You signed a long-term deal. It would be embarrassing if, in a few years after signing, the pricing is significantly higher or your service levels are significantly lower than market. Benchmarking provisions are intended to provide a mechanism for ensuring that your pricing and/or service levels are within market (taking into consideration the unique factors applicable to your deal). Set out below are some of the key components of a meaningful benchmarking provision.
NEWS FOR LAWYERS AND SOURCING PROFESSIONALS
Open Banking is an initiative mandated by the UK’s Competition and Markets Authority (CMA) in 2017. It is intended to facilitate better competition in the banking sector by mandating protocols that facilitate the secure sharing of customer-related data of the nine largest banks in the United Kingdom (CMA9) with third-party providers (TPPs).
Open Banking is developed and delivered in the United Kingdom by the Open Banking Implementation Entity (OBIE). The OBIE was established by the CMA and is funded by the CMA9. The CMA’s UK Retail Banking Market Investigation Order 2017 (Order), which applies only to the CMA9, requires the CMA9 to provide their customers with the ability to access and share their account data on an ongoing basis with TPPs through the use of specified application programme interfaces (APIs). This compliments the reforms under the EU’s Second Payment Directive (as transposed in the United Kingdom primarily by the Payment Services Regulations 2017), which requires all payment account providers to permit open access to payment accounts for authorized TPPs, but which does not specify the means of access or prescribe the scope of access in any detail.
In this contract corner, we consider the concepts of “good faith” in commercial contracts under English law.
The General Position Under English Law
The notion of good faith is a complex and evolving concept under English law, and it has important implications for those drafting commercial contracts. In contrast to many other civil (e.g., France and Germany) and common (e.g., United States and Australia) law jurisdictions, there is no general doctrine of good faith either in negotiating or in performing a contract. Instead, parties are free to pursue their own self-interests, so long as they do not act in breach of contract. However, the notion of good faith can still impact commercial contracts in three main ways:
We have all heard the horror stories: system implementation deals costing 300% more than the original budget, go-live dates for development projects being way past the scheduled dates, and deliverables that do not meet the customer’s expectations. These are the stories that keep us lawyers up at night. So what can we do in the contract to incent timely, on-budget performance by the vendor? First, there is no substitute for a detailed and well-thought-out requirements document, which provides the roadmap that shapes the design, build, and deployment. Then, while there is no magic bullet, there are numerous contractual mechanisms to be considered that are designed to provide guideposts and checkpoints to enable success.
Set out below are 10 contractual mechanisms for providing meaningful performance commitments and consequences if the commitments are not met. Maybe you will not need to invoke these mechanisms, but having firm rules may help drive good behavior (you know the old adage, “good fences make good neighbors”). As is always the case, the appropriate mechanisms to be used are deal specific, and not all deals or relationships require the full spectrum of contractual commitments set out below (but some do!).
Please join us for a dynamic webinar on hot issues impacting the structuring and negotiation of ecommerce contracts in 2020. Donald G. Shelkey and Eric Pennesi of our Technology, Outsourcing and Commercial Transactions practice will present and lead discussions on topics including:
- Privacy and Security
- Deals We Expect to See: An Integration Infection!
- 2020 Market Positions
The webinar will take place on Wednesday, December 11, 2019, from 12:00–1:00 pm (Eastern Time). Register here.
For years, there has been a persistent trend toward outsourcing retirement plan recordkeeping and other administrative responsibilities. Although historically more prevalent for defined contribution plans, this outsourcing trend has been accelerating for defined benefit plans thanks, in part, to the prevalence of frozen plans (i.e., no more benefit accruals) and the potential for administrative cost savings. But service providers will be quick to remind plan fiduciaries that lightening the administrative load does not include transferring fiduciary duties. When selecting and monitoring a service provider, one key issue facing retirement plan fiduciaries is their duty with respect to the privacy and security of plan participant data.
As we previously discussed, managing and administering retirement plans also mean managing and protecting an extensive trove of personal data. Although there is no overarching privacy law governing retirement plans, fiduciaries must adhere to the “prudent expert” standard of care in fulfilling their duties, and, in the current environment, it can be expected that courts will be sympathetic to assertions that privacy and security of plan participant data are within the scope of those duties. Given that fiduciaries are personally liable for their fiduciary breaches and considering the cost of a data breach can be in the millions of dollars, the sensible course of action for retirement plan fiduciaries is to be continuously diligent and attentive regarding data privacy and security. This extends to diligence and care in the structuring of the outsourcing agreement.
The Clearing House (the oldest banking association and payments company in the United States) recently released a model agreement as a voluntary starting point to facilitate data sharing between financial institutions and fintech companies.
The model agreement is intended to provide a standardized foundation that speeds up data access agreement negotiations; as the Clearing House notes, “[L]egal agreements between banks and fintechs have sometimes taken 12 months or more to be developed and finalized and have become a significant bottleneck to API adoption.” Additionally, the model agreement is designed to reflect the Consumer Financial Protection Bureau’s consumer protection principles on data sharing and aggregation, providing confidence to the contracting parties that the terms address key regulatory issues.
As mentioned in our recent blog post, Morgan Lewis, led by technology, outsourcing and commercial transactions partner Mike Pierides, hosted a roundtable on aviation technology contracts and issues on November 14 at the PSS2019: Retail Excellence conference. The roundtable included representatives from airlines, airline industry professionals, and technology suppliers.
The roundtable discussion focused on how industry stakeholders manage their passenger service systems (PSS). During the feedback session, Mike noted that his roundtable group’s discussion inevitably centered on the challenges that airlines and suppliers face with this process, and talked about some upfront problems that can occur when entering into a PSS relationship. Namely, the RFP process typically places significant weight on obtaining the lowest price at the expense of both the quality and the scope of that particular PSS relationship, which causes tension among an airline’s procurement, legal, and other departments.
The German Federal Office for Information Security (BSI) has determined the suitability of an industry-specific security standard (B3S) with which hospitals can align their IT security measures. The B3S standard was developed by the German Hospital Association (DKG).
Morgan Lewis partners Mike Pierides and Simon Lightman, in our technology, outsourcing, and commercial transactions practice, and Louise Skinner and Lee Harding, in our labor and employment practice, will be presenting "Ahead in the Cloud: Outsourcing and the Fourth Industrial Revolution" at the 2019 Strategic Sourcing Symposium on November 18.
They will discuss the challenges of workplace disruption arising from the insourcing or outsourcing of talent, and how businesses can ensure that their employer standards are not compromised by such outsourcing. Specific discussion topics will include the following:
- How technology developments are changing the world of work
- The multigenerational workplace
- The rise of automation
- The availability of remote working
The presentation is part of a daylong event in London that will include presentations from leading academics, business professionals, and legal practitioners in the technology industry. To register, visit the Global Sourcing Association event page.