Memo Recognizing Risk
17 January 2010
To: Span Systems Management
From: VP Contracts
Date: April 12, 2010
Subject: Recognizing Contract Risk and Opportunities
This Memo is written to Span Systems management as a result of the contract and contract negotiations with Citizen-Schwartz AG. Citizen Schwartz’s management believes that there has been a slip in the contracted schedule and resulted in poor quality of the deliverable product. Leon Thor Citizen-Schwartz’s negotiator has threatened to rescind Span Systems contract. Both parties have been in discussion, and did not want to rescind the contract or proceed with court actions. To prevent this from ...view middle of the document...
Span Systems and Citizen Schwartz has come to a resolution of the contract disagreements between each company. Span Systems still has work to be done on the specific terms of agreement. In the future we will deal with this by thoroughly reviewing the contract as much as necessary to ensure all aspects of the contract and wording s correct. Once the contract department believes that they have finished the contract, our Legal and contract negotiators will review and make a decision before implementation of the contract. In future contracts, we will have our legal team of contract negotiators, review and make recommendations before we make any decisions on the contract. Our contracts department will review the contracts as many times as necessary to ensure that the wording is to the liking of Span Systems. Like the wording, ordinary changes, was in the contract and should specify what those changes will be. We can take from this experience; we need to make sure the clarity of the contract is good for it to be a successful contract.
With Citizen-Schwartz’s claim that Span Systems has delivered 40% of the project and the quality of recent deliverables has been consistently deficient and claims that performance is not of the quality agreed upon and behind agreed delivery schedule. The contractual agreement on performance stated that neither party can cancel the contract when more than 50% of the promised specifications are completed (University of Phoenix). At the eight-month point, the risk of rescission was on the table by Citizen Schwartz AG with Span Systems completing over half of the software requirements, which would breach the 50% completion clause of the contract. This particular aspect of the contract is favorable toward Span Systems, except for the quality of the software containing five errors per deliverable, which is contrary to the baseline of zero errors required through the measurable metrics agreed upon. Span Systems software developers cites that user and system requirements have grown disproportionately originally determined making it difficult to accommodate within earlier budget and timelines. This is known as Scope Creep, Alexandrou (2011) defines Scope Creep as “Scope creep refers to the change in a project's scope after the project work has started. Typically, the scope expands by the addition of new features to an already approved feature list. As a result, the project drifts away from its original purpose, timeline, and budget.” Citizen-Schwartz has agreed that they have not followed the escalation provision as cited. With the addition in requirements Span Systems cites that Citizen-Schwartz AG project management has exceeded the review and approval times set forth in the contract. To meet the contractual delivery dates and enhance the communications and reporting process, Citizen-Schwarz AG will station a project manager at Span Systems and will be the direct interface for the...