Contracting for Success - the First Step for Any System Implementation
Successful contract negotiation is a critical step in the process of acquiring and implementing new information systems. Oftentimes, a college or university’s ability to plan for, manage, and execute a successful implementation is directly related to how well-defined the project plan and contract agreements are.
In today’s environment, colleges and universities are tightening their budgets and cannot afford the expense of a project that gets half implemented, does not meet administrative and academic needs, or does not have the necessary vendor support required to succeed. One way to mitigate these project risks is by developing a well-written agreement with the vendor.
A well-written contract agreement allows both your institution and the vendor to handle the inevitable problems – and make mutually acceptable changes – during complex projects such as the implementation of new information systems. Below are key components of an overall agreement with a vendor.
1. Deliverable Acceptance Criteria. It is important to establish clear and attainable acceptance criteria for each deliverable that is expected in the contract. Deliverables should guide the implementation process and that requires a strong working relationship between the vendor and your institution.
Well-defined deliverables criteria keeps control in your hands, not the vendor’s, and should identify the process for reviewing, revising, and accepting all project deliverables. These deliverables include but are not limited to: plans for Testing, Training, Reporting, and Knowledge Management that are critical steps in the implementation process.
2. Milestones. Establishing clear milestones for the implementation vendor help to mark progress and manage expectations. Incorporating milestones into deliverable acceptance criteria and tying them to important events, such as significant payments to the vendor, help keep a project on track.
3. Communication. A good communication plan will keep you up-to-date on the project’s progress and any issues or risks that may arise. One way to incorporate a communication plan into a project is by stipulating weekly or bi-weekly project meetings with the vendor and requiring that the vendor provide regular status reports that include information about staff, schedule, issues, and risks.
4. Cost and Payment Terms. Cost and payment terms are important and should command a lot of attention. However, these terms are only one component of the entire agreement and should not be viewed in a vacuum. The goal should be to establish a fair price and agreement for the entire implementation.
Be wary of overly complex and confusing vendor pricing schemes. No matter how a pricing scheme is set up, it should be possible to focus on and negotiate one-time cost and recurring costs. Most contracts will link deliverables to payment terms so that payment is not rendered until services are completed in accord with agreed upon acceptance criteria. In some situations, it is appropriate to incorporate a holdback option, which stipulates that a percentage of each deliverable payment is withheld until the full completion of the project.
5. Problem-solving and Escalation Provisions. An effective problem-solving and escalation clause lays out the process and identifies key individuals involved, criteria by which the process will be invoked, and what should be done in the event a contract issue arises that requires further negotiation.
In the end, contracts should be developed in a deliberate fashion that builds in the reality of change orders, possible scope creep, and other project management challenges such as staff upheaval. By incorporating the right components into a vendor agreement, you can pro-actively mitigate project risk and increase the chance of a successful implementation. In the long run, this will save your institution money.