CPPB Risk Management in Procurement 2

Question 1

What is 'inherent risk' in the context of public procurement?

Accepted Answer

The level of risk that exists before any risk controls are applied

Answer

Inherent risk is the raw, uncontrolled level of risk present in an activity or procurement before any mitigating measures are put in place.

Question 2

Which clause in a public contract helps the agency recover costs if a supplier fails to deliver on time?

Accepted Answer

Liquidated damages clause

Answer

A liquidated damages clause specifies a pre-agreed dollar amount the contractor must pay for each day of delay, compensating the agency without requiring proof of actual damages.

Question 3

When should a public procurement office conduct a risk assessment for a large contract?

Accepted Answer

During the pre-solicitation planning phase, before the solicitation is issued

Answer

Conducting a risk assessment during pre-solicitation allows the agency to design the procurement strategy, contract terms, and evaluation criteria to address identified risks proactively.

Question 4

A public buyer is procuring IT services from a vendor with limited financial reserves. Which risk mitigation measure is most appropriate?

Accepted Answer

Requiring a performance bond or financial guarantee from the vendor

Answer

Requiring a performance bond or financial guarantee protects the agency if the vendor becomes insolvent or unable to fulfill contractual obligations.

Question 5

What is the purpose of a 'force majeure' clause in a public contract?

Accepted Answer

To excuse non-performance by either party due to unforeseeable, extraordinary events beyond their control

Answer

Force majeure clauses protect both parties from liability for delays or failures caused by events such as natural disasters, wars, or pandemics that are outside their control.

CPPB - Certified Professional Public Buyer Practice Test

CPPB - Certified Professional Public Buyer Practice Test

CPPB Risk Management in Procurement 2