08 Implementation Contracts and Warranties

7/29/2019 08 Implementation Contracts and Warranties

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CONTRACTS AND

WARRANTIESBSMH 3093 HUMAN RESOURCEINFORMATION SYSTEM


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Objectives

At the end of this topic, you should be able to:

discuss the role of contracts;

explain the service contracts;

discuss the financial options in service contracts;and

determine the provisions for an adequate softwarewarranty.


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The reasons why we need a goodcontract are (Meade, 2003)

It tells what the software is going to do

It specifies what the product is going to cost

It spells out the support that the client will receive

It spells out any exceptions or special requests the client may havemade

It gives the client a basis for a formal grievance


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Contracts Contract is a formal

written agreementbetween twopeople/organizations oncertain business

agreements (Ceriello &Freeman, 1991).

It is a binding agreementbetween two or moreparties for performing, orrefraining fromperforming, somespecified act (s) inexchange for lawful

consideration.


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The main role of contracts

it clarifies responsibilities and limits for individualsor entities involved in a business relationships.

some rules apply:

1. the contract cannot encompass all eventualities, butit should cover the major risks involved and clearlyset forth the intentions of both parties;

2. the contract should be written, executed and filed;

and3. the project team should use legal counsel indeveloping and negotiating contracts because of thehigh value of the software purchase and the evenhigher cost of failure.


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Types of clauses in contracts

indicate the overall

business relationshipandGeneralclauses

cover the objectives,responsibilities, andlimits of the project.

specificclauses


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Software Contracts

A typical software contract must deal with avariety of interrelated issues such as the qualityof the system, timeliness of delivery, the effortand cost of the project, the contract payment andthe post delivery of software support.

It is not an actual purchase of software but more

to the license of using a certain number of copiesat a certain number of locations.


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Software Contracts: Key negotiating

points1. Defining clearly the functions of software,2. Defining the operating characteristics of

software,

3. Software vendors may not have the requiredassets and resources, and

4. The risks to consider when buying HRISsoftware (for example, non-performancesoftware package, vendor solvency,infringement, progress payments, productquality, excessive resource usage, and staffqualifications.


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Issues relating to HRIS contracts

Negotiating with theconsultants

Financial options in

service contractsa) Fixed-price contract

b) Time-and-materialscontract

c) Cost reimbursementcontract

d) Retainer contract


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Fixed-price contract

the simplest and classic contract

The consultant/service provider and client(project team) must agree on the price to be paid

for the HRIS project. This price cannot be changed unless the scope of

work is changed, and the consultant/serviceprovider is entitled to payment only if thecontract is completed successfully


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Time-and-materials contract

The client (project team) and consultant/serviceprovider agree on the amount to be paid forHRIS services.

The total amount paid depends on the numberof hours worked plus material at cost.

fees-and-expenses contract.

used when it is not possible to estimate theextent or duration of the work or to anticipatethe total costs.


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Cost reimbursement contract

Has some characteristics similar to both time-and-materials and fixed-price contracts

The consultant/service provider is reimbursedfor the costs it actually incurs.

A total cost estimate will be determined at the

beginning of the cost-reimbursement contract,to allow the project team to budget for the HRISproject and to establish a maximum amount forreimbursement.


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Retainer contract

used when the project duration exceeds sixmonth.

The consultant/service provider will fix number

of days per month in order to charge a lower rateover the period.

The project team needs to guarantee that the

consultant /service provider will remain on theproject throughout the period.


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Factors in choosing a financial

arrangement for consulting services

High

Retainer

Cost

Reimbursem

ent

Project

Uncertainty

Low

Fixed Price Time and Materials

Low Medium

Risk

High

Figure 5.1 Factors


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Warranties

Refers to a contract thatprotects the client in theevent of certain types ofproblems, defects, or

deficiencies in theproduct or serviceprovided.

describes the conditionsunder, and period during,which the vendor willrepair, replace, orcompensate for thedefective item withoutcost to the client.


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Some of the provisions for a good software

warranty (Ceriello & Freeman, 1991, p.246)

The vendor agrees to replace defective disks or tapeson which their software is shipped.

The vendor guarantees to fix any bugs that occur

within a given time period. The vendor will make updates and revisions

available at nominal or no cost. The vendor states in writing that the HRIS software

will run in the clients computing environment. The vendor warrants that the software conforms to

the vendors own specifications for performancecriteria, such as run time, response time, andmaximum downtime.


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QUESTIONS???

08 Implementation Contracts and Warranties

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