Marketing Vice President Roger Smith Angrily States:

Marketing Vice President Roger Smith angrily states: "I am the customer." As such, he expected the contractor to follow his request. What are the merits of Mr. Smith's assertion? To what extent is the contractor obliged to do what the customer orders?

First, Mr. Smith's assertions that he is the customer are non-meritorious. Smith is not involved in the contract in any individual capacity. XYZ Company is the customer. It does not appear that Smith was a signatory to the contract, and there is nothing in the hypothetical scenario to suggest that the contract gave Smith any type of decision-making authority or ability to direct the work of Computer Software Solution, Inc. Instead, given that McMahon was XYZ's project leader and engaged in all of the contracting duties, one imagines that McMahon was the signatory on the contract. The contract should have specified a contact point for direction from XYZ Company, but, even if it did not, Smith would not be the client; the company would be the client and Computer Software Solution, Inc. would be reasonable in expecting a consistent contact from the client.

A contractor is obliged to do what the customer orders to the extent that the contract between the parties obliges him to do what the customer orders. In this instance, the contract between the parties was the result of XYZ's developing a Statement of Work (SOW) and a Request for Proposal (RFP) based upon the steering committee's business requirements. One would assume that this RFP matched the SOW and that the contract terms were aligned with the RFP. What Smith began to seek was a project that was well-outside of the parameters described in the RFP, which means that the contractor would not be obliged to provide those services.

2. How should Francis handle the unexpected request from Roger Smith?

Francis should respond to Smith's demands by stating, "Actually, Mr. Smith, you are not our client, XYZ is our client, and what you are telling me to do is to make changes that would conflict with the written terms of my company's contract with XYZ. Please do not misunderstand me; my company is capable of making those changes and is more than willing to make those changes, but we will not make those changes without first making changes to the underlying contractual agreement, which prohibits verbal changes to the contract agreement, because doing so would put my company in breach. Your company submitted a RFQ, and our contract bid complied with the terms outlined in the RFQ, which are contained in our contract. My company has expended considerable time and effort complying with the terms of the original contract, and changing it at this date would put my company at a disadvantage because your requests are outside of the terms of that original contract. Moreover, you were not a signer in that contract. For this project's duration, I have been told to work with Mr. McMahon. My understanding is that McMahon is in charge of the steering committee that is heading this project. If I were to implement changes to this contract without input from the steering committee, I would be in breach of the contract. Therefore, what I propose is that you, I and Mr. McMahon plan a meeting where you outline the terms of the changes you need made to the contract, so that I can determine the additional costs associated with those changes and what new project deadlines would be, and then we can modify our existing contract to cover those changes."

3. How can effective change control procedures help Steve and Francis deal appropriately with this situation?

In a project of this size, no significant changes should be made without prior written agreement of both parties; to do otherwise would expose the parties to allegations of breach of contract. Therefore, in this scenario, an effective change control procedure would need to, at the minimum, specify the type of writing that could change the contract and identify a person or persons within each organization with the authority to enter into those changes. From the hypothetical scenario given, it is impossible to determine whether or not the contract between the parties had this term. Even if it did not, in most states if contracts exceed a specific dollar amount, and this one appears as if it would exceed the floor amount for most states, then any changes to the contract must be in writing in order to be valid.

However, an effective change control procedure is about more than the written guidelines governing the agreement between the parties; it is about how to implement change in a way that keeps an arrangement sufficiently flexible without creating an undue burden for any party to the contract. In this scenario, there does not appear to have been any communication issues between Steven and Francis; instead the change that they were being asked to make came from a third-party source of information. The hypothetical does not suggest that the two men will be unable to reach an agreement, but it does suggest that both of them may have difficulty determining what changes to make because they were both complying with the terms of the original agreement. In this scenario, meetings between both of the them with Smith, who was initiating the changes, would be critical. They cannot begin to manage the change without having a greater understanding of what change is requested.

4. If Francis accedes to the request of Roger Smith, what would be the possible consequences?