Solus Trading has begun a project to improve the level of delivery performance from its suppliers. They need to develop a key performance indicator (KPI) to measure the performance improvement. Which KPI would be suitable to use?

• A.Percentage of on-time in full
• B.Percentage of rejects and returns
• C.Percentage of cost reduction
• D.Percentage of customer complaints

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Standard terms and conditions should become the governing terms for which group of items?

• A.Leverage items
• B.Bottleneck items
• C.Strategic items
• D.Routine items

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Under which of the following scenarios an RFQ is most likely to be used?

• A.Purchase of a small number of standardised products under a framework agreement
• B.Purchase of complex machinery
• C.Design of a unique and complex software code
• D.When the buying organisation does not know the requirements in details and needs the input from suppliers

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In which of the following conditions, request for quotation produces the best results?

• A.With an ambiguous specification
• B.Under framework agreements
• C.Under a complex process
• D.With strategic items

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To expand its operation, Steel Co. decides to build a new plant. Despite of excitement, the senior management is very concerned about the complexity and risks of such project. Hugo, the procurement manager, suggests that the company can adopt a model form of contract. What is the advantage of using model form of contract?

• A.It shifts the balance of power in the favour of the buyer rather than the contractor
• B.The company could avoid the need to draft a complex contract from blank
• C.Model form of contract eliminates the need for legal advice totally
• D.The company does not need to draft the drawings as well as specification anymore

Correct Answer: B

Advantages and Disadvantages of using model form contracts.
Model form contracts save a lot of time and money. They are written by industry experts and the buyers and suppliers both understand what is included in the contract.
They are mainly used in Construction and term maintenance contacts. Typical ones are JCT and NEC.
Without the use of model form contracts the buyer and supplier will take a long time to write the terms, negotiate and finalise the contract.
This is time and money wasted.
However, model form contracts require buyers and suppliers to have training so you understand them.
Finally, if you are a buyer in a powerful position you cannot exploit that with a model form contract as these are written for mutual benefit.

Reference:
- Procurement Study Buddy on Facebook
- CIPS study guide page 147

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