Law 529 - Contract Creation and Management Memo

Span Systems

Memo

To: Kevin Grant

From: Mike Smith

CC: Harold Smith

Date: 8/24/2007

Re: Citizen-Schwarz AG Contract

In the future, if Citizen-Schwarz AG continues to change their original contract requirements there needs to be sign offs from both Span Systems and Citizen-Schwarz AG directors. Prior to Span Systems’ director signing off Citizen-Schwarz AG’s request, a panel of senior programmers at Span Systems needs to approve the request, so programming changes can be adequately evaluated. Span System programmers want to be assured that timetables and schedules can still be met within the agreed upon contract. If Citizen-Schwarz AG’s request requires more time to meet the deliverables of the project then Span Systems and Citizen-Schwarz AG need to exercise the ‘Requirement Change’ clause within the contract. This clause is meant to formalize a change and suppose to notify and bring in upper management from both sides to handle a change request by following the Information Technology Project Methodology Standard. This clause is not written to handle out of the ordinary requests. This clause needs to be able to handle difficult requests and effectively document a procedure that can hold both sides accountable for changes made to the original contract. This clause also needs to be streamlined, so that both parties can act quickly upon agreed changes to the contract. It would be best to amend a clause to the current contract that is specially written to handle requirement changes throughout the project. This clause should document the process to effectively make difficult change request. This process should also require sign offs from project directors from both companies. In addition, each change request needs to be a legal contract that carefully documents how the scope of the project changes with each request. Each request absolutely needs to document how the timetables and schedules will be affected through the continuation of the project.

In retrospect, Span Systems and Citizen-Schwarz AG negotiations over the low quality of deliverables along with being behind schedule was purely an interest-based negotiation. This negotiation was interest-based or win-win, because in the end both Span Systems and Citizen-Schwarz AG compromised by continuing to work together and moving forward towards their goals. Span Systems wanted to continue to finish there one-year $6 million contract with Citizen-Schwarz AG with high quality, so they could get the bigger e-CRM project that was in the works later down the road. At the same time, Citizen-Schwarz AG wanted to get a high quality, on time big- ticket Java-based transaction processing software. If both Span Systems and Citizen-Schwarz had taken a positional bargaining strategy instead of an interest-based strategy these negotiations would have produced a much different result. It would be likely that Span Systems and Citizen-Schwarz would be dueling this dispute either in court or through arbitration. If Citizen-Schwarz had gone with a positional bargaining strategy, they would have held their position on wanting Span Systems to transfer all unfinished code and wanted to severe the contract between the two companies. This strategy would have forced Span Systems to legally come after Citizen-Schwarz AG, because of breach of contract. Citizen-Schwarz would clearly be in breach of the ‘Intellectual Property Rights’ clause of the contract. Although not a favorable move, Span Systems would most likely have used this clause as a part of their negotiations in order to make Citizen-Schwarz AG change their position or pay up in full. This clause could backfire on Span Systems, but Citizen-Schwarz AG is forcing Span Systems to make bold moves since they are taking a bold stance. Clauses like