Customers in long-term technology projects can find that while they have been working towards their chosen solution a more advanced, cheaper, or simply more desirable technology has become available. The benefits of switching solutions may be very significant, but exiting an existing agreement can be costly and complex, both legally and commercially. Since delays in technology projects are frequent, and technological advancement shows no signs of slowing down, we look at what customers and suppliers can do to mitigate the risks posed by technological advancement.
This article is the third in a series looking at what customers and suppliers can do to mitigate the risks posed by technological advancement. The first and second articles address the contracting stage (click here for article one) and life of the project (click here for article two). This article considers contract reset, and dispute resolution mechanisms that can assist with keeping a project on track.
If the project timetable is inherently long rather than delayed, it is sensible to include stocktakes during the development lifecycle so that the parties can review progress – ideally in a neutral environment, rather than in the context of a dispute – to see if the contracted-for development approach continues to be the best approach for the parties. To a certain extent, even in a non-Agile development process, these stocktakes can be regarded as introducing an element of the flexibilities of Agile into a non-Agile process.
There are, of course, risks associated with this approach for both customer and supplier. For the supplier there are risks that an extensive and, hopefully, profitable development process could be cut back mid-way through the process. For the customer, there are risks that the supplier may want to de-scope an unprofitable development process so that the customer receives less than they were contractually entitled to.
In practice, even if these types of stocktakes are not included in a contract it is highly likely that longer-term development projects (i.e. more than two years) are likely to need a “contract reset” at some point during the development process. These resets are routine in longer term processes and frequently take place in the context of significant levels of dispute between customer and supplier. In general terms, separating out the disputed issues from the reset issues is key to achieving a successful reset. Again, flexibility and pragmatism are needed from both sides in order to achieve a successful large project contract reset.
Dispute Resolution mechanisms
Where the parties find themselves in dispute this can itself cause significant delays, particularly if the parties become entrenched. Contract change control can become a barrier to effective delivery if every small technical change has to be subjected to the contract change process. Effective mechanisms in the contract which address such mid-project disputes can again help to keep the project on track. “Fix first, argue later” – or preferably “fix first, resolve later” – provisions can enable work to continue even if the parties are at loggerheads. Dispute escalation and resolution provisions that are designed to enable rapid dispute resolution during the life of the project are important, as are straightforward mechanisms which allow parties to flag issues and protect their interests such as by the service of “relief event” notices.
Attempts at rapid resolution of technical issues are sometimes provided for by parties agreeing an expert determination process. This can be effective, depending on the situation and dispute in question; although where it is in one party’s interest for the matter not to be resolved rapidly that party will often find ways of slowing the process down. An adjudication-style process is sometimes considered a potential solution to this issue. The Society for Computers & Law (SCL) has recently introduced an adjudication scheme for IT disputes. This is intended to provide a forum for the relatively fast adjudication of disputes as an alternative to a court process, in much the same way that adjudication is used in construction contracts, such as the TeCSA adjudication scheme. Under the SCL scheme the adjudicator’s decision will be provisionally binding, with any subsequent litigation or arbitration proceedings required to be commenced within 6 months. The TeCSA adjudication scheme is now used extensively, including for disputes relating to breach of contract and termination/determination issues, often arising after practical completion. The SCL scheme could become similarly commonplace for IT disputes.
Finally, it is worth mentioning in the context of evolving technology that the Digital Dispute Resolution Rules recently published by LawtechUK’s UK Jurisdiction Taskforce are designed to facilitate rapid resolution of commercial disputes, particularly those involving novel digital technology such as cryptoassets, cryptocurrency, smart contracts, distributed ledger technology and fintech applications. You can read more about this innovative set of arbitration rules here.
Previous articles in this series can be accessed here:
Technology Projects: Managing the Risks of Innovation and Change (twobirds.com)
Technology Projects: Managing the Risks of Innovation and Change Part 2: During the Life of the Project (twobirds.com)
For further disputes related articles please visit Disputes+, Bird & Bird’s Dispute Resolution know how platform.