CPPB exam prep
Total cost of ownership (TCO)
-A measure of all of cost components associated with the procurement of a good or service. -The sum of all fixed and variable costs attributed to a good or service. -A philosophy for understanding all supply chain related costs of doing business with a particular supplier for a particular good or service.
What considerations should be included in the Procurement action review and remedial action plan after a disaster?
-Can normal operations be resumed and if so, how? -Can the emergency operations be re-combined with normal operations? -Assessment of the efficiency and effectiveness of the entity's COOP -Identification of a clear process to ensure that the COOP is quickly modified as needed and required -Dissemination of the modified COOP to entity staff
What are the disadvantages of leasing?
-Cost. Lessors make their profit on the difference between the financial ownership costs of the assets and the rental rate. Monthly fees spread out over the useful life of the equipment total approximately 120 to 135% of the purchase price -Control. Lessors retain control of equipment and may place restrictions on the manner in which the equipment is operated and on the operating supplies that can be used. This control may include issues such as: -Modifications -Lessor access -Location of use -Purpose -Quantity of Use
What other laws are applicable to public procurement?
-Criminal Law -Tort Law -Budget/Finance Laws
What essential elements should be included in every procurement COOP?
-Definition of essential services to be provided during the situation -Hierarchy of authority including how procurement and contracting authority will be delegated during the situation and by whom. -Location of Operations -Communication -Documentation, Records and Recordkeeping -Identification of suppliers, shippers, resources and other businesses -Emergency Procurement procedures for purchases -Establishment of credit or payment/procurement card for emergency purchases -Issuance of purchase orders and contracts -Term contracts -drive-away kits/Black boxes -Disaster aftermath activities -After action review and remedial action plan
What should a solid buying plan consist of?
-Demand analysis -Market analysis -Supplier analysis -Value analysis
When comparing costs for a make or buy analysis what three principles should be considered?
-Ensure all costs are considered. -Evaluate only costs that differ between providers -Ensure costs evaluated are for the same level of service and quality
What key elements are included in a Continuity of Operations Plan (COOP)?
-Essential functions -Orders of Succession -Delegations of Authority -Continuity Facilities -Continuity Communications -Reconstitution -Vital Records Management -Human Capital -Tests, Training and Exercise -Devolution of Control and Direction
What are the major aims of Standardization?
-Fitness for Purpose -Interchangeability -Variety Reduction -Securing Compatibility and Interface Consistency -Health and Safety of Consumers -Environmental Protection -Improved Utilization of Resources -Product Quality Standards -Enhanced Communication and Understanding -Facilitating Communication and Understanding -Transfer of technology -Improvement in Efficiency -Streamlining of Procedures -Facilitating Competitive Environment -Removal of Trade Barriers
What are the two types of financial leases?
-Full payout leases-The lessee pays the full purchase price, plus interest charges, maintenance, insurance and administration costs -Partial payout leases-Gives the lessee credit for the residual value of the leased item after the lease period is complete. The lessee pays the difference between the original price and the resale value, plus interest charges
To standardize reporting what questions can be asked in a spend analysis when reviewing a purchase?
-How can this review be made easier? -What should you be looking for when conducting your review? -Are you able to renegotiate with the supplier based on your findings?
What are the different types of performance metrics?
-Inputs -Outputs -Outcomes -Efficiency -Effectiveness
What are the three criteria for judging efficiency in the rational budget decision model?
-Inter-sector Efficiency -Inter-program Efficiency -Intra-program Efficiency
What are the advantages of leasing?
-Leased equipment can be changed when it becomes obsolete or only used when required, therefore not tying up finances with an outright purchase. -Equipment can be made available on a short-term basis for projects that do not justify a large and immediate outlay of funds. -The burden of the investment is shifted to the lessor, which means the lessee's working capital can be utilized for other, more cost-effective or profitable opportunities. -The entire expense of the lease can sometimes be treated as an operating expense minimizing taxable income and thus the entity's total tax obligation.
What are the four groups that the supplier marketplace broken down into?
-Perfect competition exists when there is free an open competition. -Imperfect competition includes the artificial restriction of available competition through the use of preference policies, restraint of trade by suppliers who create selling territorial areas, or by the business practices of the entity. -Oligopoly is a market situation in which a few companies control or dominate the market for a particular product or service. -Monopoly is a situation in which there are many buyers and only one seller of a product that has no close substitutes, giving the seller considerable control over the price because of the lack of competition.
What are the phases of a COOP plan?
-Phase I: Readiness and Preparedness -Phase II: Activation and relocation: Plans, procedures, and schedules to transfer activities, personnel, records and equipment to alternate facilities are activated. -Phase III: Continuity Operations: full execution of essential operations at alternate operating facilities is commenced. -Phase IV: Reconstitution: Operations at an alternate facility are terminated and normal operations resume.
What factors should be considered when determining whether to lease or buy?
-Purchase price compared to the sum of lease payments. When evaluating this factor, future costs (such as lease payments to made in the future) should be appropriately discounted to account for the time value of money. -Maintenance and service costs. Again, if relevant, future costs should be appropriately discounted if they will be paid in the future. -Life expectancy of the equipment -Duration of the need for the equipment -Obsolescence issues. Some types of equipment, particularly technology and heavy equipment, are more vulnerable to obsolescence than others. -Cash flow considerations. The entity must consider the budget atmosphere, both near term and projected, as well as competition for the entity's resources. -Prevailing interest rates. If equipment will be financed, then available interest rates must be evaluated. In addition, prevailing interest rates will most likely affect the cost of lease payments as the lessor may be required to cover higher interest payments ownership and may pass those expenses on to the lessee. -Funding source for the equipment. The entity must consider if the funding source will remain constant and how long funding will be available. Purchase of equipment with grant funding may also affect the lease or buy decision. -Financial statement ramifications. The different treatment of payment for an operating lease, a financial lease or outright purchase may affect the lease or buy decision. The annual cost of an operating lease will appear on the entity's income statement; the cost of a financial lease or purchase price of the asset will appear on the entity's balance sheet as a liability, while the equipment will appear as an asset.
A standardized contract contains what general and specific clauses designed to manage risk?
-Terms and conditions -Boilerplate -Bid Bond -Fidelity Bond -Payment Bond -Performance or completion Bond
What steps can be taken to develop and implement a cost avoidance program?
-The internal client department/division determines the annual entity demand requirements for a needed specific product or service. -Procurements works with the internal client department/division to review entity specifications/scope of work to make sure they are reflective of actual entity quality levels and requirements, and eliminate all unnecessary requirements and features from the specification (value analysis) -Procurement conducts a market analysis to determine if entity specifications/scope of work are compatible with commercially available goods or services. -Procurement adjusts, wherever possible, entity specifications/scope of work to be compatible with commercially available goods or services in order to meet specifications/scope of work can support competition, thereby reducing the chances of creating a sole source or single source procurement -Procurement documents show how specification/scope of work changes were made to achieve any cost avoidance opportunities.
What questions does a spend analysis answer?
-What am I really spending? -With whom am I spending it? -Am I getting what's been promised for that spend?
When considering the use of a Cost-benefit analysis, what issues must be factored in before actually analyzing competing solutions?
-What is the time involved in the solutions? If the timeframe of the competing solutions are significantly different, then the concept of the time value of money must be factored into the analysis. -A common unit of measurement for all costs and benefits must be applied. Sometimes a conversion matrix must be created before comparisons can be made.
What should a disaster drive-away kit/black box contain?
-a copy of the procurement COOP -emergency procurement procedures -the supplier contact list -a list of all contracts that have an emergency supply function -resources, including internal contact information and approval procedures -any other resources that might be required if the entity's procurement department is inaccessible for more than a couple of days.
What are disaster aftermath activities for Procurement?
-accounting for all purchases, receipts and invoices -preparation of documents for ratification of emergency purchases that were over a certain dollar amount -confirmation of required documentation and recordkeeping to obtain financial relief -disposal of surplus equipment and items.
Operating leases or rental agreements are similar to contracts for the purchase of goods or services. As such what options should be itemized and evaluated prior to execution of the contract?
-all costs to the entity -ownership at the end of the lease period -lease cancellation and penalties -insurance responsibilities -restrictions on equipment use or movement -responsibility for and restrictions on repair and maintenance
Procurement's COOP must do what?
-be dynamic and capable of being immediately adjusted and modified depending upon the situation -identify essential functions and ensure that those functions can be continued throughout, or resumed rapidly after a disruption of normal activities -be well-developed so that it addresses the people, processes, systems and infrastructure elements that will be needed to continue to perform essential functions during a disaster or emergency operation
What must Procurement professionals involved in the establishment of policy manuals be?
-be responsive and adaptive to their environments -act in the best interest of the entity -be well-informed about the information associated with regulations -provide the support to perform functions within established procurement policies and procedures
Suppliers find partnerships desirable because of opportunities to?
-become a certified or preferred seller -sell based on total value -increase the existing share of the client's business -participate in new product and market development
What are the two ways an agency relationship by created?
-by agreement between principal and agent or -by law
What groups and individuals play roles in the budget cycle?
-chief executive of the entity -governing body -various budget units (i.e., client departments/divisions) -clientele served by the budget
What does enabling legislation include?
-constitutions -statutes -ordinances and charters -rules and regulations -policy -procurement procedures
What are the two approaches to cutting costs?
-cost reduction -cost avoidance
What are some of the challenges Procurement faces when they become involved in foreign trade?
-cultural differences -transportation/logistics -legal considerations -government practices -different specifications -currency exchange rates/payment -trade agreements -customs regulations -lead time -environmental stability -communication/language differences
What business goals may be accomplished by conducting a spend analysis as part of routine procurement practices?
-decrease costs in both the short and long term -increase effectiveness of the evaluation process -increase the value of the procurement function -increase efficiency -decrease process time -increase in the return on investment -increase in Procurement's value within an entity -improve internal client service -increase control over spending that leads to allocating money more strategically (the right places) -increase procurement effectiveness by bulk purchasing to save money
What does a life cycle cost analysis include?
-determining the operating cycle for the equipment such as types of operation, routine maintenance, overhaul sequence, etc. -identifying and quantifying the factors that affect costs such as power consumption and rates at various levels of operation, labor requirements and rates, maintenance requirements and rates, average time between failures, time between overhauls, average down time costs, etc. -calculating all costs at current rates and prices -projecting costs tot he future date at which they will be incurred, adjusting for expected inflation or deflation, considering estimated salvage value, and completing the life cycle cost matrix -discounting all future costs and benefits to their present value -adding all costs and benefits to obtain the total life cycle cost, expressed in present value terms. Note that all costs are brought back to year one by using present value factors directly related to the entity's cost of money
Advantages that exist for both parties in a partnership are:
-enhanced long-term competitiveness is enhanced as partners work to improve the quality of products and services -mutual dedication to success is stronger and more significant than that achieved by two parties who meet temporarily when terms and conditions happen to be most favorable to one party
The cost-benefit study should weigh project value, provide cost-effective results, and ensure or attempt to ensure what?
-equivalent money values of the benefits and costs to the entity of a project have been estimated and totaled to determine whether or not the project is worthwhile. -a financial decision can be made on the the undertaking of one or more project that includes -potential costs of not doing the project -potential costs if the project fails -opportunity costs(the potential benefits if funds are spent spent to successfully perform a different project.) -appropriate project objectives are established -required resources for a project are defined -appropriate funding can be requested to resolve the need -project success and benefits can be measured, and -the effort to resolve an identified need is congruence with the entity's overall strategic plan
A good standardization program within an entity results in:
-fewer varieties of items being purchased in larger quantities -lower cost because of volume increases -fewer specifications and less time needed to prepare for sourcing -better inventory control -reduced operational and administrative costs -improved equipment interoperability
What are the major weaknesses of line item budgets?
-focus on what is procured rather than on the achievement of goals -provide no criteria for evaluating funding to determine what is to be gained or lost by increasing or decreasing expenditures -efficient trade-offs among services are impossible to determine and must be prone to incremental increases in successive fiscal periods -encourages a "spend it or lose it" attitude
What are the three purposes of Public budgeting which are often seen as being in dynamic tension with one another?
-goal attainment -financial control -managerial accountability
During a disaster what is the Chief Procurement Officer responsible for ensuring that Procurement does?
-has done all that it can in advance to prepare for the emergency -is supportive of the entity's clients during these situations -has clear reporting lines and procedures in place
Procurement finds partnering to desirable to?
-help supply quality goods and services more expeditiously and at competitive prices to internal clients -learn state-of-the-art techniques and practices from the exchange of ideas and information -improve communication at all levels -fully develop and utilize statistical data -jointly develop better products -share in success
What factors influence the results of a cost-benefit analysis?
-how far into the future will benefits be identified (project lifetime) -the assumptions on which the analysis is based -present and future value of the dollar -market supply and demand for the goods and services involved in the project -impact of tradeoffs, such as the measurement of time value versus money value in a high value transportation project in which the successful outcome will result in a savings of travel time. -unplanned project modifications (change order accounting)
What are some common performance indicators for supplier performance?
-include a range of cost targets -gauge whether contract requirements, service and quality requirements are met
When evaluating market factors, what should the procurement professional do?
-know market conditions -determine how competitive the current supply market is -provide accurate information to the end user to assist in forecasting accurate costs and schedules for upcoming budgets, programs or projects -assist the end user in selecting the appropriate solicitation method and the proper time to solicit for needed goods or services -know the availability of alternative or substitute goods or services -know the level and nature of competition within supplier communities -know the entity's value as a customer to the supplier -know the environmental factors affecting the supply market
What are the basic factors to consider regarding procurement records retention?
-legal or statutory requirements -administrative requirements -historical requirements
What are some common performance indicators for cost containment?
-level of savings resulting from new contract/supplier arrangements or purchasing initiatives -value of negotiated additional benefits -cost reduction as a result of using alternative goods or services -value of improved warranties -reduced stock holdings and improved payment terms -savings related to improved waste management -reduction in demand for a good or service
What instructions, worksheets, and budget message provided at the start of the budget cycle from the chief executive serve to explain?
-main points of the budget -assumptions under which it was assembled -major policy recommendations
What social and economic problems have policy makers enacted because of the magnitude of state and local government spending which require contractors to do what?
-maintain fair employee practices -provide safe and healthy working conditions -pay fair wages -refrain from polluting the air and waters -give preference to contractors from the same state/province or locality -award to small or women owned businesses -promote the rehabilitation of prisoners and the disabled
Some of the services that are typically contract out by governmental agencies are?
-maintenance, overhaul, repair, servicing, rehabilitation, salvage, modernization or modification of supplies, systems or equipment -routine recurring maintenance of real property; housekeeping and basic cleaning services -advisory and assistance services (professional services) -operation of entity-owned equipment, facilities and systems -architectural and engineering services -transportation and related services
Prior to the preparation of specifications and solicitation, time must be taken up front to research and address what?
-market conditions -price history fluctuation -available competition -the characteristics of the industry
What type of planning activities are need so that procurement managers know "what" they are measuring?
-obtain input from key stakeholders (those to whom performance will be reported) -ensure that measures are simple and relevant to the intended audience (e.g., public, stakeholders, elected officials) -ensure that measure are specific, consistently applied, and within the control of the procurement function -identify any dependencies among other functions or departments/divisions that will be related to the measures -define a specific time period for reporting measures that is directly related to the attainment of goals and objectives in the strategic plan (e.g., 6 months, one year) -utilize measures in the decision-making process that support informed decision making and lead to appropriate action. The measures should represent a balance of the types of measures critical to achieving specific objectives and goals.
Examples of methods used to measure performance include?
-performance reviews to share performance measures that identify accomplishments and areas for improvement -regular staff meetings to share performance measures and progress -benchmarking -performance indicators -performance targets -quality management tools (i.e., checklists, progress charts, graphs)
What conditions must be present for performance incentive contracting to be effective?
-potential for increased savings -motivated entity personnel -ability to establish the current cost of the service -ability to specify the desired technical and economic outcomes -determination that the entity is unwilling or unable to pursue the opportunity on its own -return for the contractor must justify the risk and ability to determine if the contractor has produced savings or revenue
What items should be considered when determining the total cost of ownership?
-purchase price (including shipping) -cost of future upgrades -licensing fees -maintenance costs -site preparation costs -training costs -cost of supplies and operating manuals -security costs -utility and insurance costs -installation costs -operating costs, e.g. fuel, labor, etc.
What criteria should be used to judge procurement for its achievement of service delivery outcomes?
-right materials -right source -right quantity -right service -right time -right price -right place
What items must he risk manager confirm that have appropriately dealt with in the contract?
-risks associated with the project have been identified and addressed -unforeseen contract conditions have been appropriately evaluated -goals to effectively manage risks have been contractually established
What are some intangible factors when performing a make or buy analysis?
-risks assumed by privatizing -diminished capacity to perform a function
What are some factors that influence price?
-supplier costs -just-in-time delivery requirements -competition -payment terms -profit margins -contract length -production differentiation -potential obsolescence -quantity -service and technical support -quality -finance costs -transportation -discounts -packaging requirements -environmental factors
What are some common performance indicators for client satisfaction?
-survey responses -regular client communications and meeting
What are some common performance indicators for supplier and industry development?
-targets to identify potential local suppliers -numbers of suppliers involved in local supplier development programs -numbers of new sources of particular goods and services
Cost avoidance actions include what?
-the application of techniques to provide good specifications which incorporate value analysis to eliminate unnecessary features or services -the use of negotiation to waive supplier manufacturing set-up costs and minimum purchase penalty charges -the early purchase of an item at the current supplier's price to avoid an upcoming scheduled supplier's price increase -due diligence to ensure that a solicitation does not have to be cancelled and re-competed.
What do COOP plans include?
-the development and implementation of consistent principles and approaches that incorporate efficient and effective preparation for the prevention of, response to, and recovery from incidents -procurement strategies and tactics -measurable activities for planning, budgeting, and managing the procurement process during a disaster
With benchmarking, in what areas are the best procurement departments able to measure and demonstrate their performance in?
-the efficiency of their own internal operations -the savings and contributions made to the overall entity, including the measurement of client satisfaction
What is typically required from departments/division in the narrative description regarding their budget?
-their department/division or program objectives -service delivery plans -staffing levels -cost/benefit analysis -specific dollar requests
What are some common performance indicators for the efficiency of internal procurement systems and processes, the volume of procurement spend transacted electronically, or through other transaction methods like pCards?
-volume of transactions transacted through aggregated or standing-offer arrangements -reduction in transaction and inventory management costs and distribution costs -internal client satisfaction with evolution of procurement processes and service levels -response time and perceived value for money -perceived degree of simplicity, convenience, and effectiveness of procurement decision making and authority lines, systems and processes
What are the four steps to consider when assessing the leases or buy decision?
1. Capture all up-front costs associated with the lease/rental agreement. 2. Determine the sum of all lease/rental payments and other expected costs (insurance, maintenance, etc.) discounted to present value. 3. Calculate the purchase price. If payment is finance, calculate discounted cost of interest payments. 4. Compute costs over the planned period of use. Consider any salvage value or cancellation penalties if new equipment may be required prior to the end of the lease period.
What is the four step approach to the make or buy analysis?
1. Define the outputs to be analyzed. 2. Determine the costs that will be saved is the requirement is outsourced. 3. Compute the costs of contracting from the private sector. 4. Compare the cost difference and make a final decision.
What are the two types of financial leases?
1. Full payout leases in which the lessee pays the full purchase price, plus interest charges, maintenance, insurance and administration costs. 2. Partial payout leases, which give the lessee credit for the residual value of the leased item after the lease period is complete. The lessee pays the difference between the original price and the resale value, plus interest charges.
What is the four-step process to market research?
1. Market surveillance. A high-level review of the pertinent industry examines all of the activities of the market. Monitoring the internet is the most effective way to stay current on market changes. It is also helpful to review journals, news magazines and other media articles that relate to the industry 2. Investigation. The process of collecting and analyzing the information related to a specific commodity or service. The information learned by evaluating the data collected through ongoing surveillance can then be utilized in preparing the next procurement. 3. Identification. The action of the entity in recognizing the availability of goods or services within the marketplace as well as the suppliers of those goods or services. 4. Procurement of the product or service. By following the previous three steps, the entity will have a summary of the market conditions, will be able to identify potential suppliers of the product or service, will understand how their anticipated requirements match up with the goods or services readily available in the current marketplace, can
What is the budget cycle?
1. Planning 2. Formalization 3. Implementation 4. Evaluation
What steps do a standardization program generally follow?
1. The client department/division advises the Procurement department in writing of its intent to create a standard for a product, service or good. The notice should include the end user requirements 2. The standardization committee meets to assess the goods and services available that appear to meet the end user requirements. General industry standards are agreed upon. 3. Procurement advertises to the general supplier community its intent to standardize the good, service or construction and the industry standard. 4. The supplier community responds with product information including specifications, samples or both. 5. The Standardization Committee reviews all the submissions, agrees on a standard, and publishes the standard. The standard may be a detailed specification or stated as "brand X or equivalent".
What are the three phases to any evaluation/audit process?
1. planning 2. data collecting 3.decision making based on findings and recommendations
What are the two major forces impacting the nature of government procurement?
1. the difficulty of securing a supply of goods and services (risk) and 2. the amount expended for each good and service consumed by the entity
What is best practice for retainage of supplier information during a disaster?
A best practice is for supplier information to be retained in a searchable electronic format within the procurement department's computer system for statewide or local entity use.
What occurs at the end of the planning phase?
A budget document is prepared for submission to the governing body. The document includes summaries of estimated receipts and outflows of all funds and any borrowing and repayment schedules.
Buying Plan
A buying plan should be developed for each major type of goods and services targeted for purchase, based on demand, market and supplier analyses.
Universal Public Procurement Certification Council (UPPCC)
A certifying body for public procurement that promotes global recognition of competency in the public procurement profession through the Certified Public Procurement Officer (CPPO) and the Certified Professional Public Buyer (CPPB) designations.
What is cost-benefit analysis?
A comparative evaluation of the trade-off between the cost of a good or service, and the value or benefit to be obtained in order to choose among alternatives. Benefits that are anticipated from a project as well as all costs that are necessary to introduce, perform, and support the project are compared and assessed.
Demand Analysis
A demand analysis is used to estimate annual requirements based on the previous year plus anticipated use for the upcoming year. Demand analysis utilizes the "ABC" system based on percentages. Applying the Pareto model, 80% of purchase dollars are expended on 20% of supply quantity. Demand is further categorized by ABC classification where A represents mission critical items, B represents routine purchases and C represents low value items.
What is Electronic Funds Transfer (EFT)?
A direct payment to contractors between financial institutions in lieu of paper checks. In general, EFTs are most used for repetitive payments such as utilities, credit cards and rents.
Chartered Institute of Purchasing & Supply (CIPS)
A global organization serving the procurement and supply profession. CIPS strives to promote and develop high standards of professional skill, ability, and integrity among those engaged in procurement and supply management. CIPS assists public sector authorities around the world to build key procurement skills and professional reputation, enabling them to achieve best value and deliver better services.
Institute for Supply Management (ISM)
A global, educational association that serves supply management professionals and organizations. The first supply management institute in the world, ISM sets professional standards and leads the supply management profession through excellence, research, promotional activities and education.
National Contract Management Association (NCMA)
A leading professional resource in the area of contract management. NCMA is dedicated to the professional growth and educational advancement of procurement and acquisition personnel worldwide.
Market Analysis
A market analysis involves researching product availability, market volatility, supply and demand and price. This should be a continuous process so that buying schedules can be adjusted to achieve maximum availability and the best price.
Responsible Purchasing Network (RPN)
A national network of procurement related professionals dedicated to socially responsible and environmentally sustainable purchasing. RPN promotes and practices responsible purchasing by identifying best practices, developing effective purchasing tools, educating the market and utilizing its collective purchasing power to maximize environmental stewardship, protect human health and support local and global sustainability.
Procurement Card (pCard)
A procurement card (pCard) program can help reduce the overall cost of small purchases by reducing administrative costs, increasing productivity, improving cash management, allowing for supplier flexibility, improving procurement controls, and reporting while increasing employee empowerment and convenience.
What is a procurement profile?
A procurement profile takes a spend analysis a few steps farther. It is the result produced after conducting a series of various analyses on the procurement expenditures of an entity, the range of goods and services acquired through purchasing (spend analysis), the markets that provide them (market analysis), the level of influence of the suppliers and the entity in the marketplace, and the risk inherent in the market that could affect the entity's operations (supply positioning). A procurement profile adds decision making intelligence to a spend analysis.
What should be performed if the total costs in the make or buy analysis are nearly the same?
A sensitivity analysis should be performed to determine the consideration of the costs relative to the assumptions.
What is a simplification program?
A simplification program involves screening the entity's inventory in order to determine which items should be consolidated, updated or no longer maintained in inventory. It
What is a standard?
A standard is the result of a particular standardization effort, approved by the recognized authority. It takes the form of a document containing a set of conditions to be fulfilled or an object for comparison, e.g. Brand X will be the standard for desktop computers.
What is a standardization committee?
A standardization committee is normally used to create standards. A standing or ad hoc committee is considered effective for standard specifications because the process normally requires the input of the client, Procurement, legal (optional) and suppliers/manufacturers (optional).
Essential Functions
A subset of government and other entity functions that are determined to be critical activities used to identify supporting tasks and resources that must be included in the entity's continuity planning process.
What may a thorough review of all items being purchased allow?
A thorough review of all items being purchased may allow the procurement professional to identify cost savings and offer increased value to the entity. This analysis requires gathering and reviewing a large amount of data and looking for the similarities while recognizing the differences.
Who performs a value analysis?
A value analysis is usually a cross-functional team effort conducted by Procurement and client departments/divisions in preparation for a solicitation.
What is cost avoidance?
Actions taken to avoid having to pay some sort of cost. This could be financial (i.e., by negotiating an extension to current prices when the entity becomes aware that price increases are likely to occur), or in resource terms (i.e., the use of cooperative arrangements means that the entity "avoids" the time and work involved in completing a bidding or contracting exercise on its own behalf).
Joint-use ventures are defined as:
Agreements between various government agencies that may involve the joint use of public property such as buildings and equipment.
continuity facilities
Alternate facilities from which an agency can perform its essential functions in a threat-free environment.
Do cost avoidance efforts result in budget savings?
Although cost-avoidance efforts prevent increased spending, they do not result in tangible budget savings and there is a continuing debate over how reporting of cost-avoidance savings should be handled.
What is an agent?
An agent is a person authorized by a superior, i.e., principal, to act for him or her. Individuals who act on behalf of an entity, such as a corporation, partnership, or any level of government as that entity conducts business. In public procurement, this designation is usually incorporated into statute and ordinance.
National Association of State Procurement Officials (NASPO)
An association dedicated to strengthening the procurement community through education, research, and communication. Made up of the directors of the central procurement offices in each of the 50 United States, the District of Columbia and the territories of the United States, NASPO offers leadership opportunities in quality professional public procurement; an exchange of information and promotes cooperation to attain greater efficiency, economy and customer satisfaction.
What is an audit?
An audit is a formal examination or verification of financial accounts or other business operations by internal staff or independent experts, concluding with a a detailed report that may also include a management letter of findings.
National Procurement Institute, Inc. (NPI)`
An institute that promotes education, professional development and networking opportunities for public sector procurement and supply management professionals. NPI is the founding sponsor of the Achievement of Excellence in Procurement (AEP) award which recognizes excellence in public procurement.
NIGP: The Institute for Public Procurement`
An international educational institute that develops, supports and promotes the public procurement profession through premier educational and research programs, professional support, technical services and advocacy initiatives. NIGP develops public procurement practices, provides supplier directives and developed the NIGP Commodity/Services Code (which is currently maintained by Periscope Holdings, Inc.). The Institute is know as a certifying body for public procurement that promotes global recognition of competency in the public procurement profession through the NIGP-Certified Procurement Professional (NIGP-CPP) designation.
International Federation of Purchasing and Supply Management (IFPSM)
An international organization that is the union of 48 national and regional purchasing associations worldwide. IFPSM facilitates the development and distribution of knowledge to elevate and advance the procurement profession in areas of purchasing, materials management, logistics, supply chain management and strategic sourcing
Canadian Public Procurement Council (CPPC)
An organization that represents public sector procurement professionals throughout Canada.
What is value analysis?
An organized effort directed at analyzing the functions of a product or service including specifications, standards, practices, and procedures with the intent to satisfy the required function at the lowest possible cost without impacting functional need and suitability.
What is a key component to review when looking at goods and services when doing a spend analysis?
Any variances in pricing from one purchase to subsequent purchases of the same item.
What is apparent authority?
Apparent authority is the reasonable impression that an agent is permitted to act on their principal's authority even though that authority has not been granted.
How often should benchmarking be used?
Benchmarking should be used continually to ensure that the benefits of performing a process outweigh the costs.
How are costs determined in a make or buy analysis when determining if the requirement should be outsourced?
By conducting a complete review of internal business processes and including accompanying costs which may include: -personnel: salaries, benefits, allowances -operating and maintenance costs: material and supplies, repair, travel -facility costs: rent, utilities -capital: assets, opportunity costs -overhead: administrative overhead, program support -conversion: one-time costs, recurring costs -common entity services: legal costs, procurement costs
How can Procurement achieve political, social and economic objectives?
By doing the following: -requiring minimum wage or to pay prevailing living wages -improving the position of disadvantaged ethnic groups, disabled, and veterans -complying with labor standards -ensuring equal employment opportunities -requesting recycled products
How can a spend analysis be used to make management decisions?
By providing answers to such questions as: -what was bought -when was it bought -where it was purchased -how many suppliers were used -how much was spent with each supplier -how much was paid for the good
Who is the COOP plan available to?
COOP plans are available to everyone in the entity as well as to stakeholders.
What is petty cash?
Case used for small dollar value purchases when other forms of payment are either unavailable or impractical.
Define operating lease.
Characterized by their duration. Most operating leases are short-term, for a fixed period of time that is considerably less than the life of the equipment being leased. These arrangements are used to fulfill short-term requirement when there is danger of rapid obsolescence or when budget constraints restrict funding on a fiscal year basis.
Define competition.
Competition can be defined as the process by which two or more suppliers attempt to secure the business of a third party by offering the most favorable price, quality, delivery terms, or service.
What is performance incentive contracting?
Contracting with a supplier can identify opportunities for savings, reduce costs, or increase revenues associated with the provision of a service, and doing so without the entity making any up-front investment of its own resources.
How many years of data should be covered in a cost comparison?
Cost comparisons should cover three to five years of data, when possible, to allow conversion and implementation costs to be spread over a reasonable period of time. All cash should be discounted to net present value.
What is cost reduction?
Cost reduction is generally realized when a manufacturer is able to lower its material or labor costs used to make its products; interchangeably used to indicate a lower price paid by the entity from what was previously paid.
In order to perform an audit or evaluation, data must be collected. What categories can data be divided into?
Data can be divided into several categories: -quantitative or objective data -qualitative or subjective data -primary data -secondary data -longitudinal data (repeated observations over time) -cross-sectional data (data collected by observing many subjects at the same point in time)
What is inter-sector efficiency?
Determines whether or not the cost of a government activity yields more benefits to society than if it remained in the private sector. For example, should daycare services be funded by the government?
What is intra-program efficiency?
Determines within each program if resources should be combined to maximize the net benefits from any given expenditure increment. For example, would it be more efficient for a specific service to be performed in-house or contracted out?
Define effectiveness.
Effectiveness measures reflect how long it takes to process a request for procurement (e.g., purchase orders, bids/proposals, etc.) or the turnaround time to receive goods or services. Effectiveness essentially measures quality and affects client satisfaction. It should be tied back to the key objectives.
Define efficiency.
Efficiency measures represent the ratio of inputs to outputs or outcomes. When outputs are increased and inputs are decreased, more efficiency is generated (e.g., lowered purchase order administrative costs, reduced requisition to PO turnaround time).
What is an electronic signature?
Electronic signatures are digital signatures that permit sending authentic electronic documents. Digital signature technology uses a complex mathematical formula to calculate and attach a certificate to the message that verifies the signer's identity.
Orders of Succession
Ensure that entity personnel know who assumes the authority and responsibility of the entity's leadership if that leadership is incapacitated or becomes otherwise unavailable during a continuity situation.
What should be evaluated and considered when computing the costs of contracting from the private sector when conducting a make or buy analysis?
Ensure that in-house costs (such as contract management) are included. Also consider the cost of: -contract administration: within the various departments/divisions, with outside provider -conversion costs: one time materials and labor, miscellaneous one-time costs, recurring costs -net salvage value: transfer of assets, disposal charge -contract performance costs: compliance audit, miscellaneous audits
Internet Auctions
Entities have been successfully utilizing the more traditional "live" auctions for many years, but now internet auction sites represent a new ay to handle the disposal of surplus property. Entities may choose to develop their own sites for surplus auction sales.
Delegations of Authority
Establish who has the right to make key decisions during a continuity situation.
Supplier Analysis
Evaluates potential new sources along with current providers. This technique is used to evaluate a supplier's performance relative to stated deliverables, and ensures that a supplier has the ability to meet specification and fulfillment requirements. Potential suppliers are evaluated to determine whether they offer attractive possibilities worth closer investigation. This type of analysis should be ongoing, as it represents a critical step to achieve maximum value for the entity.
Federal, State and Provincial Procurement Websites
Federal, provincial, state and local procurement entities have established internet sites for the benefit of the entity and its suppliers and taxpayers. The sites contain information, such as entity contact and location, policies, manuals, term contract catalogs, supplier registration, and the posting of solicitations and awards.
What is another term for fair and open competition?
Full and open competition.
Payment Bond
Guarantees that subcontractors will be paid for labor and materials expended on the contract.
List some of the guiding principles of strategic sourcing.
Guiding principles of strategic sourcing include: -making procurements in a manner that reflect the greater good of the entity -cost-effective and efficient procurement methods -managing suppliers for performance -compliance with all statutes, regulatory provisions and entity policy and procedures
improvement in efficiency
Helps in better utilization of resources through the simplification and homogenization of raw materials, spares, consumables and products.
Define a higher level management audit report.
Higher level management reports are issued to senior management and other key personnel.
Bid Bond
If the contract is awarded to the bonded offeror, the offeror will accept the contract as offered or else the surety will pay a specific amount .
What is implied authority?
Implied authority is not defined expressly, but is only determined by inferences and reasonable deductions that are necessary to perform the expressly authorized acts. Can consider the conduct of the principal regarding the historical actions of the agent.
Define Criminal Law
Imposes punishment such as imprisonment or fines for an act deemed to be criminal
In disaster preparedness, what is the strategic role of the procurement function?
In its strategic role, Procurement must ensure that the entire entity continues to receive goods and services at reasonable prices that are delivered appropriately. Goods, services and construction that are not otherwise available must be located
Surplus Property
Increasingly, governmental agencies are cooperating in the disposal of surplus equipment. Besides joint sales and auctions of property, there are agreements to share the surplus equipment with an agency that might have a need for it.
Trade Association Publications
Industry specific technical info, economic trends & supplier directories are available in trade publications.
commodity price indexex
Information is available to assist procurement professionals with market trends, pricing, negotiation with suppliers, and situations where contracts allow for periodic price adjustments.
What is inherent authority?
Inherent authority is based on an entity's sovereignty, to enter into contracts, although not explicitly authorized.
Fidelity Bond
Insurance against losses caused by the dishonesty of an employee.
ABA Model Procurement Code for State and Local Government.
Issued by the American Bar Association, it contains statutory principles, best practice recommendations, and effective management tools for state and local procurement systems as well as private sector suppliers.
What does an analytical application of measurement allow?
It allows the comparison of performance against standards.
Describe the cost-benefit (CBA) process.
It can be as simple as calculating the financial costs of a proposed procurement and the financial benefits and then subtracting the two figures. If the benefits are greater than the costs, then the procurement should proceed; if the costs are greater than the benefits, then the project should be abandoned.
What is the purpose of a make or buy analysis?
It evaluates costs to provide ("make") the goods/services through internal resources or to outsource ("buy") the requirement to a provider outside the entity.
What does budget planning involve?
It involves estimating anticipated expenditures and budget resources during the budget period. Individual user departments/divisions along with input from Procurement are the source of these estimates.
Whose responsibility is it to determine the best value of sustainable goods, services and construction?
It is procurements responsibility.
What is strategic procurement planning?
It is the transformation of the entity's mission, goals and objectives into measurable activities to be used to plan, budget, and manage the procurement function within the entity.
When if value engineering typically used?
It is usually applied to construction projects. It may be part of a request for proposal or action taken by a contractor after the award.
When does a make or buy analysis occur?
It occurs prior to the decision to acquire goods and services.
What does the concept of competition presume?
It presumes the existence of a marketplace in which there is more than one supplier providing similar goods or services.
What is the result of standardization?
It reduces the number of items carried in inventory. This reduction encourages purchases in larger quantities that result in lower unit prices. There are also reductions in the number of items warehoused. This discourages obsolescence as a result of spoilage or non-use and results in reduced inventory carrying costs.
What should an entity's strategic plan provide?
It should provide the framework to develop procurement strategy and tactics.
What does a successful value analysis verify?
It verifies the procurement of the best product or service for the need.
What is inter-program efficiency?
Judges competing programs and allocates resources to the program that produces the greatest net benefits. For example, should the police budget for youth activities be increased or should the recreation department's youth programs be increased?
Who passes laws and/or ordinances to generally define the scope of authority and identifies who may exercise that authority?
Legislative bodies.
Define Line Item Budgeting.
Line item budgets are the oldest and still predominant form of budgeting in the public sector. They are easy to understand and designed to maximize control and ensure financial accountability. Line items are funded as fixed budgets with monies appropriated for a particular period, usually one year.
Management must establish benchmarks as what?
Management must establish benchmarks as a set of standards against which the process must be measured.
Who should be placed in charge of, and made responsible for, the performance and changes in the process and for the success or failure of a process?
Management.
What must results-oriented budgeting be linked to to be effective?
Must be linked to the overall entity strategic plan, and each decision unit (similar to the decision units in zero-based budgets) must support a particular goal and objective.
Does the UCC apply to Federal Government Contracting?
No.
Does the UCC apply to the purchase of services?
No.
What is the purpose of the supply positioning matrix?
One the risks of supply are identified and a reasonable estimate is provided regarding risk factors, the supply positioning matrix can be segmented for planning purposes. The goods and services in the easy-to-secure supply (low degree of difficulty to secure supply) and low-relative-expenditure category will demand substantially less attention than goods and services in the other categories. Goods and services in the high-expenditure and high-risk quadrants require different planning needs.
Are opportunities external or internal?
Opportunities can be either internal or external.
Define outcomes.
Outcomes assess results of an activity and show whether expected results were achieved. (e.g., client service levels, improved performance of suppliers, employee retention). Outcomes must be benchmarked against other departments/divisions and outside entities. A benchmark is simply a point of reference that can be used as a standard to compare effectiveness and efficiency measurements.
What are performance audits?
Performance Audits are an increasingly common means of ensuring that those entrusted with management of public services and programs are held accountable.
Define performance budget.
Performance budgets relate expenditures and revenues to workloads. They provide a mechanism to improve the management of service delivery, with cost efficiency being the principal indicator of managerial effectiveness. -Government activities are divided into major functions, each encompassing those programs that further the goals of the entity, which in turn are made up of a number of activities that are undertaken by separate performance units. -Output or end product measures are developed for each activity of a performance unit. The entity's performance unit manager considers different mixes of objects of expenditure entailing different costs and different levels of output to select the alternative that yields the lowest unit cost.
How should performance measures be stated?
Performance measures need to be meaningful for all participants (procurement professionals, clients and suppliers) and stated in terms of Procurement's higher-level objectives, or else they will lose their impact.
How should performance measures be designed?
Performance measures should be designed to motivate staff at all levels to contribute to entity improvement.
Describe the characteristics of a performance measure.
Performance measures should be: -fair -easy to collect -consistent -objective They must also lead to demonstrable action and they must be communicated to clients.
Define tort law
Permits parties to sue each other for damage to a person or property.
What is the definition of post-consumer?
Post-consumer materials are those materials that are from commodities that have been used by consumers, recycled, and reprocessed back into a consumer product.
What is the definition of pre-consumer?
Pre-consumer materials are those that are left over in manufacturing processes and then reused in a consumer product.
Do preferences typically restrain trade?
Preferences, set asides, or goals may open opportunities for selected suppliers, but overall they do restrain competition. Preferences always restrain trade because the suppliers gender does not guarantee that the good will offer the highest market quality at the best price.
Why are benchmarks used by Procurement professionals?
Procurement professionals typically use benchmarking and best practices in many situations to determine a need and provide a more cost-effective means to accomplish a given task.
In disaster preparedness, what is the service role of the procurement function?
Procurement's service role ensures that its own department resources continue to function and continue to provide appropriate purchase order/contract documentation.
Define program budget.
Program budgets relate expenditures and revenues to public goals. This is the the most elaborate budget form. Program budgets tend to be more long range, with multi-year plans prepared along with budget requests. They are designed to have the greatest net benefit for the cost. Managers are accountable for comparing targets in the budget plan with actual achievement of objectives and program results. they can adjust programs when changes occur that affect targets or workload requirements.
Performance or completion bond
Protects the public entity from loss caused by the inability of the offeror to complete the contract as agreed.
Human Capital
Provides guidance to emergency employees and other special categories of employees who are activated by an entity to perform assigned response duties during a continuity event.
Enhanced Communication and Understanding
Provides means of communication which are to be used among different parties. It spells out the information which is to be recorded in a precise and documented form.
Uniform Commercial Code (UCC)
Provides uniform law of commerce. The code simplifies, clarifies, and modernizes laws governing commercial transactions and determines rights and obligations on the basis of fair and reasonable accepted business practices. Areas of buyer-seller responsibility include shipping, storing, delivery, acceptance, payment and warranty. Published in 1952 and amended, the code is adopted in all 50 states.
How critical is reporting of findings from a spend analysis?
Reporting is critical if a discrepancy is discovered when looking at contract awarded prices compared to invoiced pricing. Your review plays a key role in the overall review of an entity's bottom line.
What is a valuable tool in conducting market research?
Request for Information (RFI).
Removal of trade barriers
Restriction on the export of processes, goods or services by the introduction of some technical barriers to trade, such as arbitrary product requirements, are being viewed with great concern. Standardization prevents such nontariff barriers to trade by harmonizing requirements in a manner that promotes fair competition. End users can be convinced about the quality level of a product which has been manufactured according to a recognized standard.
Define results-oriented budgeting
Results-oriented budgeting is an approach that attempts to link resource allocation decision to performance criteria that include both output and outcomes measures. Although there are many facets of performance-based budgeting in the format, results-oriented budgeting adds a new wrinkle, performance measures, that look at outcomes of activities rather than at individual process steps.
What is downsizing/reengineering?
Rightsizing, downsizing, re-engineering, and re-structuring are all synonymous terms when used in conjunction with the reorganization of departments/divisions. Entities have been following the lead of the private sector with regard to "flattening out the organizational structure." Middle management positions are often being eliminated.
What can value analysis be applied to?
Some examples of what it can be applied to are: -hardware and software -development, production, and manufacturing -specification standards, contract requirements, and other procurement program documentation -facilities design and construction
What is a spend analysis?
Spend analysis is the process of collecting, cleansing, classifying and analyzing expenditure data from all sources within the entity (i.e., procurement card, eProcurement systems, etc.).
Why is a spend analysis conducted?
Spend analysis is used to leverage buying power in an entity, reduce taxpayer and budget costs, improve supplier management and create a procurement strategy.
What does standardization focus on?
Standardization focuses on agreement of designs, sizes, shapes, colors, quality, material composition, chemical properties, performance characteristics, and assembly methods (specifications).
What is standardization?
Standardization is the adoption of a single product or group of products to be used by different entities or all parts of one entity.
Boilerplate
Standardized language used in contracts for the sake of efficiency and completeness.
What does Strategic, Procurement Planning involve?
Strategic, Procurement Planning (SP2) involves the transformation of the entity's mission, goals, and objectives into measurable activities to be used to plan, budget and manage the procurement function within the entity. Procurement planning occurs across functional units and activities by extending the value chain/supply chain management concept to include procurement strategies.
What is supply positioning?
Supply positioning is an analysis of the complexity of the supply marketplace and its impact on entity service delivery based on such factors as: -dependency of entity service delivery upon particular goods and services -risk to entity service delivery arising from potential disruption such as discontinuity of supply or significant increase in price -the makeup of the marketplace -lead times -complexity of the technology involved -source of the original manufacturer or service supply or any related opportunities
Should term contracts be utilized for emergency purhcases?
Term contracts should be utilized for emergency purchases whenever possible. Procurement should establish standard terms and conditions for supply contracts that include the provision for supplies during emergencies. With client input, Procurement may determine what baseline supplies should be kept on hand to respond to emergencies. Term contracts are recommended in the event that the entity seeks relief funds.
NIGP Resources
The NIGP website contains tools to support day-to-day procurement activities and to effectively management procurement organizations. The resources include solicitations and templates to assist with solicitation development activities.
What is fitness of purpose?
The ability of the process, good, or service to fulfill a defined purpose under specific conditions. Any process, good, or service to be used in place of another to fulfill a relevant requirement.
How is improved utilization of resources accomplished in standardization?
The achievement of maximum overall economy through better utilization of resources (e.g. capital, human,
What is benchmarking?
The act of measuring a process, service or good against the characteristics of the recognized leaders in the given area of review. It is a study, review or process whereby Procurement identifies world-class entities with which to compare its practices, policies and performance outcomes.
Product Quality Standards
The assurance of certain levels of product quality. Standards concerning product quality are required to be prepared, focusing not only on the needs of the entity but also to meet the needs of the end user.
What is a standardization committee responsible for?
The committee becomes responsible for: -issuing and maintaining all standard specifications for goods, services, and construction -revising all standards specifications -establishing guidelines for drafting specifications -establishing standards for materials and products -evaluating products for the Qualified Products List (QPL)
What is the unit of measurement in a cost-benefit analysis?
The common unit of measurement is money.
What does procurement involve?
The effective and efficient management of resources to determine the right good delivered at the right time, and at the right price to entity clients.
What must the elements of a procurement COOP be defined around?
The elements of a procurement COOP must be defined around the entity's specific procurement and contracting functions and processes; and all aspects of the procurement COOP must be integrated with the entity's master COOP to ensure that it falls within the overall entity's COOP. Conflicts and ambiguities must be identified and resolved before either COOP is implemented.
What is required when defining the outputs to be analyzed in a make or buy analysis?
The first step in determining the make or buy requires establishing performance standards for the goods or services that ensure the same level of quality, measurement tools and reporting requirements. Specifications should permit prospective suppliers, if able, to offer more efficient ways of providing the intended outcome.
What is the fundamental tenet of strategic sourcing?
The fundamental tenet of strategic sourcing is continuous improvement and evaluation of methods and processes to enhance effectiveness and efficiency.
What is the goal of a standardization program?
The goal of a standardization program is to create efficiencies and savings by reducing the number of different items carried in inventory while maintaining competition among suppliers.
Supply Chain Canada (SCC)
The largest association in Canada for supply chain management professionals. SCC is the principal source of supply chain training, excellence for professional skills, knowledge and integrity and is the national voice for advancing and promoting the supply chain management profession. SCC grants the SCMP (Supply Chain Management Professional) designation, the highest achievement in the field and the mark of strategic leadership in purchasing/procurement, strategic sourcing, contract management, materials/inventory management and logistics and transportation.
What is Law of Agency?
The law of agency states that an agent is someone who acts on behalf of a principal. A product of common law that focuses not only on the creation of agent relationships but also the liability for losses suffered by others who deal with agents.
What are some of the advantages of a short-term lease?
The lessee is not bound by long commitments and gains maximum flexibility to respond to changing business conditions.
What is life cycle costing?
The lifecycle costing technique is used to determine the life cycle cost (LCC) of a procurement. It is defined as the total cost of ownership over the life span of the asset. A procurement technique that takes in account operating, maintenance, the time value of money, disposal, and other associated costs of ownership, as well as the residual value of the item.
What is one of the by-products of flattening the hierarchy of Procurement and other entity departments?
The necessity to form more cross-functional matrix organizations with the client department/division in order to accomplish major strategic projects for the entity.
What is the object of the entity in regard to a continuity of operations plan?
The objective of the entity is to identify those essential functions and ensure that the functions can be continued throughout or resumed rapidly after a disruption of normal activities.
What is the objective of the strategic sourcing plan?
The objective of the strategic sourcing plan is to lower costs to the entity and improvements in supply fulfillment from the producer level to the end user (supply chain).
Define variety reduction.
The optimization of the number of sizes, ratings, grades, composition, and practices to meet prevailing needs from the process, good or service.
What should a procurement performance measurement system accomplish?
The performance measurement system should assess progress towards achievement of the strategic plan. Performance measurement is critical to any public sector activity, program or entity.
What does the spend analysis process analyze?
The process analyzes the current, past and forecasted expenditures to allow visibility of data within the entity at various levels, e.g., by supplier, commodity, service or by department/division.
Reconstitution
The process by which surviving or replacement entity personnel resume normal entity operations from the original or replacement primary operating facility.
Partnering
The procurement function is being challenged to develop longer-term relationships with suppliers and contractors to meet both individual and mutually beneficial goals. These partnerships are a major departure from the more traditional and somewhat adversarial relationships of the past.
Example of market analysis
The procurement professional uses market analysis to determine that manufacturers of left-handed widgets traditionally issue new distributor price lists on January 2nd of each year. The entity uses left-handed widgets throughout the year. In order to avoid the expected annual price increase taking place after January 2nd, the procurement professional and the internal client department/division make a business decision to move up the January purchase by one month to December 1st. This allows them to buy an additional quantity of left-handed widgets at the current price.
Facilitating competitive environment
The promotion of competition in performance through feasible objective comparison.
What is supply and demand?
The quantity of goods available for sale at a given price and the level of consumer need for those goods at a given price. The balance of supply and demand fluctuates as external economic factors such as the cost of materials and the level of competition in the marketplace, influence the level of demand from consumers and the desire and ability of producers to supply the goods.
Define the rational budget decision model
The rational budget decision model is the most effective budgetary approach for realizing goals that mirror public preferences and values. The model promotes economic efficiency by allocating resources to those programs and services that generate greater net benefits and results in incremental benefits greater than the incremental costs.
Explain recycle in regards to environmental practices.
The recycling of items that cannot be reused in their present form (paper, cans, toner cartridges)
Explain reuse in regards to environmental practices.
The reuse of the items that can be repurposed (for example, wooden pallets, shipping containers, etc.)
What is authority?
The right to perform certain acts or prescribe rules governing the conduct of others.
What is the strategic sourcing plan?
The strategic sourcing plan is a subset of the entity's strategic procurement plan. Strategic sourcing is a methodology and process that enables procurement professionals to analyze what and how they acquire goods and services.
What is interchangeability?
The suitability for a process, good, or service to be used in place of another to fulfill a relevant requirement.
What is securing compatibility and interface consistency?
The suitability of processes, goods or services to be used together under specific conditions to fulfill the relevant requirements without causing unnecessary interaction.
What are the three phases of any type of audit?
The three phases of an audit are: -planning -collecting data -decision making based on findings and recommendations.
What is the ultimate goal of strategic procurement planning?
The ultimate goal of strategic procurement planning is to effectuate positive change in entity culture, systems and operational processes.
How is health and safety of consumers determined in standardization.
The verification or assurance that the process, good or service not only meets the requirements of health and safety but also that they do not pose a threat to human health or property, both under normal use as well as under possible misuse.
When should a cost-benefit analysis be done?
There are two distinct decision points where a cost/benefit analysis of a potential procurement are required: during the budget process (when need is identified) and during the analysis of offers.
What is Common Law?
These are based on customs and traditions and codified through the legal system. Common Law is based on custom and usage or confirmed by court decisions, i.e., a collection of court decisions. Access to published judicial decisions is available through volumes called "reporters" in major law libraries.
What is an operating lease?
These are characterized by their duration. Most operating leases are short term, for a fixed period of time that is considerable less than the life of the equipment being leased. These arrangements are used to fulfill short-term requirements when there is dander of rapid obsolescence or when budget constraints restrict funding on a fiscal year basis.
Define financial leases
These are used as a financing tool and may generate long-term benefits. Financial leases are long-term, with a fixed period of time just short of the approximate life of the equipment being leased. Many financial leases are non-cancelable.
What is a financial lease?
These are used as a financing tool and may generate long-term benefits. Financial leases are long-term, with a fixed period of time just short of the approximate life of the equipment being leased. Many financial leases are non-cancelable.
What are Statutory Laws?
These include constitutions, statutes, ordinances and charters. Statutory Laws are based on statutes or laws passed by governments. State or provincial statutes provide state/provincial-directed legislative law. Ordinances and charters provide for local and municipal governments.
Define Budget/Finance Laws
These laws prohibit an entity from spending funds beyond those that the legislative body appropriates.
What do quality metrics allow for?
They allow for the collection of meaningful data for trending analysis and rate-of-change over time.
How are procedure manuals written?
They are written at a finer level of detail that sets out processes, forms and steps.
What must benchmarks be?
They must be quantifiable, attainable and realistic.
What should policy and procedure manuals be?
They must be well organized and should contain a clear definition of the purpose of each manual and its intended use.
What is the best way to show the value of Procurement?
Through a strategic effort at linking Procurement to success of the entity. Hence, procurement planning becomes a critical component in increasing the efficiency and effectiveness of the resource allocation process of entities.
Streamlining of processes
Through standardization of procedures, conflict between departments/divisions and processes can be eliminated, thus encouraging teamwork while helping avoid the risk of redundancy or duplication.
What is the foal of a continuity of operations plan?
To ensure the continuation of essential functions.
What is the intent of a simplification program?
To intentionally reduce the number and variety of inventory items and eliminate duplication.
Cooperative Contracts
Use of contracts through which purchasing power is enhanced by cooperative procurement arrangements. Governmental agencies may access and use virtual catalogs to procure a wide range of high quality goods and services at below market rates.
What is the purpose of the supply positioning tool?
Using supply positioning, goods and services can be plotted according to their relative difficulty in securing supplies and the relative expenditure. Supply positioning is a good management tool to determine where the procurement effort should be focused and where energy and resources should be directed.
Value Analysis
Value Analysis is an organized effort directed at analyzing the functions of goods or services including specifications, standards, practices, and procedures with the intent to satisfy the required function at the lowest possible cost, and without impacting functional need and suitability. Therefore, when the procurement professional qualifies the best value of an item or process, a determination has been made that the item performs consistently for its required basic function and has the lowest total cost. The lowest total cost many not necessarily be the low bid price, but rather offers the best added value.
What is value engineering (VE)?
Value Engineering is a technique by which contractors may (1) voluntarily suggest methods for performing more economically and may share in any resulting savings or (2) be required to establish a program or identify and submit methods for performing more economically.
What is a requirements analysis?
Value analysis applied tot he writing of specifications to eliminate goods or services that are not cost effective. Requirements analysis is one tool to achieve cost avoidance.
Transfer of Technology
Values created through the standardization process acts as a good vehicle for technology transfer, since they incorporate the results of advances in science, technology and experience. These standards reflect the state of the art in technical development.
Online Supplier Assessment Resources
Web-based supplier reference checking tools substantially
Should the cost to dispose of a no longer needed asset be considered in the Total Cost of Ownership (TCO)?
When calculating the total cost of ownership, the procurement professional must also consider the costs or revenue associated with the disposal of an asset.
When is life cycle costing helpful?
When comparing costs of any capital procurement including the cost of new items vs. the cost of used items.
Is the calculation of TCO and LCC an important part of evaluation of proposals?
Yes, and the conditions of the evaluation should be included in the solicitation document. Offerors should understand that award will be based on the lowest total cost of ownership rather than the initial purchase price.
Can disposal costs be higher for hazardous material?
Yes, disposal of hazardous materials require special consideration and disposal costs may be higher.
Can return on investment (ROI) be used interchangeably with cost-benefit analysis (CBA)?
Yes, the CBA is more comprehensive than ROI and attempts to quantify both tangible and intangible (or "soft") costs and benefits. ROI is a calculation of the most tangible financial gains or benefits that can be expected from a project versus the costs for implementing the suggested program or solution.
Are total cost of ownership and life cycle costing terms often used synonymously?
Yes.
Define Zero-based Budgets (ZBB)
Zero-based budgets relate expenditures and revenues to workloads and organize budget presentations according to "decision packets" of cost centers, for which alternative levels of service delivery can be specified. Decision packets are ranked by relative importance to allow for the elimination of entire packages.
What is job order contracting (JOC)?
based on a competitively bid indefinite delivery indefinite quantity (IDIQ) contract between an entity and a construction contractor. The contract sets parameters such as the types of work that can be done, location of work, design criteria, and maximum amount of work to be awarded.
devolution of control and direction
capability to transfer statutory authority and responsibility for essential functions from an agency's primary operating staff and facilities to other agency employees and facilities and to sustain operational capability for an extended period
What is market research?
collecting and analyzing information about capabilities within the market to satisfy agency needs. The results of market research are used to arrive at the most suitable approach to acquiring, distributing and supporting goods and services
Quadrant IV of the supply positioning matrix
goods and services with a high degree of risk and a high expenditure relative to total procurement spend
Quadrant III of the supply positioning matrix
goods and services with a high degree of risk and a low expenditure relative to total procurement spend
Quadrant II of the supply positioning matrix
goods and services with a low degree of risk and a high expenditure relative to total procurement spend
Quadrant I of the supply positioning matrix
goods and services with a low degree of risk and a low expenditure relative to total procurement spend
tests, training, and exercise
provisions made for the identification, training, and preparedness of personnel capable of relocating to alternate facilities to support the continuation of the performance of essential functions
Terms and Conditions
standard boilerplate language that includes standard clause and rules which apply to bids and offers formally solicited that may become incorporated into the final contract.
Budgeting
the allocation of scarce resources among competing demands.
Continuity Communications
the availability and redundancy of critical communications systems to support connectivity to internal and external organizations, end users, and the public is vital tot he success of entity operations
Vital Records Management
the identification, protection, and ready availability if electronic and hard copy documents, references, records, information systems, data management software, and equipment needed to support essential functions during a continuity situation.
Explain substitute in regards to environmental practices.
To substitute is the use of less hazardous, more environmentally preferable goods whenever possible.
Relationships with other entities and organizations.
-A procurement professional shall not use his/her position to exert leverage on individuals or firms for the purpose of creating a benefit for the entity or entities that he/she may represent -All involvement and transaction shall be handled in a professional manner with the interest of the procurement professional's employer taking precedent.
What are some of the technologies that are currently available to procurement?
-E-Commerce; more specifically-e-sourcing, e-procurement, e-purchasing, e-auctions, e-tender -Electronic payment solutions -Marketplaces/Business exchanges -Contract registers/databases -Knowledge portals/supplier databases -Business intelligence -E-invoicing/e-payables -ERP (Enterprise Resource Planning) systems -MRP (Materials Resource Planning) inventory systems -EPOS (Electronic Point of Sales) -Barcoding/RFID (Radio Frequency Identification) -Intranets -Extranets
What should the overall purpose of a procurement policy manual be?
-Establish the legal authority of the procurement function within the entity. -Simplify, clarify, and reflect the laws governing procurement -Enable uniform procurement policies throughout the entity -Build public confidence in public procurement -Ensure the fair and equitable treatment of everyone who deals with the procurement system -Provide for increased efficiency, economy, and flexibility in public procurement activities and maximize to the fullest extent the purchasing power of the entity -Foster effective broad-based competition from all segments of the supplier community -Safeguard the integrity of the procurement system and protect against corruption, waste, fraud and abuse -Ensure appropriate public access to contracting information -Foster equal employment opportunities that are in line with legal requirements, in the policies and practices of suppliers and subcontractors wishing to do business with the entity
What are the four types of audits?
-Financial and compliance audits -Economy and efficiency audits -Program audits or evaluations -Performance audits
What should be included on a checklist of best practices to implement the use of technology in procurement?
-Integration of financial system with procurement system to allow for verification of funds prior to the release of the order -Automated process flows for approvals -Enable the entity to receive electronic requisitions -Preparation of solicitations from requisition information -Utilization of "push technology" to notify potential offerors of available opportunities -Preparation of bid tabulations and bid analysis reports -Preparation of proposal evaluation reports -Preparation and distribution of notices of award -Use of a commodity/service code structure to group and track purchases -Automated production of purchase orders for standard inventory items -Accumulation of usage data for contract items -Track order released against contracts -Implementation of supplier performance reports that reflect Client satisfaction -Client satisfaction/dissatisfaction, etc. -Automate recording and updates to the purchase history -Track the status of requisitions and purchase orders -Production of essential management reports and summaries -Inclusion of contract administration functionality within the technology -Use of e-commerce to source and order goods and services online -Acceptance of electronic informal quotes -Provide electronic catalogues to the user departments/divisions -Use of reverse auction processes for high-volume, standardized commodities -Use of online surplus auction services -Use of solicitation development software with process flow, templates, library of clauses, approval process, etc. -Online posting of purchasing , award, and contract information for transparency purposes.
Relationships with professional procurement organizations and associations.
-It is the obligation and the responsibility of the procurement professional, through affiliation with professional organizations, to represent that entity in a professional and ethical manner. -A procurement professional shall not use his/her position to persuade an individual or supplier to provide a benefit to an entity.
List special preference programs.
-Minority and women-owned business (as permitted by the entity or law) -Local or disadvantaged business enterprises -Sustainable procurement program -Joint or cooperative procurement -Surplus disposition -Materials management -Low value spend (e.g. purchasing card program)
What are some environmentally safe goods and services?
-reuse and recycle of goods and resources -disposal of organic and other solid waste -conservation efforts in regard to transportation, energy and water -disposal of hazardous waste -maintenance -pollution reduction or avoidance -construction of buildings and infrastructure, using development practices and accepted performance criteria that focus on the environment
Governments have the ability to change the specifics of their preference programs to meet the needs of the community they serve. Procurement professionals must continually monitor impending changes and assess the fiscal impact of changes on their community. Assessing the financial impact may include:
-the time and resources expended by the entity to conduct background checks on potential Minority-Owned Business Enterprise (MBEs) or Historically Underutilized Businesses (HUBs) to ensure that they meet all entity qualifications to be considered a MBE or HUB supplier -The cost of the entity's outreach program and training programs to encourage MBE participation in their solicitations -conducting a comprehensive disparity study to determine which supplier groups have been historically underutilized by the entity
List circumstances in which the procurement cannot be conducted in full and open competition (FAOC)
-Only one responsible source and no other supplies or services will satisfy entity requirements: -no other source is available -the contract is a "follow-on" for the continued development or production of a major system or highly specialized services; therefore, if switching contractors would result in unacceptable delays or a substantially higher cost -the contract is in response to an unsolicited research proposal -There exists unusual and compelling urgency (e.g., delay in award would result in serious financial or other injury -In the case of industrial mobilization; or engineering, developmental, or research capability, if there is a need for: -maintaining a facility, producer or manufacturer, or supplier in case of a natural emergency or wartime industrial mobilization -essential engineering or research and development capability to be provided by educational or nonprofit institutions or federally funded research and development centers -The head of the contracting activity prepares a document that describes the terms of an agreement or treaty or the written directions, such as a Letter of Offer and Acceptance, that has the effect of requiring the use of other than competitive procedures for the procurement. -Other than Full and Open Competition is authorized or required by statute, as is the case when procuring from: -specified prison industries -qualified nonprofit agencies for the disabled -In the case of National Security, when it would be compromised by broad disclosure of needs. -In the case of public interest, when the entity head determines that FAOC would be contrary to it.
When specifying and procuring recycle commodities, the procurement professional should be familiar with what terms?
-Post-consumer -Pre-Consumer
A procurement professional with an environmental mandate should understand what terms?
-Reduce -Reuse -Recycle -Substitute
What are the three primary sources of procurement laws in any entity?
-Statutory Laws -Administrative Laws -Common Law
What does the procurement policy of an entity reflects?
-The entity's legal system -The goals and values of the entity -Policies and practices federal-level entities use to acquire goods and services; this may not apply to state or local entities
What are two examples of policies that represent entity objectives?
-a set-aside/goal that allows an established percentage of the business conducted with an entity to be excluded from the general competitive pool and purchased from a specialized class of business -a policy that encourages and promotes a recycling program which includes procuring recycled goods
What are some of the benefits associated with strategic procurement planning?
-focuses attention on the entity's mission and links tactical procurement decisions to entity strategy. -assists in designing future procurement strategies -assists in designing or redesigning the structure of the procurement functions and processes. -allows procurement professionals to verify the legitimacy of procurement strategy consistent with the entity's strategy -creates a framework for communicating with suppliers and cross-functional team members -allows procurement resources to be assigned according to opportunities and risks -gives a framework to review strategy implementation and control -facilitates a better understanding of the implications of cross-functional problems and projects arising out of procurement decisions -facilitates the identification of opportunities and threats for future procurement decisions.
What should a supplier manual include?
-general information about the entity -key contacts and telephone numbers -how the solicitation process is conducted -how to receive an opportunity to participate in entity solicitations -a description of the need to be both a responsive and responsible supplier -how are are to be submitted, public openings of offers, and the policy regarding late submissions
What are suspicious practices suggesting collusion?
-identical bids -alternating bid patterns, where bidders rotate providing the lowest bid -rotating territorial or product bidding -"no-bid" responses from expected bidders -simultaneous price increases
What are some goals of strategic sourcing?
-improve supplier performance -reduce waste -eliminate non-value-add activities and costs -minimize risk
Guiding principles of strategic sourcing are?
-making procurements in a manner that reflect the greater good of the entity -cost-effective and efficient procurement methods -managing suppliers for performance -compliance with all statutes, regulatory provisions and entity policy and procedures.
The purpose of an audit to to ensure what?
-procurement policies and procedures are clearly defined, and end-users are in compliance regarding the solicitation process for the clients utilizing Procurement -purchase order are required and used for purchases -the proper use of the procurement card (pCard). the pCard purchases are always an area for audits and departmental/division reviews. - The department/division has the means to make purchases (emergency) after hours -Procurement maintains that the suppliers list and goods and services are properly coded for commodity and service selections -Procurement determines the performance measures of the department/division and suppliers -Impress funds (petty cash) if applicable, are replaced frequently, balanced and have authorized transactions (note: the use of the pCard may have replaced impress funds) -that the procurement staff is trained and is aware of policies and procedures affecting procurement (e.g., competitive process, supplier selection, supplier relations, direct purchases, methods of procurement, security of solicitation documents and purchase numbers, etc.) -files and folders are set up properly, in order and are easily accessible -verification of solicitation documents with requisition and supporting material -a tracking and reporting system that documents solicitation activity -the integrity, fairness, and ethical application of the procurement process in procuring goods and services from suppliers
The extent to which procurement professionals foster competition depends on what?
-requirements in law or regulation to use specific suppliers -requirements for "maximum practicable" and "full and open" competition -the validity and suitability of an unsolicited proposal -requirements to set aside procurements for small business -availability of suppliers under the small business programs
What are the characteristics of a supplier manual?
-well organized, clear and easy to understand -clear definition of the purpose and a consistent approach to decision making -framework for training -flexible -endorsed by the entity's Chief Executive Officer -supplier outreach information -transparent -facilitate revision
What is a principal?
A principal is one who employs an agent. A person who authorized another to act for him/her.
What is a supplier manual?
A supplier manual provides formal and extensive information for suppliers seeking to do business with the entity.
What will a thorough and well-crafted strategic procurement plan generate?
A thorough and well-crafted strategic procurement plan will generate an effective and efficient procurement system.
What is a SWOT analysis?
A tool used to analyze the various factors and entity could potentially face. SWOT analysis (strengths, weakness, opportunities, threats). Strengths are internal situations that will help achieve the entity's objectives, to overcome threats and weaknesses, and to take advantage of opportunities. Opportunities can be internal or external. Threats are external challenges to the success of the entity's objectives.
What is express authority?
Express authority is the authority that is explicitly given in direct language rather than inferred from conduct. It can be in writing or oral. Express authority can be very specific; for example, "the chief procurement officer is authorized to enter into a contract for less than $25,000." Express authority may also be generalized; for example, "the chief procurement officer has the authority to enter into all contracts according to the procurement needs of his/her government entity."
Define inputs.
Inputs measure resources used. They include labor, materials, equipment and supplies. Demand for goods and services may also be considered an input metric.
Define an interdepartmental audit report
Interdepartmental reports are for distribution to other departments on a need-to-know basis.
Define an intradepartmental audit report.
Intradepartmental reports are designed to inform the management concerning departmental matters.
What does competition promote?
It promotes free access to the marketplace, induces new businesses to enter, promotes better market performance, and encourages new technology and higher productivity.
Does a government official have inherent power?
No, for purposes of public procurement, there must be a specific authorization from officials in the executive branch of government to enter into contracts. Without that authority, the officials may not do so. The existence of such authority is the foundation of any public procurement system.
Define outputs.
Outputs record activity or effort that can be expressed in a quantitative or qualitative manner (e.g., total spend, total number of new contracts, total number of employees who obtained professional certification).
What is the Pareto Principle?
Pareto theorized that 20% of the people (the vital few) yielded 80% of the production while 80% of the people (the trivial many) yielded only 20% of the production... 20% of what you do yields 80% of the results. The Pareto Principle or the 80/20 rule can be applied to supply management situations such as "80% of procurement cost is created by 20% of the purchase orders issued."
Explain reduce in regards to environmental practices.
Reduction in the amount of waste by requiring certain commodities to be made with recycled content and reducing the amount of packaging.
What helps to establish an expectation to measure against?
Setting performance targets.
Are threats external or internal?
Threats are external challenges to the success of the entity's objectives.
What must be done to ensure proper organizational impact with a policy and procedure manual?
The Chief Executive Officer of the entity should endorse each manual and the manuals should be produced in a manner that facilitates revision as changes will surely happen through new legislation and increased efficiencies in processes.
What is the goal of strategic procurement planning?
The goal of strategic procurement planning is to establish a set of agreed-upon tactical goals and objectives within the operational context of the entity, thus linking resource allocation decisions in a priority-setting model.
What should be the end result of an audit?
The improvement of the decentralized unit and ensured compliance with statutory requirements, policy and procurement procedures for the entity.
What is a Financial and compliance audit?
These are normally performed by an independent accounting firm to determine whether financial transactions are recorded and verify their accuracy.
What are Administrative Laws?
These are written rules and regulations and entity policy (developed and promulgated by administrative and regulatory governmental agencies). Administrative Law, provided by the applicable regulatory entity, has equal force and effect as legislative law as long as it does not supersede the context of legislative law.
What is an economy and efficiency audit?
These audits are management or operational audits which examine an entity's managerial and administrative practices for economy and cost efficiency and strive to identify the cause of any cost inefficiencies.
What are program audits or evaluations?
These monitor results to determine the extent to which an entity has achieved program objectives. They also evaluate the cost effectiveness of the alternatives that were employed.
What are performance audits?
These review all of the operations of an entity and encompass the following types of audits: financial, economy, efficiency and program results. Performance audits are an increasingly common means of ensuring that those entrusted with management of public services and programs are held accountable.
Who primarily uses procedure manuals?
They are primarily used by the end user and procurement staff, the procedures manual provides guidelines and steps for preparing purchasing requisitions, developing specifications, receiving and inspection, and reporting and documenting supplier performance.
What do procedure manuals detail?
They detail the business processes of Procurement and describe the entity, duties of staff, signing authorities, procedures to be followed, and forms and filing systems to be used.
How is the private sector restricted in procurement?
They may do whatever the law does not prohibit.
What are performance metrics?
This is a term given to the measurement of performance.
What are the most effective procurement statutes and ordinances?
Those that establish the general parameters of an official's contracting or procurement authority and authorize that official to promulgate rules, regulations or policies to implement it.
Is Government procurement restricted to activities that are authorized by law?
Yes, the authority of the central procurement department is limited by what has been included in the enabling legislation.
Is Governmental power inherent?
Yes, they are inherent powers that are granted by a constitution, charter or act.
Whenever a procurement will be affected by preferences, does the factor have to be included in the solicitation?
Yes.
What is preference?
an advantage given to bidders/proposers in a competition for contract award, which may be granted based on pre-established criteria such as ethnicity, residence, business location, origination of the good or service, business classification (e.g., small business), or other reasons. A governmental bias.