FACULTY OF ENGINEERING & COMPUTING

Contract Management

User: Davis D Parakal SID : 3357394 Module : Contract Management

Module Leader : Owen Richards

Contract Management

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Table of content

SL NO Page

1 Invitation to tender(ITT) – Draft copy 3

2 Elements of a Valid contract 4

3 Invitation to tender ITT 5

4 Letter of Intent 6

5 Evaluation of tender 6

6 Supply of goods and services- act 1982 7

7 Breach of contract and Implications 8

8 IT / Software legal issues 10

9 Conclusion 11

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Invitation to tender (ITT) – Draft copy

To: [tenderers Name] ITT No: 145752

Date: 27-05-2011

Dear Sirs

Subject: INVITATION TO TENDER FOR SOFTWARE & HARDWARE SYSTEM FOR CUSTOMER CARE DEPARTMENT

1. You are invited to submit a tender for the supply of voice customer care system (document2)

2. The following documents are attached to this invitation and provide details of the requirement:

The technical specification

Standard terms and conditions of contract

Condition on software licensing and data protection

Instructions to tenderers 3. You are required to complete and return the following items:

Price and delivery schedule

A formal declaration of your offer

Statement of non-collusion

Detailed report on software & hardware maintenance and version upgrades 4. In addition to your proposals, the tender must also include:

an executive summary outlining your approach to the requirement

an outline of your organisation's history; its corporate structure; and the range of services it provides

the names, role, experience and qualifications of those who will be involved in providing the service

previous experience in providing services in this area

The Department expects its suppliers to be familiar with, and to carry out their contractual responsibilities in the spirit of this guidance. Copies of this publication can be obtained from the Office of Government Commerce website: www.ogc.gov.uk.

Your Faithfully,

Davis D Parakal

Project manager

[Company name]

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Elements of a valid contract

1. Intention/ Legal Purpose/ objective

2. Offer and acceptance

3. Consideration

4. Legal documentation - agreement

A valid contract not exists by simply creating some documents and an agreement between two parties.

There must be a defined objective or intention to reach the contract in between these two parties.

Also the purpose of the contact should be evaluated under the common law and verify the legality of

the business. For example the contact made between two parties to do a business on illegal drugs is

not a valid contact since the purpose of that business not supporting the illegal system around it. Here,

the law is more likely to recognise that a contract was entered into.

An offer is a definite promise to be bound, provided the terms of the offer are accepted. This means

that there must be acceptance of precisely what has been offered. In other words an offer is defined as

the manifestation of the willingness to enter into a bargain so made as to justify another person in

understanding that his assent to the bargain is invited and will conclude it. Acceptance of an offer can

occur in several ways: Acceptance of an offer is a manifestation of assent to the terms thereof made by

the offeree in a manner invited or required by the offer. Acceptance occurs when the party answering

the offer agrees to the offer by way of a statement or an act. An acceptance must not change the

terms of an offer. If it does, the offer is rejected. A material change in a proposed contract constitutes

a counteroffer, which must be accepted by the other party

Consideration is the price paid for the promise of the other party. There must be a benefit value

exchanged between the parties who being involved in the contract. It can be in terms of money or can

be in terms of business opportunities. So long as consideration exists, the court will not question its

adequacy, provided that it is of some value. For example, the promise to pay a peppercorn in return

for the lease of a house would be good consideration. Of course, the consideration must not be illegal

or impossible to perform.

To complete the contract between the parties there should be documentation which defines the term

and condition that made up in the negotiation between the offeror and accepter. This must me a

legally enforced documented when the contract break or breach, these terms and conditions are taken

into court and taken into first preference in the court.

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In our case of software and hardware system, the same elements play the key role in the contract.

The offer will be building a system with software and hardware with serve a customer care operation

in the organization. The supplier will be benefited with the money for developing the system whereas

offered organization brings a new business platform in their daily operations. Offer will have to specify

the technical requirement they needed and it can be finalized after the negotiation with the supplier.

The rules and regulation to build the four elements, the contract these parties should consider the law

in software development and licensing. This report will discuss this matter in the coming sections.

Invitation to tender ITT

The ITT is an invitation sent to a shortlist of bidders to make a formal and detailed offer to supply the

services or goods required. It is important that the ITT contains all the information and detail needed

to enable a bidder to compile a fully formed tender for the requirement. It should contain a proper

date’s section - it is important that the contracting authority designs a proper and robust procurement

process timetable which properly factors in the time needed for clarifications and evaluation. The main

factors and subjects to be discussed in an invitation to tender are mentioned below.

Project Goals and Objectives

Purpose of this Invitation to Tender

Form of Tenders

Procurement Timetable

Organisation Background

Technical Environment & Key Requirements

Detailed Functional Requirements

Cost Information Required

Proof of Supplier's sound Financial and Company Standing

Implementation Requirements

Instructions to Suppliers

In the case of software development service the invitation should contain detailed functional

requirement. The common issue among software development contract is lacking the details of

technical and functional requirement. If the functional objective is clear in the invitation then the

technical requirements and structure can be finalized with supplier before final contract. The special

needs and conditions should also be mentioned in the ITT; for example if they are looking for a

particular company in the hardware specification then the brand name should be mentioned clearly in

the ITT. In the case of software development testing is an important factor in the devolvement. The

conditions for beta and alpha testing should also be mentioned in the ITT.

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Letter of Intent

From the term itself this explain its purpose, this document describes what the parties intent to do.

Usually this has a very low validity in the court. But very recently the Court has held that letters of

intent can be legally binding in place of a formal contract. In considering the application of the letter

of intent in any pre-contract negotiations, you must ensure that the letter is drafted very carefully

and that, should it become legally binding. The Court will in particular take into consideration the

normal contractual provisions, offer and acceptance, consideration, certainty of terms and whether

or not there was any intention to create legal relations. In some special cases like, if two or more

companies want to work together on a new piece of software, they will usually write a letter of

intent. This is an outline of how their agreement might eventually be structured. The key points to

be included in letter of content are ,ownership of the final software products, confidentiality,

provisions, joint responsibility of the partners for marketing and advertising the products, revenue

splitting etc..

Evaluation of tenders

Key Principles of Evaluation

Fairness: All tender or quote evaluations must be undertaken in a fair manner. This means each bid

deserves equal treatment and assessment and scores should be applied consistently.

Confidentiality: All bids during a tender process are confidential and should not be discussed with

any person not involved in the evaluation process.

Security: All bid documentation must be stored securely during the evaluation period. Hard copies

should not be removed from Council premises or left on desks overnight. Any electronic versions

should be transferred using secure encryption methods.

Evaluation criteria: Bids can only be assessed against the criteria issued in the invitation. Any

criteria not included in the invitation cannot be considered or scored at evaluation stage. Scores

cannot be awarded or withheld based on the structure of the bid and how ‘easy’ it is to assess. Bid

content Bids can only be assessed based on what information is provided with the submission.

Assumptions should not be made regarding proposals and prior knowledge of any bidder cannot be

taken into account. At Tender stage (or open stage 2) only the proposal can be evaluated – not the

company.

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Scoring: All bids must be scored based on their performance against a set scoring model which must

be included in the invitation document. Bids should not be compared with others to determine

scores (Good Practice Guides, 2010)

Below is an example of how bidder’s scores are calculated

(Good Practice Guides, 2010)

Supply of goods and services- act 1982

An Act to amend the law with respect to the terms to be implied in certain contracts for the transfer of

the property in goods, in certain contracts for the hire of goods and in certain contracts for the supply

of a service; and for connected purposes

For the purposes of this section an excepted contract means any of the following:—

(a) A contract of sale of goods;

(B) A hire-purchase agreement;

(d) A transfer or agreement to transfer which is made by deed and for which there is no consideration

other than the presumed consideration imported by the deed;

(e) A contract intended to operate by way of mortgage, pledge, charge or other security

The Supply of Goods and Services Act 1982 requires a supplier of a service acting in the course of

business in England, Wales and Northern Ireland to carry out that service with reasonable care and

skill and, unless agreed to the contrary, within a reasonable time and make no more than a

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reasonable charge. When the service has been paid for, the buyer has certain legal rights laid out in

the supply of Goods and service act 1982.

This act covers the roles that are carried out by the seller to service.

This law says briefly:

1-If a supplier of a service breaches the conditions of a contract (for example by failing to carry the

consumer has a choice either to affirm the contract and claim compensation from the trader for his

failure to carry out what was agreed or rescind (cancel) the contract.

2-If the supplier does not carry out the work with reasonable care and skill the law treats the matter

as a breach of contract and the consumer can seek redress.

3-If no agreement has been made with the supplier about completion of the work, or about the charge

to be made, then if it is not completed within a reasonable time or the price is unreasonable, this is

also treated as breach of contract and the consumer may be entitled to compensation.

4-Any goods supplied in the course of the service must be as described, of satisfactory quality and fit

for their purpose

5-A supplier of a service who has broken a contract may also be liable for any consequential loss which

is suffered by the consumer.

6-A claim can be pursued though the courts for up to six years providing it can be shown that the

problem was due to the work not being carried out properly or the goods or materials used not being

of satisfactory quality.

In the case of some software’s it comes under the supply of goods. For example if we are buying

antivirus software from the shop, it will be considered as a Supply of good. And in the case of banking

data centres will be considered as the supply of service. There are special laws applicable for software

development. We are discussing those in our next section.

Breach of contract and Implications

A violation of a contract by either failing to perform one’s own contractual obligations or by interfering

with another party’s performance of their obligations. The main types of breach of contract will be

minor, material, fundamental, and anticipatory. Minor breaches can be, for example, a builder who

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substitutes his own type of materials for specified materials. The substituted materials may work just

as well as the specified but it can still be seen as a minor breach of contract. A material breach can be a

breach that has serious consequences on the outcome of the contract. A fundamental breach would

be one so serious that the contract has to be terminated. An anticipatory breach is one where one of

the parties makes it known that they will not be carrying out agreed work, and the consequences can

be termination of the contract and damages being sought in court

The most frequent remedy for breach of contract is damages. Damages are available provided that

they are proved. If a contract includes a provision that, on a breach of contract, damages of a certain

amount or calculable at a certain rate will be payable, the courts will normally accept the relevant

figure as a measure of damages. Such clauses are called liquidated damages clauses. Un-liquidated

damages are evaluated with legal enforcement. If the contract dispute reaches the court then court

will evaluate the reach of damage and valuate the compensation or damage. Damages claims are also

able to be made under copyright legislation. For instance, additional damages, which are damages

over and above the usual measure, may be awarded on a discretionary basis where some benefit has

been obtained by the infringer, or there has been a blatant disregard for the rights' owners’ legal

entitlements.

Data Protection Act 1998

Since April 2010 the Data Commissioner has had the power to impose a fine of up to £500,000 on

a data controller who seriously breaches the data protection principles, if the contravention was of a

kind likely to cause substantial damage or substantial distress. The contravention must either have

been deliberate or the data controller must have known or ought to have known that there was a risk

that a contravention would occur and failed to take reasonable steps to prevent it. In a SaaS

agreement the customer is the data controller and primarily liable for breaches of the Data Protection

Act, however under the terms of the SaaS agreement the supplier will invariably be liable for

compensating a customer for any supplier breaches (and those of its agents and sub-contractors, i.e.

the data centre, outsourced backup service provider, storage facility) of the Data Protection Act.

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IT / Software legal issues

People are usually so focussed on the price and functionality issues when procuring software,

hardware or IT services that they ignore the legal issues that are key to risk management and

continuity of service.

Transfer of Intellectual Property Rights (“IPR”)

If the software is being developed or customised, I IPR document should be made for the business. You

will additionally need to verify that the party purporting to assign the rights to you is the actual owner.

Flexibility

Software licences are prescriptive. Customer only allowed doing what they expressly permit under the

supplier condition. The customer has to make clause in the agreement to reuse the software or resell

it. E.g. an outsource can use it on your behalf and that you can transfer the licence to a third party.

Service Level Agreement (SLA)

Nowadays, software is often providing as a service. There are many modalities including Software as a

Service (SAAS), Cloud Computing and ASP. Each of these will depend on the internet as a backbone.

The internet is subject to glitches. To protect, customer will need to agree an SLA which provides the

appropriate guarantees in terms of uptime, backups, and disaster recovery and business continuity and

may provide service credits in the event of breach.

IPR Indemnity

If a third party alleges that the software that has been provided is actually wholly or partly theirs,

customer may well face a large claim for unlicensed use or copyright infringement. Furthermore, may

be precluded from making any further use of the software. With this in mind, client needs to ensure

that the contract contains a comprehensive IPR indemnity from the provider.

Liability

Most standard software licences and development contracts contain draconian exclusions and

limitations of liability. This may mean that even if the provider is in breach of the contract, recourse is

very limited. These clauses need to be negotiated carefully so that client not left in the proverbial

lurch.

Source Code Escrow

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Client need to secure access to the source code of the software if the developer goes bust or fails to

maintain it properly. To protect the position, demand that the source code be put in escrow with an

independent third party.

Conclusion

The report discussed about contract management and some important terms in contact

management. It is evident from the studies that a contract is not only an agreement written

between two parties, it should have a proper purpose, consideration and legal enforcements. The

offer and acceptance are two main key fundamentals in contract. The offer can be in a form of ITT

and we have seen the sample format and its characteristics in a brief. When we invite a tender the

evaluation process of the tender and contact should be defined. This can be in terms of cost, time,

quality or scope. When we come into software development and its contract some added features

like licensing and IPR also comes under the contract. The next important concept we came across is

breach of contracts and types of damages used for resolving the issues. Data protection acts are

always keep high priority in software and hardware contracts. Finally the report the general terms in

the IT contracts also discussed in the end of the report.

References & Bibliography

Mckendrick, E. (2005) 2nd ed. Contract Law Text, Cases and Materials. Oxford: New York

Paul Dobson, (2000), sale of goods and consumer credit, six editions.

Furmston,M (2000). Sales and supply of goods. 3th ed. London. UK: Cavendish publishing Ltd. p9

Edwin peel, the law of contract, 2008 (12th edn, Sweet & Maxwell 2007)

The Office of Government Commerce, 2010 available , Website , Available online: http://www.ogc.gov.uk/Introduction_to_Procurement_contract_management.asp

Local Government Improvement and Development , Invitation to tender, website, Available online: http://www.idea.gov.uk/idk/core/page.do?pageId=9308263

Procurement Portal , website, Available online: http://www.procurementportal.com/invitationtotender/

The Procurement Toolkit – Good Practice Guides Version Date: October 2010 , Available online: http://www.wakefield.gov.uk/NR/rdonlyres/F275C524-0302-477A-BE8E-DFDD688B80A3/0/06_Guide_to_tender_evaluation.pdf

Legislation laws, Available online: http://www.legislation.gov.uk/ukpga/1982/29/contents

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Bodle Law, website, available online: http://www.bodlelaw.com/it-law