Manchester’s transport fiasco - 3 options for failing IT projects13 Nov 2015
Fans of the Northern Powerhouse will groan at recent news about Manchester’s own “Oyster card” transport IT project – now hitting major buffers (apologies for the pun).
Transport for Greater Manchester have recently terminated their contract with their supplier Atos following major delays, and are seeking substantial compensation.
Given that this is unfortunately pretty common for IT projects, we asked Martin Lewis, a partner in our Commercial & Intellectual Property department, to take us through the main options for companies in similar situations.
Option 1: Wince and carry on
An obvious one, but most people usually work through project problems, cutting the other side some slack in order to avoid a major fall out. This often takes the form of customers providing extra time or cash to fix the problem, or suppliers committing further staff. Usually there’s a bit of both. Provided these further inputs are sufficient, this route often delivers success in the end, at some extra cost.
However, it may simply delay the inevitable, and waste more time and money in the process. Ideally, you should consider the merits of this option carefully and only follow it by choice, not default. Importantly, you also need to be clear on how it may affect your ability to select either of the two options below, if it fails. This is a key point.
Option 2: Break up
Frustrated clients frequently ask if they can terminate their way out of a failing project. Unfortunately, the answer can often be equally frustrating: it’s not clear. Where contracts only allow termination for “material breach”, or “substantial delay”, then each side will have their own story as to whether this has actually happened. The parties usually also have their own pile of “counter-gripes”, resulting in the equivalent of factual spaghetti.
The danger is terminating and getting it wrong – you then risk breaching the contract yourself for unlawful termination. It can be a real minefield, however including some more binary termination rights in your contract can really help, together with keeping a bit of evidence along the way.
Option 3: One more try (but with conditions)
This is usually selected to try and blend the best bits of the two options above. The idea is to grant extra time, and sometimes also extra money, in a controlled way to get the project back on track. If you’re planning to take this option, then it’s vital to preserve your legal rights, so that they can still be exercised if failure persists. This is best done by drafting a formal variation agreement containing clear new deadlines, and also caps on any extra sums payable or resources to be committed. Otherwise, your benevolence may be misinterpreted as a voluntary surrender of your rights, which never sounds like a good option!
For further information on commercial contracts and agreements, please contact us or call 0161 832 3434.