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CIPS Scope and Influence of Procurement and Supply Sample Questions (Q16-Q21):
NEW QUESTION # 16
Jan is a Contracts Manager at ABC Ltd and has recently awarded a contract to XYZ Ltd. Describe how she can manage the contract and supplier, detailing ways of monitoring performance and adding value for ABC Ltd (25 marks)
Answer:
Explanation:
See the solution inExplanation partbelow.
Explanation:
How to approach this question:
- There are 4 sections to this essay, so before you start writing I'd make a couple of notes on each of the points. Then build those notes into separate paragraphs. Your notes may look like this:
How to manage the contract - ensuring contract is fit for purpose, holding XYZ to their responsibilities, ensuring ABC are also fulfilling their responsibilities, issuing contract variations if required, planning for contingencies.
- How to manage the supplier - ensure the right relationship is in place (transactional vs collaborative), communication - open and honest, ensure there is mutual trust and understanding of each other's goals/ objectives.
- Ways of monitoring performance - use KPIs / SLAs, Supplier Scorecard, Vendor Rating, feedback from customers
- How to add value for ABC - increasing efficiencies (e.g. less product defects), improved quality, assisting with Value Engineering exercises, reduction in time and costs (e.g. through improved processes such as ordering), the supplier delivers 'extras' for ABC such as training to staff at no additional cost.
- Ensure each paragraph refers to Jan, ABC and XYZ. The question doesn't state what the businesses are buying/ selling so you can use this as an opportunity to provide examples: 'if ABC are procuring raw materials from XYZ such as metal, an effective way to manage performance would include .... If they are procuring a service, it may be more beneficial to use .... methodology' Example Essay Jan, the Contracts Manager at ABC Ltd, plays a pivotal role in ensuring the success of the recently awarded contract with XYZ Ltd. Efficient contract and supplier management involves careful planning, communication, performance monitoring, and the continuous addition of value. Here's how Jan can navigate these aspects:
In terms of contract management, Jan must ensure that the terms and conditions of the contract are "fit for purpose," aligning with the specific needs and complexity of the procurement. For instance, a simple goods procurement may necessitate a concise document, while more intricate projects like engineering endeavors may require a detailed contract such as a JCT or NEC contract. Additionally, Jan should vigilantly manage the contract during its lifespan, addressing any potential 'scope creep' that might necessitate amendments. If the contract lacks provisions for such changes, Jan may need to initiate the creation of a new contract to accommodate evolving needs Clear delineation of responsibilities and contingencies is crucial in the contract to ensure accountability and preparedness for unforeseen circumstances. The inclusion of Key Performance Indicators (KPIs) and damage clauses, where appropriate, adds a layer of clarity and accountability to the contractual relationship. Planning for contingencies involves having backup strategies in place, especially considering potential challenges that may arise during the collaboration with XYZ Ltd. For example, having other suppliers she can call upon if XYZ fail to deliver on an order.
Turning to supplier management, Jan's role involves fostering a positive and productive relationship with XYZ Ltd. This includes regular meetings to discuss progress, achievements, and future plans. A mobilization meeting is particularly important to ensure a strong start to the contract. Subsequent monthly or quarterly meetings provide a platform to review performance retrospectively and plan for the future. Additionally, effective communication is paramount, with Jan ensuring that both organizations regularly communicate, particularly regarding urgent issues that may require immediate attention. This proactive communication can occur through various channels, such as email or phone calls, facilitating a swift resolution of any emerging concerns.
Trust and honesty form the bedrock of the relationship between ABC Ltd and XYZ Ltd. Jan should work towards fostering mutual trust through both formal and informal activities, recognizing the importance of a transparent and cooperative partnership In terms of performance monitoring, Jan can employ Key Performance Indicators (KPIs) and Service Level Agreements (SLAs) to track performance regularly. These metrics should not be viewed as one-off activities but rather as ongoing tools for assessing and ensuring that performance aligns with expectations. Clear communication regarding the consequences of failing to meet these targets, such as the implementation of a Performance Improvement Plan or potential contract cancellation, is essential for maintaining accountability.
Regular performance meetings between ABC Ltd and XYZ Ltd provide an opportunity to discuss achievements, setbacks, and any necessary adjustments. Beyond quantitative metrics, surveys and feedback from customers can provide qualitative insights into performance.
Finally, Jan can contribute to the partnership's success by focusing on adding value. This involves going above and beyond the contractual obligations, such as delivering products more efficiently at no additional cost or improving operational efficiencies. Encouraging XYZ Ltd to participate in Value Engineering exercises and engaging in Early Supplier Involvement to shape and define future requirements would be a good example of this. Additionally, providing 'add-ons' or 'extras' outside the contractual framework, such as training for ABC Ltd staff, further enhances the value derived from the partnership.
In conclusion, Jan's role as Contracts Manager extends beyond the initial awarding of a contract- rather her role involves strategic contract and supplier management throughoutthe lifetime of the professional relationship. By ensuring the contract is well-suited for its purpose, fostering a positive relationship with the supplier, monitoring performance effectively, and consistently adding value, Jan contributes to the success of the collaboration between ABC Ltd and XYZ Ltd. This comprehensive approach sets the stage for a mutually beneficial and enduring partnership.
Tutor Notes:
- A case study question like this in the real exam is likely to come with more details. They often come with lots and lots of details to be honest, talking about what XYZ supplies to ABC and the names of the people involved. The case study usually gives you some good clues as to what the examiner will be looking for you to include, so do read them carefully.
- You don't have to include much 'theory' on case study questions - the important thing is to reference Jan as much as possible. BUT you could throw in a cheeky mention of the Kraljic matrix. The approach to managing the contract and supplier would depend on the type of item supplied by XYZ - e.g. if it is a bottleneck item the supplier may need to be handled differently to if it is a routine item. You could also mention KPIs and objectives as being 'SMART' - Specific, Measurable, Attainable, Relevant, and Time-Bound
- study guide p.86-90 / p.94 / p.96 -98
NEW QUESTION # 17
Sarah has recently been hired as the new Head of Procurement at Alpha Ltd, a manufacturer of small electronics such as hairdryers and alarm clocks. Alpha Ltd has a large factory based in Birmingham where many of the products are manufactured. One of the large pieces of machinery in the factory has recently broken and Sarah has been charged with replacing it as quickly as possible. Sarah is considering using the Whole Life Costing approach to this procurement. What is meant by Whole Life Costing? (5 points). Discuss
5 factors that Sarah should consider when buying new machinery (20 points).
Answer:
Explanation:
See the solution inExplanation partbelow.
Explanation:
How to approach this question
- I'd use clear headings with numbers for this one. It asks you for a definition and 5 factors. Number them.
Makes it easy for you to write and easy for the examiner to mark.
- Don't go over 5 - you won't get any extra points for this. So spend your time giving examples and explaining the 5 well, rather than naming more than 5.
Example Essay
As the new Head of Procurement at Alpha Ltd, Sarah faces the urgent task of replacing a critical piece of machinery in the company's Birmingham factory. Recognizing the complexity of the decision, Sarah contemplates utilizing the Whole Life Costing approach to ensure a comprehensive evaluation that goes beyond initial expenses. This essay explores the concept of Whole Life Costing and delves into five essential factors Sarah should consider when procuring new machinery.
Definition:
Whole Life Costing (WLC) is a procurement approach that considers the total cost associated with an asset throughout its entire lifecycle. Unlike traditional procurement methods that focus primarily on the initial purchase price, WLC evaluates all costs incurred from acquisition to disposal. This includes operational, maintenance, and disposal costs, providing a holistic perspective on the true financial impact of an asset over time.
Factors to Consider in Machinery Procurement
1) Initial Purchase Price:
While WLC looks beyond the initial cost, the purchase price remains a critical factor. Sarah should balance the upfront expense with the long-term costs to ensure the initial investment aligns with the overall financial strategy.
2) Operational Costs:
Sarah needs to analyze the ongoing operational costs associated with the new machinery. This includes energy consumption, routine maintenance, and potential repair expenses. Opting for energy-efficient and reliable equipment can contribute to substantial operational savings over the machine's lifespan, even though this may result in a higher up-front purchase price
3) Training and Integration:
The cost of training employees to operate and maintain the new machinery is a significant consideration. Sarah should assess how easily the equipment integrates into existing workflows and whether additional training programs are required, impacting both immediate and long-term costs.
4) Downtime and Productivity:
Evaluating the potential downtime and its impact on productivity is crucial. Sarah should assess the reliability and historical performance of the machinery to gauge its potential contribution to sustained production levels and minimized disruptions, impacting the overall operational efficiency.
5) Technology Upgrades and Adaptability:
Sarah should consider the machinery's adaptability to technological advancements and potential upgrades.
Investing in equipment that allows for seamless integration with future technologies ensures that Alpha Ltd remains competitive and resilient in a rapidly evolving industry landscape.
In conclusion, adopting a Whole Life Costing approach empowers Sarah to make informed decisions that align with Alpha Ltd's strategic goals. By considering factors beyond the initial purchase price, such as operational costs, training, downtime, and technology adaptability, Sarah ensures that the replacement machinery not only meets immediate production needs but proves to be a cost-effective and efficient asset throughout its entire lifecycle. The WLC approach safeguards against unforeseen financial burdens, fostering sustainable and informed procurement practices in the dynamic manufacturing environment.
Tutor Notes
- Whole Life Costing is on p.28
- Total Life Cycle Costs, Total Cost of Ownership and Life Cycle Costs are all practically the same thing. The book says they're slightly different, but don't get yourself bogged down in trying to remember the differences.
Honestly, in the real world, people use this language interchangeably.
- Other factors you could have chosen to talk about include commissioning costs and disposal costs
- Don't worry if you feel CIPS breezed through this as a topic, they did. It's explained much better in L4M7.
You can read more about it here: Whole Life Costing - What is Whole Life Costing | CIPS and here Whole-Life Cost: What it Means, How it Works (investopedia.com)
NEW QUESTION # 18
Describe the main stages of the CIPS Procurement and Supply Cycle (25 points)
Answer:
Explanation:
See the solution inExplanation partbelow.
Explanation:
How to respond to this question:
- Include as many of the stages as you can, but it's not vital to remember them all. You should aim to remember at least 8 of the 13 steps.
- The steps are; Define Business Need, Market Analysis + Make vs Buy, Develop Strategy and Plan, Pre-Procurement Market Testing, Develop Documents and Specification, Supplier Selection, Issue Tender, Bid Evaluation, Contract Award and Implementation, Warehouse Logistics, Contract performance and Improvement, Supplier Relationship Management and Asset Management Essay Plan:
Introduction - Explain what the CIPS Procurement and Supply Cycle is- a tool to be used by procurement professionals which tracks a procurement exercise from inception to close. It's helpful as it ensures procurement exercises are done correctly and steps are completed in the right order.
- Describe (briefly) what happens at each stage of the cycle, giving examples. You should put each stage into a separate paragraph. It's also a good idea to name the stages in chronological order. Some ideas of things you could mention include:
1) Define Business Need and Develop Specification - Identify what the need is, what type of purchase, put together a business case and outline the requirements
2) Market Analysis and Make vs Buy Decision - analyse the market using market segmentation (e.g. by buyer, product, geography etc) or use Porter's 5 Forces (buyer and supplier power, threat of new entrants, threat of substitutions, supplier rivalry). Looks at if what you want to procure is actually available.
3) Develop Strategy / Plan - you could use a STEEPLE and SWOT analysis. Consider if this is the right time to procure. Create timelines and budgets.
4) Pre-Procurement Market Testing - consider stakeholder engagement, supplier engagement, new / upcoming legislation, currency fluctuations, market, competitor actions. Is this the best time to procure? Will it be successful?
5) Develop Documentation / Creation of Contract terms- firm up the requirements and create the formal documents for the tender exercise. This may be a RFQ or ITT. Define the offer. Include KPIs.
6) Supplier Selection - May not be required for rebuys but an important step for new buys. May use a list of pre-approved suppliers or this may be going out to the open market. You can shortlist suppliers by sending out a pre-qualification questionnaire.
7) Issue Tender - Electronically, consider whether to use an open vs closed procurement exercise
8) Bid / Tender Evaluation - Very flexible for companies in the private sector but there are guiding principles for doing this for public procurement; transparency, equal treatment, proportionality. Often considers both price and quality.
9) Contract Award and Implementation- Organisations may have different processes for different values (e.g.
large purchases may need senior management approval, but under £500 just needs a manager's signature).
May require post-award negotiation. Contract is drafted and signed.
10) Warehouse Logistics and receipt - includes POs and Invoices. Battle of the Forms. Goods Inwards = receiving and inspecting goods- may use quality control.
11) Contract performance review - ensuring contract obligations are fulfilled includes P2P procedures, database management, budgeting / costs monitoring, reporting and dispute resolution.
12) Supplier Management - will depend on the relationship but includes; contact / meetings with the supplier, motivating / incentivising the supplier, working with them on performance issues, ensuring KPIs are met.
13) Asset Management / End of Life- considers TCO, ongoing maintenance and costs, insurance and warrantees and disposal of the item once it has reached the end of its life.
Conclusion - The CIPS Procurement Cycle is cycle rather than process as it is a continuous loop and needs constantly emerge. It never ends. New buys are more likely to follow all the stages of the cycle, rebuys may skip steps Tutor Notes:
- Often steps 11 and 12 are confused or merged together but they are different. It's possible to have great contract management and a poor supplier relationship i.e. the contract is working effectively and the supplier is delivering in line with the contract BUT the relationship may be fraught with tension and the buyer and supplier don't like each other.
- To get a high score I would include examples of all of the stages, but remember you only have 45 minutes to answer the question, so balance detail with timing so you don't overwrite
- The procurement cycle is on p. 70 or you can download it here: Procurement Supply Cycle | CIPS
NEW QUESTION # 19
What is meant by the 'Third Sector'? Describe the sector (10 points) and explain the main objectives of organisations who operate in this sector (15 points).
Answer:
Explanation:
See the solution in Explanation part below.
Explanation:
How to approach this question
- Description of the 'third sector' - the part of an economy comprising non-governmental and non-profit- making organisations including charities, voluntary and community groups, and cooperatives. These organisations reinvest surplus profits back into the enterprise to further their objectives. This is worth 10 points so should be a good 2-3 paragraphs, with examples.
- Main objectives - these could include engaging with stakeholders, social or environmental aims, education, providing a service to the community, stewardship role. There's more points for this question so you should have more content here.
Example Essay
The 'Third Sector' refers to a segment of the economy distinct from the public (government) sector and the private (for-profit) sector. It encompasses a diverse range of non-governmental organizations (NGOs), charities, foundations, social enterprises, cooperatives, and other non-profit entities. These organizations are primarily driven by social, environmental, cultural, or community objectives rather than the pursuit of profit.
They often operate based on values such as democracy, equality, and social justice. The Third Sector plays a crucial role in providing services, advocating for social causes, and filling gaps left by the public and private sectors.
The third sector is often called the 'not-for profit' sector. It's distinguished from the private sector in that the main aim isn't to make money for money's sake. The main aim is to generate money to reinvest back into the organisation so that the organisation can achieve the purpose it was set up for. Whereas the private sector may exist solely to make money, the third sector has a 'higher aim'.
Organisations operate in a very narrow marketplace. They may be the only provider in that marketplace. For example the RNLI is the only operator of lifeboats and the only organisation that sets out to save lives at sea- there is no 'competitor'.
3rd Sector Organisations have multiple sources of income; e.g. subscriptions or donations, or from donated goods that they then sell on (such as Oxfam shops), fundraising activities or selling merchandise. The sector also has a wide range of stakeholders.
The third sector is subject to same regulations as private and public companies but also has its own regulations imposed by the Charities Commission. This is a statutory regulation body which checks charities are run for public benefit and not private advantage, ensures charities are independent, and sets out to remedy serious mismanagement. They can audit, offer advice and investigate complaints. Therefore the sector is highly regulated.
Organisations in this sector have a huge range of objectives depending on why they were set up. These can be very specific, for example: charities such as Cancer Research (objective- find a cure for cancer), Museums (objective- educate the public), CIPS (objective - provide professional services to a particular industry), trade unions (objective- defend the rights of workers), pressure groups (objective- change laws and practices they morally disagree with).
However organisations in this sector do have overarching objectives in common.
1. Survival - Generating Enough Money to Continue Operations: Survival is a fundamental objective for Third Sector organizations. Unlike for-profit entities, these organizations do not aim to generate profits for shareholders but need sufficient funding to sustain their operations. This funding often comes from donations, grants, fundraising activities, and sometimes income from services provided. The challenge lies in balancing the mission with the need for financial stability, ensuring that the organization can continue to serve its community and pursue its goals over the long term. Financial sustainability is crucial, particularly in a sector where funding sources can be uncertain and competition for donations is high.
2. Creating Awareness of Their Cause: Raising awareness is vital for Third Sector organizations, as it helps to educate the public, garner support, attract volunteers, and drive fundraising efforts. Awareness campaigns are essential in highlighting the issues these organizations address, whether it's health, environmental conservation, social justice, or cultural preservation. Effective communication strategies, including the use of social media, public events, and collaborations, are employed to reach a wider audience. The more people know about a cause, the more likely they are to support it, either through donations, volunteering, or advocacy.
3. Compliance with Regulations and the Charities Commission: Compliance with legal and regulatory requirements is a critical objective. In many countries, including the UK, Third Sector organizations are regulated by bodies like the Charities Commission. These organizations must adhere to specific legal standards, including financial transparency, governance practices, and ethical guidelines. Compliance ensures credibility and trustworthiness, which are essential for maintaining public confidence and the continued support of donors and volunteers. It also ensures that the organization operates within the law, avoiding legal issues that could jeopardize its mission.
4. Providing a Service to the Community: The core of a Third Sector organization's mission is to provide services or benefits to the community. These organizations often address needs that are unmet by the private or public sectors, focusing on improving the quality of life for certain populations or addressing specific societal issues. This objective can take many forms, from offering direct services like healthcare and education to advocating for policy changes that benefit underserved communities. The impact of these services on the community can be profound, often bringing about significant social change.
5. Fulfilling a 'Gap in the Market': Many Third Sector organizations exist to fill gaps in services not provided by the public or private sectors. A classic example is the provision of air ambulance services in the UK. While the government provides comprehensive healthcare services, there's a gap in the rapid transportation of critically ill patients, which is filled bycharities operating air ambulances. These organizations identify specific needs that are not adequately addressed and work to meet them, often innovating in the process. By fulfilling these gaps, they play a crucial role in complementing existing services and enhancing the overall welfare of society.
In conclusion, Third Sector organizations operate with a unique set of objectives that distinguish them from other sectors. Their focus on survival, awareness-raising, compliance, community service, and filling market gaps is essential not only for their existence but also for the significant societal impact they make. These objectives align with the overarching mission of the Third Sector to contribute positively to society, addressing needs and issues often overlooked by other sectors.
Tutor Notes:
- A strong essay will use real life examples of organisations in the third sector and their objectives. I've mentioned a couple above such as Cancer Research UK: Our strategy to beat cancer | Cancer Research UK and North West Air Ambulance Charity: Home | North West Air Ambulance Charity (nwairambulance.org.
uk) but pick charities you know well.
- LO 4.4. P.230
NEW QUESTION # 20
Describe the four main ways that a Public Sector organisation can procure goods or services (25 points)
Answer:
Explanation:
See the solution in Explanation part below.
Explanation:
How to approach this question
- This question is testing to see if you know the 4 procurement procedures allowed in the Public Sector which are: open, restricted, competitive dialogue, competitive dialogue with negotiation. The Public Sector is limited in how it can procure due to the Public Contract Regulations, so things like Early Supplier Involvement isn't an option.
- The question doesn't specifically say it has to be these four, but these are the ones in the book. Because of the vagueness you could say something like running a competition and awarding via a Framework instead.
Talking about Public Private Partnerships could also be appropriate but that is outside of the scope of this module (and Level! It comes up in Level 5). These answers would be accepted.
- Also note that it doesn't say the UK in the question, so if you answered this about your own country, that would be fine.
Example Essay
Each country's government has its own regulations relating to how goods, services and works can be procured. The UK's procurement rules is currently dictated by the Public Procurement Regulations 2015 which is based off EU Procurement Directives. This piece of legislation will likely be superseded in Autumn
2023 due to the UK leaving the EU. Until this point, the PCR allows UK public sector organisations to procure in the following ways: open, restricted, competitive dialogue, competitive dialogue with negotiation Open Procedure: This is the most straightforward and transparent method. A local government issues an open tender for office supplies. Any company that provides these supplies can submit a bid. The government then evaluates all bids based on price, quality, and delivery terms to select the supplier. Any interested supplier can submit a tender. The process is open from the outset, and all submissions are evaluated against pre-defined criteria. This procedure is used when you wish to attract a large number of bidders for the opportunity and is often posted online on a platform such as Find A Tender.com so that suppliers can find the opportunity. If it is a large contract it is a requirement for details to be published on OJEU. The disadvantage of using this approach is that you may receive many bids which can be time-consuming.
Restricted Procedure: In this method, the public sector organization invites suppliers to express their interest.
After a preliminary selection process, only those who meet the criteria are invited to submit tenders. This is used when the opportunity is more technical, for example a healthcare authority needs specialized medical equipment. The authority would requests expressions of interest from suppliers. After reviewing these, it invites a shortlist of qualified suppliers to submit detailed bids for further evaluation. The benefit of this approach is that unsuitable suppliers are weeded out early, this saving time.
Competitive Dialogue: This is used for complex contracts where the organization cannot define the technical means or legal or financial make-up of a project in advance. A dialogue with selected bidders is conducted to develop one or more suitable solutions, which are then put out to tender. For example, a local council is planning a new public transport system but is unsure of the best solution. It enters into a dialogue with several firms specializing in transport systems to explore various options before requesting final bids based on the developed solutions. Suppliers can be eliminated through the dialogue process based on pre-determined criteria.
Competitive Dialogue with Negotiation: Similar to competitive dialogue, but with an added phase of negotiation. It's used for particularly complex projects where the needs cannot be met without adaptation of readily available solutions. For example: a government department requires a complex IT system that integrates various existing systems. It engages in a competitive dialogue to develop potential solutions and then negotiates with bidders to refine these solutions before finalizing the contract. This procedure allows for negotiations with the winning bidder to readjust requirements if needed.
The approach taken by a public sector organisation will depend on a number of factors, but in particular the complexity of the project and whether there is a pre-determined scope. Other factors to consider include; the time-sensitiveness of the project and how quickly the procurement exercise needs to be completed, the amount of suppliers in the marketplace, and whether suppliers need to be consulted on to create the specification.
Tutor Notes
- These four procedures are outlined on p.212. Post PCR 2015, these procedures may change, or be renamed, depending on what the UK government decide to do. So if you're taking this exam in November 2024 or later, note that the study guide is now out of date and you should conduct a bit of your own research.
- You could also mention that the value of spend is a factor when public sector organisations are deciding on a procurement route. For really low value stuff, like they need a new sofa for the office, most organisation's requirements are to get three quotes and compare them. That isn't in the study guide, it's just real life (I've worked in this sector so know thisstuff). Each organisation will have it's own thresholds for what procurement route needs to be taken, so I wouldn't comment on that but generally if it's under £10k there's quite a bit of flexibility. Where you reach 'threshold' then things become very serious and there's much more scrutiny.
- Thresholds are not part of the syllabus so don't worry about learning this. But if you're interested have a read here: New public procurement thresholds from 1 January 2024 - BM Insights - Blake Morgan
NEW QUESTION # 21
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