Managed IT services: contract governance failure and renewal
A university signed a four-year £2.4m managed IT services contract with a mid-sized provider. The SLA promises 99.5% availability; service credits are 2% of monthly fee, capped at 10% a year. In the last quarter availability was 97.8%. The provider submitted 14 change requests, nine without written approval, and approvals now take six weeks. There is no contract manager; the IT director acts as relationship owner and also sits on the provider's customer advisory board. Invoices are paid without checking deliverables. The provider claims £180,000 for 'out of scope' work. The contract requires written variations signed by both parties; none exist. Renewal is in 14 months, and the university's new digital strategy depends on stable services. The provider is also bidding for a separate £900,000 network upgrade.
1. Identify the contract management failures and recommend immediate actions.
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The failures are structural and behavioural. Structural: no named contract manager, no obligations register, no performance dashboard, no change-control log, and no invoice-validation process. Behavioural: the IT director combines relationship ownership with a provider advisory role, creating a conflict of interest; changes are accepted informally; invoices are paid without evidence.
Immediate actions: appoint a contract manager and separate the commercial and relationship roles; set up a governance board with minutes; reconstruct a change log and require written variations for all future work; measure availability and calculate service credits for the quarter; validate the £180,000 claim line by line against scope and approved changes; suspend payment of disputed amounts while continuing undisputed invoices; issue a contract performance notice; and create a risk register. The conflict of interest should be declared and managed, with the IT director removed from provider advisory duties or from contract decisions.
Service credits: 2% of monthly fee per breach, capped at 10% a year. If availability is below 99.5%, the contract wording determines whether credits apply monthly. Calculate from the monthly fee of £50,000 (£2.4m/48). A 2% credit is £1,000 per month; four months would be £4,000, not the full 10% cap unless the contract says otherwise. Do not simply withhold money without checking the clause.
2. Advise how to handle the £180,000 claim and prepare a negotiation plan for renewal.
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Treat the claim as a variation dispute, not a payment negotiation. Check the scope, the change-control clause, emails, timesheets and deliverables. Ask for a cost breakdown and evidence that the university authorised the work. If work was requested informally but not signed, there may be a quantum meruit or estoppel argument, but the contract requires signed variations. Make a without-prejudice settlement offer that nets off service credits and any overpayments. Escalate to mediation if the provider refuses evidence.
For renewal, build a BATNA: market-test the service, obtain indicative pricing, and cost a transition. The provider's poor performance and the conflict issue are leverage, but the university depends on stable services, so avoid public threats. Negotiate first on service improvement and governance, then price. Seek: realistic SLAs, uncapped or higher service credits, a change-control protocol with turnaround times, open-book pricing for changes, exit assistance, data return, and a performance bond or parent-company guarantee. Use the network upgrade bid as a separate commercial matter; do not link it informally. Set a walk-away position and a transition timetable.
3. Explain why service credits alone may not protect the university and what else should be in the contract.
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Service credits are a price adjustment, not a remedy for lost teaching or reputational damage. The 10% cap may be far below the cost of an outage. Credits also do not force the provider to improve if the fee is small relative to the credit. The university needs: accurate measurement and root-cause reporting; a right to require a remediation plan; step-in rights for persistent failure; termination for convenience and for poor performance; data backup, return and deletion; audit rights; and a business continuity plan. It should also require problem-management KPIs, not just availability. In renewal, link credits to critical services and consider a service continuity guarantee. Finally, the university should own the contract management capability, because a contract is only as good as its administration.