When things don’t go as planned: key considerations in relation to problem projects
August 2014 | SPECIAL REPORT: TECHNOLOGY IN BUSINESS
Financier Worldwide Magazine
August 2014 Issue
Development and renewal of IT systems and software remains an important way for companies to gain and maintain a leading edge. This is particularly true in relation to banks and finance organisations.
It is inevitable that from time to time, problems will arise in relation to IT projects.
This article briefly identifies some of the warning signs, and discusses some key considerations that should be taken into account at an early stage. The author of this article is an Australian lawyer, and thus legal comments reflect the Australian law which may differ in significant ways from the laws of other jurisdictions.
Warning signs
It is trite to say that that the warning signs for problem projects include delay, disagreements as to appropriate business requirements and scope, and (at the testing stage) serious or repeated failures to meet acceptance criteria.
But often those involved in a project are too close to it, and too busy putting out fires, to see the bigger picture.
It is important that teams involved in implementing projects step back from time to time and consider whether the project as a whole is on track and proceeding in accordance with the contract.
If it is not, then it is a good idea to get legal advice, and if necessary management support, to get it back on track.
Legal considerations
There are many legal issues to be aware of when managing projects with problems. This article briefly considers some of them.
First, the contract is an important starting point. Make sure you are familiar with relevant clauses and disputes processes. Use the processes in the contract where they are appropriate, and do not be afraid to vary them where that is the best thing to do. If you do vary them, then do it in a clear way and in writing.
Second, the contract must be read in commercial context. Courts apply an objective approach to interpreting a contract which takes into account the commercial context known to both parties when it was executed.
Third, what is written the contract is usually not the end of the story when it comes to the parties’ rights.
Sometimes customer teams have a sense of false security in a decision to, for example, impose additional requirements on suppliers part way through a project, because the contract does not expressly preclude this. But courts often imply terms in contracts, including, for example, a duty to cooperate. Consequently such conduct can give rise to rights on the supplier’s part. Likewise, if the customer does something which prevents the supplier from meeting a contract deadline, that conduct may have the legal effect of giving the supplier an extension of time beyond the deadline in the contract.
Also, a significant number of Australian technology disputes focus on misleading or deceptive conduct claims based on representations alleged to have been made before the contract was entered.
In addition, it is important to bear in mind that the contract may have been varied other than by way of the formal variation processes. Clauses which require variations to be made in writing can themselves be varied by conduct or orally, which means that they are not always effective.
Fourth, if you disclose legal advice in discussions with the other party, then you may waive privilege in relation to the advice. This means that the advice as a whole may be available to the other party and a court in any litigation. This is important because most advice refers to risks and problems, not just the matters that will assist your case.
Fifth, you can protect communications made with the other party to resolve a dispute so that they are not generally available to the court in any proceedings by making them ‘without prejudice’. There are exceptions to the rule that they are not available, so you should also be aware that this is not universal protection.
You will generally need to have some communications on the record, which means that the best approach is usually to have ‘open’ as well as ‘without prejudice’ communications, in parallel.
Sixth, it is important to get to the facts, rather than relying on overall ‘impressions’ of the project team. In our experience, people at the coal-face of a project are often too close to it to give an objective summary of the parties’ conduct. If the project is going badly, key people are often either defensive (so apt to keep your company’s part in the problems hidden) or disheartened such that they are inclined to take responsibility for everything that has gone wrong. It is usually helpful to speak to a number of people about the key facts, and to also consider key emails and project documentation.
Seventh, it is a good idea to have a clear communications and document strategy. It is important to ensure that key documents are preserved (as a Court may make draw an inference a document would not have helped your company if it is not available). It is also important to ensure that communications are conducted in a professional way, as any intemperate comments may become public through any court proceedings. Encourage people to also separate communications made for the purpose of giving or receiving legal advice or for the purpose of proceedings from other business communications. This is important to preserve privilege. Care should also be taken to keep privileged material confidential.
Finally, bear in mind that if a project is large and ongoing, preservation of the relationship may be necessary not only to resolve the dispute but also for the project to succeed. Try to deal with disputes in a fair and amicable manner. Where that cannot be achieved through negotiations, consider options like mediation or expert determination. And also consider whether it is time to reconsider the project plan or the relationship with other party.
Problems and disputes are sometimes inevitable in large and complex projects. They can, however, usually be resolved with the right approach.
Sophie Dawson is a partner at Ashurst. She can be contacted on +61 2 9258 6513 or by email: sophie.dawson@ashurst.com.
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