Optimising IT contracts
The Treasury Solicitor's Department explains the essential steps needed to help ensure the success of IT contracts and minimise the chances of procurement failure.
"Success depends upon previous preparation, and without such preparation there is sure to be failure." – Confucius
Perhaps Confucius overstates the danger, but for IT contracts, as for most aspects of business, a little preparation can go a long way.
The recent launch of a revised draft contract and accompanying guidance for IT Outputs Contracts by the Office of Government Commerce and Partnerships UK is the latest step on the path to trying to eliminate (as far as possible) the risks of an IT procurement failing and also mitigating the effects of a failure that occurs despite the use of best efforts to ensure success.
With a similar goal in mind, the following preparatory principles should be embraced at the outset of an IT procurement and borne in mind throughout the process.
Understand your own requirements
If you don't know what you need, the chances of the private sector delivering the required solution are greatly reduced. It is important therefore, that sufficient ground work is put in to assess the current capabilities of the IT systems in place in your organisation, against its needs. This will help you identify the gaps and focus on how these gaps can best be addressed.
Paramount to this exercise is a requirement to consult the users. While external consultants (or those employed by the organisation) can add value, it is generally the users operating the current systems that are the best placed to understand what is needed for those systems to be improved.
There may be a temptation to look at the easy option and purchase an off the shelf package which seemingly fulfils a high proportion of the organisation's needs in the belief that a small amount of tailoring will be required.
This is often not the case – the final 10-20% will often become a lot more time consuming than originally assumed, with the potential for the resulting system costing just as much as a bespoke solution, but not fitting the needs of the organisation as well.
So, beware of the seemingly easy option. It may ultimately be that an off the shelf package with minimal tailoring is the answer, but this route should only be taken after close evaluation of exactly what modifications will be required.
On the other hand, do not overcomplicate a procurement. The temptation is often to go for a wide all encompassing 'one hit' solution. This will invariably increase the risk of project failure and was, as has previously been stated by the OGC, a major reason why PFI for IT projects was not a success. Instead of the all-in-one solution, look to split a procurement down into smaller parts or stages. Doing so will increase the possibility of each part or stage being successful, while lessening the potential impact of one part failing.
Communicate your needs accurately to the market
Once you have worked up your desired solution it must be clearly specified to the market. A clear specification is probably the most important part of the contractual documentation, and you should aim to eliminate any ambiguities. For this reason, wherever possible the contractual specification should be bespoke to the contract - generic contractor documentation should not be used as a substitute. Clarity of thought and language will also help ensure that the specification will be as easily understood by its audience as by its authors.
Do not start working without a contract
If you begin work pre-contract, not only is the legal relationship you have with your supplier unclear, but in all likelihood, things such as the specification will not have been properly addressed. A premature start to work has the potential to be a real recipe for disaster.
Be ready to manage change
Once you have clearly specified what you are purchasing it is important that specification creep is avoided. The contract should have a change control procedure, which should be used to document any agreed changes to the specification. If change is allowed to occur without being formally agreed and documented, the work carried out in initially specifying requirements will have been wasted and the parties are bound to have different understandings of what the solution is intended to provide.
Be prepared for things to go wrong
It is important that the contract provides a suitable monitoring and disputes escalation clause. When things are going wrong it is important that the right people are informed and that constructive discussion occurs as soon as possible to try and steer the procurement onto the right path.
Where a third party is needed to settle disputes, alternative disputes resolution procedures (such as mediation) are a far cheaper and more successful manner in which to solve problems and preserve relationships - and therefore the possible success of the project - than the court system.
Finally, if all else has failed, the selection and evaluation procedure used at the outset of the contract should ensure that the chosen supplier is financially strong enough to stand behind its work and compensate for any losses that its failures have caused.
If you would like to discuss any points raised in this article, please contact Chris Knuckey on 0207 210 2943 or by email at christopher.knuckey@tsol.gsi.gov.uk
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