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CIPS Level 2 Procurement study materials
CIPS Level 2 Procurement study resources

CIPS Level 2 Procurement practice questions

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Question 1Procurement and supply principles

Which statement best describes procurement rather than purchasing?

  1. Negotiating the lowest possible unit price with each supplier
  2. Managing the whole process from need to disposal Correct answer.
  3. Expediting late deliveries so that production is not stopped
  4. The clerical task of raising purchase orders and filing them

Explanation

Procurement is the strategic, end-to-end function that begins with recognising a need and continues through sourcing, contracting, receipt and final disposal. Purchasing is the narrower transactional part of that process, mainly raising orders and arranging payment.

Question 2Procurement and supply principles

In the procurement cycle, which activity normally follows the identification of a need?

  1. Matching invoices and paying the supplier
  2. Defining the requirement and analysing the market Correct answer.
  3. Awarding the contract and onboarding the supplier
  4. Reviewing supplier performance after contract end

Explanation

Once a need is recognised it must be translated into a clear specification and understood against the supply market before any sourcing route is chosen. Award, payment and post-contract review all occur at later stages of the cycle.

Question 3Procurement and supply principles

Which of the following best expresses value for money in a procurement decision?

  1. Best whole-life cost balanced against quality Correct answer.
  2. Awarding to whoever can deliver in the shortest lead time
  3. Buying the highest specification the budget supports
  4. Choosing the supplier who quotes the lowest unit price

Explanation

Value for money weighs the whole-life cost of an option against how well it meets the requirement, including quality and fitness for purpose. Price, specification and lead time are each only single dimensions of that judgement.

Question 4Procurement and supply principles

Which document does a buyer send to a supplier to commit to buying goods or services on agreed terms?

  1. Goods received note
  2. Statement of account
  3. Purchase order Correct answer.
  4. Sales invoice

Explanation

A purchase order is the buyer's formal offer to buy at stated prices, quantities and terms, and it becomes the basis for matching delivery and payment. The other documents flow in the opposite direction or record events after delivery.

Question 5Procurement and supply principles

Which of the following is an internal stakeholder in a procurement decision?

  1. The organisation's own finance manager Correct answer.
  2. A local community group
  3. A key supplier's account manager for the contract
  4. A government regulator

Explanation

Internal stakeholders are people inside the buying organisation, such as budget holders, users and finance staff, whose needs and approvals shape the decision. Suppliers, regulators and community groups sit outside the organisation.

Question 6Procurement and supply principles

An employee evaluating tenders holds shares in one of the bidding suppliers. What is the correct course of action?

  1. Keep the interest private so the tender is not delayed
  2. Continue but award the contract fairly
  3. Resign from the company immediately
  4. Declare the interest and withdraw from the decision Correct answer.

Explanation

A conflict of interest must be disclosed promptly to the employer, and the individual should step away from any part of the process where their judgement could be influenced. Disclosure protects both the integrity of the award and the employee.

Question 7Procurement and supply principles

Which type of specification sets out what the product must achieve rather than how it must be made?

  1. Conformance to a detailed drawing
  2. Design specification
  3. Brand specification
  4. Performance specification Correct answer.

Explanation

A performance specification states the required outcomes, such as output, reliability or operating conditions, and leaves the supplier to decide how to meet them. Design, conformance and brand specifications prescribe the solution itself.

Question 8Procurement and supply principles

The three pillars of the triple bottom line approach to sustainable procurement are:

  1. Cost, risk, compliance and governance
  2. Profit, tax, investment and cash flow
  3. Social, economic and environmental Correct answer.
  4. Price, quality, delivery and service

Explanation

Sustainability is assessed against economic, environmental and social performance, often called people, planet and profit. The other sets describe commercial or financial measures rather than sustainability pillars.

Question 9Procurement and supply principles

Machine A costs £20,000 and uses £4,000 of energy a year. Machine B costs £26,000 and uses £2,000 of energy a year. Both last five years with no other costs. What is the whole-life comparison?

  1. Machine A is £6,000 cheaper over the five years
  2. Machine A is £4,000 cheaper over the five years
  3. Machine B is £4,000 cheaper over the five years Correct answer.
  4. The two machines cost the same over the five years

Explanation

Machine A totals £20,000 plus five years of £4,000 energy, which is £40,000. Machine B totals £26,000 plus five years of £2,000 energy, which is £36,000, so B is £4,000 cheaper over life.

Question 10Procurement and supply principles

A supplier provides standard stationery on occasional low-value orders with no shared planning or integration. Which relationship type fits best?

  1. A joint venture company owned by both parties
  2. A co-destiny alliance with shared risk and reward
  3. A transactional, arm's-length relationship Correct answer.
  4. A long-term strategic partnership with shared goals

Explanation

Low-value, low-risk purchases from a competitive market are best handled at arm's length with minimal relationship investment. Partnerships and alliances are reserved for high-value or high-risk relationships where collaboration adds real benefit.

Question 11Procurement and supply principles

An item is low value, has several alternative suppliers and is easy to switch. How is it classified in Kraljic's portfolio matrix?

  1. Leverage items: high value but low supply risk
  2. Strategic items: high value and high supply risk
  3. Routine items: low value and low supply risk Correct answer.
  4. Bottleneck items: low value but high supply risk

Explanation

Kraljic positions purchases by their impact on profit and by supply risk. Low value combined with low supply risk places the item in the non-critical or routine quadrant, where efficient ordering matters more than relationship management.

Question 12Procurement and supply principles

Which factor most strongly supports a decision to make a product in-house rather than buy it?

  1. The organisation has no spare capacity or specialist skills
  2. The activity is central to the firm's competitive advantage Correct answer.
  3. The supplier market is highly competitive with many capable vendors
  4. Short-term cash is needed from the sale of assets

Explanation

Capabilities that underpin competitive advantage, such as proprietary know-how, are normally retained in-house to protect differentiation and control. A strong external market or a lack of internal capability argues the other way, towards buying.

Question 13Procurement and supply principles

Where the scope of work is well defined and unlikely to change, which pricing arrangement places most cost risk on the supplier?

  1. Firm fixed price Correct answer.
  2. Cost reimbursable with an open-ended cap
  3. Cost-plus percentage of cost
  4. Time and materials

Explanation

Under a firm fixed price the supplier agrees a set price and absorbs any cost overrun, so the risk sits with the supplier. Cost-based and time-and-materials arrangements pass cost increases back to the buyer.

Question 14Procurement and supply principles

What is the main reason a buyer might adopt dual sourcing for a critical component?

  1. To reduce the risk of supply disruption if one supplier fails Correct answer.
  2. To reduce the number of purchase orders raised
  3. To simplify the administration of supplier invoices
  4. To obtain the lowest possible unit price from each supplier

Explanation

Splitting demand across two suppliers gives continuity of supply if one is hit by disruption and provides a benchmark for performance. It usually increases administration and may reduce volume discounts, so it is used where risk justifies it.

Question 15Procurement and supply principles

Before awarding a high-risk service contract, a buyer asks for audited accounts, insurance certificates and quality certification. This activity is known as:

  1. Demand planning
  2. Supplier due diligence Correct answer.
  3. Contract closure
  4. Expediting

Explanation

Due diligence checks a supplier's financial standing, insurances, certifications and track record before commitment, so that foreseeable risks are identified early. Expediting, closure and demand planning are unrelated stages of the process.

Question 16Procurement and supply principles

A sole supplier of a specialised component suffers a fire at its only factory. In procurement terms this is best described as:

  1. A currency risk
  2. A reputational risk
  3. A demand risk
  4. A supply or continuity risk Correct answer.

Explanation

Events that stop or interrupt the flow of bought-in goods and services are supply or continuity risks. Currency and demand risks concern price movements and changes in the organisation's own requirements.

Question 17Procurement and supply principles

Which e-procurement tool lets authorised staff order from a pre-approved list of items at pre-negotiated prices?

  1. A reverse e-auction
  2. An invoice dispute portal
  3. An electronic payment gateway
  4. An electronic catalogue ordering system Correct answer.

Explanation

An electronic catalogue holds agreed items and prices so that users can self-serve within policy, which cuts maverick buying and transaction cost. Auctions, payment gateways and dispute portals serve different purposes.

Question 18Procurement and supply principles

A specification names one manufacturer's product and adds 'or equivalent'. What is the main risk of this approach?

  1. Removing the need for a contract
  2. Lowering the whole-life cost of the item
  3. Restricting competition and limiting fair access Correct answer.
  4. Increasing the number of suppliers who are able to bid

Explanation

Naming a brand, even with an equivalence clause, tends to deter alternative suppliers and can be seen as discriminatory or non-transparent. Neutral specifications written around performance encourage competition and better value.

Question 19Procurement and supply principles

A buyer finds evidence of child labour deep in a supplier's extended supply chain. What is the most appropriate first action under responsible procurement?

  1. Continue buying until the current contract expires
  2. Cancel the contract immediately without further discussion
  3. Ignore it because it is outside the supplier's own operations
  4. Raise it with the supplier and agree a remediation plan Correct answer.

Explanation

Responsible procurement calls for engagement, escalation and corrective action so that the breach is addressed and workers are protected. Immediate termination can cause harm and hide the problem, while ignoring it breaches the buyer's own codes.

Question 20Procurement and supply principles

An organisation routinely pays supplier invoices two months late. What is the most likely procurement consequence?

  1. Damage the relationship and may raise future prices Correct answer.
  2. Improve the buyer's standing with other suppliers
  3. Have no effect because payment is administrative
  4. Reduce the supplier's working capital burden

Explanation

Late payment strains supplier relationships, can disrupt the supplier's cash flow and is often priced into future quotations or leads to deprioritised service. Payment terms are therefore part of the commercial deal, not a back-office detail.

Question 21Procurement and supply principles

A supplier's cost breakdown shows materials £28, labour £10, overhead £6 and a profit margin of 10% on total cost. What unit price should the buyer expect?

  1. £46.20
  2. £50.60
  3. £48.40 Correct answer.
  4. £44.00

Explanation

Total cost is £28 plus £10 plus £6, which equals £44.00, and a 10% margin on that cost adds £4.40, giving an expected price of £48.40.

Question 22Procurement and supply principles

Which activity best describes supplier development?

  1. Concentrating spend with fewer suppliers
  2. Reducing the number of deliveries each month
  3. Working with a supplier to improve its capability Correct answer.
  4. Paying suppliers earlier to obtain discounts

Explanation

Supplier development is deliberate joint work to raise a supplier's capability and performance, for example through training, process improvement or shared investment. It differs from merely consolidating spend or changing commercial terms.

Question 23Procurement and supply principles

Which situation best justifies negotiating with a single supplier instead of running an open tender?

  1. The requirement is a standard item with many capable suppliers
  2. Only one supplier holds the patented technology required Correct answer.
  3. The buyer wants to drive the price down through competition
  4. The organisation wants to demonstrate fairness to the market

Explanation

Competition requires a choice of capable suppliers; where a patented or proprietary solution exists there is no contestable market, so negotiation with the sole source is appropriate. Sole sourcing for standard, competitive items would forgo the benefits of competition.

Question 24Procurement and supply principles

A firm outsources its IT helpdesk to one provider on a five-year contract. Which risk does this arrangement create?

  1. A reduced need for the buyer to manage the contract
  2. Loss of in-house skills and dependence on the supplier Correct answer.
  3. A guaranteed reduction in the total cost of the service
  4. The elimination of all risk from the service

Explanation

Long-term outsourcing transfers knowledge and control to the provider, so the buyer can lose the capability to specify, monitor or bring the service back in-house. Contract management effort typically increases rather than disappears.

Question 25Procurement and supply principles

Standardising a commonly used item across all sites typically:

  1. Reduces variety and can lower unit price Correct answer.
  2. Prevents suppliers from bidding for the business
  3. Removes the need for a written specification
  4. Increases unit prices because sites order smaller quantities

Explanation

Standardisation cuts the number of variants, which allows larger consolidated volumes, simpler inventory and stronger negotiating leverage. It does not remove the need for a specification, since the standard item must still be defined.

Question 26Procurement and supply principles

The procurement cycle begins with which activity?

  1. Issuing a purchase order to a supplier
  2. Selecting a supplier from a shortlist
  3. Recognising and defining a need Correct answer.
  4. Paying the supplier's invoice

Explanation

The procurement cycle starts when a need is recognised and defined, because nothing can be specified, sourced or contracted until the requirement is understood. Ordering, supplier selection and payment all happen later in the cycle, after specification and sourcing decisions have been made.

Question 27Procurement and supply principles

Which of the following is one of the traditional 'rights' that procurement aims to achieve?

  1. Right currency
  2. Right quantity Correct answer.
  3. Right brand
  4. Right discount

Explanation

The traditional purchasing rights are quality, quantity, time, price and place (sometimes extended to include the right source). Quantity is one of these, ensuring the organisation buys an amount that meets demand without excessive stock or shortage. Brand, currency and discount are commercial considerations but are not part of the classic list.

Question 28Procurement and supply principles

Which statement best distinguishes procurement from purchasing?

  1. Procurement covers the full cycle from need to payment Correct answer.
  2. Procurement is limited to the act of placing orders with suppliers
  3. Purchasing covers sourcing strategy, contract management and supplier development
  4. The two terms mean exactly the same thing in all organisations

Explanation

Procurement is the wider concept, embracing the whole cycle from identifying a need through specification, sourcing, contracting and payment. Purchasing is narrower and generally refers to the transactional buying activity within that wider process.

Question 29Procurement and supply principles

Which statement best describes value for money in procurement?

  1. Awarding the contract to the supplier with the largest market share
  2. Awarding the contract to the lowest price offered
  3. Awarding to the supplier with the shortest delivery time regardless of cost
  4. Balancing whole-life cost with quality and fitness for purpose Correct answer.

Explanation

Value for money considers the optimum combination of whole-life cost and quality to meet the user's requirement, not simply the cheapest bid. A low price that delivers poor quality or high running costs does not represent good value.

Question 30Procurement and supply principles

Spend analysis shows that 8% of a firm's suppliers account for 75% of total spend. What is the most useful implication?

  1. All remaining suppliers should receive the same level of management attention
  2. Management effort should focus on that small group of high-spend suppliers Correct answer.
  3. The 8% of suppliers should be removed from the approved list to reduce administration
  4. Spend analysis cannot be used to prioritise supplier management

Explanation

Spend analysis typically reveals a Pareto pattern in which a small number of suppliers carries most of the value, so commercial and relationship effort should be concentrated where the spend is. Low-spend suppliers are usually handled through simpler, lower-cost processes rather than equal attention.

Question 31Procurement and supply principles

A manufacturer wants to reduce the cost and time of developing a new component. Which action best reflects early supplier involvement?

  1. Asking suppliers to submit invoices electronically
  2. Running a price-only tender after the design has been fully frozen
  3. Involving a key supplier's engineers before the design is finalised Correct answer.
  4. Adding a penalty clause for late delivery to the contract after award

Explanation

Early supplier involvement brings the supplier's expertise into the design and specification stage, when changes are cheap and ideas can still be adopted. Once the design is fixed, the supplier can only quote on what has already been decided.

Question 32Procurement and supply principles

A procurement team groups all of its marketing spend under a single manager who develops a sourcing strategy for that group of purchases. This is best described as:

  1. Category management Correct answer.
  2. Logistics management
  3. Quality assurance
  4. Inventory control

Explanation

Category management organises spend into groups of similar purchases and manages each group as a strategic unit with its own supply market analysis and sourcing plan. It differs from operational activities such as stock control or quality inspection, which deal with individual transactions or conformance.

Question 33Procurement and supply principles

An organisation sets up a framework agreement with three approved suppliers of IT consumables for two years. What is the main characteristic of this arrangement?

  1. Each order needs a new full tender competition open to any supplier
  2. Terms are agreed in advance and orders are called off as needed Correct answer.
  3. The organisation must buy its entire requirement from one supplier
  4. Prices are negotiated separately after each order is placed

Explanation

A framework agreement sets out terms, including pricing, in advance for a defined period, and the buyer then places call-off orders as requirements arise. Competition is confined to the framework suppliers rather than reopened to the whole market.

Question 34Procurement and supply principles

A buyer wants to measure whether a supplier is meeting agreed delivery commitments. Which measure is most appropriate?

  1. Orders delivered on the agreed date and in full Correct answer.
  2. The supplier's total annual turnover in the last financial year
  3. The number of staff the supplier employs at each site
  4. Number of invoices received from the supplier each month

Explanation

A key performance indicator must relate directly to the behaviour being managed, so delivery performance is measured by on-time-in-full delivery against the agreed date and quantity. Turnover, staffing and invoice volumes describe the supplier's size or administration, not its delivery reliability.

Question 35Procurement and supply principles

A buyer has a complex requirement and wants to limit the tender to suppliers able to demonstrate relevant experience. Which approach fits best?

  1. Restricted (pre-qualified) tendering Correct answer.
  2. Open tendering advertised to all interested parties
  3. Purchase by catalogue from a wholesaler
  4. Direct negotiation with a single supplier

Explanation

Restricted tendering uses a pre-qualification stage to screen suppliers on capability and experience, and only those who pass are invited to tender. Open tendering invites any interested party, which suits simple requirements where wide competition is more important than screening.

Question 36Procurement and supply principles

In a purchase-to-pay process, which arrangement best reduces the risk of fraudulent payment?

  1. Splitting ordering, receipt and payment approval between different staff Correct answer.
  2. One manager approves the purchase, receives the goods and authorises payment
  3. The supplier prepares and approves the invoice
  4. Paying all invoices without a purchase order to speed up processing

Explanation

Segregation of duties ensures that no single person controls a whole transaction, so ordering, receiving and payment approval are checked against each other. This makes it much harder to create fictitious purchases or divert payments.

Question 37Procurement and supply principles

A tender is scored with quality weighted at 60% and price at 40%. A supplier scores 70 out of 100 on quality and 90 out of 100 on price. What is the supplier's weighted total score?

  1. 76
  2. 72
  3. 74
  4. 78 Correct answer.

Explanation

The weighted total is (70 x 0.6) + (90 x 0.4) = 42 + 36 = 78. Weighting converts each criterion score into its contribution to the overall mark before the contributions are added together.

Question 38Procurement and supply principles

Which statement best captures the difference between value analysis and value engineering?

  1. Value engineering is a method of calculating a supplier's profit margin
  2. It improves value in existing products, while value engineering does so at design stage Correct answer.
  3. Both terms describe negotiating a lower purchase price after the contract has been awarded
  4. Value analysis is used only for services and value engineering only for goods

Explanation

Value analysis examines an existing product or process to see how its function can be delivered at lower cost or with better value, while value engineering applies the same functional thinking during design before the item exists. Both focus on function rather than simply cutting price.

Question 39Procurement and supply principles

A group with sites in several countries is considering centralising its procurement. Which is the most likely disadvantage?

  1. Inconsistent contract terms and conditions between the sites
  2. Slower response to local needs and less local ownership of decisions Correct answer.
  3. Loss of buying leverage and higher unit prices from suppliers
  4. Duplication of purchasing effort across the sites

Explanation

Centralisation typically increases leverage and standardises terms, but it can distance purchasing from local operations and slow down responses to site-specific needs. Sites may also feel less ownership of agreements imposed from the centre.

Question 40Procurement and supply principles

Before negotiating with a preferred supplier, a buyer identifies an alternative supplier that can meet the requirement at a known price. In negotiation terms this is best described as:

  1. A cost-plus pricing model based on the supplier's actual costs
  2. The supplier's reservation price below which it will not trade
  3. A liquidated damages clause protecting against late delivery
  4. The buyer's best alternative to a negotiated agreement Correct answer.

Explanation

The best alternative to a negotiated agreement is the course of action a negotiator will take if no deal is reached. Identifying a credible alternative strengthens the buyer's position because walking away remains a viable option.

Question 41Procurement and supply functions

Which term best describes the whole process of acquiring goods and services, from identifying a need through to the end of the contract?

  1. Procurement Correct answer.
  2. Purchasing
  3. Expediting
  4. Requisitioning

Explanation

Procurement spans the full cycle: identifying a need, specifying it, sourcing, contracting, and managing the contract and supplier relationship to its conclusion. Purchasing refers more narrowly to the transactional act of buying, while expediting and requisitioning are individual activities inside the wider process.

Question 42Procurement and supply functions

The traditional 'five rights' of purchasing are concerned with securing:

  1. The right quality, quantity, time, price and place Correct answer.
  2. The right supplier, contract, budget, approver and auditor
  3. The right price, payment terms, currency, Incoterm and discount
  4. The right specification, tender, evaluation, award and review

Explanation

The five rights are the classic summary of what a buyer must get right: the right quality, in the right quantity, at the right time, at the right price, delivered to the right place. The other lists mix in commercial terms, governance roles or cycle stages that are not part of the model.

Question 43Procurement and supply functions

For a furniture manufacturer, which of the following is an indirect (non-production) purchase?

  1. Upholstery fabric used for sofas
  2. Office cleaning services for the head office Correct answer.
  3. Timber used for chair frames
  4. Foam filling used for cushions

Explanation

Direct purchases are the goods and materials that go into the product being made and sold, such as timber, fabric and foam. Indirect purchases support the running of the organisation itself, such as cleaning, stationery or IT support, and do not form part of the finished product.

Question 44Procurement and supply functions

A department that raises a requirement for goods it will use itself is best described by procurement as:

  1. A supplier
  2. A shareholder
  3. A regulatory authority
  4. An internal customer Correct answer.

Explanation

Procurement treats the colleagues and departments it buys for as internal customers, because their needs define the requirement and their satisfaction measures service quality. Shareholders, regulators and suppliers are external parties with different relationships to the organisation.

Question 45Procurement and supply functions

The purchase-to-pay (P2P) cycle describes:

  1. The end-to-end process from identifying a need to paying the supplier Correct answer.
  2. The process of finding and approving new suppliers
  3. The step in which goods are received into the warehouse
  4. The annual audit of supplier invoices

Explanation

P2P covers the whole transactional chain: a need is recognised, a requisition and order are raised, goods or services are received and matched, and the invoice is paid. Receipt of goods, invoice audit and supplier approval are single elements within that chain, not the cycle itself.

Question 46Procurement and supply functions

Which role typically has overall responsibility for leading the procurement function at executive level in a large organisation?

  1. The finance director in every organisation
  2. The chief procurement officer Correct answer.
  3. The warehouse supervisor
  4. The head of sales

Explanation

The chief procurement officer (or equivalent head of function) is the executive who sets procurement strategy, leads the function and represents it at board level. Finance, warehousing and sales roles have different remits, even though they may work closely with procurement.

Question 47Procurement and supply functions

In public procurement, value for money is best described as:

  1. Always selecting the lowest-priced compliant offer
  2. The optimum combination of whole-life cost and quality to meet the requirement Correct answer.
  3. Awarding to the supplier offering the fastest delivery
  4. Always selecting the highest-quality offer regardless of price

Explanation

Value for money balances cost against quality and fitness for purpose over the whole life of the requirement, not just the headline price. Choosing the cheapest or the best-quality option in isolation ignores the trade-off between them and the cost of ownership.

Question 48Procurement and supply functions

What is meant by 'maverick buying'?

  1. Buying in unusually large volumes
  2. Buying at a negotiated contract discount
  3. Buying from the organisation's preferred supplier
  4. Buying outside agreed contracts and procedures Correct answer.

Explanation

Maverick buying is spending that bypasses the organisation's approved suppliers, contracts or purchasing channels, usually by buying directly from a non-contracted source. It undermines negotiated pricing, spend visibility and compliance controls.

Question 49Procurement and supply functions

A key advantage of a centralised procurement structure is:

  1. Faster local response to day-to-day operational needs
  2. Greater leverage through consolidating spend and standardising terms Correct answer.
  3. Closer relationships between local buyers and local users
  4. A reduced need for any procurement staff

Explanation

Bringing spend together lets the organisation present a larger volume to suppliers, which supports stronger negotiation and consistent contract terms. Local responsiveness and proximity to local users are the strengths of decentralised structures, so they are not advantages of centralisation.

Question 50Procurement and supply functions

Four hospitals jointly run one tender for medical gloves so that all of them can buy on the resulting terms. This arrangement is best described as:

  1. A reverse auction
  2. A framework agreement awarded to a single supplier
  3. A purchasing consortium Correct answer.
  4. An outsourcing contract

Explanation

A purchasing consortium exists where several separate organisations combine their requirements and run a joint sourcing exercise to gain scale. A framework agreement is the contract vehicle that may result, and outsourcing or reverse auctions describe different commercial arrangements.