CIPS Exam L4M3 Topic 7 Question 39 Discussion

Actual exam question for CIPS's L4M3 exam

Question #: 39
Topic #: 7

[All L4M3 Questions]

Which of the following is always an advantage of using fixed price arrangement in a contract for buying organisation?

ABuyer can allocate budget with certainty

BBuyer can harness falling market price

CSupplier always receives a fixed margin

DSuitable for contracts that last 5 years or more

Show Suggested Answer

Suggested Answer: A

Advantages of using fixed pricing arrangement are as below:

- Budget/income certainty - prices are fixed up front and should not change

- The impact of changes to the supplier's cost base is not fed through to the purchaser. If costs diminish, the supplier will benefit from this, and if costs rise, the purchaser will benefit

LO 3, AC 3.3

by Nicolette at Jul 10, 2024, 05:10 PM

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Gretchen

4 months ago

Ah, the joys of procurement. Trying to harness falling market prices while keeping the supplier happy. It's a delicate dance, for sure.

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Dahlia

4 months ago

Haha, the supplier always getting a fixed margin? That's a good one. They'll find a way to squeeze out more if they can.

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Leah

4 months ago

Yeah, it's definitely a balancing act between the buyer and the supplier in these contracts.

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Denae

4 months ago

I think the advantage of allocating budget with certainty is the most important in a fixed price arrangement.

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Georgiann

4 months ago

True, suppliers are always looking for ways to maximize their profits.

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Dominic

5 months ago

I agree with Lenora, having a fixed margin for the supplier can ensure quality and reliability in the long term.

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Raina

5 months ago

But I'm not sure a fixed price is always suitable for longer contracts. The market can be pretty volatile these days.

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Youlanda

3 months ago

C) Supplier always receives a fixed margin

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Yong

3 months ago

B) Buyer can harness falling market price

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Herminia

3 months ago

A) Buyer can allocate budget with certainty

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Eleonora

3 months ago

C) Supplier always receives a fixed margin

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Kandis

4 months ago

B) Buyer can harness falling market price

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Twila

4 months ago

A) Buyer can allocate budget with certainty

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Lenora

5 months ago

I see your point, Annelle. But I think C) Supplier always receives a fixed margin is also important for stability.

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Annelle

5 months ago

I disagree, I believe B) Buyer can harness falling market price is more beneficial in the long run.

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Kati

5 months ago

I think A) Buyer can allocate budget with certainty is the best option.

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Jospeh

5 months ago

A fixed price arrangement is definitely the way to go for budget allocation. Buying organizations need that certainty, no doubt.

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Carol

4 months ago

D) Suitable for contracts that last 5 years or more

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Karima

4 months ago

A fixed price arrangement provides stability for budgeting.

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Alisha

4 months ago

C) Supplier always receives a fixed margin

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Terry

5 months ago

B) Buyer can harness falling market price

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Yvonne

5 months ago

A) Buyer can allocate budget with certainty

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