CPP Contract Negotiation & Management 3 — Questions and Answers
Question 1: A supplier submits a Request for Equitable Adjustment (REA) claiming additional costs due to a buyer-directed change. Under the Changes clause, the buyer is MOST responsible for:
- Rejecting all REAs that exceed the original contract value
- Negotiating fair compensation for costs directly caused by the directed change (Correct answer)
- Requiring the supplier to absorb all additional costs as part of normal risk
- Issuing a new contract for any work outside the original scope
Correct answer: Negotiating fair compensation for costs directly caused by the directed change
The Changes clause obligates the buyer to equitably adjust the contract price and schedule for costs directly resulting from authorized directed changes.
Question 2: Which of the following BEST describes a 'standstill agreement' in procurement negotiations?
- A clause preventing the supplier from hiring the buyer's employees
- An agreement to pause negotiations while both parties gather additional information (Correct answer)
- A contract provision freezing prices for a set period after award
- A requirement that the supplier not negotiate with the buyer's competitors
Correct answer: An agreement to pause negotiations while both parties gather additional information
A standstill agreement temporarily halts negotiations, giving both parties time to reassess positions, gather data, or allow cooling-off without losing their negotiating standing.
Question 3: An evergreen contract is one that:
- Automatically renews at the end of each term unless notice of cancellation is given (Correct answer)
- Contains green/sustainability performance requirements
- Is awarded only to certified minority suppliers
- Has a fixed price that never changes throughout the contract term
Correct answer: Automatically renews at the end of each term unless notice of cancellation is given
An evergreen contract automatically renews for successive periods unless one party provides timely notice of termination, which can create unintended long-term obligations.
Question 4: During a negotiation, the supplier's team suddenly requests a recess and returns with significantly changed positions. This is MOST likely an example of:
- The nibbling tactic
- The good cop/bad cop tactic
- The limited authority tactic (Correct answer)
- The bogey tactic
Correct answer: The limited authority tactic
The limited authority tactic involves one negotiating team claiming they need to consult a higher authority, often used to gain time, reset expectations, or introduce new demands.
Question 5: A contract's 'warranty of merchantability' provision primarily protects the buyer by ensuring that goods:
- Are delivered on time and in the correct quantity
- Are fit for the ordinary purposes for which such goods are used (Correct answer)
- Meet all custom specifications outlined in the contract
- Have a minimum lifespan as agreed in the contract
Correct answer: Are fit for the ordinary purposes for which such goods are used
The implied warranty of merchantability, under UCC Article 2, guarantees that goods are fit for the ordinary purposes for which they are normally used.
Question 6: When negotiating payment terms, a buyer offering '2/10 net 30' is proposing:
- A 2% penalty if payment is not made within 10 days of the 30-day period
- A 2% discount if payment is made within 10 days, with the full amount due within 30 days (Correct answer)
- Payment in two installments: 10% upfront and 30% at delivery
- A 2% interest charge applied after 10 days within the 30-day net period
Correct answer: A 2% discount if payment is made within 10 days, with the full amount due within 30 days
The term '2/10 net 30' means the buyer receives a 2% discount if they pay within 10 days; otherwise the full invoice amount is due within 30 days.
Question 7: Which contract management practice BEST ensures supplier accountability throughout the contract lifecycle?
- Conducting a post-award conference only when problems arise
- Establishing performance metrics and regular review milestones at contract inception (Correct answer)
- Relying on the supplier to self-report any performance issues
- Limiting communication to formal written correspondence only
Correct answer: Establishing performance metrics and regular review milestones at contract inception
Establishing clear KPIs and scheduled review milestones at the outset creates measurable accountability and allows proactive problem resolution throughout the contract.
CPP Contract Negotiation & Management 3
A supplier submits a Request for Equitable Adjustment (REA) claiming additional costs due to a buyer-directed change.
Under the Changes clause, the buyer is MOST responsible for: