CIPS key terms

The whole set of activities an organisation uses to obtain goods, services or works, from identifying a need through to managing the contract and eventual disposal or exit.

The transactional part of procurement: raising requisitions, placing orders, receiving goods and paying suppliers. It is narrower than procurement and usually sits inside a wider sourcing and contract management process.

The process of identifying, evaluating and selecting suppliers and agreeing the commercial terms that will meet a defined need, ending with a signed contract or purchase agreement.

Grouping similar spend into categories and managing each as a strategic business unit, with its own strategy, supplier plans, performance measures and improvement targets.

Examining an organisation's purchasing records to show what is bought, from whom, at what price and by which business unit, so that priorities and consolidation opportunities can be identified.

The large number of low-value transactions that together form a small share of total spend. It is costly to process and is often targeted for simplification, catalogues or delegated purchasing.

A clear written description of what the buyer needs, including quantities, performance levels, timescales and mandatory constraints, written so suppliers can respond without guessing the buyer's intent.

A detailed technical or performance description of the goods or services to be supplied. Output-based specifications state the required result and leave the method to the supplier, encouraging innovation.

A formal request inviting suppliers to submit priced offers against a defined requirement, usually under stated evaluation criteria and a fixed deadline for submission.

A document asking suppliers to propose a solution to a stated business need, including approach, resourcing and price, typically used where the buyer wants supplier expertise and innovation rather than simple compliance.

A simple request for prices against a well-defined, often low-risk requirement. It is quicker than a tender and is normally used where specifications are clear and competition is straightforward.

The stated factors, and their relative weights, that will be used to judge supplier offers. They must be published in advance and applied consistently so that decisions are defensible and fair.

An award approach that selects the offer giving the best overall value against published criteria such as quality, delivery, risk and price, rather than the lowest price alone.

The total cost of acquiring, operating, maintaining and disposing of an asset over its useful life, used to compare offers that have different running costs or durability.

A wider view than purchase price, adding acquisition, usage, administration, risk and end-of-life costs so that the true cost of dealing with a supplier or asset is visible.

An analysis of a supplier's price into elements such as materials, labour, overheads and margin, used to test whether a price is reasonable and to support negotiation.

An independent estimate of what a product or service ought to cost, built from materials, processes and reasonable margins, used as a benchmark against supplier quotations during negotiation.

An internal request authorising procurement to buy a stated quantity of goods or services, usually triggering budget checks and approval before an order is placed.

A buyer's formal written offer to purchase goods or services on stated terms. Once accepted by the supplier it forms a binding contract and controls what is delivered and invoiced.

The standard clauses that set out each party's rights and obligations, including payment, delivery, liability, warranties and termination. Which party's terms apply is often a key negotiation point.

The situation where buyer and supplier each seek to contract on their own standard terms. The outcome depends on which terms were last accepted before performance began, so clarity is essential.

A legally enforceable agreement between two or more parties, created by offer, acceptance, consideration and an intention to be bound, and setting out what each side must do.

A schedule within or attached to a contract that defines measurable service standards, such as response times or availability, together with how performance is reported and what happens when targets are missed.

A measure chosen to show whether a supplier is achieving an important outcome. Good indicators are specific, measurable, attributable and reviewed regularly with the supplier.

The ongoing process of measuring, reviewing and improving what a supplier delivers, using agreed indicators, regular meetings and corrective action where performance falls short.

The structured way an organisation segments its suppliers and manages the most important relationships, aiming to reduce risk, capture innovation and improve value over the contract term.

Sorting suppliers into groups, such as strategic, leverage, bottleneck and routine, according to their impact and supply risk, so that management effort is proportionate.

A portfolio tool that positions purchased items by profit impact and supply risk, producing four quadrants that suggest different strategies from competitive tendering to long-term partnership.

Choosing between potential suppliers using published criteria such as capability, capacity, quality, financial stability and price, supported by evidence and due diligence.

Checks carried out before appointing a supplier, covering financial health, legal status, capability, ethical record and ownership, to confirm the supplier can and should be trusted.

The chance that a supplier fails to deliver as agreed, or causes harm through financial failure, quality problems, ethical breaches or disruption, together with the impact if it happens.

Planning that keeps essential operations running during disruption. In procurement it means identifying single points of failure and arranging alternatives, stock cover or contractual obligations to recover.

Preparing specific actions and resources in advance for identified risks, such as approved alternative suppliers or buffer stock, so that a disruption can be handled quickly.

A structured discussion between parties with differing interests, aiming to reach an agreement both can accept, using preparation, trading of variables and clear understanding of each side's priorities.

The best alternative to a negotiated agreement: what a party will do if talks fail. A strong alternative increases bargaining power and sets the point beyond which agreement is worse than walking away.

The bargaining power one party holds over another, arising from competition, spend volume, scarcity, switching costs or time pressure. Understanding it shapes both strategy and tactics.

Administering a contract after award: tracking obligations, variations, payments, performance and risks, and ensuring both parties meet what they agreed until the contract ends.

A formal, documented change to a contract's scope, price or timescale, agreed by both parties. Uncontrolled variations are a common source of cost overrun and dispute.

A situation where a person's private interests, or those of a connected party, could improperly influence procurement decisions. It must be declared and managed, often by removing that person from the process.

Buying in line with stated values and standards, including fair treatment of suppliers, respect for labour and human rights, and avoidance of bribery, corruption and exploitation in supply chains.

The demonstrable honesty, fairness and integrity of a procurement process, evidenced by audit trails, equal treatment of bidders and decisions that can withstand external scrutiny.

Openly publishing opportunities, award criteria and outcomes so that suppliers and the public can see how decisions were made, which builds trust and deters improper behaviour.

Exploitative practices such as forced labour, debt bondage and human trafficking. Buyers address it through supplier codes, risk mapping of high-risk categories and audit or certification requirements.

A document setting the standards a buyer expects suppliers to meet on labour, environment, ethics and health and safety, often backed by audit rights and termination for breach.

Taking environmental, social and economic impacts into account alongside price and quality when buying, so that purchasing decisions support long-term public and organisational goals.

An approach that keeps materials in use through reuse, repair, remanufacture and recycling, reducing waste. Procurement supports it by specifying durability, take-back and recycled content.

A structured review of a design or requirement to find ways of achieving the same function at lower cost or with better performance, often carried out with suppliers during delivery.

An arrangement with one or more suppliers setting terms for orders placed over a period, without guaranteeing volume. It speeds repeat buying and can be reopened to competition.

An order placed under an existing framework or master agreement, using its pre-agreed terms and prices rather than running a new competition each time a need arises.

The plan linking what the organisation buys to its wider goals, setting priorities, sourcing approaches, risk appetite and measures of success for procurement activity.

Identifying the people and groups affected by or influencing a procurement, understanding their needs and influence, and communicating with them so decisions are supported and requirements are accurate.

The choice between producing something in-house and buying it externally, weighing cost, control, capability, capacity and strategic risk rather than price alone.

Transferring an activity or service to an external provider under contract, usually to access specialist skills or lower cost, accepting loss of direct control and new dependency risk.