9. Procurement

Question 1

Explain the purpose typical content and importance of a Procurement strategy

Hint: Purpose answer, content = 7 points, and importance answer.

O - S - R - C - S- C - B

Answer 1

Purpose = ensure the organisation obtains goods and services it needs at the right time, quality and cost.

Contents:
1.Objectives
2.Scope
3.Risk Management
4. Contracting Approach
5. Supplier selection criteria
6. Contact management
7. Budget and financial considerations

Importance = clear roadmap which obtains the best value for money, minimises risk and manages contract effectively. Procurement strategy also helps to build confidence between stakeholders and enhance transparency and accountability.

Question 2

Differentiate between the different methods of supplier reimbursement

Hint: 4 points

1. FP/LS
2. CR
3. T+M
4. IB

Answer 2

1. Fixed price or lump sum - pre-agreed price, often used when risk is low and scope is well defined.
2. Cost reimbursement - the supplier is reimbursed for the actual costs incurred in delivering products or services.
3. Time and materials - hybrid model that combines both fixed price and cost reimbursement. The supplier is paid for the actual time and materials used, and a pre-agreed rate is applied for labour and materials.
4. Incentive-based - links supplier payment to specific performance or quality metrics.

Question 3

Differentiate between different contractual relationships

Hint: 5 points
FP- T+M - CP - GMP - PB

Answer 3

1. Fixed price: contractor assumes risk associated with overruns
2. Time and materials:
3. Cost Plus:
4. Guaranteed maximum price:
5. Performance-based:

Question 4

Explain a supplier selection process

Hint: 7 points

I - D - I -E - N-S-M

Answer 4

1. Identify the need
2. Develop selection criteria
3. Identify potential suppliers
4. Evaluate potential suppliers
5. Negotiate contract terms
6. Select the supplier
7. Monitor supplier performance