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1. What is it?
2. Who does it?
3. Who owns it?
4. How much is paid for it?
5. What happens if it is not done?
If, at the end of the contract negotiation process, the parties are confident that these five issues have been fairly and comprehensively addressed, it is likely that the relationship between the parties will survive the inevitable day-to-day disputes that arise in complex contractual relationships and, hopefully, flourish as methodologies and technology advance.
It is important to note at this point that a fair contract is not one that is necessarily ideal from either party’s perspective. As discussed in Chapter 3, a negotiation with respect to an outsourcing arrangement is not one that either party
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should seek to win. A fair contract may well be one that requires both parties to perform in a way that will not result in optimal economic performance (as each party may define it). Similarly, there is no bright line for determining when a contract is sufficiently comprehensive, because comprehensiveness is in the eye of the beholder. A contract that might be deemed comprehensive for one organization could, in the eyes of another organization, be deemed insufficiently detailed to allow the customer to realize the anticipated benefits.
In any event, the threshold concern in addressing the five basic issues set forth earlier is to determine what the “it” is. From the vendor’s perspective, the “it” is a sufficient level of detail so that the vendor is not required to perform services it did not anticipate in its cost models (or, perhaps more important, services it did anticipate at service levels it did not account for in its cost models) and for the customer to receive the services it anticipated receiving when it made the decision to enter into the agreement. With respect to the customer’s employees who are being transitioned to the vendor, the “it” is to adequately address the terms under which such employees will be hired and fired (e.g., to define the benefits the employees will be receiving).
As with any contract, the contracting party must identify and evaluate the fundamental risks and anticipated benefits associated with the transaction before negotiations begin. As discussed in Chapter 3, the key risk and reward factors must serve as the basis for any negotiation strategy (regardless of which side of the transaction you represent) and should be reviewed and updated as the negotiations proceed.
4.2 USE OF ATTORNEYS
One virtually unavoidable consequence of entering into an outsourcing transaction is that the customer will need the services of an attorney, whether corporate or outside counsel. Most vendors make extensive use of corporate (and to some extent outside) counsel, as well as “contract professionals” who often function in the role that an attorney would typically fill. In addition, many companies have rules requiring the involvement of an attorney with respect to any contract for more than a specified amount of money. In many instances, it is simply the complexity of the vendor’s standard form or the obvious attempts by the vendor to limit its liability and disclaim all forms of warranties that leads the customer to seek legal advice.
Regardless of whether the attorney involved is a conscript or a volunteer, he or she is all too often used in an inappropriate manner. Business professionals who would never consider entering into a new project without clear-cut objectives, a timetable for development, and contingency plans in the event the project fails will assume that the attorney involved will be able to accurately capture in detail that which is often reflected by only the barest of writings. Perhaps the best advice to give to a business professional with respect to the proper use of counsel in an outsourcing transaction is to view the attorney as one would view a project leader who has been asked to draft a project plan that will
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consider the various contingencies that may arise over the long term (perhaps as long as 10 years), accurately reflect the hundreds of obligations that the parties need to perform, and make specific provision for what happens in the event that none of the foregoing happens—and to do all of this as soon as possible. Just as the success of the project leader in this example would be largely contingent on the input he or she was given, even the most obstreperous and recalcitrant attorney can be effectively managed by his or her client—and provide value—if the client takes the time to consider what information the attorney will need to perform his or her tasks, periodically monitors these tasks to ensure that they are being handled in an efficient and effective manner, and perhaps most important, realizes that a deal that has taken several months to forge cannot usually be codified overnight.
In addition to drafting and assisting in the negotiating of the agreement, an attorney can be useful as a lightning rod around which difficult issues can be discussed. An outsourcing agreement is at its essence a service agreement, and it is important that the individuals who will be involved on an ongoing basis in providing and receiving the services develop a candid but professional relationship during the negotiations. As discussed in Chapter 3, conflict is inevitable during any negotiations, and, while this does not necessarily mean that the negotiations have to be adversarial, discussions often become heated. The focus of these conflicts should be primarily the parties’ legal representatives, not the parties themselves. This will allow each side to articulate its perspective openly without personalizing the discussion. The resolution of most difficult issues is often left to businesspeople, but attorneys should be responsible for framing the issue and, ideally, for proposing alternative solutions.