Don't rely on a simple handshake

A badly-planned contract process is likely to lead to an ineffective and costly contract.

Conversely, a well-planned contract process is much more...

A badly-planned contract process is likely to lead to an ineffective and costly contract.

Conversely, a well-planned contract process is much more likely not only to produce a fair, balanced and effective contract from a legal perspective but to create significant cost and time savings and add to the parties' general project planning.

Strategic planning in relation to contracts should start well before any particular project is to be undertaken. As an IT manager, you should already have in place a clear set of guidelines as to what contractual approach you will adopt in a range of different project types.

Having a clear idea of what your contractual parameters are will assist you in making informed risk assessments and ensure a consistency of approach. This in turn can be of assistance in ensuring proper controls are in place through all levels of decision making.

Developing the strategy

In developing the strategy, you should consider some or all of the following issues:

  • Identify what are the common types of IT project work you commission, categorise them in terms of risk or cost on a sliding scale

  • Identify what types of IT resource you use in relation to these different projects ie individual contractors or larger consultancies. Categorise them in terms of their resources and their ability/willingness to accept/ share contractual risk

  • Apply to the different categories appropriate and reasonable expectations in relation to key issues such as warranties, liabilities and intellectual property rights.

    Consider, for instance, whether it is worth insisting on a right of indemnity against an individual contractor for his contractual failures who is unlikely to have the resources to stand behind such an obligation or would a better strategy be to structure payments through instalments depending on successful acceptance tests or key milestones being reached

  • Document a contract process to include negotiation timetables, responsibilities for matters such as the commercial agreement and recording of the crucial commercial and bespoke project issues such as scope, specification, payment, timetables, resource and communication channels

  • Include an appropriate formal sign-off procedure that is designed to ensure trivial contracts are not referred to senior personnel for sign off but equally larger contracts go through appropriate legal and senior managerial sign off and, if necessary, board approval

  • Arrange training for all personnel involved in the contract process, explain the procedures, the categories and the basic limitations or risks in relation to the different contractual positions

  • Test the processes/procedures and the documents in practice and have follow-up reviews to improve the systems

  • Have regular reviews with your lawyers to keep the process up to date with new case law, statutes or regulations.

    Taking time to establish a contract strategy will in the long run save both time and resources.

    It will assist in the proper management of your legal resource and it should lead to a clearer working relationship and better understanding with your IT service providers.

    For further information please contact DLA's Tim Andrews on 0161-235 4002.


  • Plan ahead

  • Have a set of guidelines

  • Know your contractual parameters and resources

  • Document the process

  • Arrange a sign-off process

  • Test and review the process

  • Read more on IT risk management