CIPS Exam Report for Learner Community:

Qualification: Diploma in Procurement and Supply

Unit: D2, Business Needs in Procurement and Supply
Exam series: May 2016

Question 1 Mark
Question:
Q1(a) Using examples, explain the difference between direct and indirect costs. 5 Marks
Q1(b) Describe FIVE factors that a buyer might expect a supplier to take into 20 Marks
account when setting the selling price of their product.

Learning outcome addressed 1.2

Command word explanation: Explain- Give reasons for or account for something
Describe- Give a full account of something

Examples of good content/good approaches in answers:

Part (a) of this question sought an explanation of the difference between direct and indirect costs. Direct costs
can be clearly and directly attributable to a particular product or service; whereas indirect costs cannot be so
allocated. Examples of each type of cost were a specific requirement of this part of this question. Typical
examples given of direct costs were raw materials and components; typical examples of indirect costs were
the business rates, rent of buildings, and non-production salaries.
Part (b) sought descriptions of any five factors that a buyer might expect a supplier to take into account when
setting the selling price of their product. Correct ‘factors’ that were included in many answers typically
included: recovering all costs (labour, materials overheads, etc); desired levels of profit; the extent of
competition in the marketplace; wider economic factors; the nature of the actual/desired relationship with
the buyer; and the desirability of the buyer as a customer. All other valid factors were also accepted.

Examples of content for merit/distinction grade answers:

For Part (a), good explanations and good choices of examples secured high marks, and there were many ‘full
marks’ given for this part of this question. For Part (b), higher marks were awarded for more detailed
descriptions, and also for the provision of good, illustrative examples.

Examples of poorer content/ poorer approaches in answers: A small number of answers to Part (a) just gave
guesses at the meaning of the phrases ‘direct costs’ and ‘indirect costs’; and a few gave ‘direct’ and ‘indirect’
costs the wrong way round. Some responses were far longer than could be justified by the maximum of five
marks on offer: some candidates even wrote a full side and more. This is not ‘wrong’ at all, but it uses up
valuable time that could be better spent on other questions. Some responses did not explain the differences
clearly; and/or just gave extremely simplistic definitions, which repeated the words of the question. Weaker
responses to Part (b) gave little more than five bullet points, without descriptions. A few responses went into
over-much unnecessary introductory and unrelated detail about costs in general; and a very few responses
gave more than five ‘factors’; which again is not ‘wrong’ as such, but as Markers do not assess ‘extra’ content
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 of this kind, writing the extra words gains no further marks, and uses up valuable time that could be better
spent writing responses to the other questions.

Concluding comment: Part (a) of this question was generally answered well, with the majority of candidates
getting four or five marks; and part (b) was also generally answered well, with many candidates gaining high
marks.

Question 2 Mark
Question:
Q2(a) Propose and justify FIVE key performance indicators that could be 15 Marks
included in a contract for cleaning services.
Q2(b)(i) Define the term ‘service level agreement’. 2 Marks
Q2(b)(ii) Outline FOUR reasons why a service level agreement might fail to
8 Marks
achieve its objectives.

Learning outcome addressed 2.3

Command word explanation:

Propose- Put forward a suggestion for consideration
Justify- Show good reasons for decisions or conclusions
Define- Explain the exact meaning of a phrase
Outline- Give the main features, facts or the general idea of something

Examples of good content/good approaches in answers:

Part (a) of this question sought proposals and justifications for any five KPIs that might be included in a
contract for cleaning services. There are very many KPIs to choose from, and Markers accepted all feasible
KPIs. Many responses proposed appropriate and imaginative suggestions for KPIs that would clearly be
relevant to a contract for cleaning services. A broad interpretation of the meaning of ‘cleaning services’ was
applied by the Markers, and all reasonable suggestions for relevant KPIs attracted marks. Typical correct KPI
proposals included: attendance hours; service availability; numbers of rooms/areas cleaned; customer
feedback from surveys or other channels; reports from a ‘mystery shopper’ or inspectors on quality of
cleaning; numbers of customer complaints and/or plaudits; health and safety record; overall standards of
cleanliness achieved; staff presentability and helpfulness; cost; cleaning materials used; and overall value for
money.
Part (b) sought a definition of ‘SLA’, and candidates could use their own words to express this definition: no
pre-determined or set wording was required. The question then asked candidates to outline four reasons why
a service level agreement might fail to achieve its objectives. Amongst the more commonly-chosen reasons
were: lack of commitment from buyer/supplier; lack of support/governance; SLAs too detailed and
burdensome to monitor; SLAs not ‘SMART’; SLAs not understood; staff not trained in SLAs.

Examples of content for merit/distinction grade answers:

Responses to Part (a) that fully proposed, justified, and contextualised each of the five proposed KPIs scored
highly. Many responses to Part (b) defined ‘SLA’ well, and got the full two marks; and then the relatively ‘light’
command word ‘outline’ meant that great detail was not required; and many candidates scored well here
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 also.

Examples of poorer content/ poorer approaches in answers:

For Part (a), KPIs had not only to be ‘proposed’, they had also to be ‘justified’, as required by the second
command word in this part of this question; and many responses overlooked this additional requirement.
Some responses were very short, and/or gave very generic KPIs, that would not be relevant to cleaning
services. Some responses carefully distinguished between ‘qualitative’ and ‘quantitative’ KPIs; or added wider
descriptions of the role of KPIs. This was not ‘incorrect’ as such, but it was not sought by the question, so
attracted no further marks. For Part (b), there were a few weaker answers that were too short even for an
‘outline’ - just a bullet list - and a few responses that misunderstood ‘SLAs’. There were also a few responses
where candidates gave more than four ‘reasons’. This is an important point to remember about good
examination technique: give all of the content that the question requires; but do not give any more content
than that – it is a waste of valuable examination time, and cannot gain any marks.

Concluding comment:
This question was generally answered well, with many candidates giving good responses. Where, as here, the
question asks for a specific number of examples or factors, typically ‘THREE’, or ‘FIVE’, such number will
usually appear in CAPITAL letters, and be emboldened. Candidates should recognise this number as being part
of the command word within the question, and should clearly delineate, or indicate precisely, just that
number of entries in their responses. This can be done in many ways: by numbering; by separating sections or
paragraphs; or textually. Some candidates, in this response and elsewhere, gave more than the required
number of responses.

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 Question 3 Mark
Question:
Q3(a) Outline FIVE examples of contractual terms that might be used in a 15 Marks
commercial agreement.
Q3(b) Suggest conditions that may be included in a contract to ensure a supplier 10 Marks
complies with recognised ethical and labour standards.

Learning outcome addressed 3.2

Command word explanation: Outline- Give the main features, facts or the general idea of something

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Suggest- Give the most appropriate answer or answers

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Examples of good content/good approaches in answers:
There are many examples of contractual terms that might be used in commercial agreements, and marks

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were awarded in Part (a) for all possible examples given in responses. Typical responses included: exclusion
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terms; limitation terms; force majeure terms; IPR terms; sub-contracting terms; duration of agreement terms;
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price variation terms; insurance terms; indemnity terms; retention of title terms; liquidated damages terms;
applicable law terms; break/termination terms; and dispute resolution terms. This is not an exhaustive list of
those terms that were proposed by candidates, and credit was given by Markers for all other relevant terms.
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Part (b) was also a broad question, and all and any relevant conditions that could be included in a contract to
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ensure that a supplier complies with ethical and labour standards were fully accepted as correct answers by
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the Markers. Typical answers that were given included conditions such as: adherence to Fair-trade rules; bans
on the use of child labour; stringent health and safety requirements; enforcing the payment of minimum
wage or fair wage; rules against bribery and corruption; prompt payment of sub-contractors and employees;
compliance with CSR policies; enforcement of equality and diversity policies; compliance with International
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Labour Organisation (ILO) or similar standards; membership of the Ethical Trading Initiative (ETI) or similar
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bodies; commitment to transparency; and commitment to Trades Union recognition. No specific number of
‘conditions’ was sought by the question, so responses could either cover a few conditions in some depth, or a
larger number of conditions in less detail; all appropriate different levels of breadth and depth were accepted,
and were awarded marks as appropriate.
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Examples of content for merit/distinction grade answers:

The use of the command word ‘outline’ for Part (a) meant that long descriptions or explanations were not
needed in order to still achieve full marks, and many responses gave good ‘outlines’, and gained at, or close
to, the full fifteen marks available. Similarly, the use of the command word ‘suggest’ for Part (b) meant that
especially deep levels of description or explanation were not needed here either.

Examples of poorer content/ poorer approaches in answers:

For Part (a), generic headings , such as ‘conditions’, ‘implied terms’, ‘express terms’, or ‘warranties’, were not
correct answers, as the question specifically sought ‘examples’ of terms; but if appropriate wording for such a
term was included within an otherwise generic response, then marks were awarded for that content. A few
responses gave, incorrectly, the conditions that must exist for a legally binding contract to come into being,
such as ‘offer and acceptance’; and a few also gave, incorrectly, the ‘five rights of purchasing’ as the answer.
A few responses to Part (b) misinterpreted the question, and answered it by stating the consequences of not
meeting the conditions; rather than suggesting what the actual conditions might be. And some responses to
Part (b) were little more than short, bulleted lists, which did not meet the requirements of even the relatively
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 light command word ‘suggest’.

Concluding comment: This question was generally answered well, with many candidates giving good
responses.

Question 4 Mark
Question:
Q4 Alternative sourcing options must first be evaluated before making a business
case to outsource processes or services. The considerations of these alternative
sourcing options may be included as part of the business case.

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Q4(a) Describe THREE such alternative sourcing options that could be evaluated

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15 Marks
when making an outsourcing decision.

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Q4(b) Discuss TWO options for a purchaser if a contract for outsourced services

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breaks down. 10 Marks

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Learning outcome addressed 4.3
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Command word explanation: Describe- Describe- Give a full account of something
Discuss- Consider something by writing about it from different points of view
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Examples of good content/good approaches in answers:

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Part (a) of this question sought three ‘alternative sourcing options’ to outsourcing. Correct answers included:
producing the services in-house; licensing or franchising the technology or designs to external supplier(s);
establishing a joint development project with another organisation; acquiring the supplier outright;
purchasing from a qualified external supplier under a normal customer/supplier relationship; entering into a
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long term development or supply relationship; ‘partial outsourcing’ (i.e. giving some elements to an
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outsourced service provider, but retaining some elements in-house); and using a Shared Services Unit to
deliver the required services. Credit was also given for responses based on the ‘relationship spectrum’, such
as the formation of ‘strategic alliances’ or ‘partnerships’ with suppliers, but these needed to then be related
to the question and presented clearly as alternative options to outsourcing. Credit was also given for generic
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business case options, such as 'do nothing', i.e. maintain the status quo, unchanged.
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Part (b) sought a discussion of two options for a purchaser if a contract for outsourced services breaks down.
All valid responses were awarded marks, as long as they related to the relevant ‘outsourced services contract
breakdown’ aspects. Correct content typically found in responses included: establish clearly the underlying
problems with the current provider/customer, and implement an action plan for immediate/urgent correction
and recovery; award the contract instead to another supplier, perhaps the ‘second choice’ provider from the
previous sourcing exercise; re-tender the contract if too much time has elapsed since the original contract was
awarded; or bring the work back in-house.

Examples of content for merit/distinction grade answers:

For Part (a), responses which addressed the question fully, within an appropriate structure of ‘three
alternatives’ to outsourcing, achieved high marks. High-scoring responses to Part (b) were well structured,
and clearly separated each of two ‘options’ for the purchaser, as per the question as set.

Examples of poorer content/ poorer approaches in answers:

Poorer responses to Part (a) showed confusion about what the question was actually asking for; and there
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 were many over-long and irrelevant answers, on topics such as the reasons for outsourcing, and the risks of
outsourcing of ‘non-core’ activities. Some responses failed to provide three ‘alternative sourcing options’ at
all; and quite a few responses included ‘outsourcing’ as an ‘alternative sourcing option’, even though it is
specifically excluded by the wording of the question: clearly, ‘outsourcing’ cannot ever be an ‘alternative to
outsourcing’. The ‘discuss’ command word in Part (b) sought a response that addressed the pros and cons of
each of the two chosen options, typically around areas such as cost, speed, practicability, and acceptability to
stakeholders. A few responses did not give enough ‘discussion’, only giving short descriptions; a few only
proposed one option instead of two; and a very few gave more than two ‘options’.

Concluding comment: Part (a) of this question was answered poorly by the great majority of candidates. Few
responses correctly addressed the question as set, and there were quite a lot of ‘theory dump’ responses that
didn’t address the question; as well as some outright guesses at the right answers. Part (b) was generally

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answered more successfully than was Part (a), and many candidates were able to recover at least some marks

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here that they had not gained for Part (a). Many candidates demonstrated good knowledge and experience of

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outsourcing in Part (b), and showed insight into the risks and consequences of failure of an outsourcing

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contract.

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