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This document provides a checklist of issues a company should consider before entering into an outsourcing agreement. An outsourcing agreement is an agreement between a business and a service provider for necessary services, such as for data processing and information management. Companies should consider use of staff, equipment, and facilities. This checklist can be customized in order to help shape a company’s analysis of an outsourcing agreement prior to executing the agreement.
This document provides a checklist of issues a company should consider before entering into an outsourcing agreement. An outsourcing agreement is an agreement between a business and a service provider for necessary services, such as for data processing and information management. Companies should consider use of staff, equipment, and facilities. This checklist can be customized in order to help shape a company’s analysis of an outsourcing agreement prior to executing the agreement. Checklist for Outsourcing Agreements 1. Definition of the relationship, goals and objectives of both parties A. Exclusive of other vendors B. Protect market position of customer 2. Scope of services to be provided A. Define services and deliverables to be provided to customer by vendor B. Define services excluded C. Define service levels (i.e., performance standards) and remedies D. Provide for modification of service levels from initial levels upon execution after conversion to vendor operations E. Provide for milestones and project schedules (time phased, person loaded) F. Scope of vendor's authority 3. Term of Agreement A. Renewal periods B. Automatic renewal 4. Personnel A. Staffing requirements 1. On customer site/off customer site 2. Vendor right to change personnel 3. Customer right to approve personnel B. Specific obligations of vendor regarding vendor personnel 1. Confidentiality 2. Non-compete 3. Guaranteed service period for certain personnel 4. Succession planning 5. Mix of staff levels C. Vendor to offer employment to customer's work force 1. Define employees to be transitioned 2. Parameters for offers of employment D. Employee transition plan 5. Use of Customer Facilities A. Vendor to provide services from customer premises until specified date for conversion to other facilities B. List of equipment and services at facilities available for vendor use C. List of facilities square footage and rate to be paid, if any for use by vendor D. Vendor access to customer facilities E. 24 hour/normal vendor working hours F. Security issues © Copyright 2013 Docstoc Inc. registered document proprietary, copy not 2 G. Relocation of vendor 6. Customer owned equipment A. Purchase of equipment owned by customer used to perform the services B. List of equipment/depreciated value C. Disposition of equipment subject to capital leases D. Obligation of customer to provide or acquire certain equipment 7. Customer leased equipment A. Vendor permitted to use equipment leased by customer to perform the services B. Customer to terminate or assign leases for the leased equipment C. Customer to exercise option to purchase equipment under terminated lease and sell to vendor at cost 8. Data Processing services -- For customer-owned intellectual property A. Customer grants vendor license to use customer owned intellectual property for term of the agreement or until conversion of services using other intellectual property, if contemplated by parties B. Assignment to vendor of licenses for non-customer owned intellectual property to be used to provide services C. Termination of licenses for intellectual property not required by vendor to perform services D. Obligation for integration, new products E. Cost of correction of processing errors 9. Vendor intellectual property A. License to use/included as part of services B. License with respect to termination 1. Bankruptcy issues 2. Substantive license issues (scope of use, updates, warranties, etc.) 10. Third party services A. Customer to assign agreements for third party services to vendor B. Vendor responsible for cost of third party services C. Vendor to have the right to replace third party services with its own services or services of a third party of its choice 11. Management of projects and other services A. Appointment of project managers by vendor and customer to be principal liaisons between parties B. Respective roles of parties (e.g., establishing priorities) C. Management planning D. Acceptance testing of vendor deliverables 12. Customer responsibilities A. Establish priorities © Copyright 2013 Docstoc Inc. registered document proprietary, copy not 3 B. Delivery of data C. Training D. Forms/documents/supplies/consumables 13. Confidentiality obligations A. Customer business information/data B. Vendor business information C. Intellectual property of either party or its licensor 14. Customer data A. Security B. Right of customer to obtain data at any time C. Back-up procedures 15. Procedures to change scope of services A. Customer right to change priority or scope of vendor's services/effect on rights and obligations of both parties B. Procedures for requesting changes to vendor's services C. Different performance standards for changes 16. Conversion services A. Development of a plan to convert from customer's procedures to vendor's procedures to provide services B. Rights and obligations related to performance standards C. Software or processing modifications 1. Scope 2. Approval by customer 3. Vendor obligations for updates, legal and regulatory changes 17. Training -- Training for customer personnel A. Full training -- "train the trainer" B. Daily/hourly 18. Fee structure A. Fixed time/time based fee/volume based fee B. Basis of calculation C. Credits/reimbursements to customer D. Expenses E. Cost of living adjustment F. Fee schedule based on milestones G. Late fees/payment and billing/disputed amounts 19. Liability issues A. Limitation of liability B. Warranties regarding services/products/personnel C. Disclaimer of warranties © Copyright 2013 Docstoc Inc. registered document proprietary, copy not 4 D. Indemnities 20. Termination A. Specific rights B. Right to extend for limited time upon termination C. Termination assistance D. Transitional rights and obligations 1. Offers to personnel 2. Acquisition of equipment/software 21. Sharing of computer resources A. Use of resources other than customer purposes B. Use by customer (if less than a full outsourcing) 22. Dispute Resolution (For Example): Notwithstanding the foregoing, and anything herein to the contrary, any dispute under this Agreement shall be required to be resolved by binding arbitration of the parties hereto. If the parties cannot agree on an arbitrator, each party shall select one arbitrator and both arbitrators shall then select a third. The third arbitrator so selected shall arbitrate said dispute. The arbitration shall be governed by the rules of the American Arbitration Association then in force and effect. 23. Assignment (For Example): The rights of each party under this Agreement are personal to that party and may not be assigned or transferred to any other person, firm, corporation, or other entity without the prior, express, and written consent of the other party. 24. Insurance requirements 25. Independent Contractor Status (For Example): Contractor is an independent contractor and is not an employee, servant, partner or joint venturer of Owner. Owner shall determine the services to be provided by Contractor, but Contractor shall determine the legal means by which it accomplishes the services in accordance with this Contract. Owner is not responsible for withholding, and shall not withhold or deduct from the commissions FICA or taxes of any kind, unless such withholding becomes legally required. Contractor is not entitled to receive the benefits which employees of Owner receive and is not entitled to receive and shall not be entitled to workers compensation, unemployment compensation, medical insurance, life insurance, paid vacations, paid holidays, pension, profit sharing, or Social Security on account of his services to Owner. It is further understood that Contractor is free to contract for similar services to be performed for other (type of entity) or organizations while under Contract with Owner. 26. Restriction on hiring of other party's personnel. (For Example): Company shall not hire or otherwise retain the services of any employee, contractor or agent of the Contractor or solicit or in any manner encourage employees of the Contractor to leave its employ for a period commencing on the date of this Agreement and © Copyright 2013 Docstoc Inc. registered document proprietary, copy not 5 ending (number) years after the date of termination of this Agreement, without the Contractor’s express prior written consent. 27. Taxes 28. Disaster Recovery and/or Force Majeure (For Example): In the event of force majeure (as defined below), Contractor may terminate this Agreement without liability to Contractor. For purposes of the Agreement, force majeure shall mean circumstances or occurrences beyond Contractor's reasonable control, whether or not foreseeable at the time of signing the Agreement, in consequence of which Contractor cannot reasonably be required to perform his obligations under this Agreement. Such circumstances or occurrences include, but are not limited to: acts of God, war, civil war, insurrection, fires, floods, labor disputes, epidemics, governmental regulations and/or similar acts, embargoes, termination or temporary unavailability of any server on which the Website is located or maintained, and non-availability of any permits, licenses and/or authorizations required by governmental authority. 29. Audit issues 30. Most Favored Customer © Copyright 2013 Docstoc Inc. registered document proprietary, copy not 6
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