CPCM Test with Complete
Solutions
Cooperative Purchasing - Answer-Process whereby two or more communities, counties
or other governmental jurisdiction voluntarily agree to coordinate their purchase of one
or more commodities to obtain the best unit price through volume buying
International Contract Negotiation Conditions - Answer-- Import Issues
- Export Issues
- Currency differences
Supply Management - Answer-a systems management concept that combines activities
in a single department, similar to the arrangement of a materials management form of
organization
Logistics management - Answer-Implements and controls effective and efficient forward
and reverse flow of goods and services from the point of origin to the point of
consumption
Forward Buying - Answer-Practice of buying materials in quantity exceeding current
requirements, but not beyond the actual foreseeable requirements
Quantity Discounts - Answer-Price reduction given to buyers and normally offered for a
specific dollar purchase or quantity purchase
Horizontal Integration - Answer-companies that own several different plants, each of
which does the same thing (retail store)
Vertical Integration - Answer-firms that own several plants, each owning a different
stage in the production process
Forecast - Answer-Based on several data inputs including market trends, sales, fore
feedback and historical data
Operational Plan - Answer-A plan that is prepared in January that details the specific
actions that must be taken to award two contracts in excess of $5 million by September
15 to meet specific objectives
Negotiated price and responsiveness - Answer-Metrics used to evaluate a buyers
performance
,Organizing - Answer-Sorting an effort into tasks and allocated resources
Complexity of mission - Answer-normally dictates the contract management staff
composition
Contingency Planning - Answer-Planning that focuses on changing environmental and
economic conditions
Leadership - Answer-the common point of intersection among the strategic, operational
and interpersonal domains
Dicharge of a contract - Answer-Results when the obligations incurred by the parties
when they entered the agreement are excused and the parties are no longer bound to
perform as promised
Breach of Contract - Answer-The failure, without legal excuse, to perform any promise
that forms the whole or part of the contract
As Is - Answer-Condition of property to be sold or leased and generally pertains to a
disclaimer of liability. Generally not guaranteed
Kickback - Answer-Seller providing a portion of the portion price to the buyer to induce
purchase or to influence future purchases
Condition Precedent - Answer-A condition that activates a term in a contract
Forbearance - Answer-Intentional failure of a party to enforce a contract requirement,
usually done for an act of immediate or future consideration from the other party
Sometimes referred to as a non waiver or one time waivers but not as a relinquishment
of rights
Agency - Answer-Relationship whereby the principal authorizes another to act for an on
behalf of the principal and to bind the principal in a contract
Novation Agreement - Answer-Legal instrument executed by the seller (transferor), the
successor in interest (transferee), and the buyer by which the transferor guarantees
performance of the contract. The Transferee guarantees performance of the contract,
and the buyer recognizes the transfer of the contract and related assets.
Acceptance - Answer-1. The act of an authorized representative of the buyer by which
the buyer assents to ownership of existing and identified supplies, or approves specific
services rendered, as partial or complete performance of a contract. 2. An offer's
manifestation of assent to the terms of an offer made to him or her by an offeror. The
acceptance is the act, the verb or written assent, or, in certain instances, the silence
that creates contractual liabilities for both the offeror and the offer. 3. the taking and
,receiving of anything in good part and as if it were a tacit agreement to a preceding act
that might have been defeated or avoided if such acceptance had not been made. 4.
Agreement to the terms offered i a contract. An acceptance must be communicated and
(in common law) it must mirror image of the offer
consideration - Answer-The cause, motive, price or impelling influence that induces a
contracting party to enter a contract
Conflict of Interest - Answer-An employee's personal or financial interest conflicts or
appears to conflict with his or her official responsibility
Fraud - Answer-An intentional misrepresentation of truth to induce another in reliance
upon it to part with something of value to him or her, or to surrender a legal right
Ethics - Answer-Standards by which one should act based on values
Defective specifications - Answer-Mistakes and omissions in the requirements set forth
Domestic End Product - Answer-Type of product is considered to be manufactured in
the United States if the cost of components mined, produced or manufactured exceeds
50% of the cost of all its components
Firm Fixed Price - Answer-Contract family the provides for a price that is not subject to
any adjustment on the basis of the contractors cost experience in performing the
contract
Advantages of a Firm Fixed Price Contract - Answer-Fair and reasonable price can be
established at outset
Fixed-Price Incentive Contract - Answer-Profit is earned or lost based on the
relationship that the contracts final negotiated cost bears to the total target cost
Advantage of Cost-Plus Incentive-Fee Contract - Answer-Performance incentives are
clearly identified and objectively measured
Cost-Plus Award Fee - Answer-Award fee is earned for excellence in performance,
quality, timelines, ingenuity, and cost-effectiveness and can be earned in whole or part
Time and materials (T&M) contract - Answer-A ceiling price is established at time of
award
Cost Reimbursement - Answer-Type of contract family provides for payment of
allowable, allocable, and reasonable costs incurred in the performance of a contract
, Time and Materials (T&M) Contract - Answer-Type of contract provides for acquiring
supplies or services on the basis or direct labor hours at specified fixed hour rates that
includes wages, overhead and materials
Letter Contract - Answer-A preliminary written agreement to begin immediately
manufacturing supplies or performing services
Examples of competitive acquisition methods - Answer-1. Sealed Bidding, 2. simplified
acquisition, 3. Negotiation
Payment Bond - Answer-Bond that secures the appropriate payment of subcontractors
for their completed and acceptable goods and/or services.
Surety backs a contractor ensuring their subs/ suppliers get paid
Cost of Capital - Answer-Under the net-present-value method, a manager determines
some minimum desired rate of return.
AVERAGE RATE a firm pays on combination of debt and equity.
Acquisition Cost - Answer-This includes all costs associated with generating and
processing an order and its related paperwork. It is the sum of the ordering,
transporting, handling and all inventory handling costs associated with the acquisition of
material
Accrual Accounting - Answer-This type of accounting recognizes important concepts,
such as receivables due from customers, payables due to vendors, interest due from
investments, and other matching concepts as a means of providing an accurate picture
of a company's financial position.
Follows revenue recognition principle and matching principles.
Direct Labor - Answer-All work that is obviously related and specifically and
conveniently traceable to specific products.
Direct Costs - Answer-Costs specifically identifiable with a contract requirement,
including but not restricted to costs of material and/or labor directly incorporated into an
end item
Fixed Price with Award Fee - Answer-This type of contract is sometimes used when it is
difficult to include other incentives because contractor performance cannot be
measured objectively. It established a fixed price, including normal profit that will be
paid for satisfactory contract performance, also establishes additional fee the contractor
can earn for performance.
Fixed Price Incentive Contract - Answer-Provides for an initial fixed price, and also
allows for adjusting profit and establishing, the final contract price by use of a formula
that compares the relationship of total final negotiated cost to total target cost
