Contract Creation and Management

Contract Creation and Management

Introduction

This week’s simulation looks at the relationship between Span Systems, a California-based e-banking software developer and their client Citizen-Schwarz AG. Citizen-Schwarz AG is a Stuttgart, Germany-based company looking to break into the American banking market. This document will be written to Span Systems Director of Projects, Kevin Grant. Citizen-Schwarz AG is dissatisfied with Span Systems and wants to break the contract. This is my outlook on how to retain the contract and improve Span Systems.

Changes to Original Contract Requirements

During the initial 8 months of the contract, Citizen-Schwarz AG has added to and made changes to the original contract. This has created problems with both meeting promised deadlines and decreased the quality in deliverables. Kevin, I suggest we make the following changes to the contract:

1) Create a Change Control Board. The board will consist of a project manager and a lead software engineer from Span Systems and Citizen-Schwarz AG. The Board will decide what changes to accept or reject. Both Span Systems and Citizen-Schwarz AG will abide by the decisions of the Board (Contract Creation and Management).

2) We need to increase our manpower for this project to ensure our deliverables are on time and of highest quality. I recommend we add at least 10 additional programmers to the project.

3) Finally, I would charge Citizen-Schwarz AG for any additional changes to function points after the contract is signed. I suggest the following breakdown:

a. Features added 3 months after signing the contract would be $1,100 per function.

b. Features added 6 months after signing the contract would be $1,250 per function.

c. Features added 9 months after signing the contract would be $1,500 per function.

d. Features added 12 months after signing the contract would be $1,750 per function.

The Change Control Board would be responsible for determining all changes (Contract Creation and Management).

Positional vs. Interest-Based Bargaining

I believe it was in the best interest of both Span Systems and Citizen-Schwarz AG to adhere to an interest-based bargaining strategy instead of a positional strategy. The advantages of an interest-based strategy allowed both companies to focus on the problems at hand and establish a level of open communication between Span Systems and Citizen-Schwarz AG to focus on the real issues plaguing the project. Taking a positional stand would close off communication and set up confrontations between the two companies. Both companies would be making demands of each other without fully understanding the reasoning behind those requests. Span Systems would ultimately loose the respect of Citizen-Schwarz AG, loose our current contract and have no hope at gaining the e-CRM project that is in the works (Interest Based Bargaining).

Should Span Systems Enforce the Original Provisions of a Contract

Kevin, when creating future contracts, I would use what we learned from the Citizen-Schwarz AG contract in all future dealings. As I have shown, there are tremendous benefits by having an interest-based contract versus one which is positional.