Checklist for Outsourcing Agreements


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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.
                                   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

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         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

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         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

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         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

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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

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