Procurement Risks and Contingencies

Correct Answer: Start building relationships with alternate vendors and prepare to switch if necessary.

The best approach when a vendor is facing potential legal problems would be to 'Start building relationships with alternate vendors and prepare to switch if necessary.' This will ensure business continuity, even if the current vendor fails to deliver. Preparing for a worst-case scenario is part of risk management in project planning. Signing a long-term agreement will not guarantee that the vendor will be able to deliver, especially if they are facing legal issues. Furthermore, stopping all activities related to the vendor's resources could delay the project and might be unnecessary if the vendor's issues are resolved quickly. Putting pressure on the vendor is unlikely to resolve their legal issues and could strain relations, which could negatively impact your project even further.

Correct Answer: Activate the contingency plan to procure from an alternate supplier.

The best course of action in this situation is to activate the contingency plan and procure from an alternate supplier. This is because, in project management, it's crucial to manage risks and keep the project on schedule. A strike is an unforeseen circumstance, and the project schedule cannot be dependent on its resolution. Therefore, activating the contingency plan ensures that the project can move forward without significant delays. Waiting for the strike to end may result in project delays and cost overruns. Sending a legal notice may not immediately resolve the problem and may also strain the business relationship, which is not ideal unless all other options have been exhausted. Stopping the project is not a feasible solution as it may lead to a failure in delivering the project on time and within the budget.

Correct Answer: Initiate the contingency plan for supplier risk, including securing alternative suppliers.

The most effective action to mitigate procurement risk when a main supplier is facing bankruptcy is to initiate the contingency plan for supplier risk, which includes securing alternative suppliers. This ensures the project can continue with minimal disruption by having backup suppliers ready to step in and provide the necessary materials or services. Requesting a huge discount for immediate payment to aid the supplier's cash flow is not a reliable solution, as it does not address the root cause of the issue and the supplier may still go bankrupt despite the short-term cash injection. Sending a legal notice demanding fulfillment of contract obligations may be necessary, but it does not directly solve the immediate problem of the supplier being unable to deliver due to bankruptcy. Ordering a large surplus of materials to stockpile before the supplier goes bankrupt is a reactive measure that ties up project capital and may not be feasible or cost-effective, especially if the materials have limited shelf life or storage requirements.