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Broken Promises in Outsourcing and Contracting

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A surprisingly common occurrence is firms undertaking outsourced activities simply not doing what they promised to do. 

This is not always as easy to deal with as one would guess. The expectation is that one simply institutes legal action for breach of contract when this occurs. 

 

Complications 

There are a number of complications.  

The first complication is that in a number of outsourcing arrangements, promises made by the firm undertaking the outsourced activities never make it into the signed contract.

 

Presentations 

An area where this happens fairly frequently is when firms competing for the contract to undertake the outsourced activity, are given the opportunity to make presentations to the tender selection committee/panel. 

In the presentation promises are made which are not always put into the final contract. 

 

Complicated Tendering Processes 

Where the tendering process is complicated there is a greater risk of promises being left out of the final contract. 

Examples are where the tendering process involves many stages, where there are many clarifications and requests for further information, where there are retenders and post tender negotiations, where there are communications which are not in writing, and combinations of these. 

Many organisations attempt to cover this exposure by having a clause in the contract and tender papers, which provides that all tender submissions, correspondence and communications are part of the final contract.  

This is generally useful but does not always completely overcome the problem. 

 

Wording 

The way that the promises were stated in the communications may result in confusion, uncertainty and a lack of legal enforceability.   

In addition in some cases there is confusion as to whether the promises are offers, offers extinguished by new offers, provisions of information, etc.  

So even where the promises were in writing there may still be confusion and disputes as to whether or not the promises are enforceable and what they mean. 

 

Experience 

Experience has shown that where promises are not legally enforceable, they are often broken. As the saying goes: A verbal contract is not worth the paper it is written on. 

 

Promises for Outsourced Work 

Promises made by firms wanting to undertake the outsourced activity are often not incorporated into the signed final agreement. The result is that you are left in a position where you usually have to rely on the goodwill of the firm and are prone to fraud by them. There have been some spectacular examples of this in recent months. This list is provided to help ensure that the risk is avoided in your organisation: 

 

 

Check Contract Covers These Items

 

 

Where to Check

 

Promises made at presentations or briefing sessions by the tenderer

 

 

Minutes of meeting.

Material provided by the tenderer for the meeting.

 

 

Promises that are considered by the tender evaluation committee or panel in assessing the tenders.

 

 

Report of committee or panel.

Minutes of meetings of committee or panel.

Working papers of committee or panel.

Checklist prepared by the committee or panel.

Reports, minutes, working papers, checklists, etc. of people advising the tender evaluation committee or panel.

 

 

Promises that are made in correspondences.

 

 

Letters on the tender files.

Checklist or sign-off by committee/panel members.

 

 

Promises that are made in telephone or face to face conversations.

 

 

Contemporaneous notes of conversations.

Checklist or sign-off by committee/panel members.

 

 

All promises made by tenderer

 

 

Committee member(s) sign off that the contract is complete.

Users/monitors of outsourced activity sign off that the contract covers all areas of concern and all promises of which they are aware.

 

 

 

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For more tips, advice and practical pointers see Fraudproof Your Business Manual.