ICT Projects present any business with a number of challenges. Apart from the risk of money, value and time, what are the other risks? A failure to negotiate and put in place a contractual framework is a risk that often leads to an increase in fees and expenses. Contractual framework is important as this naturally sets forth the foundation and includes the rights and limitations for each party. A strong framework should typically include mechanisms to limit and control the costs, along with mechanisms to ensure the project is delivered on time and within scope.

Weak project management mechanisms can also be easily managed through the contractual framework, namely, each party’s roles and responsibilities can be clearly set forth. Project meetings and the composition of the reports should be clearly documented to avoid any confusion, and the technologies limitations should also clearly be set out in the framework, as this will ensure that both the commercial and technology stakeholders are all on the same page and prevent any misunderstanding or finger pointing. Essential elements for any meaningful contractual framework should include:

  • Rights of affiliates
  • Protection of both parties intellectual property rights
  • Payment terms
  • Each party’s responsibilities  
  • Change control provisions which manage any change in scope
  • Warranties provided by the service provider (intellectual property, confidentiality, quality services)
  • Indemnities
  • Payment dispute mechanisms
  • Termination for convenience
  • Termination/expiration assistance

For the above reasons, one should ensure that a contractual framework is in place that least addresses the above prior to engaging in any IT project.