Having defined the sourcing process, AC 1.2 asks you to differentiate the approaches by which requirements are actually sourced — how many suppliers, through what mechanism, and with what trade-offs. Aligned to AC 1.2.
1. Single, dual and multiple sourcing
Single sourcing is usually decided at strategic, top-management level. It may be appropriate where:
- The total requirement is too small to justify splitting orders
- One supplier is so far ahead on reputation, quality or price that using anyone else makes no sense
- Expensive set-up costs (e.g. tooling or systems integration) are required
- The requirement is subject to supply risk or short supply
(Note the difference between single sourcing — choosing one supplier when others exist — and sole sourcing, where only one supplier is available; the exam tests this wording.)
Relying on a narrow supply base concentrates risk: over-dependence if a supplier fails; supply disruption (strikes, breakdown, natural disaster); loss of preferred suppliers' goodwill; suppliers growing complacent; being 'locked in' to a poorly-performing or incompatible supplier; and missing more competitive suppliers in the wider market.
Dual or multiple sourcing can protect the buyer during shortages, strikes and emergencies, maintain competition, provide a back-up source, avoid single-supplier complacency, and help where the technology path is uncertain. Its disadvantages are higher procurement and administration costs (many small orders, lost volume discounts), failure to exploit collaborative relationships, and waste from retaining little-used suppliers and proliferating stock variety against standardisation.
2. Partnership sourcing (AC 1.2)
Partnership sourcing is "a commitment to both customers and suppliers... to a long-term relationship based on clear, mutually agreed objectives to strive for world-class capabilities" (Partnership Sourcing Ltd). It depends on cultural compatibility, high trust and openness, win-win acceptance, complementary expertise, clear joint objectives, cross-functional teams, a total-quality philosophy and systems integration. It is beneficial where spend or risk is high, the product is technically complex or vital, or the supply market is fast-changing or restricted — not for routine, low-value items.
3. Tendering approaches (AC 1.2)
In the public sector these are contract-award procedures under the Procurement Act 2023 (commenced 24 Feb 2025, which replaced the PCR 2015 regime). PA-2023 provides exactly two competitive tendering procedures:
- Open Procedure — a single-stage process: any interested supplier submits a tender by the closing date; the authority evaluates and awards. Suits straightforward requirements where broad market participation is desirable. Can generate a large number of tenders, making evaluation resource-intensive. Commercial negotiation is not permitted within the Open Procedure.
- Competitive Flexible Procedure (CFP) — a multi-stage procedure the contracting authority designs to suit the complexity of its procurement. The authority must state the stages in the tender notice. Stages may include a participation stage (to short-list suppliers), dialogue with suppliers, iterative tender improvement, and/or negotiation. Commercial negotiation and/or dialogue may be permitted — but only where the authority has included and disclosed this in the original tender notice.
PA-2023 and the old PCR 2015 procedures. The PCR 2015 named four separate multi-stage procedures (restricted procedure; competitive dialogue; competitive procedure with negotiation; innovation partnership). All four are discontinued as distinct statutory procedures. Under PA-2023, a contracting authority that wants to pre-qualify suppliers (as the old restricted procedure did), or hold dialogue (as competitive dialogue did), or negotiate (as the competitive procedure with negotiation did), does so by designing those stages into a Competitive Flexible Procedure and disclosing them upfront. The outcomes are achievable; the separate procedure names are not current law.
Trade-offs at a glance: the Open Procedure maximises competition and is the simpler option, but offers no pre-qualification and no negotiation. The Competitive Flexible Procedure allows the authority to tailor the process — including pre-qualification, dialogue, and negotiation — but requires more design effort upfront and greater transparency about the intended stages.
4. Direct negotiation, intra-company trading and transfer pricing
Direct negotiation aims to obtain a fair price for the specified quantity and quality, secure on-time performance, exert control over how the contract is performed and develop a sound continuing relationship.
Intra-company trading applies in large enterprises and conglomerates where materials can be bought from a group member, justified by group profitability and (in recession) helping subsidiaries cover fixed costs. The transfer price is the monetary value recorded as goods or services move between divisions; it can have a profound effect on reported divisional performance. Practical approaches include variable cost, full cost / full-cost-plus / variable-cost-plus, and market price.
5. International sourcing trade-offs
Benefits of going international include availability of materials and skills, competitive prices and scale economies, and leverage of ICT systems. Drawbacks include exchange-rate risk, high sourcing and transaction costs, sustainability/compliance/reputational risk from lower standards, differing legal frameworks and cultures, and the environmental impact of transport (especially air freight). (The detailed international-compliance mechanics — Incoterms 2020, customs/CDS, letters of credit — are developed under LO3.) Partnership sourcing is especially indicated when the customer is a small player in the market for an item, where a committed relationship secures supply and attention the buyer could not command on volume alone.
Currency note: supplier capability is now assessed through proportionate conditions of participation; the current PSQ template may collect evidence, while the former SQ/PQQ terminology belongs to PCR 2015; the public-sector procurement procedures named above operate under the Procurement Act 2023 (commenced 24 Feb 2025), which replaced the PCR 2015 regime and its OJEU advertising with the Find a Tender Service (FTS). (SQ/PA-2023/FTS currency trainer-supplied per the CIPS 2024 syllabus.)
§12 trap box: (1) Single sourcing ≠ sole sourcing (choice vs no choice). (2) A narrow supply base concentrates risk; a wide base is not free — it raises transaction/admin cost and loses volume discounts. (3) Partnering suits high-value/high-risk needs only, not everything.