CIPS
L4M5 Exam
CIPS Level 4 Diploma in Procurement and Supply
Questions & Answers
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Question: 1
Which of the following occur within the planning and preparation stage in a negotiation process?
Select THREE that apply.
A. Understanding the other party
B. Defining the constituents
C. Making as few concessions as possible
D. Using questions to elicit information
E. Narrowing the range of solutions
F. Analyse the bargaining power
Answer: A, B, F
Explanation:
In the planning and preparation stage of negotiation, it is essential to build a strong foundation by
understanding various factors that influence the negotiation outcome. According to CIPS resources,
critical aspects of preparation include:
Understanding the other party (A): This helps in anticipating their needs, objectives, and potential
negotiation styles, leading to more strategic discussions.
Defining the constituents (B): This involves identifying all stakeholders or parties impacted by the
negotiation, ensuring their interests are considered when planning the negotiation strategy.
Analyzing the bargaining power (F): Understanding the relative power each party brings to the
negotiation helps in setting realistic goals and predicting possible negotiation dynamics.
These elements are foundational in ensuring a well-rounded approach and enabling both parties to
enter negotiations with clarity and strategy, enhancing the potential for a positive outcome.
Question: 2
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A purchasing organisation is discussing its approach to an upcoming negotiation with a key supplier
over a contract for critical new services. They have decided they want to find a Win/Win (integrative)
solution. Which TWO of the following would be appropriate in this scenario?
A. Collaboration
B. Problem solving
C. Coercion
D. Persuasion
E. Transfer of risk
Answer: A, B
Explanation:
In a Win/Win or integrative negotiation approach, the goal is to achieve mutual benefit, which is
characterized by a collaborative environment. According to CIPS principles on integrative
negotiation:
Collaboration (A): Actively working together enables both parties to find solutions that maximize
joint gains and address the needs of both sides.
Problem solving (B): Focusing on problem-solving allows both parties to address the issues at hand
rather than competing over positions, facilitating a solution that satisfies both parties' needs.
By emphasizing collaboration and problem-solving, the organization increases the likelihood of a
successful, sustainable agreement that respects both parties' interests.
Question: 3
Maria is a professional services category buyer within the National Health Service. Due to the severe
financial budget cutbacks the National Health Service is facing, the procurement team has been
tasked with achieving cost savings so that funding available can be spent on patient care. Maria plans
to achieve savings with one of her collaborative suppliers. Which negotiation approach should she
undertake?
A. Win-Lose
B. Lose-Lose
C. Win-Perceived Win
D. Win-Win
Answer: D
Explanation:
The Win-Win approach is the most appropriate negotiation strategy in situations where collaboration
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and ongoing relationships are prioritized. In this case:
Achieving cost savings: The NHS aims to reduce expenses in order to reallocate funds to critical areas,
making it essential that both parties work together to find cost-effective solutions.
Collaborative supplier relationship: Since Maria is working with a collaborative supplier, maintaining
a positive relationship through mutual benefit is essential for continued cooperation.
Alignment with public service objectives: A Win-Win outcome aligns with the NHS's broader
objectives of maximizing resources for patient care, as it ensures that savings are achieved without
undermining the supplier’s commitment to quality service.
This approach aligns with CIPS guidelines for maintaining productive, ethical partnerships in
procurement, especially in critical sectors like healthcare.
Question: 4
Hammad Alsuwaidi is a procurement professional leading a negotiation for a vehicle rental contract.
Hammad has a clear goal to negotiate a two-year contract in exchange for a minimum of a 20%
discount. During the negotiation, Hammad presents to the supplier the facts, figures, and
justification for a 20% discount. Which of the persuasion methods below has Hammad chosen?
A. Push
B. Visionary
C. Pull
D. Collaborative
Answer: A
Explanation:
Hammad’s approach of presenting facts, figures, and justifications aligns with the Push persuasion
method. The Push strategy involves directly presenting information, data, and logical arguments to
convince the other party of a certain outcome. In this scenario, Hammad is using objective evidence
to influence the supplier towards agreeing to a discount, which is characteristic of the Push method,
as per CIPS guidance on negotiation tactics.
Question: 5
Which of the following are variable costs?
A. Rent
B. Loan repayments
C. Insurance
D. Packaging
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Answer: D
Explanation:
Packaging is considered a variable cost because it fluctuates with the level of production or sales
activity. Variable costs change directly in relation to the volume of output or service. In contrast:
Rent (A), Loan repayments (B), and Insurance (C) are fixed costs, as they generally do not vary with
production levels within a certain range. These are recurring costs that remain constant over time,
aligning with CIPS's cost classification in procurement.
Question: 6
For a commercial negotiation to be effective, the organisation has to identify resources required for
negotiation. Which one of the following could help?
A. Involve a larger team than the other party
B. Involve an appropriate cross-functional team
C. Involve a team of only senior managers
D. Involve a location-based team only
Answer: B
Explanation:
Involving an appropriate cross-functional team is beneficial for effective commercial negotiation
because it brings together diverse perspectives and expertise relevant to the negotiation context.
According to CIPS, a cross-functional team ensures that all aspects, such as technical, financial, and
operational inputs, are considered, leading to more balanced and informed decision-making. This
approach also helps in addressing complex negotiation elements effectively.
Question: 7
What are the potential sources of conflict between the buyer and supplier? Select TWO that apply.
A. Persistent late payment of the supplier’s invoices
B. Unequal sharing of gains, risks, and costs with the supplier
C. Requesting early supplier involvement
D. Planning scheduled visits to the supplier site
E. Scheduling agreed supplier delivery dates
Answer: A, B
Explanation:
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Persistent late payment of the supplier’s invoices (A) and Unequal sharing of gains, risks, and costs
with the supplier (B) are potential sources of conflict as they create dissatisfaction and imbalance in
the relationship. According to CIPS materials:
Late payments (A) can strain the supplier’s cash flow, affecting their operational stability and leading
to mistrust in the buyer.
Unequal sharing of gains, risks, and costs (B) can result in one party feeling exploited or unfairly
treated, which undermines the collaborative spirit essential for long-term partnerships.
In contrast, requesting early supplier involvement, planning visits, or setting delivery dates are
typically part of constructive relationship management practices and do not inherently lead to
conflict.
Question: 8
When developing a negotiation approach, according to recognised theory (for example, Mendelow),
how should stakeholders with high interest but low power be managed?
A. Minimal effort
B. Key player
C. Keep informed
D. Keep satisfied
Answer: C
Explanation:
According to Mendelow's Stakeholder Matrix, stakeholders with high interest but low power should
be managed by keeping them informed. These stakeholders are invested in the outcome but lack the
influence to change it, so keeping them updated helps in maintaining their support and managing
expectations without intensive resources or prioritization. This approach aligns with CIPS guidance
on stakeholder management in negotiation planning.
Question: 9
A procurement professional is dissatisfied with how a recent negotiation was concluded. What could
they do to improve their negotiation approach?
Seek feedback from the supplier on their recent performance
Prepare for all negotiations with a WIN/LOSE (distributive) approach
Involve lots of people in future negotiations
Undertake reflective practice after each negotiation
A. 1 and 3
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B. 2 and 3
C. 1 and 4
D. 3 and 4
Answer: C
Explanation:
To improve negotiation outcomes, seeking feedback from the supplier (1) and undertaking reflective
practice (4) are recommended actions. Feedback from the supplier can provide insights into areas for
improvement from the counterparty's perspective, while reflective practice allows the negotiator to
evaluate their own approach, outcomes, and areas for growth. This approach aligns with CIPS's
emphasis on continuous improvement in negotiation skills.
Question: 10
Maria has adopted an adversarial style relationship with her stationery supplier. This relationship
style can be characterised by which of the following? Select the TWO that apply.
A. Minimal sharing of information
B. Requirement to exceed expectations
C. Degree of mutual commitment
D. Use of power to seek the best possible deal
E. Requirement to secure quality of supply
Answer: A, D
Explanation:
An adversarial relationship is characterized by a competitive, often zero-sum approach where:
Minimal sharing of information (A): In adversarial settings, there is limited transparency as each
party prioritizes its interests.
Use of power to seek the best possible deal (D): Power dynamics are leveraged to gain favorable
terms, often at the expense of the other party.
This style typically lacks collaboration and mutual commitment, focusing instead on short-term gains
rather than building a partnership, as described in CIPS resources on adversarial relationships.
Question: 11
Which of the following stages of the CIPS Procurement Cycle are typically where commercial
negotiations take place?
Contract management and improvement
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Develop tender documentation
Market sector analysis
Contract award and implementation
A. 1 and 4
B. 1 and 3
C. 3 and 4
D. 2 and 3
Answer: A
Explanation:
Commercial negotiations commonly take place during Contract Management and Improvement (1)
and Contract Award and Implementation (4) stages. During these stages:
Contract Management and Improvement (1): Ongoing negotiations may be required to adjust terms
and conditions as part of managing the contract lifecycle.
Contract Award and Implementation (4): Initial negotiations finalize terms, setting the foundation for
successful contract execution.
These stages are pivotal in ensuring both initial and ongoing alignment, as outlined in the CIPS
Procurement Cycle.
Question: 12
A supplier can produce a product for $160. The supplier sells the product to their client for $240,
making a profit before tax of $80 on the transaction. What is the mark-up profit percentage earned
by the supplier on this transaction?
A. 33%
B. 159%
C. 50%
D. 67%
Answer: C
Explanation:
The mark-up percentage is calculated as the profit divided by the cost of production, then multiplied
by 100 to convert it into a percentage.
Calculation:
(
80
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/
160
)
×
100
=
50
%
(80/160)×100=50%
Thus, the supplier’s mark-up percentage is 50%, as per standard pricing calculations used in
procurement.
Question: 13
A wide range of factors may be taken into account by suppliers when setting or negotiating prices.
Which of the following are external factors in pricing decisions? Select TWO that apply.
A. Competition in the market
B. Cost of production
C. Where the product is in its lifecycle
D. Customer perception of value
E. Costs of sales
Answer: A, D
Explanation:
External factors in pricing decisions include Competition in the market (A) and Customer perception
of value (D). These factors are outside the supplier's direct control but influence pricing strategies to
remain competitive and meet customer expectations:
Competition in the market (A): Market competition dictates how much a supplier can charge without
losing business to competitors.
Customer perception of value (D): How customers perceive the product’s worth affects its acceptable
price range.
These factors are considered external as they relate to market dynamics rather than internal cost
structures, according to CIPS's guidance on pricing influences.
Question: 14
Which of the following roles would support negotiations with an external supplier when planning a
negotiation for a low-value, routine purchase? Select TWO that apply.
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A. The Human Resource (HR) manager
B. A legal advisor
C. The procurement manager
D. The Chief Executive Officer (CEO)
E. An internal business user
Answer: C, E
Explanation:
For low-value, routine purchases, the involvement of The procurement manager (C) and An internal
business user (E) is appropriate. The procurement manager brings expertise in supplier engagement,
while the internal business user provides insights on specific needs for the product or service.
Involving high-level roles, like the CEO or a legal advisor, is unnecessary for routine purchases, as per
CIPS guidance on resource alignment in procurement.
Question: 15
The stages of commercial negotiation involve which of the following characteristics?
A. Preparation, proposal, bargain, leave
B. Open, testing, bargaining, closing, revisiting
C. Preparing, opening, bargaining, agreement, closure
D. Opening, debating, promising, testing, disagreeing, closing
Answer: C
Explanation:
The typical stages of commercial negotiation are Preparing, opening, bargaining, agreement, and
closure. This sequence facilitates a structured approach where negotiators prepare strategies, initiate
discussions, engage in bargaining, reach agreements, and formally close the negotiation. This
structure is emphasized in CIPS materials as essential for achieving a balanced negotiation process.
Question: 16
Which of the following constitutes a key element to developing high-trust supplier relationships?
A. Contract management
B. Supplier audits
C. Delivering on commitments
D. Information gathering
Answer: C
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Explanation:
Delivering on commitments is fundamental to building high-trust relationships. When an
organization reliably fulfills its promises, it reinforces the supplier’s confidence in the partnership,
fostering long-term collaboration. While contract management and audits are supportive processes,
delivering on commitments directly strengthens trust, as emphasized in CIPS best practices for
relationship management.
Question: 17
The sourcing manager has decided to adopt an adversarial style of negotiation to take advantage of
the buyer's greater bargaining power over the suppliers. In what other circumstances should an
adversarial relationship be used?
A. When the supplier is likely to respond with further concessions to maintain a long-term
relationship
B. In all forms of negotiation as each party is always trying to gain advantage over the other
C. In a monopoly market as the supplier will respond by conceding quantity discounts
D. When the issues concerned are non-negotiable, for example, health and safety commitments
Answer: D
Explanation:
An adversarial style is appropriate when issues are non-negotiable, such as health and safety
commitments (D). In these scenarios, compliance is required without compromise, and a firm stance
may be necessary. This aligns with CIPS guidance, where adversarial tactics are used in non-
negotiable contexts to enforce strict standards.
Question: 18
The sourcing manager has decided to adopt an adversarial style of negotiation to take advantage of
the buyer's greater bargaining power over the suppliers. In what other circumstances should an
adversarial relationship be used?
A. When the supplier is likely to respond with further concessions to maintain a long-term
relationship
B. In all forms of negotiation as each party is always trying to gain advantage over the other
C. In a monopoly market as the supplier will respond by conceding quantity discounts
D. When the issues concerned are non-negotiable, for example, health and safety commitments
Answer: D
Explanation:
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This question is a duplicate of Question 17. The answer remains the same: When the issues
concerned are non-negotiable, such as health and safety commitments (D). Non-negotiable issues
require an assertive approach to ensure adherence to essential standards, as highlighted in CIPS’s
framework for negotiation styles.
Question: 19
A skilled negotiator will use a range of questioning techniques in a negotiation. If they wished to
explore options with the other party without making any formal commitment, which type of
question style would they use?
A. Leading
B. Hypothetic
C. Reflective
D. Multiple
Answer: B
Explanation:
Hypothetical questions are used to explore options or scenarios without making commitments. This
technique allows negotiators to understand the other party’s preferences and limitations by
presenting hypothetical situations, as recommended in CIPS guidelines for negotiation questioning
techniques.
Question: 20
Where a negotiator uses numerical reasoning with facts as part of their negotiation approach, which
of the following techniques will they be adopting?
A. Threat
B. Logic
C. Emotion
D. Power
Answer: B
Explanation:
Using logic involves applying numerical data and factual evidence to support arguments in a
negotiation. Logical reasoning appeals to objective analysis rather than emotional or coercive tactics
and is effective in convincing the other party through structured, fact-based arguments, aligning with
CIPS's guidance on logical negotiation techniques.
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