Ch-2 Proposals and Contracts

Introduction Many issues have to be handled in a contract and a proposal including legal concerns, commercial arrangements and intellectual property rights.

Customer and Vendor Interaction The first step of customer organization to get s/w services is to get in touch with vendor. This is initiated by organization itself or by sales person of vendor. Or sales person of vendor finds out the customer through his information network and contact that organization. After this customer requests information from the vendor itself. This interaction is called request for information. This includes vendor’s organization, background of employees, past projects done, current and past customers etc.

Continue The customer might shortlist some of the vendors and possibly visit them. Now the interaction becomes more specific. Depending on the customer’s needs vendor uses different models. Some of the models that Infosys uses are as follows:-

Continue If there is a single project then customer sends a request for proposal (RFP) along with sample contract illustrating type of clauses. Fixed price model:- -> Here the vendor analyzes the RFP, estimates the effort and schedule and based on it gives the price for executing the project. -> This price is fixed, unless the requirements change, the customer will give agreed price to vendor. -> If the effort estimates are lower than the actual effort then vendor has to bear the cost of extra effort. If effort estimate is higher then vendor gets profit. -> This model is used when the requirements are precise.

Continue If the details are not sufficient then the project is viewed of consisting of two parts: first for requirement analysis and second for developing the software. For the first part time and material (T & M) model is used. Time and Material model:- -> In this vendor agrees to provide one or more analysts at per person month without estimating the effort that it will take for analysis. -> The customer agrees to pay the vendor for the first part on the basis of actual effort for analysis. -> This part ends with delivering documents to the customer.

Continue The proposal for the second part includes detailed cost estimates. When first part is over and detailed requirements are available fixed price bid is given for the development part. The vendors of both parts must be different. Besides this two models there is a third model doing whole project on T & M basis. In this customer agrees to pay on the actual effort expended. This model is adopted when customer is not clear on the requirements.

Proposal A proposal has two parts namely technical and commercial with technical describes issues relating to project execution. Its main sections are as follows: 1. Technical description 2. Assumption 3. Proposed solution 4. Effort estimate 5. Project schedule 6. Customer responsibility 7. Penalty/reward for timely delivery 8. Risk management 9. Requirement changes 10. Other requirements and issues

Continue The commercial part of proposal deals with monetary aspects. It includes details such as rates for manpower for seniority levels, travel costs, hardware costs, data communication costs and consultancy costs. The proposal is prepared by project leader with the salesperson.

Contract It is a legal document and covers areas that are not directly related to the software development. Contract has following type of clauses:- 1. Scope of services 2. Estimates 3. Rates and payment 4. Hardware and software 5. Confidentiality 6. Security 7. Rights on data 8. Nonsolicitation 9. Warranty 10. Limitation of availability 11. Indemnity

Continue 12. Service level agreements. Besides this there are clauses on jurisdiction, arbitration, termination of contract, payment defaults etc. The clauses need negotiations between client and vendor or between lawyers of two organization. The continuous clauses are clauses in which the interest of the customer and vendor differ. They include clauses such as liability, rate, nonsolicitation, penalty and warranty.