Foundation Diploma in Purchasing and Supply. Developing Contracts in Purchasing and Supply L4-02 LEVEL 4. Senior Assessor s Report

Transcription

1 Foundation Diploma in Purchasing and Supply Developing Contracts in Purchasing and Supply L4-02 LEVEL 4 Senior Assessor s Report May 2009

2 SECTION A Q1 Write an informal report to the chief executive of SDC to: Q1(a) Analyse the processes that SDC adopted for the awarding of the contracts to: Green Star Media for the marketing campaign Rock Building Services for refurbishing of the playgrounds. (16 marks) This question tested the candidates application of knowledge of the processes of contract development in a public sector body and the ramifications of the EU procurement directives. This question required the response to be presented in the CIPS informal report format, for which up to two marks could be gained. Answers should have demonstrated awareness that SDC is a public sector body and therefore subject to European Union Procurement Directives. For the Green Star Media contract, candidates should have understood that this is a Services contract in EU terms and that its value (about 1m) exceeds the threshold above which full application of the EU Directives (including advertising on the OJEU website) is mandatory. In addition, the candidates should have recognised the lack of good procurement practices such as: competitive tendering; a written contract strategy; an output specification; use of pre-qualification criteria; stakeholder involvement. For the Rock Building Services contract, candidates should have understood, that in EU terms, this is a Works contract, which falls below the threshold for application of full EU Procedures. Candidates should also have recognised the failure to: meet the requirements of public expenditure accountability and probity; make all reasonable attempts to advertise the tender locally, such as the local/national Press, the SDC website, the magazine Government Opportunities'; practice formal competition with more than two companies; debrief the unsuccessful tenderer. L4-02/SA report/may

3 Answers should have concluded that there were shortcomings of varying severity with the procedures adopted and that the consequences could be poorly performing contracts and/or recourse by other potential contractors to the EU Remedies Directive with possible contract suspension or financial penalty. A large number of candidates answered this question reasonably well and showed real understanding of the subject matter. As well as making use of issues raised in the analysis above, they raised creditable points that were consistently elaborated upon, such as: the lack of Procurement involvement; poor specifications and use of estimated prices; the lack of analysis of the prices quoted. Those answers which gained low marks for this question, often failed to answer the questions posed, providing a fragmented account that possessed only vague notions of relevance. Often these answers just repeated the case material. Indeed, a significant number failed to recognise any implications under the EU Directives, although some alluded to this rather than dealt with it directly. Very few correctly quoted the financial thresholds and did not recognise that these are different for Services and Works contracts. Other weaknesses of answers included: assuming that the instruction issued by Nigel Wainwright was not a valid contract, but only a Letter of Intent; there was clear offer and acceptance in this case; stating that under EU rules, a debrief was mandatory. Though certain information has to be declared under the Standstill Rules, full debriefs are only required at the request of the unsuccessful tenderer. Finally many candidates did not use the report format as asked and some gave what appeared to be their own names as part of their "report writing". This is not permitted as detailed in the instructions on the question paper. Q1(b) Suggest ways in which SDC might improve the process for future tenders. (9 marks) This question tested the candidates application of knowledge of correct public sector contract formation procedures. Rather than repeat the issues raised for Q1(a), answers should have suggested more than just processes that need to be put in place. This would include not just formal tendering and contract award, but also suitable methods of promulgating the guidance and information about how it should be done to all of SDC staff, who might be involved in L4-02/SA report/may

4 letting contracts in the future, to ensure that the rules are known, understood and fully applied. This could have included: training courses briefings etc; publicity and open events; intranet instructions; controls on spend and spend permissions; policing of spend and spend decisions; tighter controls on delegated authority etc.; separation of duties. Once again, many candidates did not use the report format as asked and a significant majority of answers were often restricted to suggestions of only one way of improving the process for future tenders i.e. a good tendering process. Better answers included those points mentioned in the analysis above as well as a detailed explanation on the need to comply with EU Directives. Q2(a) Identify THREE relevant performance targets which SDC might have included in the contract with Green Star Media and explain the importance of each. (15 marks) Q2(b) Identify TWO relevant performance targets which SDC might have included in the contract with Rock Building Services and explain the importance of each. (10 marks) This question tested the candidates application of knowledge of the creation and application of performance measures into service and works contracts. Answers should have identified relevant performance targets that are demonstrably SMART (specific, measurable, achievable, relevant/realistic, and time-bound) and relevant to the desired outcome. Generic targets which were not rooted firmly in case study-specific information gained fewer marks. For the Green Star Media contract, candidates should have chosen to give targets covering the timing, penetration, responses, costs and impact of the marketing campaign proposed around community impact and perceptions of value and SDC 'doing the right things' for its communities. In the case of the Rock Building Services Contract, issues such as timeliness, the safety issues, aesthetics, the quality and the price of the refurbishment/rebuilding work would have been appropriate. L4-02/SA report/may

5 The responses to this question varied widely with very few candidates scoring highly in both parts. Most of them cited advertisement in various media and the consequences related to penetration and campaigning. Many candidates provided a response that discussed KPIs rather than targets and very few demonstrated the need for 'SMART' targets Many of the weaker answers only provided a short account that had one or two elements of relevance including vague references socio-economic concepts etc. Some answers did not demonstrate understanding of the difference between targets and specifications or requirements. For example in the case of the playground construction contract, a target of compliance with health and safety legislation was described, which is a requirement, not a target. A target might be no lost time accidents or two documented safety observations per day. Better answers included the use of percentage improvements as valid targets. SECTION B Q3 (a) Distinguish between an express term and an implied term, using examples to support your answer. (10 marks) This question tested the candidates understanding of express and implied terms. This was a standard textbook question, and candidates should have highlighted the key differences: Express terms are those actually written into or otherwise specifically included within the particular contract under consideration. Implied terms are those that do not appear anywhere in the contract, but whose existence can nevertheless be implied. Better responses identified and explained the various sources from which terms can be implied such as legislation, statute, legal precedence and custom and practice and included at least one appropriate example of an express term and one of an implied term. Most candidates gave at an answer which gained a pass grade for this question. Better answers tended to produce a clearly structured account demonstrateing a sound understanding of express and implied terms combined with a good range of examples. Poorer answers tended either to evidence a basic understanding of express or implied terms, got both mixed up and/or provided incorrect examples for each. L4-02/SA report/may

6 Q3(b) Distinguish between the circumstances in which a purchaser should use: (i) Their own organisation s standard terms and conditions (ii) Especially written contractual terms and conditions. (15 marks) This question tested the candidates understanding of the appropriate application, and the limitations, of standard terms and conditions. (i) The answers should have stated that standard terms and conditions (Ts&Cs) should be used for simple low value, low risk regular purchases such as stock items and M and O spares. In addition, the differences between buyer s and seller s Ts&Cs, in terms of who those are written to protect should have been considered. Answers should then have covered why therefore most organisations have a set(s) of standard Ts&Cs which they promulgate wherever possible by reproduction on their Purchase Order forms, their order acknowledgments, invoices, receipts etc. (ii) Candidates should have recognised that for more complex and/or larger, more strategically important or unconventional purchases, the standard Ts&Cs are very unlikely to include all of the detail and specifics that need to be addressed. Answers should also have included mention of industry standard Ts&Cs, such as the NEC3 forms of contract and the MoD Ts&Cs, with an explanation of how these can be used and their limitations. Answers to this question varied significantly. The best answers were quite sophisticated and demonstrated a solid understanding of the terms and conditions underpinned with good examples. Others were very general and content was sometimes replicated from the previous answer. There were also some irrelevant discussions of the difference between conditions and warranty or lengthy deanswer bookletions of individually drafted conditions such as Liquidated Damages rather than the circumstances for their use. For the second part of the question a few candidates mentioned that specifically written or industry standard T&Cs could be used in more complex contracts. Q4 An organisation is about to let a contract for the supply and maintenance of business-critical information technology (IT) hardware and software. Discuss how the contract should provide for each of the following: (a) The duration of the contract. (5 marks) (b) Renewal of the contract. (5 marks) (c) Resolution of disputes between an organisation and the contractor. (5 marks) (d) Variations to the requirement during the life of the contract. (5 marks) (e) The legal system under which the contract is to be drawn up. (5 marks) L4-02/SA report/may

7 This question tested candidates understanding of specific aspects of contractual terms and contract formation Answers were required to address each of (a) to (e) in clearly separated sections and should have been relevant to the context, not just generic observations. (a) (b) (c) (d) (e) The duration of the contract. Discussions should have highlighted that duration must be appropriate to the subject, whether of open or closed duration, and that definitions of duration and time issues would need to be tight and very clear. Answers could also have explored how the contract might be ended, voluntary or otherwise, by the different parties. Renewal of the contract. Discussions should have highlighted that renewal may be automatic or may be a reward for good performance; that renewal methods should be covered in the original contractual terms; and that renewal can be by further competition or not (except in the public sector, where re-competition is normally mandated by EU procurement directives). Resolution of disputes between your organisation and the contractor. Discussions should have highlighted the various different forms of legal dispute resolution and ADR that exist between the extremes of negotiation and litigation, and how and when these should be incorporated into contractual terms, possibly with examples. Variations to the requirement during the life of the contract. Discussions should have highlighted the types of change and variation that are likely to happen during the life of an IT contract and should explain how the contract terms should be drafted. The legal system under which the contract is to be drawn up. Discussions should have highlighted the choices of legislature in an international context, and the factors that need to be considered, when a real choice of governing legislature is possible. Answers to this question were generally satisfactory with although they varied in the level of detail produced. Most candidates were able to discuss, to varying degrees, duration and renewal but some had difficulty with issues relating to ADR and in particular, the choice of legislature. Most candidates were able to discuss in detail at least one or two issues but responses varied from very detailed to fragmented responses. Better quality answers related their responses to IT issues although it was not uncommon to find weaker candidates ignoring this issue completely. L4-02/SA report/may

8 Q5 Discuss the arguments for and against the use of electronic tendering from the perspective of the purchaser. (25 marks) This question tested the candidates understanding of electronic tendering. This question required a discussion of the pros and cons of e-tendering, from the purchaser s point of view and such arguments for e-tendering that might have been included in the discussion: speed of electronic response ease of compiling mailing lists ease of issuing communications to tenders and other stakeholders ease of managing data and information improved data security and data despatch reduced costs of copying of postage improved audit trails use of electronic tender assessment tools. Arguments against e-tendering that might have been included in the discussion: potentially deterring bidders resistance within the buyer s organisation costs of software and hardware lack of ICT skills both on the buyers and the sellers side doubts about credibility of data security difficulties of printing off large bids to give to evaluation teams; This question was generally answered satisfactorily by most of the candidates. Some candidates demonstrated a very good understanding of the principles needed when discussing e-tendering. Most candidates were able to identify the most common elements for and/or against this process. Some weaker answers appeared to confuse the distinction between e-tendering and e- auctions and others tended to include insufficient content, often in bullet point format that contained a lack of explanatory detail. A common mistake was to state that e- tendering would worsen buyer/supplier relationships; this is not dependent on the medium for communication, but the behaviors of the parties. L4-02/SA report/may

9 Q6(a) Describe a typical battle of the forms. (10 marks) This question tested the candidates understanding of the battle of the forms. Candidates should have describe a typical battle of the forms in terms of the exchange of documents between buyer and seller with each attempting to secure their own terms and conditions as being those that apply. Better answers explained the history and origin of the phrase and the legal precedent case: Butler vs. Ex-Cell-O. Answers could also have included what happens at each stage of the battle and that the battle is usually won by whichever party fires the last shot. Generally, this was a well answered question with even poorer answers scoring above the pass mark criteria. Many candidates demonstrated a good understanding of counter offer and battle of the forms with good use of case authority to supplement their accounts. Other candidates failed to gain marks by not giving a valid example to explain the concept. (b) Describe the nature and purpose of each form in the battle. (15 marks) This question tested candidates understanding of the documents that can participate in the battle of the forms. Answers should have described both the nature and the purpose of each form in a typical battle of the forms. These forms include: initial enquiry acknowledgment of enquiry issue of quotation purchase order acknowledgment of order confirmation of order advice note delivery note invoice. Answers should have described the nature of each and their purpose in sequence and the exchange of these documents between buyer and seller, detailing whose terms and conditions might prevail at each stage. L4-02/SA report/may

10 Answers varied in detail and accuracy and it can be assumed that a significant proportion of the weaker responses indicated that the candidate had either not prepared for this type of question or had run out of time (especially if other answers had been fairly detailed). Common weaknesses of answers ranged from providing a general and brief account of the battle of the forms through reliance on own knowledge, an amalgamation of facts from previous answers or bullet point/spider diagrams of key words. In fact it is surprising how many answers did not demonstrate and understanding of the question requirements and did not even mention any form names nor their purpose. In addition, some answers described specific contractual terms such as Time is of the Essence, Warranty and Force Majeure and so gained very few marks for the second part of the question. OVERALL SUMMARY The range and quality of answer booklets for this particular examination varied from very low to the occasional distinction. At the higher end of the scale, candidates provided consistently developed responses throughout the whole of the answer booklet with good use of relevant case examples as well as diagrams to illustrate their answers. Moreover, they directly addressed the question requirements. Other areas of weakness were: answers having a poor structure, with either no clear basis of argument or where a number of points are asked for, no clear separation between them excessive use of generic answers to questions, when there should be clear references to a case study repeating case study material irrelevant use of known theoretical models such as the five rights or Carter s nine Cs or five Ss answers often too short, with not enough detail or examples where appropriate poorly planned work misreading the question. L4-02/SA report/may

11 APPENDIX: Syllabus matrix indicating the learning objectives of the syllabus unit content that each question is testing SECTION A SECTION B Question No Learning Objective a b a b a b a b 1 Develop commercial agreements x x 1.5 x 2 The formation of contracts x Contractual terms x 3.4 x x 3.7 x 4 Letting contracts 4.1 x 4.2 x 4.3 x 4.4 L4-02/SA report/may