NIGP Terms Volume III Exam Questions and Answers

NIGP Terms Volume III Exam Questions and Answers Advance Payments - Answer-Agreed upon disbursements between buyer and seller made prior to the delivery of the contracted goods and services. Payments may be for a stated amount or for a percentage of the purchase price. Sometimes referred to as Cash in Advance. Agreement - Answer-An understanding between two or more parties in which they state a common understanding and intention regarding past or future intentions or facts, sometimes with a view to altering performance, rights, and obligations. When the additional elements of a contract are satisfied, e.g., mutual obligation (consideration), capacity, definiteness, and legal purpose, contracts may be formed. Then the terms agreements and contracts are sometimes used synonymously Arbitration - Answer-1. A process by which a dispute between parties is presented to one or more disinterested parties (arbitrators or neutrals) for a decision, whose decision the contending parties agree to accept with no further appeal process. Also known as binding arbitration. 2. The resolution of a conflict between parties by a party removed from the dispute. 3. A form of Alternative Dispute Resolution. Best Value - Answer-1. A procurement method that emphasizes value over price. The best value might not be the lowest cost. Generally achieved through the Request for Proposals (RFP) method. 2. An assessment of the return that can be achieved based on the total life cycle cost of the item; may include an analysis of the functionality of the item; can use cost-benefit analysis to define the best combinations of quality, services, time, and cost considerations over the useful life of the acquired item. Bid Analysis - Answer-A comprehensive review of all bids received as a result of a competitive process. The review is usually conducted for the purpose of comparing strengths and weaknesses of the bids received based on the requirements and criteria set forth in the Invitation for Bids. Bid Opening - Answer-The official process in which sealed bids are opened, usually in the presence of one or more witnesses, at the time and place specified in the Invitation for Bids. The amount of each bid is recorded and bids are made available for public inspection. The bid opening may be open to the public. Binding Arbitration - Answer-Specific to Alternative Dispute Resolution (ADR), binding arbitration involves the presentation of a dispute to an impartial or neutral individual or panel for issuance of a binding decision. The parties usually have the ability to decide who the individuals are that serve as arbitrators. Blanket Order - Answer-1. An agreement to purchase goods from a specific supplier over a defined period of time, up to a maximum dollar amount. 2. A blanket order generally includes established prices, terms and conditions for a defined period of time, although no quantities are specified; shipments are to be made when and as required by the purchaser, which, in certain cases, may be the end user. Breach of Contract - Answer-Failure by either contracting party to fulfill a contract, wholly or in part, without legal excuse. Cancellation of a Contract - Answer-Occurs when the authority has determined that the contract should be terminated for cause, default, or convenience. Cannibalize - Answer-A term used to describe the disassembly, dismantling, stripping, or tearing down of buildings or equipment for salvage components or parts, which may be used to repair, assemble, or rebuild other equipment. A process used to extend the life cycle of equipment. Capital Equipment - Answer-Assets listed on an organization's accounting records that have value, usually can be depreciated, and are durable. Carrying Cost - Answer-The cost of keeping inventory on hand including lost opportunity cost, storage cost, handling cost, insurance cost, shrinkage, damage, breakage, and obsolescence cost. Cartage - Answer-1. The act of carting or transporting, generally used to identify local delivery of goods received from a carrier. 2. The cost of such transportation. Caveat Emptor - Answer-Latin term which translates to "Let the buyer beware." It implies that the purchaser/buyer is responsible for the quality assurance of a product or service. Commodity Code - Answer-A system of words, numbers, or both, designed to identify and list goods and services by classes and subclasses. Concealed Damage - Answer-Damage that may occur during shipment of goods that is not apparent or noticeable at the time of receipt or acceptance. Contract Modification - Answer-Any written alteration in specifications, delivery point, frequency of delivery, period of performance, price, quantity, or other provisions of the contract, accomplished by mutual agreement of the parties to the contract. Cost Estimate - Answer-A forecast amount as distinguished from an actual outlay, based upon related cost information available at the time and anticipated future conditions. The process of calculating the probable cost of a job. Cost-Reimbursement Contract - Answer-Reimburses the contractor for all incurred costs that are allowable and allocable under the terms of the contract and applicable laws and regulations; may include profit or fee. May also be referred to as a Cost Plus Contract. Delivery Terms - Answer-Conditions in a contract regarding freight charges, place and time of delivery, or method of transportation. Design Specification - Answer-A type of specification that establishes the characteristics an item must possess, including details indicating how it is to be manufactured. May include engineering plans or drawings, and blueprints. It states to the contractor in prescriptive terms what the contractor must provide to the buyer. Direct Delivery - Answer-The shipment of goods directly from the source to an end user; frequently used where a third party acts as purchasing agent for the end user. Efficiency - Answer-1. The ratio between inputs and outputs. When outputs are increased and inputs are decreased, more efficiency is generated. 2. Getting the most out of the resources used. Encumbrance - Answer-The commitment of appropriated funds to purchase an item or service. To encumber funds means to set aside or commit funds for a specified future expenditure. Estimated Cost - Answer-The cost to be used as the basis of the sourcing decision. It is representative of all known work and expected unscheduled work arising out of the requirements, i.e., the total estimated contract value. Evaluation Criteria - Answer-Generally used in the Request for Proposals (RFP) method. Qualitative factors that an evaluation committee will use to evaluate/score a proposal and select the most qualified proposer(s). May include such factors as past performance, references, management and technical capability, price, quality, and performance requirements. Excess Property - Answer-1. Any supplies or equipment, other than expendable supplies having a remaining useful life, that are no longer required by the agency in possession of the material. 2. Material and supplies that are acquired by a government agency but are not required or can no longer be used by the agency and it may or may not have a residual value. Express Contract - Answer-Those contracts, either written or oral, in which all of the formal elements for contract creation exist. Extended Price - Answer-The price for the total number of items ordered, calculated by multiplying the quantity ordered by the unit price. Fixed Costs - Answer-Costs of production that do not change when the rate of output is altered, e.g., the cost of basic plant and equipment. Fixed-Price Contract with Escalator (Economic Adjustment Clause) - Answer-A contract under which the contractor is reimbursed at a fixed price for all services and material provided that allows for periodic price increases or decreases at one or more stated intervals during the contract term. The amount of increase or decrease is based on the movement of an independent price index (escalator) for goods, services, or labor. Forecasting - Answer-A tool used to determine future needs. An ongoing assessment to examine opportunities and is an essential element of strategic planning. It requires procurement professionals to keep abreast of the market and surveys and understand various indicators, business cycles, indexes, lead times, and price histories of goods and services.