As every IT director will be aware, IT contracts are particularly vulnerable to dispute - the most frequent contentions being price, delay, and failure to comply with specification. To achieve a satisfactory resolution of such disputes, it is important that an IT director manages the dispute in the same way as any other business issue.
Start with an investigation into the problem. This should include areas where the user company may have been at fault in the project. If a dispute is to be successfully managed, it is important to be aware of any allegations that might be thrown back at you. Also, it may be necessary for an independent third party to be brought in to provide guidance.
Review the relevant documentation - this is not only the IT contract but also other documentation such as e-mails or minutes of meetings. The question of disclosure of documentation is a major concern and is governed by complex rules. Be aware that documentation created during the investigation may have to be disclosed at a later stage. This investigation stage is crucial and should enable the IT director to decide on the strategy moving forward to manage the dispute effectively.
Having decided on the desired outcome from the dispute, it is advisable for the IT director to help diffuse it by bringing in managers from elsewhere in the business not directly involved in the stand-off with the supplier.
If the parties find that face-to-face negotiation does not result in progress, then the IT director should consider appointing a mediator to assist.
The process of mediation involves an independent and impartial trained mediator who will not impose a judgement or decision on either party but will seek to encourage the parties to settle the dispute. As a process, mediation is fast, relatively inexpensive and can enable both parties to maintain their relationship and deliver on the project.
If mediation is not appropriate or fails to achieve a resolution, other methods of dispute resolution might also be considered. For example, the process of expert determination - where the parties refer one or more isolated issues to an agreed expert who provides determination on the point - can be a quick and effective method of resolving disputes of a technical nature.
There will inevitably be disputes that a director cannot resolve by any of these methods and they may need to be resolved either through arbitration or the court process. Both these routes can be expensive and time-consuming.
From the IT director's perspective, it is crucial to be aware of the various routes available to resolve a dispute but, more importantly, it is necessary to clearly determine at an early stage what the preferred outcome is. This may be to have the project completed, to have the supplier removed from site and a full refund given or compensation to be paid for the inadequacies of the system.
Although this objective may change during the course of the dispute resolution process, the IT director will be able to follow a strategy to have the best prospects of achieving that aim.
Mark Rhys-Jones is IT litigation specialist at law firm Eversheds
This was first published in February 2004