To minimize costs and improve service levels an outsourcer should seek which of the following
contract clauses?

A.
O/S and hardware refresh frequencies

B.
Gain-sharing performance bonuses

C.
Penalties for noncompliance

D.
Charges tied to variable cost metrics

Explanation:

Because the outsourcer will share a percentage of the achieved savings, gain-sharing
performance bonuses provide a financial incentive to go above and beyond the stated terms of the
contract and can lead to cost savings for the client. Refresh frequencies and penalties for
noncompliance would only encourage the outsourcer to meet minimum requirements. Similarly,
tying charges to variable cost metrics would not encourage the outsourcer to seek additional
efficiencies that might benefit the client.