March 11, 2013
In the Contract Creation and Management simulation, there were several legal issues and related principles involved with the incidents occurring between Span Systems and Citizen-Schwarz AG (C-S). As indicated in the simulation, it provides an opportunity to develop a negotiating position, argue performance of the contract, and amend an existing contract to prevent a potentially disruptive business dispute.
Harmon & Stephan (2001), state “proper contract administration from the bidding phase through contract closeout is essential. Then, if disputes do arise despite your best efforts, the parties are prepared with all of the facts needed to make a decision readily available” p. 1. Within the claims avoidance techniques, contract administration involves thorough understanding and acceptance of three controls: document management, schedule management, and change management. In the case of Span Systems and C-S, had they clearly stipulated contract negotiations, realistic time schedules, and change management procedures, much of the conflict would have been alleviated.
In the simulation, it is already acknowledged that bidding had occurred and the contract was given to Span Systems. C-S and Span have a one-year contract worth $6 million. C-S’s bigger e-CRM order is in the pipeline, and chances of Span getting the order hinge on the performance of this contract. During the formation stage both parties should have developed realistic time-lines and accommodated for potential or likely problems during the course of the contract. Harmon & Stephan (2001) call this phase “Premobilization” and suggest that “it is a good idea to have someone on each team thoroughly analyze the contract and make a “cheat sheet”, a one or two page summary that lists all the key clauses for their project team” p. 1.
The scenario for Span and C-S indicated claims and counter-claims concerning quality of deliverables, delivery schedule slips, and ever-growing end-user requirements. During coordination with the project managers at C-S, a dispute over quality and schedule of deliverables comes into focus between C-S and Span. Span’s deliverables in the last couple of months have been behind schedule. In addition, the quality of the deliverables has been unacceptable, with major bugs being detected in the user testing stage.
A conflict is created because specific requirements of the software were not entirely clear to both parties. C-S expressed their apprehensive concern to have the project up and running by a certain deadline but had not considered unexpected issues with change management and how change impacts on the agreement of the contract. After eight months into the project, both parties start to realize the concern for the deadline and the problems begin to escalate.
Suddenly, one of Span’s marketing managers reports that C-S is in talks with an Indian software developer to complete the transaction software project and there is reason to believe that C-S may have already shared the code of a few modules developed by Span to get the Indian vendor started. Span’s lawyer notes that if it’s true that C-S is negotiating with another vendor and has released code to them, it is a clear violation of the contract on the substantial performance and copyright fronts. This instills the fear of losing the project to another vendor and the utmost importance of immediate action.
In the beginning of the simulation for the month of December, there were three notable breaches of contract clauses; internal escalation of procedures for disputes, requirements change, and communication and reporting. According to Span’s attorney, the first breach of clause should force C-S to reconsider its’ position, noting that Span has kept up with most change requirements, especially noting that it was C-S that made changes with project management which