Top Ten Tips - Scoping an Outsourcing Agreement

Posted: 07/09/2012

In practice, and despite the expensive hours spent formulating the various parts of the outsourcing contract, issues are likely to arise that will concentrate on issues of scope and price. Companies may ask, "Are we getting what we expected to get, and at the price we expected to pay? Here then are some top tips for addressing the scoping exercise, aimed at providing the answers to those questions.

1. Break down the services into logical modules/towers, depending on their nature or location. This will make it easier to change later on, and help the supplier understand it in the first place.

2. Create as clear a link as possible between the different aspects of the services and (a) the corresponding charges and (b) the corresponding service levels. This will help tremendously in the event of there being future changes, and/or in the event of partial terminations (as it will then be clearer as to what the consequences will be).

3. Ensure that you have the necessary internal resources/individuals available to help document and, thereafter, negotiate the services schedules. This is not a task to be underestimated, and ideally you shouldn't have people trying to fit this in around their day job!

4. Include a provision to require the supplier to provide services which are "reasonably or necessarily implied" by reason of the overall scope of services, as well as those that are actually set out in the contract itself. Even in the best drafted contract, at least some things will have been missed.

5. Provide sufficient detail of what is required. As a general rule, the descriptions should be sufficient to enable someone unconnected with the project to still understand the nature/scope of what is envisaged.

6. As it is inevitable that the services requirements will change over time, include a detailed change control procedure to govern how this will be discussed, agreed and documented. This should also be clear on whether the supplier can charge for simply assessing change requests (as opposed to actually implementing them), and if so, how much.

7. If the services descriptions refer to other documents (e.g. policies or procedures), ensure that they are fully identified, such as by reference to dates and version numbers.

8. Consider incorporating (a) your original RFP, and/or (b) the supplier's response to it, as part of the Supplier's service commitment. Although there will obviously be further discussions regarding the service requirements and indeed detailed service descriptions drafted for inclusion in the contract, the RFP will likely remain the fullest description of what you actually want.

9. If the services are to be provided in multiple jurisdictions, consider whether there will be unique service requirements in individual countries. If so, incorporate them in country contracts ancillary to the "main" outsourcing contract. In that way, the main contract can still pick up the services that are common/generic to the overall deal/relationship, but you won't miss out on the more unique requirements of local affiliates, etc.

10. Ensure that the services description includes not just the provision of the outsourced services in "steady state", but also the termination assistance services that will be required as and when the contract comes to an end. This should include, for example, all of the knowledge transfer that will be necessary to enable a new provider to take on responsibility for the ongoing provision of the services, and the packaging up and provision of all of the data necessary to inform them as to the current status of them.

If the above steps are taken and fully reflected in the final outsourcing agreement, it is far more likely that both customer and supplier will be aligned as to the services to be provided, such that the chances of future disputes as to scope will be much reduced, if not avoided altogether.

Posted: 07/09/2012

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