Contract Creation And Management

In this simulation there was new clauses agreed upon by Citizen-Schwartz AG (software purchaser) and Span systems (software developer) in the contract that the two companies had entered into eight (8) months ago. C-S had made complaints that the multi-million dollar project was not being communicated properly. C-S had made the accusation that Span Systems had not been presenting updates on the software in a timely manner and that the code did not work each time it was presented. This led to a renegotiation of contract. In this paper both sides, Citizen-Schwartz AG and Span Systems, will present their sides of the renegotiation process.

The C-S Side of the Contract Clauses

There are only two of the clauses that will be beneficial to C-S. First the performance clause, Span has only completed 40% of the work promised by this date. The project is a one-year 6 million dollar project and in the eighth month only 40% of the work is complete. There are also quality issues. C-S has every right to rescind the contract and look elsewhere for software. If the project is not completed on time and with high quality expected, C-S will miss their deadline on release of the transition software in the market.

The second clause that would be beneficial to C-S is the intellectual property clause. This states that if C-S makes payments due they have the right to unrestricted, royalty-free, perpetual, irrevocable license to use the intellectual property created as part of this contract. C-S can decide to make the outstanding payment, get the intellectual property transferred and rescind the contract. At that time, C-S can hire another provider to complete the project on time and with the quality necessary to meet their own rollout of the software.

The other three clauses are detrimental to the C-S cause. The internal escalation clause is not ideal for C-S at this time because based on the data; C-S is in clear violation of this clause. C-S has not called for dispute negotiation. The communications and reporting clause will not really be advantageous for C-S either due to the fact that C-S has changed its project management team. To their advantage though, Span will need to provide evidence that there was delay in C-S’s turnaround time. Finally, the requirements clause since C-S has made many changes that are considered by both as “anything but ordinary,” it is our belief that C-S cannot challenge this clause.

The New Amended Clauses

The clause for performance that was agreed upon in negotiations was that in order for C-S to receive all work products in process or completed as of the date of termination or cancellation would be subject to clearance of all payments. This is not as important to C-S as it is to Span because if C-S is not ethical Span could lose the second half of their financial agreement or spend years in court trying to recoup it. Since C-S is an ethical company and needs to maintain their reputation this should not be an issue.

The clause for control change that was agreed upon in negotiations was “any changes to the user and system requirements originally agreed will be monitored by Change Control Board (CCB) comprised of the project manager and lead software engineer from Span Systems and Citizen Schwartz AG. The CCB will reject any changes that result in size increases greater than 200 function points. This is important to Span rather than C-S AG because C-S has had many changes that do not qualify as “ordinary changes.”

For C-S the communication and reporting clause project status reports, in the form of minutes of meetings and tracked project span, will be uploaded on Span’s extranet available to authorized C-S personnel. C-S is going to station a project manager in Span systems offices in California who will participate in project meetings and act as the direct interface between C-S and Span. The cost of stationing a project manager in the Span systems office will be paid entirely by C-S. This will be important for C-S because they will have someone in the Span offices that will be able to communicate progress and or problems and if there is a problem will be able to go into crisis mode move quickly averting additional contract issues.

The control change clause can be both important for C-S and possibly a problem for C-S. At this time of the simulation C-S was having issues with changes that were above the “ordinary changes” guideline which was ambiguous at best. That being said, C-S will have up to 200 function points prior to there becoming a problem so if C-s will stay within the range they will be able to stay within the original project budget.

Span Systems Perspective

Underneath the performance clause, C-S can terminate the agreement within (7) days of written notice. The benefit to Span Systems under this amendment is that complete payment must be made before the agreement can be terminated. This does allow C-S to keep the intellectual property and do with it what they feel is right.

The only problem with this amendment is that C-S can keep the uncompleted portion of code after full payment is made. Keeping the uncompleted software could allow Span Systems code to fall in the hands of some other software company and possibly converted to a similar program. This could be further amended by adding a clause that would not allow C-S to give the code to another company, such as the Indian software company.

The other part of this amendment is that there is a 30 day acceptance testing period that would allow C-S to pass or fail the software if there is any problems with the code. C-S will keep a tight record of all data to ensure the products have met the requirements of the Standard of Performance. This can help out Span Systems by having an entire record of the software’s performance to see what improvements could be made in future software programs.

Underneath the change control clause, C-S must compensate Span Systems for any other changes that could be approved by the CCB after the renegotiation of the contract. This would allow for Span to make the necessary changes without it the company any more additional money. This clause actually helps out Span Systems by not having to put any more additional money into the project.