Certified Professional Public Buyer (CPPB) Practice Test

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What type of contract is designed to be flexible concerning the changes in a supplier’s delivery capability?

Fixed-price contract
Term contract
Types of service contract
Open-ended contract

The correct answer is: Term contract

A term contract is designed to allow flexibility in changes related to a supplier's delivery capability. This type of contract establishes a supplier's obligation to furnish goods or services over a specified period, often allowing for adjustments based on varying needs, such as fluctuating demand or changing project requirements. It enables purchasing entities to address unpredictable situations, ensuring they have access to necessary supplies without committing to fixed quantities that may not align with their actual needs. The flexibility inherent in a term contract makes it particularly suitable for situations where project scopes or supplier capabilities may change over time. This adaptability helps organizations respond to market conditions and supplier performance effectively. In contrast, fixed-price contracts set prices at the outset without room for modifications, limiting flexibility. Types of service contracts may vary in structure but are not inherently designed for flexibility in delivery capability. Open-ended contracts, while they may allow for indefinite durations, often lack the specific timeframes and commitments that characterize term contracts, making them less effective in addressing delivery fluctuations.