Checklist for a Good Contract for IT Purchases - Industry Trend or Event

Health Management Technology, March, 2000 by Richard X. Fischer, Simmi P. Singh

Three specific agreements to protect you when making clinical computing investments.

As the company's CIO, you've identified your organization s clinical computing needs in detail. You've also received input from all the clinical department heads and other users of the system. You've reviewed and priced all the available systems and determined which system fits your needs and budget. You've talked to your preferred vendor, who has assured you that it can deliver all the desired capabilities quickly and efficiently, without disrupting your existing system operations. All that's left to do is to sign the vendor's standard contract, and you're off and running, right?

Not so fast! Some people might view the contracting process as a bureaucratic exercise that only delays the start of work. But contract development is the most crucial step in the procurement of a clinical computing system. Properly drafted and negotiated, the contract does three things:

[check] Ensures that the vendor clearly understands your expectations of the system's capabilities and the time and expense involved in getting it up and running;

[check] Controls your remedies in the event that the system does not perform properly, and provides protection against cost overruns; and

[check] Guarantees that you will receive the ongoing maintenance, support, and system updates needed to protect your investment and keep up with advances in clinical computing capabilities.

Most vendors of clinical computing systems provide contracts with three agreements: a master agreement, a license agreement, and a maintenance and support agreement. If your project also involves a substantial amount of custom design and programming, then a development agreement may also be needed. Each agreement addresses a distinct part of the services and products being provided, and must be coordinated with the other agreements to provide you with the maximum benefit and protection.

The Master Agreement

The master agreement provides the overall framework for the project, and should:

[check] Clearly state the purchaser's goals for its computing system and the vendor's agreement that its system will meet those goals:

[check] Specify the desired capabilities, including the data elements that should be captured and viewable, the number of users that can be accommodated, the process for determining a person's right to access information, and other applications with which the clinical module should be able to interface;

[check] Specify the ability of the new hardware and software to interface with the purchaser's existing information systems and to be accessible through the existing or planned communications network. Also specify the requirement for the clinical applications to operate properly with existing systems without compromising any portion of the overall integrated system;

[check] Warrant that the new components will operate without programming errors or other defects for a certain period of time, and state that certain commonplace adaptations or custom programming by the purchaser will not void the warranty;

[check] Specify the custom design and programming services, updates, enhancements and new versions that are included in the base fee (as noted above, significant custom programming may warrant a separate development agreement, which should also address the purchaser's economic rights in such programming);

[check] Specify the installation and acceptance-testing schedule--each new program or component must be tested separately and in conjunction with the existing system, on a "dry-run" basis and using real data from the purchaser's operations. The purchaser should be able to witness the test and the agreement should specify how the test results are to be documented and verified;

[check] List the documentation to be provided to the purchaser and, since complete documentation often does not exist at the onset of a programming/installation project, also reference the system specifications agreed to in the negotiation process;

[check] Describe the conditions under which the purchaser can obtain access to the vendor's source code for the purchased programs;

[check] Designate a project manager for the vendor and the purchaser so that both parties have a defined route for communicating with each other about issues. The purchaser should also have the right to approve or disapprove project staff, and should insist that all project staff be experienced on the installation in question--meaning that you should let someone else pay for training the vendor's personnel.

Finally, although it is an unpleasant topic, the parties should specify the purchaser's remedies in the event that the installation falls significantly behind schedule or the finished system does not perform according to specifications. Depending on the situation, such remedies can range from a delay in payment of fees to a partial or whole refund to vendor liability for reasonably foreseeable losses.

The License Agreement

A license agreement permits a certain number of users employed by a licensee to use the licensed software for certain defined purposes. It should address a number of issues, including the following: