: A,B
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 98
Which of the following may be a benefit for purchaser in using call off contract?
Correct Answer: C
Benefits for the purchaser in using call off contract are as below: - The benefit of a call off contract is that they allow the supply of materials, goods and services to be secured over multiple delivery dates across the length of a project. - Agreed prices, either fixed or pre-agreed mechanism for adjustment. This helps with setting and controlling budgets. - Simple order mechanisms at the point of need - Schedules of rates pricing enables electronic procure-to-pay systems, which gives greater control and visibility of spend - The value of spend ad length of contract justify the cost of proper market engagement and tender or negotiation processes resulting in better value for money - The longer the contract, the greater the opportunities for aligning working practices to create joint efficiency. Reference: - Call Off Contracts - What are they and how are they used? - CIPS study guide page 63-64 LO 1, AC 1.3
Question 99
Under a framework agreement, which of the following are supplier selection mechanisms? Select TWO that apply:
Correct Answer: B,D
A framework agreement is an agreement with one or more suppliers/providers which sets out terms and conditions under which individual contracts (call-offs) can be made throughout the term of the agreement. A framework agreement itself is not a contract, but the call-offs made from it are. Framework arrangements create a streamlined and flexible process for procuring goods, works or services Where a framework for the same goods, works or services is awarded to several suppliers, there are three possible options for awarding call-off contracts: direct award (or direct call-off), mini-competition or a combination of both. Option 1 - Apply the terms of the framework agreement (direct award). Where your requirements match the terms and/or specification of the framework agreement (in the event of any query, you should clarify the situation with the organisation that established the framework), a particular call-off should be awarded without re-opening competition. The call-off should be awarded to the provider who is identified as the most economically advantageous tender based on the award criteria used at the time that the framework was established (i.e. the supplier ranked no. 1). Randomly selecting a supplier off a framework is not permitted. Option 2 - Hold a mini-competition between capable suppliers. If your requirements do not match the terms and/or the specification of the framework, you should conduct a mini-competition exercise. Whilst it is not permitted to substantially change the basic terms or specification of the framework, in running a mini-competition it is possible to supplement or refine the basic terms of the framework prior to making a call-off. Examples of such terms are: - The particular goods/services/works required; - Particular delivery timescales; - Particular invoicing arrangements and payment profiles; - Associated services such as installation, maintenance and training; - Quantity; - Functional specification. Under no circumstances should brand names or brand-specific descriptions of goods be used e.g. BIC Biro Pen, Hewlett-Packard Printer, Dell computer. Descriptions should give reference to the characteristics and outputs of the product or service. Where no other description is possible, any reference should be qualified by adding the words 'or equivalent'. When a mini-competition exercise is held, all suppliers appointed to the framework that are capable of meeting the requirement must be invited to submit a tender. (This might just relate to suppliers within a particular 'lot'). You must not limit the mini-competition exercise to selected providers. A time limit for submitting the tender must be set and advised to competing suppliers. This time limit must be reasonable, taking account of the complexity of the requirement. The call-off must be awarded on the basis of the framework award criteria and new criteria cannot be added, although, where permitted, the weightings may be varied to take account of a particular requirement. However, in adjusting the weightings, care must be taken to ensure that any such changes do not have an adverse effect on competition. Option 3 - Combination of direct award and mini-competition To use a combination approach, the procurement documents must state that this route may be used. The procurement documents will also specify which terms may be subject to the re-opening of competition. Reference: - Guidance on the Use of Framework Agreements - CIPS study guide page 60-62 LO 1, AC 1.3
Question 100
A manufacturing company signed a contract with a raw material supplier. The contract includes a clause on liquidated damages in case of late delivery. Purchaser was obliged to pay after 30 days from delivery. Eventually raw material was delivered 1 week later than initial plan due to supplier's slow production process. There is no defect in the delivered batch. Which of the following can be claimed by the manufacturing company?
Correct Answer: B
In certain circumstances, where two parties have monetary debts against each other, the right to set-off may arise. A right of set-off allows a ("Party 1") to take into account the amount owed to it by the second party ("Party 2") against any amount owed by Party 1 to Party 2, each party must be a debtor and a creditor. Common law provides the key features that must be present for set-off to arise are; 1. mutuality of debts (each party must be the sole beneficial owner of the debt it is owed and the sole person liable for the debt it owes) 2. the claims each party has must be for non-payment of money The common law provisions of set-off can be greatly enhanced by the inclusion of a contractual right to set- off (this is discussed further below) so that set-off is applicable in a greater range of situations. If you envisage set-off being a useful right it is not advisable to rely on the implied ability to use it (via common law or equitable set-off). Common law and equitable set-off are subject to various conditions and limitation however, a contractual right of set-off can be drafted to ensure parties are able to agree exactly how and when set-off should be applied. In the above scenario, the supplier owes the manufacturer the payment for damages, while the manufacturer owes the supplier the payment for goods. This is mutuality of debts, which leads to right of set off. Reference: - Set-off on the right foot: a practical guide to set-off - CIPS study guide page 158-159 LO 3, AC 3.2
