Once a supplier has been selected for an engagement, the next step is to put all the requisite contractual elements in place. In the end-to-end lifecycle model, Sourcing now works with Legal and Finance to insure your interests are represented and protected.

Master Services Agreement

The Master Services Agreement (MSA) governs the legal aspects of the supplier-client relationship. We strongly recommend executing an MSA with a supplier that has been properly vetted with and approved by your Legal and Finance management for any strategic large engagement and for any situation where repeat work is likely. Having a MSA in place accelerates the engagement start-up process because Statements of Work (SOWs) are then only required to describe the specific work to be delivered by the supplier; otherwise the complete Terms and Conditions (Ts&Cs) of the supplier need to be included and approved separately by your Legal department. Depending on any support, maintenance, or intellectual property (IP) issues identified, this approval can significantly extend the amount of time required to sign off an otherwise completed engagement-ready SOW.

Following is a checklist of points which any services MSA should cover unless there is a specific reason to exclude. Always take into account the specifics of the type of work or solutions to be delivered.

• Statement of Work (SOW) clause - Must be executed to start project work, attach a sample as appendix
• Service Level Agreements (SLA) - Note and explain
• Non-hire and non-solicitation
• Performance of services - Only use supplier's personnel
• Cost Of Living Adjustment (COLA) - Rate increases clause
• Security of sensitive cardholder data - PCI Standard clause
• Business Continuity Plan (BCP) and Disaster Recovery (DR) processes in place and tested annually
• Permission required to transfer client work to another geography; some client work cannot be executed off-shore owing to governmental or other contractual constraints
• SSAE 16 or similar certifications on controls
• Identification of critical resources
• SLA and penalty clause for attrition of critical resources
• Volume Discounts - Plan for break on volume
• Confidentiality - Definition of confidential information
• Employee Confidentiality - Proof that employees receive training at induction and that training and attestation are conducted annually
• Proprietary Rights - Retained rights, deliverables, supplier materials, ownerships
• Indemnification, representations, warranties, and covenants clause
• Limitation of liability clause
• Term and termination clause
• Publicity - Permission to use either party's company name, logo, etc.
• Insurance - Liability, bodily Injury, property damage, professional liability (errors/omissions), employee dishonesty
• Dispute resolution
• Business rcovery and force majeure - Include health events
• Client code of conduct to be added to all MSA's

Statement of Work

The Statement of Work (SOW) defines specifics of the engagement which the supplier is contracting to deliver to the client. It typically includes:

• Scope of Work — work to be done in detail, preferably referring to completed specifications; hardware and software involved and nature of the work to be done
• Location of work — where services will be delivered, both staff and equipment locations
• Period of performance — anticipated start and end dates; any hard dates for key deliverables; hours worked per day if not standard or specified by MSA
• Deliverables schedule — what work output will be provided to the client and when
• Applicable standards — industry and/or client-specific standards to follow in delivery of the engagement
• Applicable Metrics — these can include productivity, defect prevention and/or resolution, schedule slippage, work effort over-runs, and so on; these may also factor directly into acceptance criteria (following)
• Acceptance criteria — how the client will determine the engagement deliverables are acceptable, also the acceptance process and approval authorities
• Special requirements — additional requirements regarding staffing qualifications, travel which is/is not included as part of the engagement, and so on
• Remedies — any specific remedies if the client cannot honor their obligations to provide certain information, if the supplier is unable to meet specific hard dates, and so on; these are typically not required if an MSA is already in place which includes these; the more that can be specified in the MSA, the simpler the SOW for each specific engagement
• Type of contract and payment schedule — typically fixed prices or time and materials; in either case there is typically an invoicing schedule which is tied to project deliverables and acceptance thereof; we recommend withholding 5% to 10% of the total engagement cost until the warranty period (if applicable) has completed successfully
• Any other miscellaneous items

Whenever you consider engaging an outside supplier, you need to factor in the time required to select a supplier and to put an executed SOW in place prior to commencing work, as indicated in our project RFP sample timeline. This is why it is important to pre-qualify suppliers and to have a robust MSA in place with suppliers who are regularly engaged, so that the SOW process and the SOW itself can be streamlined.