Memo

Running head: RECOGNIZING CONTRACT RISK AND OPPORTUNITIES MEMO Recognizing Contract Risk and Opportunities Memo Melissa Merchut University of Phoenix Recognizing Contract Risk and Opportunities Memo Span Systems is a prestigious leader in banking software projects. Span Systems is currently working on a one-year contract with Citizen-Schwarz a large German Bank. The contract with Citizen-Schwarz is worth six million and there is potential for Span Systems to also obtain Citizen-Schwarz’s e-CRM project. An issue has arisen between both Citizen-Schwarz and Span Systems in regard to the quality and schedule of deliverables. Because of the issues with the project Citizen-Schwarz has requested to have Span Systems transfer all unfinished codes, and asserted the rescission of the contract. In this paper I will identify what a manager might do to avoid these risks, to minimize liabilities, and to benefit from opportunities. Identify the legal principles and relate specific measures managers might take to minimize legal risk or realize legal opportunities. Evaluate alternatives to resolve problems identified in the simulation. Explain which alternative approach you believe is best and explain why. With Citizen-Schwarz advising Span Systems that the quality and schedule of deliverables has been unacceptable for several months is a concern. This situation is due to lack of communication and also lack of management on Span Systems side. In order for Span System to avoid this issue in the future, they must set up or fine tune their project management. A project manager will have the responsibility to make sure the employees are on task and on time. The project manager will also need to stay in communication with the contracting company to confirm quality compliance to his or her standards. This will help Span Systems in finding issues and resolving them immediately. By improving the communication Span Systems will be more of a partner to Citizen-Schwarz on the project. This partnership will open doors for Span Systems in their future and might secure another contract with Citizen-Schwarz on their e-CRM project. The legal principle that arises between Citizen-Schwarz and Span Systems is inferior performance material breach. According to Citizen-Schwarz, Span Systems was breaching the contract by not providing a quality computer program or providing the programs on a timely basis. Inferior performance breach means that Citizen-Schwarz may rescind the contract and seek restitution of any compensation paid under the contract to Span Systems. Citizen-Schwarz would then be discharged from any further performance under the contract and could sue Span Systems to recover damages. To prevent misunderstanding in the future a manager must keep the communication between both parties consistent. Span Systems needed to communicate to Citizen-Schwarz the issues with the response time of Citizen-Schwarz’s project management department. Had this been done the issue would have been handled and the situation would not have reached a point of canceling the contract. The three alternatives chosen to resolve the miscommunication issue between Span Systems and Citizen-Schwarz were; upload daily project updates on Span’s extranet for authorized Citizen-Schwarz personnel to view, scale the team of Span Systems programmers to deliver the project within a reasonable timeframe and invite the presence of Citizen-Schwarz project manager at Span Systems to serve in a quality control capacity. Each option of resolution was received by Citizen-Schwarz positively. Span Systems upper management was also supportive, although they were leery of the suggestion of giving Citizen-Schwarz authorization to their extranet for project updates. Allowing Citizen-Schwarz to have access to the extranet for project updates will eliminate excessive phone calls, meetings, and confusion. With Citizen-Schwarz acquiring direct access to the information they will receive updates daily. Citizen-Schwarz will need to have their project manager to review this information and participate in project meetings and act as a direct interface between Span Systems and Citizen-Schwarz. The cost of having the station project manager to receive project updates and to participate in project processes will need to be paid entirely by Citizen-Schwarz. Increasing the team of programmers will ensure the completion of the project to be on time. Span Systems will add an additional 10 programmers within 10 days of the new contract being accepted. Span Systems will also provide Citizen-Schwarz a copy of the new programmers resumes. Span Systems will be responsible for the pay of the 10 new programmers. Finally, Span Systems and Citizen-Schwarz will need to create a Change Control Board. This board will consist of the project manager and lead software engineers from both Span System and Citizen-Schwarz. This board will review changes and will determine if the changes will be accepted or rejected. By having a Change Control Board Citizen-Schwarz and Span Systems will be making changes together so there will be no miscommunications. The alternative approach that would be the best for this situation is creating a Change Control Board. This approach will be the best way for Span Systems to protect itself during the contract. With both companies being involved with the creation and implementation changes that need to be made will be done with either little or no disagreement between the two companies. Citizen-Schwarz can at the present time be reassured that the project will get done on a timely basis and will meet their quality requirements. Also with the partnership that has been developed between Citizen-Schwarz and Span System the transition from the current project to the new upcoming project e-CRM would be seamless. This is a huge benefit for both companies. This paper has identified what a manager might do to avoid these risks, to minimize liabilities, and to benefit from opportunities. Identify the legal principles and relate specific measures managers might take to minimize legal risk or realize legal opportunities. Evaluate alternatives to resolve problems identified in the simulation. Explain which alternative approach you believe is best and explain why. The result for Span Systems was positive. They were able to re-due their contract with Citizen-Schwarz and save the working relationship. Span Systems has implemented changes to their processes that will lead to many more jobs with Citizen-Schwarz. Reference University of Phoenix (2002, n/a). Contractual Conflict. Retrieved July 20, 2010, from https://ecampus.phoenix.edu/secure/aapd/vendors/tata/sims/legal/contract/legal_contract_frame.html