Certified Professional Public Buyer (CPPB) Practice Test

What type of contract establishes a source of supply for a specified period of time for specified services or supplies?

1. Fixed-term contract

2. Term contract

3. Open-ended contract

4. Service contract

The correct answer is: Term contract

The correct answer is a term contract, which is designed to create a reliable source of supply for goods or services over a predetermined duration. Term contracts are often utilized in procurement to ensure that a buyer has access to necessary resources consistently throughout the contract period, which can range from several months to multiple years. This type of contract typically articulates not only the quantity and type of goods or services required but also the price and terms of delivery, ensuring that the buyer can plan and budget accordingly while having a guaranteed source. Term contracts can foster better relationships between suppliers and purchasers, as they often lead to more predictable purchasing patterns and can sometimes secure more favorable pricing due to the commitment involved. In contrast, a fixed-term contract usually refers to a contract that is set for a specific length of time but may not inherently imply a source of supply or repeated purchases, as a term contract does. An open-ended contract does not specify a term and often continues until terminated, which could result in uncertainty from a supply management perspective. A service contract may focus on delivering a specific service rather than establishing ongoing supply terms, which differentiates it from a term contract's broader intent for both goods and services.