Question 1

Long-term contracts should be written to exclude incentive or cost-sharing arrangements.

Accepted Answer

A) True 
 B)False  False

Question 2

The _____ clause in a contract ensures that all information, technology, and so on shared between the parties remain confidential and are not shared with other customers or suppliers.

Accepted Answer

A)  assignment and contracting
B)  liability
C)  third-party rights
D)  confidentiality
E)  intellectual property D

Question 3

Even if the client company does not withhold income taxes, a consultant will normally be viewed as an employee, not as an independent contractor.

Accepted Answer

A) True 
 B)False  False

Question 4

In a firm fixed price contract, if market prices _____ the stated contract price because of outside factors such as competition, changes in technology, or raw material prices, the _____ assumes the risk or financial loss.

Accepted Answer

A)  rise above….purchaser
B)  stay the same….seller
C)  stay the same….purchaser
D)  fall below….purchaser
E)  None of these answers.

Question 5

The _____ clause of a contract outlines the relationship between the Agreement and any other purchase orders issued by the company to the supplier.

Accepted Answer

A)  specifications, quality, and health, safety, environment
B)  most favored customer
C)  statistics
D)  effective date and termination
E)  purchase orders

Question 6

Even when there is no contract, most transactions are covered by a "gap filler" known as the Uniform Commercial Code.

Accepted Answer

A) True 
 B)False

Question 7

An important factor to consider when hiring an outside consultant to perform contract services for a company is that such a person is the purchasing company's employee, not its agent.

Accepted Answer

A) True 
 B)False

Question 8

A/An _____ is new intellectual property (such as tools, methodologies, and knowledge) developed as the result of the interaction between the enterprise and the consulting company.

Accepted Answer

A)  evergreen contract
B)  output
C)  good
D)  service
E)  residual

Question 9

Which of the following is not one of the potential disadvantages of using long-term contracts?

Accepted Answer

A)  Supplier volume uncertainty.
B)  Volume leveraging.
C)  Buyer is unreasonable.
D)  Selecting the wrong supplier.
E)  Supplier foregoes other business.

Question 10

In a _____ contract, the supplier receives reimbursement for all of its allowable costs up to a predetermined amount plus a fixed fee, which typically represents a percentage of the targeted cost of the good or service being procured.

Accepted Answer

A)  cost plus fixed-fee
B)  fixed-price with redetermination
C)  time and materials
D)  fixed-price plus fixed-fee
E)  None of these answers.

Question 11

In a firm fixed price contract, if the supplier increases its contract price in anticipation of rising costs, and the anticipated conditions do not occur, then the purchaser has paid too high a price for the good or service.

Accepted Answer

A) True 
 B)False

Question 12

Long-term contracts can help the buyer to gain exclusive access to proprietary supplier technology, and blocking competitor access to this supplier technology can result in at least a short-term competitive advantage for the buyer.

Accepted Answer

A) True 
 B)False

Question 13

_____ are based on the notion that as purchase volume increase, cost structures change.

Accepted Answer

A)  Short-term contracts
B)  Firm fixed price contracts
C)  Long-term contracts with incentives
D)  Time and materials contracts
E)  Blanket orders

Question 14

Purchasers cannot rely on an arbitration clause contained in their forms, particularly if the suppliers' forms do not contain such a clause.

Accepted Answer

A) True 
 B)False

Question 15

A carefully worded and prepared contract is not subject to any form of dispute or disagreement.

Accepted Answer

A) True 
 B)False

Question 16

Agreeing to a short-term contract frequently allows the buyer to have access to more detailed cost and price information from the supplier in exchange for the shorter contract term.

Accepted Answer

A) True 
 B)False

Question 17

In many instances, the alternatives to court adjudication are slower than litigation.

Accepted Answer

A) True 
 B)False

Question 18

[A/An] _____ is a form of presentation, involving an exchange of information between managers from each organization involved in the dispute.

Accepted Answer

A)  mediation
B)  arbitration
C)  rent-a-judge
D)  mini trial
E)  dispute prevention

Question 19

As the total dollar value/unit cost of the contract decreases, purchasers must spend more effort creating effective pricing mechanisms.

Accepted Answer

A) True 
 B)False

Question 20

The _____ clause of a contract stipulates whether either party has the ability to terminate the contract at any time, and how much advance notice must be given.

Accepted Answer

A)  effective date and termination
B)  payment
C)  third-party rights
D)  most favored customer
E)  force majeure

Exam 14: Contract Management

Long-term contracts should be written to exclude incentive or cost-sharing arrangements.

The _____ clause in a contract ensures that all information, technology, and so on shared between the parties remain confidential and are not shared with other customers or suppliers.

Even if the client company does not withhold income taxes, a consultant will normally be viewed as an employee, not as an independent contractor.

In a firm fixed price contract, if market prices _ the stated contract price because of outside factors such as competition, changes in technology, or raw material prices, the _ assumes the risk or financial loss.

The _____ clause of a contract outlines the relationship between the Agreement and any other purchase orders issued by the company to the supplier.

Even when there is no contract, most transactions are covered by a "gap filler" known as the Uniform Commercial Code.

An important factor to consider when hiring an outside consultant to perform contract services for a company is that such a person is the purchasing company's employee, not its agent.

A/An _____ is new intellectual property (such as tools, methodologies, and knowledge) developed as the result of the interaction between the enterprise and the consulting company.

Which of the following is not one of the potential disadvantages of using long-term contracts?

In a _____ contract, the supplier receives reimbursement for all of its allowable costs up to a predetermined amount plus a fixed fee, which typically represents a percentage of the targeted cost of the good or service being procured.

In a firm fixed price contract, if the supplier increases its contract price in anticipation of rising costs, and the anticipated conditions do not occur, then the purchaser has paid too high a price for the good or service.

Long-term contracts can help the buyer to gain exclusive access to proprietary supplier technology, and blocking competitor access to this supplier technology can result in at least a short-term competitive advantage for the buyer.

_____ are based on the notion that as purchase volume increase, cost structures change.

Purchasers cannot rely on an arbitration clause contained in their forms, particularly if the suppliers' forms do not contain such a clause.

A carefully worded and prepared contract is not subject to any form of dispute or disagreement.

Agreeing to a short-term contract frequently allows the buyer to have access to more detailed cost and price information from the supplier in exchange for the shorter contract term.

In many instances, the alternatives to court adjudication are slower than litigation.

[A/An] _____ is a form of presentation, involving an exchange of information between managers from each organization involved in the dispute.

As the total dollar value/unit cost of the contract decreases, purchasers must spend more effort creating effective pricing mechanisms.

The _____ clause of a contract stipulates whether either party has the ability to terminate the contract at any time, and how much advance notice must be given.