Using a Mediator to Preserve a Troubled Commercial Relationship
Is your company a user of technology services that is having a dispute with its services provider? Is your company a technology services provider having a dispute with a customer? Are you worried about the state of the relationship? Do you want to preserve the relationship? If so, a mediator with deep technology transactions experience may be able to help you resolve the dispute, successfully complete the implementation, preserve your relationship, and avoid litigation.
The Agreement
User Company retained Service Provider to implement a SaaS-based solution (e.g., an HR service enabling employee self-service). Under the Agreement, both parties are responsible for certain aspects of the work. The Agreement contains target completion dates for certain interim milestones and for the implementation of the solution. Under the Agreement, Service Provider’s charges are determined on a time and materials basis with payments monthly and upon the achievement of certain milestones. Service Provider is to use commercially reasonable efforts to complete the implementation within an agreed budget.
The Current State of Affairs
Although the work is continuing, the project is now late, and Services Provider’s charges have exceeded the budget. The parties are highly frustrated with each other. Their relationship is breaking down with the User Company threatening to stop making required payments, and the Service Provider responding by stating that it the payments stop, the work stops.
Service Provider’s View
The Service Provider blames the User Company asserting that the User Company: (i) has not provided clear business requirements in a timely fashion, (ii) keeps changing the requirements it provides, and (iii) is failing to perform its responsibilities in a timely fashion.
User Company’s View
The User Company blames the Service Provider asserting that the Service Provider: (i) promised the solution would meet the User Company’s business needs, (ii) failed to disclose the degree of User Company process change that would be required, and (iii) repeatedly failed to meet key milestone dates.
The Way Forward – Mediation
Although companies typically think of mediation, and mediation is typically employed, following the termination of the underlying agreement and the filing of litigation, an experienced mediator retained prior to termination and litigation may be able to help the parties avoid termination and litigation by helping them to:
- articulate User Company’s business requirements;
- describe the capabilities and processes inherent in the solution;
- identify the gap between such business requirements and capabilities; and
- address the gap by, for example, User Company agreeing to implement some process change and Service Provider agreeing to configure or adapt the solution to better meet User Company’s business requirements.
Moreover, with the assistance of the mediator the parties may realize that, given the costs of project failure, it makes sense for them to:
- reallocate responsibilities for tasks according to the parties’ respective abilities; and
- agree to share the costs of successfully completing the project in a mutually agreeable manner.