Maria is working on a new one-off construction project and is looking to expand a factory. A requisition comes through for an outright purchase of a digger. Maria changes this to a lease order instead. Is she right to do so?
Correct Answer: B
For short-term or one-off projects, leasing equipment is often more cost-effective than purchasing. It reduces the financial burden of asset ownership, such as depreciation and maintenance, especially if the equipment is not needed beyond the project’s scope. Maria’s decision aligns with sound procurement and asset management practices.
What are disadvantages of a buyer contracting on the supplier’s terms? Select TWO that apply.
Correct Answer: A, C, D, E
Contracting on the supplier’s terms can pose risks for the buyer. Common disadvantages include retention of title clauses (C), where the supplier retains ownership of goods until full payment is made. Also, suppliers may include clauses allowing them to raise prices without notification (E). These terms shift risk to the buyer and reduce predictability and control.
CIPS L4M3 Commercial Contracting Study Guide, Chapter 3, Section 3.1.3 — Standard forms of contract and negotiating key terms.
Which of the following would you expect to see in an Invitation to Tender (ITT)?
Correct Answer: D
An ITT specifies what the buyer requires — including delivery milestones, scope, and evaluation criteria.
Supplier rates and BAFOs are part of supplier responses, not ITT content.
EAC Facilities Management is planning for a new construction project in the suburban area. They decide to use NEC or FIDIC model form of contract for this project. Is this a right course of action?
Correct Answer: A
Construction procurement is particularly complex and risky. Forming a contract in construction may take lots of time and energy of both client and contractor. Therefore, standardisation inconstruction contract would help the buying organisation to save their precious resources. Furthermore, the wording of these model form contracts is accurate as it has been agreed among the professionals within an industry.
One of the advantage of using model forms of contract is the balanced of risk and reward allocation between the contractor, consultant engineer and the client.
– An Introduction to FIDIC model contracts
– CIPS study guide page 139-147
LO 3, AC 3.1
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