Certified Government Auditing Professional (CGAP) Practice Exam

What technique would provide significant assurance of economical procurements?

1. Establishing a training program for employees

2. Requiring competitive procurements over US $5,000

3. Quality assurance upon procurement receipt

4. Written authorization for all procurements

The correct answer is: Requiring competitive procurements over US $5,000

Requiring competitive procurements over US $5,000 is a technique that significantly assures economical procurements because it fosters a competitive environment among suppliers. When multiple vendors are invited to bid for a contract, it allows the purchasing entity to compare different proposals and select the most cost-effective option that meets their requirements. This competition can drive down prices and improve the quality of goods and services provided, as suppliers strive to offer better value to win the contract. In addition to enhancing the chances of obtaining favorable pricing, this competitive process also encourages transparency and accountability in the procurement process. It can help mitigate the risks of favoritism or collusion, which may lead to inflated costs and reduced quality in procurement. By ensuring that large-value procurements undergo scrutiny through competition, organizations can maximize their resources and achieve more economical operations. Other options, while valuable in their own right, do not specifically target the core issue of obtaining economically advantageous procurements in the same manner as competitive bidding. They may support operational efficiency or compliance but do not inherently create the same level of assurance in securing cost-effective procurement outcomes as competitive bidding does.