Some contracts make 'a mockery of methodology'

Lawyer Michael Wigley reveals some traps on the legal side of IT

There’s a move within the industry to bypass the costly and lengthy process of arbitration where contracts are in dispute, says Wellington IT contract lawyer Michael Wigley.

“This follows what the building industry has done where, instead of using arbitration, which may take up to a year to get a resolution, the two parties employ an independent expert and go for a quick and dirty decision,” he says. “They take a risk but it’s quick. A year is too long in the IT industry. I expect more of this over the next year.”

Wigley is president of the Technology Law Society and has been involved in contract and other IT-related law for the past seven years.

While at university, he worked part-time as an IBM mainframe operator, for organisations such as BP and the Apple and Pear Board.

“I became a commercial litigator but when I went out on my own, I migrated my practice to IT and telecommunications,” he says.

He is one of two IT litigators in New Zealand but says he is surprised how little work there is of that nature, particularly since a high proportion of contracts are dysfunctional.

“Most contracts are waterfall contracts, which are more often than not honoured in the breach rather than being compliant. It makes a mockery of methodology.

“Vendors have contracts that look like one thing but do something entirely different.”

He defines waterfall as drilling down into more and more detail with milestones along the way.

“It’s usually impossible to get acceptance criteria at the beginning of the contract and in some circumstances the contract will be unenforceable because you may not know what the key deliverable is.

“Perhaps 80% of all waterfall contracts don’t have acceptance criteria set at the start, so they are hugely uncertain.”

Wigley says his company handles scores of contracts each year.

He is of the view that a contract could be written within half an A4 page.

Why half a page? “In the very imperfect world of IT, no contract can cover more than the key points.

“Best industry practice is used as a benchmark, which is construed to mean ‘to a reasonable standard’. That’s the lawyer’s classic approach.

“In New Zealand, that doesn’t necessarily equate with international best practice because the customer may not want to spend that much, so it's subject to refinement and variation.”

Wigley notes that scope creeps — time and money-consuming changes requested by customers after the commencement of a project — make their way into many projects under the guise of change control.

“We think having the right people on board is far more important than a contract. The other major factor in risk mitigation is day-by-day monitoring of the project by the customer. However, good project managers are hard to come by.”

Another major issue is what he terms a huge lack of understanding by customers of intellectual property. “They think they own software development but if they want it to work, the best way is for the vendor to resell it and thus commit to redevelopment.

“It’s a huge issue for government in New Zealand. The Government has billions of dollars invested in software that is locked in and going to waste.”

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