Note: since the question is worded with "colleague" and not "employee" or "subordinate," I'm going to answer this as it would apply to a NONSUPERVISORY position.

There are generally two management styles that determine how employers want their people to handle such situations. Unfortunately, they are completely different.

One style encourages employees to resolve conflicts and fix problems at the lowest level. So in that case, they'd probably want you to talk to your colleague one-on-one, to explain what he or she is doing wrong and how it's bad for the company and his/her own job security. Then offer to help that person improve (as long as it did not adversely affect your own duties). If you can help this person improve, then you are helping the employee pull his/her weight (meaning he/she may not have to be replaced), you are helping the company maintain its quality standards, and also helping the supervisor/manager by saving them from having to deal with this problem.

The other style encourages employees to notify supervisor/managers immediately whenever there is a problem. The theory here is that management needs to know what's going on so they can make improvements. If there's an employee who is not performing up to standards, it could mean that employee was poorly trained, is not being properly motivated, or should never have been hired. Any of those situations should be addressed by management, so the best thing would be to bring the colleague's poor performance to the attention of your supervisor. He/she can then decide what to do about it.

As you can see, these management styles are opposite in nature. If possible, it would be good if you could find out which type of approach is preferred by the company involved. But I realize that may be difficult. In that case, I believe the best way to answer that question is something like this:

"My first step would be to determine how ABC Company prefers for these types of situations to be handled -- whether they want such problems resolved at the lowest level, or immediately brought to management's attention. Can you tell me which is preferred by ABC Company?"

If they do tell you, then you can easily adjust your answer to fit their particular management style. If they do not tell you, then you'll have to say something like, "Well, if they prefer that these situations be handled at the lowest level, then I would personally try to help the employee to improve his performance (as long as it did not affect my own duties)." (Then go into some detail about ways you could help, such as answering his questions, showing him how to do a particular task, etc.)

"If my attempts to help the employee were unsuccessful and I felt his performance was going to continue to be below ABC Company standards, I would bring the matter to the attention of my supervisor. I know that ABC Company prides itself on quality service and performance, so I feel it would be my responsibility to ensure those standards are upheld, not only by myself, but by those around me.