Outsourcing - change of agreement

The ability to make changes in the contract should be taken into account during the preparation of agreement with a specialized outsourcing service provider. This is due primarily to the changing needs of customers and the range of purchased services, the changes in prices, or also with the need to dispel doubts arising from the improper wording of particular provisions.

Renegotiation of the terms of cooperation relates in particular to the situation when a predetermined period of binding agreement is long, and entities are the subject of customized services in the areas where the pace of change and development makes it difficult to predict the shape of the target operating conditions. Need to renegotiate the conditions may also result from the completion of the period of the existing agreement, if the parties express their willingness to continue cooperation with the assumption that adjustments to the existing rules of operation can apply. As emphasized by PB Schary and T. Skjøt-Larsen typically service provider have an advantage over competitors in a bid to sign another contract, which may result from compliance with the existing requirements of the company, using its resources (e.g., in the form of a lease), and knowledge of the operation of the existing partner.

Although included in the agreement possibility to make changes provide protection for both parties, it concerns mainly the company commissioning the services. Dependence on service providers related to its impact on the realization of core business processes cause, that the omission of the provisions of re-establishment of conditions of cooperation might weaken bargaining power of company [Ch. L. Gay, J. Essinger, 2002, p. 112]. Changes in the conditions of cooperation should therefore be carried out on the basis of mutually acceptable procedure, beginning with the procedure of reporting of problems and ending with the procedure of change of agreement.

See also:

• Formalization

Outsourcing - change of agreement — recommended articles

Contract documents — Termination for convenience — Outsourcing — Outsourcing - Agreement definition — Outsourcing agreement — Service Level Agreement — Outsourcing - agreement dissolvement — Outsourcing - Transfer of service — Mutual agreement

References

• Grossman, G. M., & Helpman, E. (2005). Outsourcing in a global economy. The Review of Economic Studies, 72(1), 135-159.