Appendix C. The Essential Elements of the Contract
Key issues 176
It is in the nature of outsourcing arrangements that no two are exactly alike. In this Appendix we look at the range and type of issues that both parties to such an arrangement will need to address but it is not intended for use as the basis of a draft contract. The unique nature of each outsourcing arrangement should be incorporated into its own legal documentation.
Another point to be aware of when drawing up an outsourcing contract is that there will usually be factors that cannot be quantified or measured until much of the transition work has been completed. Hence, many outsourcing arrangements begin with a qualified contract. For example, the initial phase of the work may involve studies into issues such as the SLAs, the baseline charges and the method of calculating the risk/reward elements, the results of which will have a direct bearing on how the latter phases proceed. In ideal circumstances, these studies should be carried out prior to negotiating the contract, but if this is not possible, then the contract must contain the assumption that agreement on these issues will be able to be reached.
In spite of this assumption, it is essential that such a contract makes provisions for the possibility that agreement will not be reached. In this eventuality the contract will need to be terminated at the end of the transition or soon after and there will need to be an agreed mechanism for the division of the costs incurred.