CPP Ethics & Legal Compliance in Purchasing 2 — Questions and Answers
Question 1: A buyer who signs a purchase order beyond the dollar limit in their delegation of authority, while the supplier reasonably believes the buyer can bind the company, has most likely created a contract based on what?
- Implied warranty
- Express authority
- Apparent authority (Correct answer)
- Ratification by estoppel
Correct answer: Apparent authority
Apparent authority arises when the principal's conduct leads a third party to reasonably believe the agent has authority, even beyond internal limits.
Question 2: Under UCC Article 2, a contract for the sale of goods priced at $500 or more generally must be:
- Notarized by both parties
- Approved by a state procurement officer
- Filed with the Secretary of State
- Evidenced by a writing signed by the party against whom enforcement is sought (Correct answer)
Correct answer: Evidenced by a writing signed by the party against whom enforcement is sought
The UCC statute of frauds (§2-201) requires a signed writing for sales of goods of $500 or more, with some exceptions.
Question 3: A supplier offers to buy from your company only if your company also buys from them. This practice is called:
- Tying
- Reciprocity (Correct answer)
- Price discrimination
- Bid shopping
Correct answer: Reciprocity
Reciprocity is a mutual-purchase arrangement that ethics codes discourage because it undermines merit-based supplier selection.
Question 4: Which federal law prohibits U.S. companies from paying foreign government officials to obtain or retain business?
- Clayton Act
- Sarbanes-Oxley Act
- Foreign Corrupt Practices Act (Correct answer)
- Robinson-Patman Act
Correct answer: Foreign Corrupt Practices Act
The FCPA's anti-bribery provisions bar payments to foreign officials to win or keep business.
Question 5: A buyer shares one bidder's pricing with another bidder so they can undercut it. This unethical practice is known as:
- Bid bonding
- Bid shopping (Correct answer)
- Bid rigging
- Sealed bidding
Correct answer: Bid shopping
Bid shopping means disclosing competitors' confidential bids to get a lower price, which breaches confidentiality and fair dealing.
Question 6: Under the Robinson-Patman Act, which party can also be held liable for illegal price discrimination?
- Only the competing retailer
- The Federal Trade Commission
- A buyer who knowingly induces or receives a discriminatory price (Correct answer)
- Only the seller offering the price
Correct answer: A buyer who knowingly induces or receives a discriminatory price
Section 2(f) makes it unlawful for a buyer to knowingly induce or receive a prohibited discriminatory price.
Question 7: A procurement manager's spouse owns stock in a company bidding on a contract the manager evaluates. The best ethical action is to:
- Continue evaluating but score objectively
- Tell the bidder to withdraw
- Ask the spouse to sell the stock after award
- Disclose the interest and recuse from the evaluation (Correct answer)
Correct answer: Disclose the interest and recuse from the evaluation
Ethics codes require disclosing conflicts of interest and stepping away from decisions they could affect.
