The Waterfront Partnership

Outsourcing - key issues

Whether you are the company outsourcing your services or the organisation providing outsourced services, the issues are the same.

The key things to cover in the outsourcing contract are:

• Transition - how does the outsourcer get the data and other information that it needs to begin provision of the services? Will there be a period of "parallel running" to ensure that the new provider can commence provision of the service without any interruption to the business? Does any outgoing service provider need to provide data or assistance during the transition phase?
• Obligations - who needs to do what and when? This will apply equally to the outsourcer as the service provider. In order to provide the service, what data and information does the outsourcer need to provide to the service provider. Whose responsibility is it if this data is not provided on time?
• Service Levels. What are the measures by which the outsourced service provider will be assessed? Where are these specified and can they be amended to deal with changing circumstances at the outsourcer?
• Service credits/debits/liquidated damages. Always a hotly contested subject! Should service credits apply if the service provider fails to comply with the Service Levels? How is "failure" measured? Do related third party failures mitigate the failure of the service provider? How do you calculate what the service credit is?
• TUPE (Transfer of Undertakings (Protection of Employment) Regulations. Does the incoming provider take on the staff who are currently providing the service? Will the service provider staff transfer to the new provider/the outsourcer on completion of the contract? Who is liable for any claims that these staff members may have?
• Exit provisions. What does an outgoing service provider have to do on completion of the contract? What data and information must it pass over? How much assistance must be given to the incoming provider (a company which is, after all, likely to be a direct competitor)? For how long after the termination of the contract should any assistance continue to be provided?
• The above points are a flavour of the types of issues that are particular to outsourcing contracts. Needless to say there are many more, as well as the usual contractual provisions which arise in all commercial contracts.
• Whether you are an outsourcer or an outsourced service provider, it is vital to protect your interests with a robust contract which address the issues specific to outsourcing. Failure to do so may result in costly legal wrangling!