With there being various moving parts to an IT project, IT projects may be more susceptible to issues when implemented. This is generally caused by a failure or delay in the performance of a contracting party, unexpected cost overrun, or insufficient resources being allocated to the IT project for the duration of the project.
Given the complexity associated with IT project implementation, it can often be difficult to identify when a project is in distress, especially when operational teams are immersed in the delivery of the project without necessarily having regard to the overall impact on time, costs, and resources.
If the root cause of the problem is not quickly identified or resolved, it may adversely impact the parties' relationship and undermine trust. It is therefore important to identify a distressed IT project as early as possible so that the parties can prevent an irretrievable breakdown of their relationship.
IT projects fall into distress for a number of reasons, including:
- lack of proper planning of the project and deliverables;
- unaligned expectations between the parties;
- failure to manage scope changes or extensions;
- overly optimistic project schedules and timelines;
- lack of resourcing on the part of one or both parties;
- a service provider's failure to timeously and/or clearly advise customers of expectations when it comes to access to resources, decision makers, third-party service providers, and the like; and
- poor communication between the parties or their respective contractors.
If these issues cannot be resolved by: (i) invoking agreed-upon penalty clauses; (ii) withholding or delaying payment to the service provider where the contract permits; or (iii) recourse through governance structures, then in order to rectify and recover from a distressed event the parties should look to the contract for guidance, which may, in extreme cases, include dispute resolution processes and termination clauses.
The dispute resolution provisions set out the processes for solving conflicts through change control management, mediation, arbitration, or litigation.
Where the parties have read ambiguous documents differently, an independent and neutral adjudicator helps settle such disputes. Dispute resolution processes also help to avoid prolonged discussions of the issues by the parties and issues can be fixed relatively quickly.
The dispute resolution provisions may also include the implementation of recovery actions as a contractual mechanism to get the project back on track, which is generally referred to as a “correction plan”, “rectification plan”, "project realignment plan", or a “remediation plan”. The purpose of this plan is to guide the parties in diagnosing the issues in the project, to agree on steps to rectify matters and to establish measures and targets to ensure that recovery is achieved.
Sound legal advice should be sought when drafting project contracts, however it is essential to obtain appropriate legal advice when a dispute is likely to arise in an IT project. In particular, expert technology lawyers are able to guide the parties on the manner in which the plan is to be implemented, and to assist parties in carrying out applicable dispute resolution procedures in order to resolve their differences. Alternatively, these legal experts can provide the necessary legal advice to mitigate the risks and consequences that arise due to contract termination, and to prevent a repudiation of the contract.
Rescuing an IT project can be expensive, but the costs of delays, wasted expenditures, costs of termination, and finding a replacement provider are much higher making salvaging the project a more feasible option. ENSafrica's expert technology law team have assisted a number of clients in successfully realigning projects or mending relationships, and can assist your organisation with dealing with distressed IT projects.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.