Chapter 3.2 Flashcards
Through-life contracts
A contract that gives a contractor sole accountability for the design, acquisition, operation, maintenance and disposal of an asset
Decomissioned
Withdraw an item from active use or service
When are through-life contracts commonly used?
When procuring an asset such as machinery or IT equipment
Name 2 things a through-life contract needs to support
- The new purchase of the asset
- Continuing services that support the installation, operation, maintenance and eventual disposal of the asset
Name 5 typical parts of the through-life requirements of an asset
- Design
- Manufacture
- Installation
- In-service support
- Decommission and disposal
Explain the design stage in the through-life requirement of an asset
Process by which the buyers needs are translated into a design that can be signed off by the buyer as a technically correct version of what is required
Explain the manufacture stage in the through-life requirement of an asset
Design is passed to operations who manufacture the product or assemble it from components. The product may then be subject to testing and quality approval process before being ready to ship to the customer
Explain the installation stage in the through-life requirement of an asset
Install it on the buyers premises and check to ensure that it is working to the standards set out in the design specification
Explain the in-service support stage in the through-life requirement of an asset
There may be a need for technical support from the manufacturer. This can include regular maintenance as well as periodic repair activities
Explain the decommission stage in the through-life requirement of an asset
When an asset has reached the end of its useful life it needs to be decommissioned and disposed of through environmentally sound processes
Name 4 benefits of through-life management
- Lower costs over the whole-life of the asset
- Lower risks as there is a single company accountable for costs and service over the life of the asset
- A closer match between the asset delivered and the users needs
- Development of capability over the life of the asset as the supplier continues to get experience of the user’s needs and can adapt services to meet them
What does the scope of the specification for a through life contract need to reflect?
The associated benefits and cover all relevant activities
Name a major advantage of a through-life specification
It covers both the physical product or asset and the subsequent services needed to operate and support it
What is the first and most crucial step in producing any specification to support a through-life specifications?
To design the user requirements
Name 6 considerations when drawing up a definition for a through-life specification
- Produce a user requirements document (URD)
- Identify user requirements by asking open ended questions. Share these questions with key stakeholders so that they can have input
- Make sure that functions, attributes, constraints, preferences and expectations for the product or service are fully explored and any trade-offs between them agreed
- The detail contained within the specification must give the contractor sufficient information quickly and accurately to develop a price for the product or service
- There should be sufficient information in the specification to minimise the risk later in the through-life contract
- The specification should include on-site instructions as to what services should be delivered and how, but without being unduly prescriptive. It should be described in terms of outcomes
What is a user requirements document
A statement of the results or outputs that the users expect to receive
Name 2 things a user requirement document should identify
- The technology that may be needed to meet the requirements so that this can be further investigated
- Identify the boundaries for the through-life management in terms of performance, cost and timelines
Name 5 reasons why it is important to make sure that the functions, attributes, constraints, preferences and expectations for the product or service are fully explored and any trade-offs between them agreed when drawing up a definition for a through-life specification
- Functions describe what the product or service has to accomplish
- Attributes are the characteristics of the functions that are important to stakeholders. Two products can have the same functions but different attributes
- Constraints set limits on the functions of the product or service
- Preferences of the stakeholders or the end users
- Expectations in terms of the look and feel of the product or the feelings it generates
Name 7 things to consider when gathering sufficient information in the specification to minimise risk later in the through-life contract
- Make sure the parties to the contract are clearly identified
- Clearly identify any testing and quality assurance procedures and who will perform them
- Document every important aspect of the specification including a project plan that describes activities, role, dependencies, outputs and timelines
- Include a reasonable limitation of liability clause in the contract and reference it in the specification
- Identify any warranties that are needed
- Be clear on what insurance will and will not cover
- Make sure there is a clear audit trail of any changes to the specification together with approvals
Define limitation of liability
A limit placed on the financial obligations of a party within a contract
Define warranties
Warranties are lesser terms in a contract which can result in damages but not contractual termination in the event of a breach
What is a key activity for procurement?
Managing risk
What needs to be identified at the specification stage?
Sources of future risk. This is so that ways of mitigating those risks can be found
Name 4 phrases you should write down to write a clear description of your requirement
- ‘I expect the product/service to’ - describe what it has to do
- ‘so that’ - why does the user want it to do this
- ‘when’ - describe what triggers the use of the product or service
- ‘because’ - detail any constraints the user may have
Name 6 ways you can provide clarity for the contractor in the description of the product or service
- Use simple langauge in short sentences
- Define any acronyms used
- Avoid abbreviations
- Be specific and avoid ambiguity
- Avoid any in-house jargon that a contractor might not be familiar with
- Use imperative forms of language whenever possible
Define acceptance testing
A form of testing used to determine if the requirements of a specification or contract are met
Define functional tests
A form of testing whether the functions of a product as set out in the specification are achieving their objective
Name three terms for acceptance testing
- End-user testing
- Field testing
- Operational testing
What three things may acceptance testing involve?
- Physical tests
- Chemical tests
- Performance tests
How do functional tests differ from acceptance tests
Functional tests differ in that the end user is not involved in the testing. therefore, they only test whether the product works and not whether it meets the needs of the customer
Name 5 main types of acceptance testing
- Alpha and beta testing
- Contract acceptance testing
- Regulation acceptance testing
- Operational acceptance testing
- Black box testing
When would alpha testing usually take place?
During the development phase and generally only involves contractor employees
What are the results of the alpha test used to do
To modify the product so that it complies better with the specification
Are both acceptance and functional tests needed?
Yes - both
Explain beta testing
It usually takes place on the customer’s premises and involves the customer staff using the product in a real life environment
What is another name for beta tests
Field tests
What happens in contract acceptance testing
The product is tested against criteria and standards that were set out in the specification and so are predefined
What happens in regulation acceptance testing?
Tests the product for compliance with any regulations required by law such as health and safety requirements
What is the final testing that is done?
Operational acceptance testing
What does operational acceptance testing do?
Tests that all operational functions of the product are in working order prior to releasing the product to the customer
When is black box testing most commonly used?
When testing software
What does black box testing focus on?
Inputs and outputs without consideration for the internal workings of the product
Name three types of testing that the supplier and end-user should maintain throughout the life of the asset
- Quality
- Performance
- Compliance
Name 7 reasons why you may want to change the specification during the course of writing a specification
- The stakeholder changes their mind about the functionality or the cost of the product/service
- A new sponsor for the contract takes over and has different ideas about the product or service
- The buying organisation’s strategy changes and this forces a change in the product/service or even the cancellation request of the project
- A change in regulations forces a change to the specification scope or requirements
- As work on the specification starts, the assumptions behind the requirements and scope may be challenged and weaknesses found or better alternatives identified
- Lack of resources for the contractor means that a change in the specification may be needed in order to complete the project on time
- Technology is updated, which can have either a positive impact or negative impact for the project
Why is a change control process needed?
So that any compromises and changes to the specification are properly evaluated and approved. Changing the specification may result in additional cost or a longer time to complete the project
Name the 4 stages of a typical process for identifying and approving changes to a specification
- Describe the change
- Review the change
- Look at options
- Final approval
Explain a change management process
Every project, such as specification writing, needs a way to authorise and make changes but without so many changes that the project gets derailed
Name step 1 in the change management process
Identify the change needed and describe it in a change request document
Name 4 things a change request document should include
- A description of the change
- The reason for the change and the consequences if the change is not made
- What difference the customer will see if the change is made and what they can expect
- How long the change will take and what impact this will have on the overall project timescales
What does the review stage in the change management process allow for?
It gives everyone involved in the project the chance to comment on the change and suggest amendments that would improve the change. It also allows them the chance to put forward reasons for rejecting the change
What should you do in the option stage of the change management process?
Document any options for the proposed change together with any data that supports the preferred change and the options put forward
What does the option stage of the change management process help with?
It helps the customer to decide which path to take or indeed to reject the change or all options
What should the option stage of the change management process identify?
An expiration date for a decision and the potential impact on the project if no decision is made by that date
What happens in the final approval stage of the change management process?
Any approved changes are then incorporated into a revised specification and updated project plans
Why should specifications be assessed from an economic perspective?
To ensure any requirements within the specification are economically viable for the organisation
Name 7 areas to consider when assessing economic viability
- Whole-life costs
- Timescales and lead times
- Sustainability
- Impact on the environment
- Social and ethical implications
- Quality
- Risk identification, exposure, management and mitigation
Why are there more ethical risks involved in relation to international sourcing?
Working conditions and modern slavery implications
What plays a big part in assessing environmental and economic viability?
Risk mitigation and management
Name 6 factors in the physical environment that can affect how a business performs financially?
- Recovery from natural disasters
- Management of waste emissions
- Pollution
- Energy efficiency
- Disposal stipulations
- End-of-life asset recovery
What is there a growing need to do in a world that is ever more aware of the shrinking availability of raw materials?
Recapture recyclable materials as part of the supply chain disposal process
Name 3 things that are becoming increasingly important when capturing recycleable materials?
- Reverse logistics
- Repair-loops
- Closed-loop recycling
Name two impacts natural disasters have on a business
Disrupt supply chains and damage assets
Name a cost of a natural disaster that is often overlooked?
Disruption to the business and future revenues
Name 4 questions you should ask when assessing the risk of potential natural disaster to supply chain
- How long can you go without a product from key supplier if their facilities go down due to a natural disaster
- Where else could the product come from
- Is it possible for you to build a surplus of the product before the supplier’s plant closes
- If your own production has to slow or stop, how will you communicate this? how might this affect your brands reputation?
What issue is associated with waste?
The issue of the sustainability of raw materials
Explain how you can make raw materials sustainable?
Taking measures so that when a raw material is used it is replaced
What may be required when transferring waste inside a nation and across international boundaries
Waste transfer licence
Why may a waste transfer licence be needed
To ensure that waste is managed responsibly
Who provides legal guidelines to organisations as to how best store, manage and transport hazardous items or materials
COSHH - Control of Substances Hazardous to Health
Name 11 business that are likely to create air pollution
- Manufacturers
- Farmers
- Construction, building and demolition trades
- Vehicle repairs
- Welders
- Mines and quarries
- Printers
- Hauliers and other transport businesses
- Waste management business
- Dry cleaners
- Laboratories
What will a risk assessment of pollution do?
Point the way for any action needed, such as sourcing from alternative suppliers or re-specifying the product so that pollution effects are minimised or eliminated
What is air pollution often caused by?
Burning fuels both in boilers or furnaces and from burning material in the open air
Name another major cause of pollution
Exhaust fumes from delivery vehicles
How can energy efficiency improve an organisations financial performance
By delivering increased productivity and reducing pollution and consumption of natural resources
Name the 4 step priority list for improving energy efficiency
- Get a commitment from senior management and invite employees to participate in the energy efficiency programme. Reward them for suggestions that are implemented
- Carry out an energy audit. This will highlight where the business wastes energy, what that waste costs and how improvements can be made.
- Use the output from the energy audit to create an energy management plan. Prioritise actions based on costs and benefits and how long they will take to implement
- Start with low-cost measures to improve energy efficiency. These are easy to do and give an immediate sense of accomplishment
What can energy efficiency increase?
Profitability and competitiveness by reducing the cost of doing business
Define social capital
The network of relationships between people who work in a particular environment
What is social capital the sum of?
Knowledge, experience and skills of the workforce and the total value people put on their health and wellbeing
What will social capital increase or decrease depending on?
Activities and actions of organisations and their supply chains
When is social capital destroyed by organisations?
When risks are not managed, regulations are not followed and employees work in unsafe conditions
Is social capital static?
No
When does the value that society puts on the output from organisations change?
As demographics and the tastes and values of society change
Name 8 factors that influence social views of an organisation
- Media views of the industry
- Work ethic and working practises
- Brand, company and technology image
- Lifestyle trends
- Cultural taboos
- Consumer attitudes and opinions and their buying patterns
- Buying access and trends
- Publicity
Name 7 stakeholders that should be involved in the specification development
- Finance
- Risk management
- Warehousing
- Logistics
- Import/export agents
- Health and safety
- Waste team
Name 3 forms of governance within procurement and supply chain
- Corporate governance - mechanisms, procedures and processes that are used to control and direct the activities and people within an organisation
- Global governance - the laws and legislation that govern society
- Supply chain governance - the system of directing the behaviours and decisions of procurement within an organisation via legislative, executive and judicial processes
What does compliance with corporate governance ensure?
Senior management and relevant stakeholder buy-in and support as well as alignment with the overall end-goals, vision and mission purpose
What does compliance with global and supply chain governance ensure
Minimising the risk of financial implications such as fines, in addition to reputational damage
