Which decisions are central to developing a contract strategy?

Developing a contract strategy involves making fundamental decisions that shape how the procurement process will be conducted and what kind of contract will ultimately be used. The correct answer highlights the essential components of this strategic formulation: deciding on the procurement method, contract type, and competition level.

When determining the procurement method, a team assesses how best to acquire the goods or services needed, which could involve options like using a traditional competitive bidding process or choosing to negotiate directly with suppliers. The contract type defines the legal framework for the arrangement, ranging from fixed-price contracts to cost-reimbursement contracts, each having specific implications for risk and reward distribution. Finally, the competition level directly impacts the pool of suppliers considered, influencing both cost and quality outcomes.

These three areas—procurement method, contract type, and competition level—are critical, as they align with organizational goals, risk management strategies, and market conditions, ultimately guiding the successful execution of a contract that meets project needs.

The other choices, while they contain elements that could be part of a broader contracting discussion, do not encapsulate the primary considerations critical to developing a robust contract strategy. Limiting scope, focusing solely on financial terms, and choosing sole source contracting lack the comprehensive approach necessary for strategic contract development and often ignore