Chapter 13 – Contract Management

A contract is a legally binding agreement between a buyer and a supplier. Is this
1. true?
2. partly true?
3. false?
What are normally the three key elements of a contract?
1. order, delivery and payment
2. offer, acceptance and consideration
3. inputs, operations and outputs
4. negotiation, agreement and execution
5. purchase, terms and schedules,
What are the usual contents of a contract?
1. introduction, content and conclusion
2. introduction, clauses and schedules
3. order, delivery and payment
4. offer, acceptance and consideration
5. strategy, tactics and operations
Most contracts use standard templates that have been designed by legal staff. Is this:
1. true?
2. usually true?
3. false?
Which of the following should a contract normally specify?
1. the precise items being bought
2. details of delivery
3. guarantees and warranties
4. statement of when the purchaser will accept items
5. costs and other terms
6. all of the above
Which of the following is not a standard type of fixed price contract?
1. fixed price with incentives
2. fixed price with letout
3. fixed price with escalation
4. firm fixed price
5. fixed price with redetermination
Which of the following is not a standard type of cost-based contract?
1. cost sharing
2. time and materials
3. cost plus fixed fee
4. cost plus unforeseen events
5. cost plus incentive fee
What types of contract generally give least and most risk, respectively, to a buyer?
1. firm fixed price, and cost plus fixed fee
2. cost plus fixed fee, and firm fixed price
3. time and materials, and fixed price with incentives
4. time and materials, and firm fixed price
5. fixed price with escalation, and cost sharing
6. none of the above
Which of the following is not normally an important factor in the choice of contract type?
1. process or technology uncertainty
2. market uncertainty
3. time available for negotiations
4. long term agreements
5. degree of trust between buyer and seller
6. supplier’s ability to impact costs
Which of the following is not a common benefit associated with long term contracts?
1. access to cost / price information
2. access to supplier technology
3. assurance of supply
4. reliance on a small supply base
5. consolidation of orders
Which of the following is not a common risk associated with long term contracts?
1. selecting the wrong supplier
2. lack of supplier information for planning
3. supplier opportunism
4. supplier volume uncertainty
5. supplier is unreasonable
Which of the following is not a common contingency element in long-term contracts?
1. evergreen clause
2. price adjustment mechanism
3. escape clause
4. supplier performance improvement
5. outsourcing option
Certain types of non-traditional contract cause special concern for buyers. Is this
1. true?
2. sometimes true?
3. false?
Common concerns in an IT contract are changing conditions, level of service, performance and conversion. Is this:
1. true?
2. neither true nor false?
3. false?
A well-researched and presented contract should never allow a dispute between buyers and sellers. Is this:
1. true?
2. partly true?
3. false?
When a buyer has a disagreement with a supplier they are forced into taking legal action. Is this:
1. true?
2. partly true?
3. false?
Which of the following is not a common way of settling disputes that do not involve legal action?
1. mediation
2. face-to-face discussions
3. arbitration
4. minitrial
5. opinion poll
Which of the following is not, usually, a factor in choosing a method to resolve a dispute between buyers and suppliers?
1. cost
2. speed
3. amount of direct involvement of the parties
4. information required
5. type of relationship
6. items supplied