The IT Law Wiki
Register
Advertisement

Citation[]

TechAmerica, Transforming Procurement for the 21st Century: Part I: Reforming IT Contract Terms and Conditions to Improve Procurement Environments and Outcomes (March 2009) (full-text).

Overview[]

This paper presents a consolidated view from the Information Technology (IT) industry regarding state and local government (SLG) contract terms and conditions and the contract formation process for complex IT projects. It discusses industry concerns about generic contract terms that are not well-suited to implement complex IT projects and how they are driving costs up and competition and innovation out of the SLG market.

The paper explains that complex IT projects truly require partnerships between the SLG customer and the contractor and how this partnership must be reflected in the contractual agreement rather than constructed from a standard contract template. This approach not only reduces associated project risks but also increases competition during all phases of the procurement process. Project risks are discussed in the context of partnership and how they should be shared between industry and SLG customers. In addition, contract terms such as intellectual property rights, warranties, indemnification, liquidated damages and performance bonds are discussed as to how they can increase project risks and costs.

There is also a discussion on how the bid requirements and RFP's contract terms are critical to pricing and cannot be independent from the cost and competitive assessment by explaining industry pricing models and cost structures and their relationship to contract terms and conditions — e.g., a company cannot produce an accurate a la carte price for a broader indemnity clause. A contract term such as this could force companies into a "no bid" situation or attach extraordinary pricing premiums thus driving the competition down and cost up for the SLG customers.

Finally, recommendations are presented for SLGs to increase transparency to their procurement processes and discuss contract problems with industry to improve contract agreements and help determine mutual solutions. They urge SLGs to share their experiences and use lessons learned, as well as to consider Federal government terms and commonly-accepted commercial provisions for their IT procurements. This will improve the SLG competitive process by modernizing their procurement philosophies with thoughtful terms and conditions that protect the public interest while managing balanced, commercially-acceptable business risk with industry partners.

Advertisement