Which of the following are examples of incentives which can be embedded in contract terms? Select THREE that apply

Which of the following are examples of incentives which can be embedded in contract terms? Select THREE that apply
A . Gainshare
B. Indemnity
C. Contract extensions
D. Service credits
E. Liquidated damages
F. Faster payment

View Answer

Answer: A,C,F

Explanation:

Gainsharing is a system of management used by a business to increase profitability by motivating suppliers to improve their performance. As their performance meets the targets, suppliers share financially in the gain (improvement). Gainshare is an incentive for cost control.

Other incentives for good performance are:

– Contract extensions: Buyer can extend the contract duration as an incentive to supplier for meeting their targets.

– Accelerated payments

Reference: CIPS study guide page 187-188

LO 3, AC 3.3