Negotiating technology contracts

Cover
Title page
Copyright information
Table of contents
Introduction
1. Due diligence in outsourcing arrangements
	1. Introduction
		1.1 Overview of due diligence
		1.2 Factors affecting the extent of due diligence conducted
		1.3 Contract certainty
		1.4 Due diligence is correct at the time it is done
		1.5 The due diligence process
		1.6 Types of due diligence information
	2. The customer perspective
		2.1 The due diligence the customer will perform
		2.2 The customer attitude to due diligence as encapsulated by the terms of the contract
			(a) Due diligence clause
			(b) Sweeper clause
			(c) No post-contract variation
			(d) Contractualise financial stability
	3. The service provider perspective
		3.1 The due diligence the service provider will perform
		3.2 Service provider attitude to typical contractual clauses
			(a) Risk transfer
			(b) Service levels
			(c) Contractualising assumptions and dependencies
	4. Potential solutions
		4.1 Suitable period for due diligence
		4.2 Blanket of confidentiality
		4.3 Typical due diligence clause and bounded right to post-contract variation
		4.4 Relief event mechanism
2. Service provisions
	1. Introduction
	2. The customer perspective
		2.1 The services description
		2.2 Linkage to request for proposal
		2.3 Implied services
		2.4 Customer dependencies
		2.5 Acceptance and approvals
		2.6 Warranty/post go-live
	3. The service provider perspective
		3.1 The services description
		3.2 Linkage to request for proposal
		3.3 Implied services
		3.4 Customer dependencies
		3.5 Acceptance and approvals
		3.6 Warranty/post go-live
	4. Potential solutions
		4.1 The services description
		4.2 Linkage to request for proposal
		4.3 Implied services
		4.4 Customer dependencies
		4.5 Acceptance and approvals
		4.6 Warranty/post go-live
3. Compliance with laws and regulations
	1. Introduction
	2. The customer perspective
		2.1 What is a law for the purposes of this commitment?
		2.2 Who should commit to comply with laws?
		2.3 What should be delivered and provided in accordance with laws?
		2.4 Which jurisdiction’s laws are being referred to?
		2.5 What happens if there is a change in law?
	3. The service provider perspective
		3.1 What is a law for the purposes of this commitment?
		3.2 Who should commit to comply with laws?
		3.3 What should be delivered and provided in accordance with laws?
		3.4 Which jurisdiction’s laws are being referred to?
		3.5 What happens if there is a change in law?
	4. Potential compromises
		4.1 What is a law for the purposes of this commitment?
		4.2 Who should commit to comply with laws?
		4.3 What should be delivered and provided in accordance with applicable laws?
		4.4 Which jurisdiction’s laws are being referred to?
		4.5 What happens if there is a change to laws?
4. Service level agreements
	1. Introduction
	2. Service level models
		2.1 Simple service level values
		2.2 Pool Allocation Percentage Model
		2.3 Service Credit Point Scheme
	3. The customer perspective
		3.1 The starting service levels
		3.2 Do service credits apply, and, if so, with what cap?
		3.3 What is included in the calculation of the at-risk amount?
		3.4 Are service credits a ‘sole and exclusive’ remedy?
		3.5 Termination triggers
		3.6 Continuous improvement
		3.7 Exclusions and relief
		3.8 Linked obligations
	4. The service provider perspective
		4.1 The starting service levels
		4.2 Do service credits apply, and, if so, with what cap?
		4.3 What is included in the calculation of the at-risk amount?
		4.4 Are service credits a ‘sole and exclusive’ remedy?
		4.5 Termination triggers
		4.6 Continuous improvement
		4.7 Exclusions and relief
		4.8 Linked obligations
	5. Potential solutions
		5.1 The starting service levels
		5.2 Do service credits apply, and, if so, with what cap?
		5.3 What is included in the calculation of the at-risk amount?
		5.4 Are service credits a ‘sole and exclusive’ remedy?
		5.5 Termination triggers
		5.6 Continuous improvement
		5.7 Exclusions and relief
		5.8 Linked obligations
5. Use of agile methodologies
	1. Introduction
		1.1 Agile contracting
		1.2 The waterfall approach
		1.3 Agile development
		1.4 How agile works in practice
	2. The customer perspective
	3. The service provider perspective
	4. Potential solutions
		4.1 The requirements
		4.2 What about stakeholder attitudes?
		4.3 Using the contract to help
		4.4 Clear rules of the game
		4.5 Performance management during the term
		4.6 The right commercial model
		4.7 Fault
		4.8 The ‘what if’ scenarios
6. Warranties
	1. Introduction
	2. The customer perspective
		2.1 Performance warranties
		2.2 Performance of the services in accordance with a performance standard
		2.3 Warranty as to fitness for purpose
		2.4 Adherence to the service levels
		2.5 Compliance with specification
		2.6 Commitment to timescales
		2.7 Warranties regarding intellectual property rights (IPR)
		2.8 Use of open source
		2.9 Security
		2.10 Data protection and privacy
		2.11 Compliance with laws
	3. The service provider perspective
		3.1 Performance warranties
		3.2 Performance of the services in accordance with a performance standard
		3.3 Adherence to service levels
		3.4 Compliance with specification
		3.5 Commitments to timescales
		3.6 Warranties regarding IPR
		3.7 Use of open source
		3.8 Security
		3.9 Data protection and security
		3.10 Compliance with laws
	4. Potential compromises
		4.1 Performance of the services in accordance with a performance standard
		4.2 Warranty as to fitness for purpose
		4.3 Adherence to the service levels
		4.4 Compliance with the specification
		4.5 Commitments to timescales
		4.6 Warranties regarding IPR
		4.7 Use of open source
		4.8 Security
7. Relief/excused events
	1. Introduction
	2. The customer perspective
	3. The service provider perspective
	4. Potential solutions
8. Intellectual property provisions
	1. Introduction
	2. The customer perspective
	3. The service provider perspective
	4. Potential solutions
9. Data protection liabilities
	1. Introduction
	2. The customer perspective
	3. The service provider perspective
	4. Potential solutions
10. Benchmarking in outsourcing transactions
	1. Introduction
		1.1 Why would the customer need to include such provisions in its outsourcing contract?
		1.2 To benchmark or not
		1.3 Who can undertake the benchmark?
		1.4 Who and what will be compared against?
		1.5 How involved can the parties be?
		1.6 What does ‘good’ look like?
		1.7 What happens next?
	2. The customer perspective
		2.1 Required provision or negotiation chip?
		2.2 Let’s be clear, this is a customer-centric concept
		2.3 How often should the right be exercised?
		2.4 Approach to the comparison
	3. The service provider perspective
		3.1 When can a service provider welcome a benchmarking process?
		3.2 How often should the right be exercised?
		3.3 Approach to the comparison
	4. Potential solutions
		4.1 Sensible representative samples
		4.2 Setting the benchmark
		4.3 Implementing the benchmarker’s recommendations
		4.5 Who pays for the benchmarking?
11. Setting limits of liability
	1. Introduction
		1.1 Why do we limit liability in contracts?
		1.2 What should the limit be?
		1.3 A model for a liability clause
	2. The customer perspective
	3. The service provider perspective
	4. Potential solutions
12. Excluded liabilities
	1. Introduction
	2. The customer perspective
	3. The service provider perspective
		3.1 Indirect/consequential losses
		3.2 Loss of profit/revenue
		3.3 Loss of anticipated savings/benefits
		3.4 Loss of goodwill/reputation
		3.5 Loss or corruption of data
		3.6 Amounts payable to third parties
	4. Potential solutions
		4.1 Indirect/consequential loss
		4.2 Loss of profit/revenue
		4.3 Loss of anticipated savings/benefits
		4.4 Loss of goodwill/reputation
		4.5 Loss or corruption of data
		4.6 Amounts payable to third parties
13. Unlimited liabilities
	1. Introduction
	2. The customer perspective
		2.1 Breach of intellectual property rights (IPR)
		2.2 Breach of confidentiality
		2.3 Data protection liabilities
		2.4 Data and IT security obligations
		2.5 Official fines and sanctions
		2.6 Wilful default/abandonment
		2.7 TUPE/Acquired Rights Directive
		2.8 Breaches of law or regulation
		2.9 Gross negligence
	3. The service provider perspective
		3.1 Breach of IPR
		3.2 Breach of confidentiality
		3.3 Data protection liabilities
		3.4 Data and IT security obligations
		3.5 Official fines and sanctions
		3.6 Wilful default/abandonment
		3.7 TUPE/Acquired Rights Directive
		3.8 Breaches of law or regulation
		3.9 Gross negligence
		3.10 Payment of the contract charges
	4. Potential compromises
		4.1 Breach of IPR
		4.2 Breach of confidentiality
		4.3 Data protection liabilities
		4.4 Data and IT security obligations
		4.5 Official fines and sanctions
		4.6 Wilful default/abandonment
		4.7 TUPE/Acquired Rights Directive
		4.8 Breaches of law or regulation
		4.9 Gross negligence
		4.10 Payment of the contract charges
14. TUPE in outsourcing agreements
	1. Introduction
		1.1 Overview of TUPE regulations
		1.2 How TUPE applies
		1.3 The European legal backdrop
		1.4 When TUPE applies
		1.5 Step 1: Does the legislation apply?
			(a) The tests themselves
		1.6 Step 2: Who transfers?
		1.7 Step 3: What transfers?
		1.8 Step 4: What are the information and consultation requirements?
	2. The customer perspective
		2.1 Can TUPE be avoided?
		2.2 Is it desirable that TUPE is applied?
	3. The service provider perspective
		3.1 New supplier view
		3.2 The incumbent supplier’s view
		3.3 Cherry picking and lemon dropping
	4. Potential solutions
		4.1 Disagreement as to TUPE application
		4.2 First time outsource
		4.3 First time offshore
		4.4 Incumbent to new supplier transfer
		4.5 What if there is more than one new supplier?
		4.6 Information
		4.7 How is this captured contractually?
15. Termination rights
	1. Introduction
	2. The customer perspective
		2.1 Insolvency
		2.2 Material breach
		2.3 Breach of specified clauses
		2.4 Service level triggers
		2.5 Required by law/regulation
		2.6 Impact upon reputation
		2.7 Termination for convenience/upon notice
	3. The service provider perspective
		3.1 Insolvency
		3.2 Material breach
		3.3 Breach of specified clauses
		3.4 Service level triggers
		3.5 Required by law/regulation
		3.6 Impact upon reputation
		3.7 Termination for convenience/upon notice
	4. Potential solutions
		4.1 Insolvency
		4.2 Material breach
		4.3 Breach of specified clauses
		4.4 Service level triggers
		4.5 Required by law/regulation
		4.6 Impact upon reputation
		4.7 Termination for convenience/upon notice
16. Step-in provisions
	1. Introduction
	2. The customer perspective
		2.1 Step-in triggers
		2.2 What steps the customer can take when stepping-in
		2.3 What is the duration of the step-in?
		2.4 Cost consequences of step-in
		2.5 Step-out
	3. The service provider perspective
		3.1 Step-in triggers
		3.2 The steps that can be taken as part of the step-in
		3.3 Responsibility for the step-in and impact on the agreement
		3.4 Duration of the step-in
		3.5 Commercial consequences of step-in
		3.6 Step-out
	4. Potential solutions
		4.1 Step-in triggers
		4.2 The steps that can be taken during step-in
		4.3 Duration of step-in
		4.4 Commercial consequences of step-in
17. Audit rights
	1. Introduction
	2. The customer perspective
		2.1 Frequency
		2.2 Scope
		2.3 Conditions
		2.4 Auditors
		2.5 Cost
		2.6 Liability
		2.7 Consequences
	3. The service provider perspective
		3.1 Frequency
		3.2 Scope
		3.3 Conditions
		3.4 Auditors
		3.5 Cost
		3.6 Liability
		3.7 Consequences
	4. Potential solutions
		4.1 Frequency
		4.2 Scope
		4.3 Conditions
		4.4 Auditors
		4.5 Cost
		4.6 Liability
		4.7 Consequences
18. Dispute resolution provisions
	1. Introduction
	2. The customer perspective
		2.1 Escalation
		2.2 Mediation and arbitration
		2.3 Referral to courts
		2.4 Ability to appoint an expert
		2.5 Beneficiaries and herding of claims
	3. The service provider perspective
		3.1 Referral to courts
		3.2 Ability to appoint an expert
		3.3 Beneficiaries and herding of claims
	4. Potential solutions
		4.1 Referral to courts
		4.2 Beneficiaries and herding of claims
19. Negotiation in practice
	1. Background
	2. Initial considerations
	3. The procurement process
		3.1 Number of bidders
		3.2 Request for proposal
		3.3 Key terms versus full contract
		3.4 Process to downselection
	4. Key contract aspirations of the parties
	5. Likely areas for key debate and potential solutions
		5.1 Acceptance process
		5.2 Timeliness of delivery
		5.3 Warranty/service level agreement provisions
		5.4 Liability clauses
20. Conclusion
Index