CIPS L4M2 Exam With Confidence Using Practice Dumps

Explanation

Internal stakeholders may contribute to defining needs and drafting the specification by using their technical expertise. In this scenario, IT team may consult procurement team on the technical specification of the software, including compatibility with company's current IT system.

Comprehensive and Detailed Explanation (from CIPS L4M2 – Cost Management and Analysis)

CIPS teaches that indirect costs (e.g. overheads, admin, factory costs) can be estimated by using:

Supplier financial statements,

Benchmarking,

Industry cost models.

Analysing these supports negotiations by revealing true cost drivers.

Therefore, Option B is correct — buyers can and should assess indirect costs when evaluating total cost and negotiating.

Relevant L4M2 references:

“Understanding direct and indirect cost elements”

“Cost analysis and should-cost models in business case preparation”

Explanation

An Outcome Based Specification (OBS) focuses on the desired outcome of a service in business terms, rather than a detailed technical specification of how the service is to be provided; this allows providers scope to propose innovative solutions that might not have occurred to the procurement team. Outcome should be distinguished from output, which is the measurable results of a set of inputs. The example of difference between outcome and output is written at the bottom of page 123 in the study guide.

Outcomes should be the starting point in making new specification. However, using outcome-based specification has some setbacks:

- First, it is not easy to measure the outcomes. Usually, outcome of a project is a statement like 'increase customer satisfaction', 'maintain ambient temperature' or 'provide a convenient way to do something'. They are not easy to measure as output.

- Second, sometimes the desired outcomes require time to be materialised

- Third, outcomes can be ambiguous