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Beware the scope creep: Establishing service levels

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Headnote

Ian Sadler considers the vital question of constructing an outsourcing contract The assistance of Or Thomas Reith of Menold & Aulinger Stuttgart and Jon Edgell and Robert Shooter of Tft & Lewis, London, is gratefully acknowledged

This was to be the year when the buyer and its long established provider of professional tax services really got it right. A modicum of advance planning, some loose timetabling arrangements and even looser commitments from both parties to deliver to those timetables would mean that the annual tax compliance cycle should proceed effortlessly. Historic disputes would be consigned to the past, quality of service would be assured and a blame culture replaced by a harmonious working relationship.

And sometimes it really can come true. More often than not, of course, when the pressure is on, misunderstandings between the parties arise about what was really envisaged within the agreed range of tax services. Accusations are made of the buyer that it has not fulfilled its part of the deal and that the scope of services has quietly, often unwittingly, crept beyond its intended boundaries. Both parties end up in what can only be described as a de facto re-scoping exercise as blame is allocated, and price redefined. Once again the buyer and provider relationship is tested to the full until both parties make up with promises to do better next year.

Outsourced arrangements begin with no less enthusiasm and no fewer statements of intent. The main difference lies in the fact that the negotiated levels of expected service, together with the accompanying scope and price for the provision of that service, are laid down in well-defined contractual detail on a prospective basis. While this approach is not a panacea and disputes can always arise, a well understood, mutually beneficial outsourcing contract should also...