CIPS Procurement and Supply in Practice - L4M8 Exam Practice Test
What do STEEPLE and SWOT stand for?
Correct Answer:
See the answer in explanation.
Explanation:
RESPONSE
After a need in an organization has been identified/understood, defined, justified and authorized, the next stages are to understand how commodity prices are reacting, which suppliers are available and their strength.
The make or buy decision can be reached with knowledge from this; the procurement professional can consider the organization external environment, strength, weakness opportunity and threat to develop strategy
/plan of how to achieve the procurement.
'STEEPLE' is an effective way to evaluate the external environment. It helps buyers to assess factors that could affect the need in hand and helps them to develop the plan accordingly. 'STEEPLE' is an acronym which stands for, Social, Technology, Economic, Environment, Political, Legal, Ethical
'SWOT' helps the organization to analyze its strength and within the organization and the oppor-tunity and threats outside the organization.
'SWOT' is an acronym which stands for, strength, weakness, opportunity and threats.
* Refer to the question column
Explanation:
RESPONSE
After a need in an organization has been identified/understood, defined, justified and authorized, the next stages are to understand how commodity prices are reacting, which suppliers are available and their strength.
The make or buy decision can be reached with knowledge from this; the procurement professional can consider the organization external environment, strength, weakness opportunity and threat to develop strategy
/plan of how to achieve the procurement.
'STEEPLE' is an effective way to evaluate the external environment. It helps buyers to assess factors that could affect the need in hand and helps them to develop the plan accordingly. 'STEEPLE' is an acronym which stands for, Social, Technology, Economic, Environment, Political, Legal, Ethical
'SWOT' helps the organization to analyze its strength and within the organization and the oppor-tunity and threats outside the organization.
'SWOT' is an acronym which stands for, strength, weakness, opportunity and threats.
* Refer to the question column
What are the 3Ps in the triple bottom line.
Correct Answer:
See the answer in explanation.
Explanation:
Trying to measure how sustainable an organization was use to be challenging undertaking. However, during the 1990s, a concept brought up by American John Elkington change the way sustainability was measured.
This framework is known as the triple bottom line (TBL) and measures sustainability in relation to organizational performance and investment against the 3Ps (1) Profits (2) People (3) Planet. For example; Profit: A packaging manufacturer reinvesting its profits in State- of-the-art recycling machinery for it wasted cardboard.
People: A large privately owned call centre donate its end of life computers to a local youth clubs and social groups to help gain internet cases.
Planet: A driving instructors using only hybrid vehicles to teach her learners, thus to reducing Co2 emission.
* Refer to the question column for response
Explanation:
Trying to measure how sustainable an organization was use to be challenging undertaking. However, during the 1990s, a concept brought up by American John Elkington change the way sustainability was measured.
This framework is known as the triple bottom line (TBL) and measures sustainability in relation to organizational performance and investment against the 3Ps (1) Profits (2) People (3) Planet. For example; Profit: A packaging manufacturer reinvesting its profits in State- of-the-art recycling machinery for it wasted cardboard.
People: A large privately owned call centre donate its end of life computers to a local youth clubs and social groups to help gain internet cases.
Planet: A driving instructors using only hybrid vehicles to teach her learners, thus to reducing Co2 emission.
* Refer to the question column for response
What information should be included on a purchase requisition?
Correct Answer:
See the answer in explanation.
Explanation:
RESPONSE
A purchase requisition should contain the following information
1) Date of the requisition
2) Description of what is required
3) Supplier if known
4) The quantity
5) when the need is required
6) why the need is required
7) who identified the need
8) who approved the need
9) if it's a re-buy
Explanation:
RESPONSE
A purchase requisition should contain the following information
1) Date of the requisition
2) Description of what is required
3) Supplier if known
4) The quantity
5) when the need is required
6) why the need is required
7) who identified the need
8) who approved the need
9) if it's a re-buy
Maximum Score: 25
Explain the elements that Lucie should include in her analysis based on whole-life asset management.
(25 marks)
Water Works Limited
11
Water Works Limited is the regulated public authority for the provision of clean and waste water services in the Southern region. The procurement manager, Lucie James, has been asked to review the contract for the supply of vehicles across Water Works' ten regional offices. The vehicles are currently hired from Vehicle Press, but several vehicle breakdowns have created operational issues on Water Works sites. There are currently 200 vehicles in the fleet. Some of these are now several years old and running costs are increasing.
Lucie reviewed the contract with Vehicle Press and is aware that the expiry date of the contract is at the end of the current year. Water Works has the option to extend the contract. Lucie undertakes a review of Vehicle Press' contract performance and the specification for vehicles, together with the number of vehicles that will be required in the future. Following this, Lucie presents the analysis of the options available to the operations director, Anna Cabo, in a procurement strategy report. Lucie's report presents the following three options;
1. Extend the contract with Vehicle Press Limited for the hire of the vehicles 2. Re-tender the contract to the open market for the provision of hired vehicles Purchase the vehicles instead of hiring them from the open market.
3.
3. Purchase the vehicles instead of hiring them from the open market. Anna's decision is to progress with option three to purchase the vehicles, as there are capital funds available for strategic purchases in the current year. To proceed, Anna must generate a business case for presentation to the senior leadership team. Anna asks Lucie to prepare a detailed whole life asset management analysis for the provision of the vehicles to support her business case.
Explain the elements that Lucie should include in her analysis based on whole-life asset management.
(25 marks)
Water Works Limited
11
Water Works Limited is the regulated public authority for the provision of clean and waste water services in the Southern region. The procurement manager, Lucie James, has been asked to review the contract for the supply of vehicles across Water Works' ten regional offices. The vehicles are currently hired from Vehicle Press, but several vehicle breakdowns have created operational issues on Water Works sites. There are currently 200 vehicles in the fleet. Some of these are now several years old and running costs are increasing.
Lucie reviewed the contract with Vehicle Press and is aware that the expiry date of the contract is at the end of the current year. Water Works has the option to extend the contract. Lucie undertakes a review of Vehicle Press' contract performance and the specification for vehicles, together with the number of vehicles that will be required in the future. Following this, Lucie presents the analysis of the options available to the operations director, Anna Cabo, in a procurement strategy report. Lucie's report presents the following three options;
1. Extend the contract with Vehicle Press Limited for the hire of the vehicles 2. Re-tender the contract to the open market for the provision of hired vehicles Purchase the vehicles instead of hiring them from the open market.
3.
3. Purchase the vehicles instead of hiring them from the open market. Anna's decision is to progress with option three to purchase the vehicles, as there are capital funds available for strategic purchases in the current year. To proceed, Anna must generate a business case for presentation to the senior leadership team. Anna asks Lucie to prepare a detailed whole life asset management analysis for the provision of the vehicles to support her business case.
Correct Answer:
See the answer in explanation.below.
Explanation:
3. Explain the elements that Lucie should include in her analysis based on whole-life asset management.
(25 marks)
Whole-life asset management means evaluating the total cost and value of an asset over its full life , not just the initial purchase price. CIPS explains this as whole-life costing / total cost of ownership , covering acquisition, usage and end-of-life costs. ISO 55000 also states that asset management should consider assets over their life cycles to realise value for the organisation.
In Water Works' case, Lucie should include the following elements in her analysis of purchasing the 200 vehicles.
1. Initial acquisition costs
Lucie should first calculate the purchase price of the vehicles. This includes not only the price of each vehicle, but also delivery charges, registration, taxes, any fit-out requirements, signage, tracking systems and initial insurance. This is important because the capital cost will be high for a fleet of 200 vehicles, so the business case must show the full upfront investment rather than just the list price. CIPS notes that whole-life costing includes purchase price and acquisition cost .
2. Operating and running costs
A major element is the cost of operating the vehicles during their working life. Lucie should estimate fuel or energy costs, servicing, maintenance, repairs, tyres, road tax and insurance. This is especially relevant because the case states that some current vehicles are several years old and running costs are increasing . Therefore, Lucie should compare the likely running costs of new vehicles with the current hired fleet to show whether ownership offers better long-term value. CIPS identifies usage cost as a core part of total cost of ownership.
3. Reliability and performance
Lucie should assess how reliable the vehicles are expected to be over time. The case already mentions several breakdowns causing operational issues on Water Works sites. Therefore, her analysis should include the likely cost of breakdowns, lost productivity, missed site visits, delays to operations and possible emergency replacement vehicles. This is important because a cheaper vehicle may not represent best value if it is unreliable and disrupts service delivery. Whole-life asset management is about the value delivered over the asset life, not only cost. ISO guidance emphasises value, risk and outcomes across the lifecycle.
4. Maintenance strategy and support arrangements
Lucie should include how the vehicles will be maintained once purchased. For example, she should assess whether servicing will be outsourced, managed through manufacturer warranties, or supported by local garages across the ten regional offices. She should also consider the availability of spare parts and support response times. This matters because purchasing the fleet transfers more responsibility for asset upkeep to Water Works compared with hiring.
5. Asset life and replacement cycle
Another important element is the expected useful life of the vehicles. Lucie should estimate how long the vehicles will remain economically and operationally effective before replacement is needed. This should include mileage, intensity of use, operating conditions and likely deterioration. Since Water Works operates across ten regional offices, some vehicles may experience heavier use than others. A whole-life analysis should therefore include assumptions on replacement timing and fleet renewal planning.
6. Residual value and disposal value
Lucie should include the likely residual value of the vehicles at the end of their useful life. If Water Works owns the vehicles, they may be sold, traded in or auctioned. This means the organisation may recover some value at the end of the asset life. She should also include any disposal costs, such as decommissioning, collection, administration or environmentally compliant disposal. CIPS notes that whole-life costing includes end-of-life cost .
7. Financing and cost of capital
Although capital funds are available, Lucie should still consider the financial impact of tying up funds in vehicle ownership. The analysis should show whether using capital for vehicles represents best value compared with other strategic uses of funds. She may also include depreciation and the effect on budgets over time. This is important because purchasing assets creates a different financial commitment from hiring them.
8. Specification and fitness for purpose
Lucie should review whether the chosen vehicles meet operational needs. This includes vehicle size, load capacity, durability, fuel efficiency, suitability for site conditions and any specialist requirements for water service operations. A whole-life approach requires the asset to be fit for purpose, because a poor specification can increase maintenance costs and reduce operational value later in the lifecycle.
9. Risk analysis
Lucie should include risks associated with ownership. These may include unexpected repair costs, changes in fuel prices, asset obsolescence, poor resale values, non-availability of parts and the risk that operational needs change during the asset life. She should compare these ownership risks with the risks under hiring arrangements. ISO 55000 highlights that asset management should consider risks and opportunities throughout the lifecycle .
10. Sustainability and regulatory factors
As a regulated public authority, Water Works should also consider environmental and regulatory issues.
Lucie's analysis should include emissions, fuel efficiency, possible transition to lower-emission vehicles, compliance requirements and disposal obligations. This is relevant because public sector organisations are expected to consider long-term environmental impact as well as cost.
11. Whole-life comparison against hiring
Finally, Lucie should compare the total whole-life cost of buying against the alternatives of extending the current hire contract or re-tendering for hired vehicles . This comparison should include all acquisition, usage, maintenance and end-of-life costs, as well as service reliability and operational value. CIPS describes whole-life costing as an end-to-end cost estimate to support procurement decisions.
Conclusion
In conclusion, Lucie's whole-life asset management analysis should not focus only on the purchase price of the vehicles. It should include acquisition costs, operating costs, maintenance, reliability, useful life, replacement cycle, residual value, disposal costs, finance implications, specification, risk and sustainability considerations . By analysing all these elements, Lucie can show whether purchasing the fleet gives Water Works better long-term value than continuing to hire vehicles. This is the main purpose of whole- life asset management.
Explanation:
3. Explain the elements that Lucie should include in her analysis based on whole-life asset management.
(25 marks)
Whole-life asset management means evaluating the total cost and value of an asset over its full life , not just the initial purchase price. CIPS explains this as whole-life costing / total cost of ownership , covering acquisition, usage and end-of-life costs. ISO 55000 also states that asset management should consider assets over their life cycles to realise value for the organisation.
In Water Works' case, Lucie should include the following elements in her analysis of purchasing the 200 vehicles.
1. Initial acquisition costs
Lucie should first calculate the purchase price of the vehicles. This includes not only the price of each vehicle, but also delivery charges, registration, taxes, any fit-out requirements, signage, tracking systems and initial insurance. This is important because the capital cost will be high for a fleet of 200 vehicles, so the business case must show the full upfront investment rather than just the list price. CIPS notes that whole-life costing includes purchase price and acquisition cost .
2. Operating and running costs
A major element is the cost of operating the vehicles during their working life. Lucie should estimate fuel or energy costs, servicing, maintenance, repairs, tyres, road tax and insurance. This is especially relevant because the case states that some current vehicles are several years old and running costs are increasing . Therefore, Lucie should compare the likely running costs of new vehicles with the current hired fleet to show whether ownership offers better long-term value. CIPS identifies usage cost as a core part of total cost of ownership.
3. Reliability and performance
Lucie should assess how reliable the vehicles are expected to be over time. The case already mentions several breakdowns causing operational issues on Water Works sites. Therefore, her analysis should include the likely cost of breakdowns, lost productivity, missed site visits, delays to operations and possible emergency replacement vehicles. This is important because a cheaper vehicle may not represent best value if it is unreliable and disrupts service delivery. Whole-life asset management is about the value delivered over the asset life, not only cost. ISO guidance emphasises value, risk and outcomes across the lifecycle.
4. Maintenance strategy and support arrangements
Lucie should include how the vehicles will be maintained once purchased. For example, she should assess whether servicing will be outsourced, managed through manufacturer warranties, or supported by local garages across the ten regional offices. She should also consider the availability of spare parts and support response times. This matters because purchasing the fleet transfers more responsibility for asset upkeep to Water Works compared with hiring.
5. Asset life and replacement cycle
Another important element is the expected useful life of the vehicles. Lucie should estimate how long the vehicles will remain economically and operationally effective before replacement is needed. This should include mileage, intensity of use, operating conditions and likely deterioration. Since Water Works operates across ten regional offices, some vehicles may experience heavier use than others. A whole-life analysis should therefore include assumptions on replacement timing and fleet renewal planning.
6. Residual value and disposal value
Lucie should include the likely residual value of the vehicles at the end of their useful life. If Water Works owns the vehicles, they may be sold, traded in or auctioned. This means the organisation may recover some value at the end of the asset life. She should also include any disposal costs, such as decommissioning, collection, administration or environmentally compliant disposal. CIPS notes that whole-life costing includes end-of-life cost .
7. Financing and cost of capital
Although capital funds are available, Lucie should still consider the financial impact of tying up funds in vehicle ownership. The analysis should show whether using capital for vehicles represents best value compared with other strategic uses of funds. She may also include depreciation and the effect on budgets over time. This is important because purchasing assets creates a different financial commitment from hiring them.
8. Specification and fitness for purpose
Lucie should review whether the chosen vehicles meet operational needs. This includes vehicle size, load capacity, durability, fuel efficiency, suitability for site conditions and any specialist requirements for water service operations. A whole-life approach requires the asset to be fit for purpose, because a poor specification can increase maintenance costs and reduce operational value later in the lifecycle.
9. Risk analysis
Lucie should include risks associated with ownership. These may include unexpected repair costs, changes in fuel prices, asset obsolescence, poor resale values, non-availability of parts and the risk that operational needs change during the asset life. She should compare these ownership risks with the risks under hiring arrangements. ISO 55000 highlights that asset management should consider risks and opportunities throughout the lifecycle .
10. Sustainability and regulatory factors
As a regulated public authority, Water Works should also consider environmental and regulatory issues.
Lucie's analysis should include emissions, fuel efficiency, possible transition to lower-emission vehicles, compliance requirements and disposal obligations. This is relevant because public sector organisations are expected to consider long-term environmental impact as well as cost.
11. Whole-life comparison against hiring
Finally, Lucie should compare the total whole-life cost of buying against the alternatives of extending the current hire contract or re-tendering for hired vehicles . This comparison should include all acquisition, usage, maintenance and end-of-life costs, as well as service reliability and operational value. CIPS describes whole-life costing as an end-to-end cost estimate to support procurement decisions.
Conclusion
In conclusion, Lucie's whole-life asset management analysis should not focus only on the purchase price of the vehicles. It should include acquisition costs, operating costs, maintenance, reliability, useful life, replacement cycle, residual value, disposal costs, finance implications, specification, risk and sustainability considerations . By analysing all these elements, Lucie can show whether purchasing the fleet gives Water Works better long-term value than continuing to hire vehicles. This is the main purpose of whole- life asset management.
What is Iso 14001?
Correct Answer:
See the answer in explanation.
Explanation:
14001 set out as international standards for an environmental management system.
Explanation:
14001 set out as international standards for an environmental management system.
What is needed for a contract to be binding?
Correct Answer:
See the answer in explanation.
Explanation:
A contract is written or verbal agreement, made between two or more parties that is legally enforceable. For a contract to be legally binding it must include intention of parties entering into the contracts. All parties must have the capacity to contract or be contracted. They must be of a sound mind, there should be a promise (offer) for per-formance from the other party and an exchange (consideration) of one thing for another within an agreement for contract to be binding, and there must be an acceptance of the offeror's offer by the offeree.
Explanation:
A contract is written or verbal agreement, made between two or more parties that is legally enforceable. For a contract to be legally binding it must include intention of parties entering into the contracts. All parties must have the capacity to contract or be contracted. They must be of a sound mind, there should be a promise (offer) for per-formance from the other party and an exchange (consideration) of one thing for another within an agreement for contract to be binding, and there must be an acceptance of the offeror's offer by the offeree.
Which type of power is most likely to be used in corruption?
Correct Answer:
See the answer in explanation.
Explanation:
The abuse of power within the supply chain can be linked to corruption. If individuals with seniority favor one supplier over another, they can exercise their power to award the contract to whoever they wish.
According to CIPS code of conduct, this is not ac-ceptable.
According to French and Raven, there are five types of power (Legitimate power, Re-ward, Expert, Referent and Coercive), and these powers can most likely be used in corruption.
Explanation:
The abuse of power within the supply chain can be linked to corruption. If individuals with seniority favor one supplier over another, they can exercise their power to award the contract to whoever they wish.
According to CIPS code of conduct, this is not ac-ceptable.
According to French and Raven, there are five types of power (Legitimate power, Re-ward, Expert, Referent and Coercive), and these powers can most likely be used in corruption.
What happens in the public sector, regarding providing feedback?
Correct Answer:
See the answer in explanation.
Explanation:
A sector is an area of an industry, e.g., private, public or third sector.
A public sector is a sector of the economy that is owned, finance and run by the government. This sector is financed with tax payer's money. And therefore owe the general public an ethical explanation towards all investment and decision.
Once the supplier that is awarded the contract has accepted, the buyer can tell the unsuccessful bidders. This usually happens through email or letter. The public sector is more likely to give feedback to unsuccessful bidders and also have to respond to any stakeholders that request information on why a supplier is not successful.
* Refer to the question column for response
Explanation:
A sector is an area of an industry, e.g., private, public or third sector.
A public sector is a sector of the economy that is owned, finance and run by the government. This sector is financed with tax payer's money. And therefore owe the general public an ethical explanation towards all investment and decision.
Once the supplier that is awarded the contract has accepted, the buyer can tell the unsuccessful bidders. This usually happens through email or letter. The public sector is more likely to give feedback to unsuccessful bidders and also have to respond to any stakeholders that request information on why a supplier is not successful.
* Refer to the question column for response
Why is it important to keep ethical codes of practice up to date?
Correct Answer:
See the answer in explanation.
Explanation:
A code of ethics is a set of morals and principle set out by an organization to state what it deems to be acceptable conduct and behavior An ethical code of practice is a continually changing and developing document with society changing and different suppliers coming to market, the document has to remain current Suppliers should continually monitor their codes of ethics to ensure that;
1. They are looking after the interest of the supply chain
2. That potential customers can be reassured that they are conforming to the required regulation, e.g. ISO
14001.
Ethical code of conduct should be constantly monitored and updated in accordance with the changes organization faces. This include 1) Define (2) prevent (3) detect (4) reprove (5) evaluate.
Explanation:
A code of ethics is a set of morals and principle set out by an organization to state what it deems to be acceptable conduct and behavior An ethical code of practice is a continually changing and developing document with society changing and different suppliers coming to market, the document has to remain current Suppliers should continually monitor their codes of ethics to ensure that;
1. They are looking after the interest of the supply chain
2. That potential customers can be reassured that they are conforming to the required regulation, e.g. ISO
14001.
Ethical code of conduct should be constantly monitored and updated in accordance with the changes organization faces. This include 1) Define (2) prevent (3) detect (4) reprove (5) evaluate.
Create two KPIs and two SLAs for a contract with which you are familiar.
Correct Answer:
See the answer in explanation.
Explanation:
Key performance Indicators (KPIs) and service level Agreement (SLA) are measures that demon-strate the effectiveness of a supplier. By using KPIs and SLAs as part of suppliers management, procurement professionals can monitor and evaluate performance and identify areas that need attention or improvement.
KPIs and SLAs are used for product and service contract respectively.
Two KPI
1) Number of defects: Not more than two defects is allowed on the generator and its accessories
2) Supplier Lead Time: Delivery after placing order should not be anytime longer than 14 days.
Two SLAs
1) The toilet should be washed with soap, and deodorant should be sprayed twice a day
2) Bathroom and toilet should not be allowed to smell out to the passage. Bathroom smelling out to the passage twice a month is a violation of the contract.
Explanation:
Key performance Indicators (KPIs) and service level Agreement (SLA) are measures that demon-strate the effectiveness of a supplier. By using KPIs and SLAs as part of suppliers management, procurement professionals can monitor and evaluate performance and identify areas that need attention or improvement.
KPIs and SLAs are used for product and service contract respectively.
Two KPI
1) Number of defects: Not more than two defects is allowed on the generator and its accessories
2) Supplier Lead Time: Delivery after placing order should not be anytime longer than 14 days.
Two SLAs
1) The toilet should be washed with soap, and deodorant should be sprayed twice a day
2) Bathroom and toilet should not be allowed to smell out to the passage. Bathroom smelling out to the passage twice a month is a violation of the contract.
Create a list of primary and secondary Data sources?
Correct Answer:
See the answer in explanation.
Explanation:
Data can be primary or secondary
Primary data are derived from original work or research through experience. Primary data can be gathered from the following sources; 1) Interview (2) survey (3) meetings (4) case studies.
Secondary data is derived from a previous source, i.e. somebody else has gathered the data. Sec-ondary data can be gained from; (1) Books (2) Websites, Trade magazines, etc
Explanation:
Data can be primary or secondary
Primary data are derived from original work or research through experience. Primary data can be gathered from the following sources; 1) Interview (2) survey (3) meetings (4) case studies.
Secondary data is derived from a previous source, i.e. somebody else has gathered the data. Sec-ondary data can be gained from; (1) Books (2) Websites, Trade magazines, etc
Create two KPIs and two SLAs for a contract with which you are familiar.
Correct Answer:
See the answer in explanation.
Explanation:
Key performance Indicators (KPIs) and service level Agreement (SLA) are measures that demon-strate the effectiveness of a supplier. By using KPIs and SLAs as part of suppliers management, procurement professionals can monitor and evaluate performance and identify areas that need attention or improvement.
KPIs and SLAs are used for product and service contract respectively.
Two KPI
1) Number of defects: Not more than two defects is allowed on the generator and its accessories
2) Supplier Lead Time: Delivery after placing order should not be anytime longer than 14 days.
Two SLAs
1) The toilet should be washed with soap, and deodorant should be sprayed twice a day
2) Bathroom and toilet should not be allowed to smell out to the passage. Bathroom smelling out to the passage twice a month is a violation of the contract.
* Refer to the question column for response
Explanation:
Key performance Indicators (KPIs) and service level Agreement (SLA) are measures that demon-strate the effectiveness of a supplier. By using KPIs and SLAs as part of suppliers management, procurement professionals can monitor and evaluate performance and identify areas that need attention or improvement.
KPIs and SLAs are used for product and service contract respectively.
Two KPI
1) Number of defects: Not more than two defects is allowed on the generator and its accessories
2) Supplier Lead Time: Delivery after placing order should not be anytime longer than 14 days.
Two SLAs
1) The toilet should be washed with soap, and deodorant should be sprayed twice a day
2) Bathroom and toilet should not be allowed to smell out to the passage. Bathroom smelling out to the passage twice a month is a violation of the contract.
* Refer to the question column for response