Question 1

The Equality Act in the UK was introduced in which year?

Accepted Answer

C

Explanation: The Act was introduced in 2010. Although this is a UK-centric QUESTION NO :, it is valid for several rea-sons. Firstly, the UK was one of the first countries to introduce such a wide-ranging Act; secondly the Act is so wide-ranging that all UK managers need to be familiar with it. People who live and work outside the UK may wish to familiarise themselves with the content of the Act to have an idea of what the impact of such legislation might be like. Interestingly, in the UK, the Act has seldom been used 'in anger'.

Question 2

The primary purpose of a public sector organisation is to:

Accepted Answer

D

Explanation: The correct answer is to provide services. However, some other secondary factors may come into play. For example, some public sector organisations may be encouraged to boost national prestige eg airports, airlines; or they may be used as job creation schemes.

Question 3

Under a contract with a price adjustment clause, which of the following would commonly be grounds for price adjustment (depending on the precise contract terms)?

Accepted Answer

B, C

Explanation: Exchange rate fluctuations and escalating materials costs can both substantially impact on a contract price. Where a contract has been drafted to allow for it, the price may be adjusted in line with some pre-agreed mechanism or formula to make the price paid more equitable. Quality problems of the supplier's own making and shareholders seeking extra profit - neither being uncommon - are not seen as being grounds for adjusting price (upwards). I should mention that price adjustment clauses can result in prices being adjusted either upwards or downwards, or not at all, depending on circumstances.

Question 4

Sources of finance for a public sector entity are primarily (select one):

Accepted Answer

B

Explanation: The correct answer is 'taxpayers'. On occasion, part of a public sector organisation may make sales which will generate revenue. In some mega-projects (eg power generation), public sector bodies will sometimes into long-term arrangements with private sector financiers, but this is not the mainstream. Delaying payments to suppliers is a tactic used by some organisations, but they are more likely to be private sector, and such a practice is regarded as unethical by many, including CIPS.

Question 5

An arrangement between a buyer and a supplier in which they agree to apportion benefits (such a reduced costs, or increased outputs) arising from particularly sound contract performance may be called:

Accepted Answer

D

Explanation: There is an expression 'painshare' which is an almost-ironic term referring to the opposite of the situ- ation described in the QUESTION NO : - when something has gone wrong, and the additional cost must be shared between the parties. The other two answers are a little bit facetious. The correct answer is 'gainshare' when the parties share benefits, according to a pre-agreed ratio or formula.

Question 6

Doing the same with fewer resources is:

Accepted Answer

A

Explanation: Economy is most easily thought of as paying less, hopefully with no loss of quality, service, etc Effectiveness is most easily thought of as achieving the right outputs. What one really seeks is effectiveness. Unfortunately it is possible to be efficient without being ef- fective. An example from my work life is the collection of statistics / 'returns'. I have come across parts of organisations which were very efficient at collecting data, but the data were not used in any meaningful way - the outputs of the efficiency did not add value and did not create useful outputs. There was a lack of effectiveness. The distinction is worthwhile, I think.

Question 7

Which of the following are examples of renewable resources?

Accepted Answer

A, D

Explanation: Both wind power and hydro-electric can be used many times over - they are renewable - wind, riv- ers, tides return each day, more or less. On the other hand, coal, oil as well as wood, turf and gas are non-renewable - that is, there are lim- ited stocks and they will run out. Many economies are now switching to use of renewables to generate electricity, heat, etc

Question 8

Thinking of Michael Porter’s Industry Structure Analysis (commonly referred to as Five Forces Analysis), which of the following are seen as threats (select all that apply):

Accepted Answer

A, C

Explanation: The model speaks of the threat of new entrants and the threat of substitutes. New entrants are par- ticularly attracted by high profitability in the sector. Substitutes can come about in a number of ways for example, through lower prices or because of technology.

Question 9

Because of the need for frequent or semi-frequent uses of competition, public sector buyers are less
likely to find themselves in a close partnership arrangement with a supplier than private sector buy-
ers. True or false?

Accepted Answer

B

Explanation: This is true.

Question 10

'Open tendering may impose a substantial administrative burden on the procurement function.' True or false?

Accepted Answer

A

Explanation: Because a wide range of organisations (or even individuals) may respond to an open tender, consid- erable administrative resource may have to be devoted to analysing offers.

Question 11

'Price' and 'payment terms' are the same thing. True or false?

Accepted Answer

B

Explanation: An easy question. Price is what the customer will pay for goods or services eg fifty dollars; payment terms are the ar- rangements under which you pay the price eg in advance, on delivery, 30 days, 60 days, etc. Although this may seem rather obvious, I have encountered a surprising number of people who seem to confuse the two.

Question 12

'Shareholders are an example of stakeholders'. True or false?

Accepted Answer

A

Explanation: Shareholders are one example of a range of stakeholders in a private or public limited company.

Question 13

'Trade within major trading blocs tends to expand, whereas this is not necessarily the case regarding trade between major trading blocs'. True or false?

Accepted Answer

A

Explanation: This is true. The purpose of creating or entering into a trading bloc is to increase the volumes of trade between countries within that bloc. This is irrespective of trade between blocs, which may grow or not, de- pending on circumstances.

Question 14

Shareholders of a limited company are not liable for unpaid debts'. True or false?

Accepted Answer

B

Explanation: This is true: the liability of shareholders is limited to their agreed financial commitment, not beyond that.

Question 15

Public sector procurement has a wider group of stakeholders than private sector. True or false?

Accepted Answer

B

Explanation: This is normally true, often resulting in greater complexity in managing public sector organisations.

Free CIPS L3M1 Actual Exam Questions