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INFORMATION FOR CANDIDATES The senior assessor’s report is written in order to provide candidates with feedback relating to the examination. It is designed as a tool for candidates - both those who have sat the examination and those who wish to use as part of their revision for future examinations. Candidates are advised to refer to the Examination Techniques Guide (see the following link: http://www.cips.org/en-GB/Qualifications/study-support/ ) as well as this senior assessor’s report. The senior assessor’s report aims to provide the following information:

An indication of how to approach the examination question

An indication of the points the answer should include

An indication of candidate performance for the examination question Each question has a syllabus reference which highlights the learning objectives of the syllabus unit content that the question is testing. The unit content guides are available to download at the following link: http://www.cips.org/Qualifications/About-CIPS-Qualifications/cipsqualifications/ ADDITIONAL SOURCES OF INFORMATION The Supply Management magazine is a useful source of information and candidates are advised to include it in their reading during their study. Please see the following link to the Supply Management website: http://www.supplymanagement.com/

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SECTION A Q1 Explain FIVE ways the processes in the AC Quick Guide to

Purchasing can be improved when developing contracts for low-value, routine purchases

(25 marks)

Analysis of the Question This question tested candidates’ knowledge of correct procurement processes when developing contracts for low value items. Analysis of the Answer Candidates had a wide range of choice of things that could be done differently by AC from their ‘Quick guide to purchasing’ when developing contracts for low-value purchases of non-strategic items. There are many improved procedures that could be adopted which would save the company money or reduce risk, or both. Alternatives to the specific guidance could include:

‘Check phone directories for suppliers and telephone three of these for price estimates’ - AC could arrive at a preferred supplier list/approved supplier list, use the internet for faster sourcing or find out which suppliers the other AC franchisees are using and share knowledge about them. AC could also get a quick idea of price from internet sources and choose the cheapest supplier; spot buy from the first supplier identified or put framework contract(s) in place.

‘Select the cheapest price’ - AC could conduct an e-auction or a mini-competition between framework providers or set up regular supply agreements with trusted suppliers.

‘Issue Purchase Order’- AC could use a purchasing card, e-commerce or use suppliers who offer a self-billing facility.

‘Requiring partial matching’ - AC could automate proper full three-way matching, for parts of these processes or introduce tolerance levels for minor differences.

‘Pay supplier’s invoice’- AC could use a purchasing card or e-commerce, use monthly accounts or even pay from petty cash.

Other possible improvements include:

outsourcing the procurement function for minor/trivial purchases;

expand the role of the centralised HQ function so it buys trivial items on behalf of all the franchisees and perhaps secures discounts in the process;

more co-ordination between franchisees in different areas to share resources;

use of e-auctions. Exam Question Summary The majority of candidates answered this question satisfactorily and there were often very sound descriptions given of the use of approved supplier lists, framework agreements and various forms of electronic tools such as e-catalogues, automatic 3-way matching of order, goods receipt and invoice. Some answers went beyond this and looked at the organisation of the procurement function, with valid recommendations such as centralising procurement, use of an outsourced provider.

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Some of the more common weaknesses included:

Answering the question as a single, sometimes rambling, narrative, rather than describing five specific ways as the question required.

Giving solutions that were not relevant to low value, routine purchases, such as use of Key Performance Indicators, Pre-Qualification Questionnaires.

Devising an entire procurement process, rather than addressing the specifics in the questions.

Suggesting valid solutions, but not explaining what they actually were, such as P-Card, Frameworks.

Q2 Explain FIVE ways the processes in the AC Quick Guide to Purchasing can be improved, when developing contracts for high value, strategically important projects such as the three given in the case.

(25 marks)

Analysis of the Question This question tested candidates’ knowledge of correct procurement processes when developing contracts for high value projects. Analysis of the Answer Candidates had a wide range of choice of things that should be done differently from the quick guide in respect of the purchase of substantial capital items, in particular regarding the three high-value, strategically important projects listed in the case. Alternatives to the specific guidance include:

‘Check phone directories for suppliers and telephone three of these for price estimates’- AC should undertake proper market research, supplier selection and appraisal and a formalised competition process, such as competitive tendering or negotiation.

‘Select the cheapest price’ – AC should conduct a proper evaluation, based on costs over the life of the project of the best value solution and explore ways to add value.

‘Issue Purchase Order’- AC should prepare a formal and comprehensive contract, including full documentation of the project and the deliverables, risk analysis and transfer and full protection of its commercial interests.

‘Pay supplier’s invoice’- AC should prepare a structured and incentivised payments system that stages payments in line with contractors’ achievements and progress on the projects and rewards successful and efficient implementation of projects.

Other suitable areas to address might have included market testing, a business case and HQ approvals process, involving franchisees and other stakeholders in project plans and teams. Exam Question Summary This question was similar to Question 1, except that it was high value contracts that were being looked at. In general, the answers given were of a higher standard than for Question 1, with many strong and sometimes outstanding explanations given, centring around such subjects as:

use of a full tendering process, including formal pre-qualification and tender evaluation;

employing techniques such as make vs buy and life-cycle costing;

negotiating a formal contract containing full terms and conditions, Key Performance Indicators and payments linked to successful achievement.

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Some of the more common weaknesses included:

Overlong and unnecessary introductions, which merely anticipated near-identical text in the main body of the answer;

Answering the question as a single, sometimes rambling, narrative, rather than describing five specific ways as the question required;

Giving only descriptions of types of conditions of contract;

Suggesting valid solutions, but not explaining what they actually were, such as “most economically advantageous tender”;

Writing an answer almost identical to Question 1. SECTION B Q3 Q3(a)

Explain each of the following in the context of developing contracts under English Law. Intellectual Property Rights (‘IPR’);

(5 marks)

Analysis of the Question This question tested candidates’ knowledge of IPR when developing contracts. Analysis of the Answer Candidates should have explained that IPR is a term referring to a number of distinct types of creations of the mind for which a set of exclusive rights are recognised under English Law and beyond. IPR can be sold, leased, licensed and stolen. Like other types of ‘property’. IPR grants certain exclusive rights to a variety of intangible assets, such as musical, literary, and artistic works; discoveries and inventions; and words, phrases, symbols, and designs. Common types of IPR include copyright, trademarks, patents, and registered designs. Exam Question Summary The question as a whole was relatively popular amongst candidates. Answers to part (a) were normally satisfactory, but rarely outstanding. Many candidates failed to actually explain what IP is or confused it with confidentiality. In addition, there was a general lack of understanding how IP arose and who it originally vests in, though there was more clarity of the need to define ownership in the contract. Q3(b) A warranty (5 marks)

Analysis of the Question This question tested candidates’ knowledge of ‘warranties’ as opposed to ‘conditions’ when developing contracts.

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Analysis of the Answer This was a standard ‘contract law’ question. Answers should have explained that a ‘warranty’ in this context is a contractual term that is lesser than a ‘condition’, so the contract will survive a breach of a warranty whereas it can be terminated by breach of a condition. Breach of either a condition or a warranty will give rise to a possible claim to damages. Candidates who confused ‘warranty’ in this sense with any other meaning of the word ‘warranty’ (such as when it means a guarantee of some sort) obtained no marks at all for this part. Exam Question Summary Understanding of the concept of a warranty was generally very good with many candidates giving sound explanations, with relevant examples, case law (Bettini v Guy) or the issue of encumbrance in the Sale of Goods Act. Q3(c) A condition (5 marks)

Analysis of the Question This question tested candidates’ knowledge of ‘conditions’ as opposed to ‘warranties’ when developing contracts. Analysis of the Answer Answers should have explained that a ‘condition’ in this context is a contractual term that is more substantial and significant than a ‘warranty’, so the contract will terminate if a condition is breached, though the injured party may wish to continue or affirm the contract. Breach of either a condition or a warranty will give rise to a possible claim to damages. It is a matter of fact, to be determined ultimately by the Courts, how ‘substantial’ any particular contractual term might be – i.e. whether it is a mere warranty; is the intermediate ‘innominate’ term; or is a full ‘condition’. Candidates who confused ‘condition’ in this sense with any other meaning of the word ‘condition’ (such as “Sold in Pristine Condition”) obtained no marks at all for this part of the question. Exam Question Summary In a similar vein to Q3(b), understanding of the concept of a condition was generally very sound with many candidates giving strong explanations, with relevant examples, case law (Poussard v Spiers and Pond) or the issues of satisfactory quality or fitness for purpose in the Sale of Goods Act. There was occasional mention of innominate terms or affirmation and some candidates wrongly stated that a condition had to be express and written, when it does not have to be either. Q3(d) Consideration (5 marks) Analysis of the Question This question test candidates’ knowledge of ‘consideration’ when developing contracts.

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Analysis of the Answer

Candidates should have explained that ‘Consideration’ is the concept of legal value in connection with contracts under English Law. ‘Consideration’ can be anything of value promised to another when making a contract. ‘Consideration’ can take the form of money, physical objects, services, promised actions, abstinence from a future action, etc etc. ‘Consideration’ does not have to be ‘adequate’ – in other words, it can represent really poor value for one party but still be legally binding – but ‘Consideration’ cannot be nothing at all, nor can it be fulfilment of a pre-existing obligation, like payment of outstanding wages or attending Court as a witness.

Candidates who confused ‘consideration’ in this English Law sense with any other meaning of the word ‘consideration’ (such as “I will give that my full consideration.”) obtained no marks at all for this part of the question. Exam Question Summary This part question was not answered so well as for parts (b) and (c), though most candidates did demonstrate a general understanding. Common errors included:

Believing that consideration had to have a monetary value.

Stating that the principle was defined in the Sale of Goods Act. Q3(e) Consensus ad idem (5 marks) Analysis of the Question This question tested candidates’ knowledge of ‘consensus ad idem’ when developing contracts. Analysis of the Answer Answers should have explained that ‘consensus ad idem’ is a long-standing Latin phrase from English Law which can be translated to mean a “Meeting of the Minds” or “Mutual Assent”. In contract law it means that both parties to a contract are thinking about the same thing – there is no confusion or mistake. There must be a common understanding in the formation of the contract and this is a necessary requirement to the formation of a legally enforceable contract under English Law. Exam Question Summary Answers ranged mostly from a few satisfactory attempts to wild ramblings and guesses, bizarre interpretations (such as force majeure), to frequently not attempting it at all. Q4 (a) You are preparing to develop a contract for office cleaning

services. Your colleagues have suggested different durations for this contract

(16 marks)

(i) One year (ii) Five years (iii) Ten years

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Indefinite – no specified end date Give ONE reason in favour and ONE reason against each of the

options (i) to (iv)

Analysis of the Question This question tested candidates’ understanding of appropriate durations for contracts. Analysis of the Answer

Candidates should have given one reason in favour and one reason against each of the options i. to iv. Some examples include:

i. One year

+ frequently re-testing the marketplace for new suppliers and new ideas.

- lots of work to re-let a contract so often.

ii. Five years

+ good compromise between re-testing market and efforts involved in re-letting the contract.

- long enough to lose in-house expertise of the cleaning function and the tendering processes.

iii. Ten years

+ long enough to be really appealing to a potential contractor, and for him to fully recoup his investment in new kit, new people, training etc.

- so long that competitors will leave the marketplace, and create a monopoly market.

iv. Indefinite – no specified end date

+ let it once and forget it – cleaning is usually not a business critical activity; frees up buyer’s time to do more cost-effective things.

- supplier could become complacent and lazy, standards will inexorably slide.

Exam Question Summary The question as a whole was relatively popular amongst candidates. Many scored very highly on this part, often with strong differentiation between the different durations covering such issues as developing relationships and complacency (on both sides). Answers were normally of sufficient detail with only a few resorting to mere bullet points. Q4(b) Explain THREE options available for contract dispute resolution (9 marks) Analysis of the Question This question tested candidates’ knowledge of methods of dispute resolution affecting contracts Analysis of the Answer

Candidates should have explained any THREE of the methods available for resolving disputes about contracts. Any of the well-known range of ‘ADR’ options could all apply here such as

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mediation, arbitration, adjudication as could any level of discussion and negotiation and ultimately, litigation.

Exam Question Summary This part question was generally very well answered, with candidates demonstrating a detailed understanding of the subject and stronger candidates contrasting the different methods very well. There was only the occasional misunderstanding that arbitration was a quick and cheap option. Q5(a) Explain the difference between an ‘invitation to treat’ and an

‘offer’ under English Law. (8 marks)

Analysis of the Question This question tested candidates’ understanding of the differences between ‘invitation to treat’ and ‘offer’. Analysis of the Answer

Candidates should have explained that an ‘invitation to treat’ under English Law merely indicates the interest of one party to enter into negotiations and is by no means supposed to form any part of a binding contract. Whereas an ‘offer’ is an expression by one party of willingness to be legally bound by contract to another party; it is a legally binding promise.

Exam Question Summary This question as a whole was relatively popular and this part was generally well answered, with candidates clearly understanding the distinction between an invitation to treat and an offer. Stronger answers quoted appropriate case law such as Pharmaceutical Society v Boots, Fisher v Bell and Carlill v Carbolic Smoke Ball, though some candidates merely quoted these without explaining their significance. Q5(b) Star Manufacturing places an order for industrial adhesives with

Globestix on 3rd October. Globestix returns an acceptance of the order by Royal Mail post, sent on 5th October. Star sends an email to Globestix on 6th October cancelling the order, explaining that the order had been ’made in error, by an untrained member of staff.’ Discuss the legal position of Globestix under English Law with regard to the order, including any additional commercial considerations.

(17 marks)

Analysis of the Question This question tested candidates’ understanding of contract formation under English Law.

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Analysis of the Answer

This was a classic ‘legal contract formation’ question and candidates should have produced an analysis of the circumstances shown in the question, in the light of English Contract Law. Candidates should have described the initial offer (the order of 3rd October) and the acceptance of the order (5th October) and could conclude that this forms a legally binding agreement under the Postal Rule (Adams vs. Lindsell), but it is not clear from the case whether the ‘order acceptance’ is actually ‘unqualified acceptance’ or not, and candidates should have identified this. Candidates should also have analysed when and if the contract was formed. The cancellation (6th October) raises the same issues – is it a ‘valid’ cancellation or not? Again, candidates should have noted that ‘it depends’ on the circumstances surrounding the case. If there was already a contract created on 5th October, then this email cannot ‘uncreate’ that contract. If, however, there was no contract made on 5th October, then this email is merely a counter-offer, albeit it an important one as it effectively ends the exchange of counter-offers.

The reference to “made in error, by an untrained member of staff” was irrelevant as, if there were a contract already in existence on 5th October, these factors would make no difference. Neither “made in error” not “untrained member of staff” would normally be accepted by the Courts as good enough grounds to set aside a contract, once made.

Candidates should also have explained any ‘additional commercial considerations’. The value of the order is not known and that would be a factor if there were a contract in existence and it were a significant chunk of business to lose. But to maintain the relationship and to be seen to be helpful and co-operative, it might well make sense for Globestix just to accept the cancellation. Globestix can hopefully sell the adhesives to another customer in due course. But, if it were a really big, business-critical order, then maybe recourse to the Courts would be the only correct or possible course of action; but only accepting that there are a lot of negative factors to this choice of action: Globestix might not win; it will cost Globestix a great deal of time and money; Globestix’ business reputation for being ‘litigious’ might not be one that Globestix would want. Court action would probably, then be regarded as a waste of time and money, unless this order was really high value and Globestix can demonstrate a definite contractual formation.

Stronger responses might also have suggested that there was scope for some fact-finding and negotiation to try and resolve the issues first, as a half-way house on the road to litigation.

Exam Question Summary Candidates generally recognised and understood the issue of the Postal Rule and were apply to apply this to this mini-case study. Fewer candidates debated the potential issue of qualified acceptance and some made the incorrect assumption that because a member of staff was untrained, he therefore lacked capacity. This was often followed by irrelevant discussions of capacity around age and influence of alcohol and drugs and mental incapacity. In addition, many candidates did not fully examine the commercial considerations. Q6 “At the heart of a good contract lies a good specification.”

Explain FIVE reasons that could support this statement. (25 marks)

Analysis of the Question This question tested candidates’ understanding of the importance of a specification to a good contractual outcome.

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Analysis of the Answer

There were many reasons that candidates could have brought to bear in justifying this statement, and the consequences of poor specifications are universally well known in purchasing and supply circles. Candidates might have constructed their responses around the idea that the specification is the ‘voice of the user’; and if that voice isn’t heard loud and clear then the product or service will not meet the user’s needs except by luck.

The specification is for ‘communication’ as well as for ‘comparison’ between different potential solutions. The many types and forms of specifications, which range from vague 'back of the envelope' statements that are open to costly misinterpretation, to overblown indigestible volumes that take an inordinate time to produce, whilst also stifling innovation.

A good specification will

state the requirements clearly;

contain adequate and sufficient information but no more;

provide a ‘level playing field’ for comparison;

avoid ambiguities and confusion;

allow for innovation.

Exam Question Summary This was not a popular question and answers tended to achieve satisfactory rather than outstanding marks. Most candidates were able to give valid reasons, though some over-emphasised the difference between performance and conformance specifications or relied upon very general descriptions or theory dump. Once again, some candidates answered the question as a single narrative, rather than describing five specific reasons as the question required APPENDIX: Syllabus matrix indicating the learning objectives of the syllabus unit content that each question is testing