Checklist: IT services
Issues to consider when negotiating an IT services agreement include:
- Is the engagement for the provision of services, or for delivery of specific deliverables? Or a combination of both?
- Is it a one-off engagement, or likely to be the first of a series of engagements ?
- Is the services provider being paid on a time-spent basis (‘time & materials’/’T&M’), or on delivery of pre-agreed deliverables (‘fixed price’)?
- Is payment for the deliverables subject to user acceptance testing (UAT)? If so, who is responsible for testing, what tests/criteria are used, and is the services provider excused any minor failures? What happens if the deliverable fails UAT?
- Is delivery staged, using pre-agreed milestones? If so, will the milestones trigger interim UATs and/or part payments? What happens in the service provider fails to meet a milestone?
- What rights does the client have if the service provider fails to deliver the deliverable (and/or pass the UAT) by the agreed date? If there is a late delivery payment, is this the client’s only remedy?
- Does the client own the intellectual property rights in the deliverables or other output of the services? If the client is granted a licence instead of ownership, what rights does the service provider retain? What licensing arrangement apply for third party software?
- Is any third party software required in connection with the project? Who is responsible for procuring this software? Is it licensed directly to the customer, or subject to a sub-licence granted by the service provider?
- Are the arrangements between the service provider and its consultants/contractors consistent with the customer acquiring ownership of the IP? Should the customer look for additional comfort regarding assignment of the IP directly from the supplier’s consultants/contractors? If the service provider is a limited company, does the client need separate agreements with the individuals who are actually creating the deliverables?
- What warranties are being provided by the service provider for the deliverables, and for how long?
- If the service provider is an individual contracting via a personal service company, are the arrangements affected by the off-payroll working rules (IR35)?
- Is the engagement ‘fixed’, or can the client terminate the engagement for convenience? If so, how much notice must the client give, and what are the client’s obligations on termination? What if any termination rights does the service provider have?
- Is the service provider restricted from providing services to the customer’s competitors?
- Are there restrictions on the customer hiring/poaching the supplier’s staff?