CIPS Exam Report for Learner Community:

CIPS Exam Report for Learner Community: Qualification: Diploma in Procurement and Supply Unit: D2: Business Needs in Procurement and Supply Exam series: November 2016 Question 1 Learning Outcome 1 Q1(a) Define the term total lifecycle costing 5 marks Q1(b) Describe FIVE costs that should be considered when calculating the lifecycle cost of an item, apart from the purchase price of the item 20 marks Learning Outcome addressed: 1.2 Explain how costs and prices can be estimated for procurement activities. Approaches to total costs of ownership/ total life cycle costing Command words explanation: Define: explain the exact meaning of a word or phrase. Describe: give a full account of something. First, a clear definition of the term total lifecycle costing, along the lines of: An economic assessment which considers all projected cost flows over a period of time, expressed in monetary terms. The projected costs are those needed to achieve the required levels of performance, including reliability, safety and availability. Good descriptions of five costs that should be considered when calculating the lifecycle cost of an item, apart from the purchase price of the item. These might include: transaction costs; taxes; foreign exchange costs; the costs of forming a contract; finance costs (such as interest charges and bank charges); acquisition costs; transportation costs; delivery costs; installation costs; commissioning costs; operating costs; energy consumption costs; usage costs; maintenance and repair costs; downtime costs; storage costs; security costs; inspection costs; re-work costs; end-of-life costs; de-commissioning costs; removal costs; disposal costs; etc. etc. Examples of content for merit/distinction grade answers: A clear definition of the term total lifecycle costing ; followed by fuller and more detailed descriptions of relevant costs, from the list above or other relevant costs; supplemented with examples of such costs. NOV16_D2_EXAM REPORT _LEARNER_COMMUNITY_FV 1/6

Examples of poorer content/ poorer approaches in answers: Inaccurate definitions; and definitions that merely repeat or re-order the words of the question. Irrelevant examples of costs. Descriptions of pricing elements, rather than cost elements. Responses that were too short for the marks available, or that consisted of little more than bullet-point lists. Diagrams, such as the Iceberg diagram, presented without any supplementary textual description. Putting content relevant to part (b) into the part (a) response. Not reflecting the split of marks (5:20) in the amount of content devoted to part (a) and part (b). Irrelevant discussion of direct and indirect ; and fixed and variable costs. Other irrelevant content. Concluding comment: Both parts of this question were generally answered well by the majority of candidates, although very high marks for either part were quite rare. s were awarded for all possible relevant definitions in part (a); and for all possible relevant costs in part (b). Question 2 Learning Outcome 2 Q2(a) Explain TWO risks for a buying organisation of allowing a supplier to take the lead in preparing a specification Q2(b) Explain the role of Information Assurance in developing specifications in order to reduce risks to the purchaser 10 marks 15 marks Learning Outcome addressed: 2.2 Explain the content of specifications for procurements. Drafting specifications and developing market dialogue with suppliers The role of information assurance in developing specifications Command word explanation: Explain: give reasons for, or account for, something. First, identifying two risks for a buying organisation of allowing a supplier to take the lead in preparing a specification; and then giving a clear explanation of each of those two risks. Examples of such risks include that a supplier-led specification may be: highly technical; based on the suppliers expertise; misunderstood by the buyer; constructed in such a way as to make evaluation difficult; defined solely in terms of what the supplier can offer (rather than what is actually needed by the buyer); limiting competition; in breach of IPR; and may be likely to lead to claims of an uneven playing field (i.e. risks of challenge for not treating all NOV16_D2_EXAM REPORT _LEARNER_COMMUNITY_FV 2/6

potential suppliers equally and without discrimination). Also, the buyer may be legally unable to reject goods which are not suitable but which do comply with the supplier s specification: this could lead to the buyer being liable for a breach of contract if he attempts to reject the goods. Then, giving a clear and full explanation of the role of Information Assurance ( IA ) in developing specifications in order to reduce risks to the purchaser, either in terms of the IA needs of the specification document itself (and it might well be a secure document) or in terms of the IA abilities that the specification may require from potential supplier organisations, such as holding IA accreditation, etc. Responses could explain the role of corporate governance and information security, and cover areas such as: data protection; fraud prevention; securing IPR; securing MIS; the use of Non-Disclosure Arrangements ( NDA s); firewalls; passwords; staff training in security awareness; valid protocols for specification changes and version controls; and accreditations required for IA from potential suppliers, such as ISO27000, or other industry-specific accreditations. Examples of content for merit/distinction grade answers: Well-structured responses, explaining in depth, and perhaps with examples, two clear and distinct risks for a buying organisation of allowing a supplier to take the lead in preparing a specification; and a clear and full explanation of the role of Information Assurance ( IA ) in developing specifications in order to reduce risks to the purchaser. Examples of poorer content/ poorer approaches in answers: Short responses, lacking depth and detail. Irrelevant definitions and explanations of e.g. different types of specifications, and/or the advantages and disadvantages of different types of specification, such as conformance and performance specifications. Giving explanations of more than two risks for a buying organisation of allowing a supplier to take the lead in preparing a specification. Misunderstanding of the meaning and application of the phrase Information Assurance, and its applicability to specifications. Concluding comment: Part (a) of this question was answered very well by the majority of candidates: marks were awarded for all possible relevant risks that were explained. But, despite the fact that Part (b) of this question used, verbatim, the wording from Learning Outcome 2.2 as quoted above, the great majority of responses to this part of the question scored very poorly indeed, and did not address the question set. A lot of misunderstanding was evident of the meaning and the application of the phrase Information Assurance, and its applicability to specifications. NOV16_D2_EXAM REPORT _LEARNER_COMMUNITY_FV 3/6

Question 3 Learning Outcome 3 Q3(a) Outline FOUR reasons for using model form contracts (such as those produced by NEC, FIDIC, and IMechE/IEE), rather than using bespoke contracts Q3(b) Describe THREE aspects that should be addressed in a contract clause dealing with sub-contracting 16 marks 9 marks Learning Outcomes addressed: (a) 3.1 Explain sources of contractual terms for contracts that are created with external organisations The use of model form contracts such as NEC, FIDIC, IMechE/IEE (b) 3.2 Interpret examples of contractual terms typically incorporated into contracts that are created with external organisations Main terms in contracts for indemnities and liabilities, sub-contracting, insurances, guarantees and liquidated damages Command words explanation: Outline: give the main features, facts, or the general idea, of something. Describe: give a full account of something. For part (a), a clear outline of any four reasons for using model form contracts rather than bespoke contracts. These reasons might include that model form contracts: should be readily understood and recognised by both parties; save time and money; avoid disputes and misunderstandings; reduce the need for expensive legal advice; reduce the time and costs of contract development; avoid re-inventing the wheel; incorporate a great deal of accumulated contracting experience and learning; are widely accepted across the world; reduce the need for lengthy negotiations; and can sometimes be designed to be fair to both contracting parties. For part (b), a clear description of any three aspects that should be addressed in a contract clause dealing with sub-contracting. These aspects might include: whether any sub-contracting is to be permitted at all; whether the buying authority retains the right to investigate, pre-qualify, and approve any sub-contractors that are proposed for use by the prime contractor; whether the buying authority requires the use of particular, named, sub-contractors; statements that the prime contractor remains liable for any failures on the part of any sub-contractor; statements about the relationship that should exist between the various parties if a subcontractor is appointed; statements that requirements contained within the prime contract, such as payment terms, are to be cascaded down and equally applied to sub-contractors; and statements about compliance with ethical and environmental standards specified by the purchaser. NOV16_D2_EXAM REPORT _LEARNER_COMMUNITY_FV 4/6

Examples of content for merit/distinction grade answers: Clear, concise, and comprehensive outlines of four distinct and persuasive reasons for using model form contracts rather than bespoke contracts. Clear and comprehensive descriptions of any three distinctly different aspects that should be addressed in a contract clause dealing with sub-contracting; perhaps supplemented with examples. Examples of poorer content/ poorer approaches in answers: Poorly-structured answers, giving more than - or fewer than - the required four reasons and three aspects that were sought by the two parts of this question. Inappropriately short responses, and mere bullet-point lists. Confusion between model form contracts and standard terms and conditions, evidenced by e.g. suggestions that model form contracts are appropriate for low-value and repeat purchases. Concluding comment: Both parts of this question were generally answered very well by the majority of candidates, with many high marks awarded for both parts of the question. s were awarded for all possible relevant reasons in part (a); and for all possible relevant aspects in part (b). Question 4 Learning Outcome 4 Discuss the stages of the procurement process when an organisation outsources an activity. Use examples to illustrate your discussion. 25 marks Learning Outcome addressed: 4.3 Develop a plan for procuring outsourced work or services. The procurement process for outsourcing Command word explanation: Discuss: consider something by writing about it from different points of view. Identification of, and detailed and relevant discussion of, all of the stages of the procurement process when an organisation outsources an activity; supplemented by examples to illustrate that discussion, as specifically required by the question. Different authors and different sources vary in how many such 'stages' there are; and so all relevant stages were accepted and awarded marks. But typically these stages, and thus the areas for discussion in responses, would include: research the options for make vs. buy and prepare the business case, NOV16_D2_EXAM REPORT _LEARNER_COMMUNITY_FV 5/6

cost analyses, etc.; prepare the specification; identify potential suppliers; appraise potential suppliers; invite tenders or RFQs; evaluate tenders or RFQs; engage in post-tender negotiations; award the contract; notify and de-brief unsuccessful bidders; manage the contract; and monitor supplier performance. Examples of content for merit/distinction grade answers: Well structured responses, with deeper and more detailed discussions of most or all of the elements above, with particular reference to the relevance of each aspect to an outsourcing scenario, then supplemented with relevant and clearly described examples to amplify the discussion points made. Examples of poorer content/ poorer approaches in answers: Poorly structured answers, without logical chronological sequence to the stages discussed, and/or lacking examples, as required by this question. Charts, lists, and diagrams, offered without any supplementary textual descriptions or explanations. Addressing the general subject of outsourcing, rather than the processes for bringing about an outsourcing contract. Explaining the benefits and the disadvantages of outsourcing, rather than discussing the processes for doing it. Concluding comment: This question was answered very well indeed by the great majority of candidates, and was often the highest-scoring question on a paper. NOV16_D2_EXAM REPORT _LEARNER_COMMUNITY_FV 6/6