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NEW QUESTION: 1
Scenario
A central government department, the Ministry of Food Hygiene (MFH), faces increasing pressure to cut costs, better manage suppliers' performance and reduce the confusion caused by inadequate internal controls, outdated standards and outdated technology. External consultants were employed to conduct a feasibility study to identify options to address the problems, and the likely costs and benefits. The following options were considered:
Do nothing.

Re-engineer selected business functions.

Outsource selected business functions.

The feasibility study concluded that there was a case for outsourcing the MFH Information Technology Division and the Facilities Division (maintenance of buildings and grounds). The recommendations were:
One service provider should be contracted to provide the services currently provided by the Information Technology Division and the Facilities Division. A 10-year service contract should be agreed with the selected service provider.
The feasibility study developed high-level designs of the current organization, processes, systems and operating models, plus an outline Business Case for the required project. The external consultants also made the following recommendations for the management of the project:
Use PRINCE2.

Set up the project with 4 management stages:

Stage 1. Standard PRINCE2 initiation activities.
Stage 2. Create detailed designs (future organization, processes, systems and operating models) and the service level agreement between MFH and the future service provider.
Stage 3. Request and evaluate proposals, select service provider and agree contract.
Stage 4. Transfer equipment and staff, transfer responsibility for service provision and run trial period.
Initial estimates indicated that the project would cost £2.5m and take two years to complete. MFH senior management agreed that there was a case for outsourcing, and accepted the recommendations as a basis for the project. There is an expected saving of £20m over 10 years.
The Outsourcing project has completed the Starting up a Project process and is now in the initiation stage.
Because of the strategic importance of the project, the MFH Chief Executive Officer has taken the role of Executive. A PRINCE2-experienced Project Manager has been appointed from within MFH. Staff within the business functions being outsourced will work with the external consultants who conducted the feasibility study to define the detailed designs.
Which 2 statements should be recorded under the Major risks heading?
A. MFH's operations may be reduced and the 1a-year contract may not achieve its estimated value of
£80m, which would reduce the service provider's profit.
B. The management stages recommended by the consultants may not be appropriate, resulting in confusion in planning.
C. The initial estimates, taken from the feasibility study report, indicate that the project will take two years to complete, which means that the business problems would remain for this period.
D. Due to market conditions a suitable service provider may not be found, possibly leading to premature closure of the project.
E. Owing to employment contract changes staff may resist outsourcing, which would make it difficult to transfer staff to the selected service provider.
Answer: C,E


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