Tips on Negotiating the Acquisition of a Telecommunications System

When it's time to replace your telecom system, the devil is in the details - and there are a lot of details.

Virtually every business depends on its telecommunications systems - and the bigger the company, the more crucial, and the more complex, those systems become. When the time arrives (and trust me, it will arrive) to replace an outdated or under-sized telecom system, the company official(s) responsible for making the necessary arrangements will be faced with a daunting project. Whether you're a knowledgeable Chief Information Officer or simply the luckless official on whose desk the job happens to land, you will need help. Even the most experienced CIO is unlikely to list acquisition and implementation of a new telecommunications system among his or her day-to-day tasks. And the price tag on such a project routinely exceeds the average CIO's spending authority, meaning other company officials will be involved in approving and overseeing the process.

Most companies outsource their telecommunications services: that is, the user does not build, operate, own or maintain the necessary infrastructure, but instead leases services on infrastructure built, operated, owned and maintained by a company dedicated to providing such services. (There are some exceptions. For example, some businesses, utilities and governmental agencies rely on private radio alternatives, such as Project 25 (P-25) land mobile radio systems (LMRS), distributed antenna systems (DAS) and internal telephone systems.) This post is intended to provide some basic direction to CIOs or other corporate officials about to embark on the procurement of a conventional telecom system.

The process entails multiple steps, each of which requires deep familiarity with (among other things) the company's needs and resources, the available technology and the myriad pitfalls to be avoided when soliciting and negotiating with potential vendors. The system must be designed to best meet the enterprise's present and future needs. A comprehensive request for proposals (RFP) must be developed and distributed. Responses to the RFP must be reviewed and evaluated critically. Once a vendor has been selected, contracts must be negotiated, and once a deal has been signed, the vendor's performance must be carefully monitored. It's a long process, often stretching over years (the negotiation of acceptable arrangements with the vendor itself may take up to a year). Preparation at each step of the way is key.

Here are some tips to assist in planning and execution.

1. Assess your present - and future - needs. Medium-to-large scale telecommunications systems are complex and must be tailored to fit the particular needs of the user. It's not like buying a car or other consumer item with standardized functions and features and a relatively small menu of customizable options. To the contrary, a sophisticated telecommunications system must be purpose-built, designed for the particular needs of the particular company, with few "standard" features. As a result, no two sophisticated telecommunications systems will be comparable: you won't be able to conduct a simple web search or read Consumer Reports to determine what to buy and how to price it. So your first order of business will be a careful and detailed assessment of the company's telecommunications needs. And since the new system will likely be in place for years, possibly decades, it's important that that assessment include a realistic look ahead to factor in likely future needs.
2. The RFP Process - Get Some Help. Once you have a firm idea of what you expect to need, you should prepare an RFP to solicit bids. This is not an easy chore. Not only must the RFP accurately reflect your anticipated needs, but it should also be carefully crafted to contemplate a wide variety of details that may seem minor at first, but that could loom large down the line as the project moves forward. Expert consultants are available, for a fee, to help draft the RFP, consider vendor responses, negotiate prices, make a vendor selection and even oversee vendor performance. These are professionals who have experience in all aspects of the process. Is it worth it to bring in a consultant? That depends on the size of the project: For a $5,000,000 or larger procurement, you will almost certainly find these consultants can save you money and headaches.
   If you use a consultant who is not an attorney, you should also be prepared to call on an attorney experienced in this area to review the RFP and responses to better ensure that you know what you are getting. Ordinarily, system requirements, functions and features not included in either the RFP or the successful vendor's response will be strongly resisted by the vendor when the final agreement is negotiated, and will likely add to the overall cost if they are to be included. Experienced counsel can help avoid unhappy surprises at the negotiation stage by careful review at the RFP stage.
3. Beware of Vendor Documentation. Vendors are typically masters in drafting documentation that minimizes their own responsibilities while providing the buyer with less protection than the buyer wants and needs. The vendor has been to this rodeo many, many times, and expects to exploit your lack of knowledge of the process and the underlying technical details. The vendor will routinely propose that you use its documentation, which tends to be massive in size. Do not assume that the amount of paper and ink corresponds in any way with the level of protection that the documentation will give your company. It generally does not. Vendor documentation, regardless of its volume, tends to be one-sided, full of puffery, and woefully short on legally enforceable obligations you will need.
4. Scope Creep. Scope creep occurs when the RFP, the vendor's response to the RFP or the final agreements do not provide for all that is required for the procurement of a complete, properly designed and functioning system. The result: unanticipated costs, delays, hassles and overall uncertainty. These can usually be avoided if the RFP and the final documents make clear that the vendor is building a complete system and provide that the vendor is responsible for all construction tasks and equipment other than items specifically identified, in a schedule, as the responsibility of the customer or a third party.
5. Incomplete or Overly Narrow Warranties. While all vendors will provide warranties of some sort, many vendors will attempt to limit the warranties to, e.g., specific pieces of equipment, while ignoring the performance of the ultimate system as a whole. System warranties are a necessity.
6. System Performance Standards. Vendors often resist inclusion of system performance standards - commonly called SLAs or Service Level Agreements - in the final agreement. But such standards are important; they should be identified and defined in the RFP and the final documentation. For instance, system up-time requirements, major faults and minor faults, should all be specified, and the vendor should be required to warrant up-time performance and fault correction consistent with those specifications.
7. Maintenance Requirements. Maintenance agreements are a usual part of the procurement of telecommunications systems. Care should be taken to ensure that the vendor's maintenance obligations are comprehensive and, for example, require fault correction within set times. The maintenance of third party software embedded in the vendor product can be an especially controversial issue, but given the importance of that software in the performance of the system, it must be addressed and resolved early in the process.
8. Obsolescence. Telecommunications system technology evolves at a very fast pace. It is, after all, driven by software which, as we know, is constantly improved. Your telecommunications system may have a useful life of up to 20 years. You need to know that the vendor will support the entire system, including the embedded software as long as you're using it. Alternatively, you should confirm that third party support will be available if and when the vendor stops supporting the software you are using.
9. Post-construction Needs. Many companies acquiring telecom systems - including some with experienced CIOs in charge of the process - give little or no attention to issues that might arise after the system is placed in service. Will spare parts be needed? If so, will they even be available, and what will they cost? How much will maintenance in the post-warranty period cost? Will the software continue to function as needed in the post-warrant period, and will updates/patches be available? Failure to focus on such details can lead to considerable disappointment and added expense down the line.

This list provides, at most, a high-level summary of general concerns that should be addressed in sophisticated telecommunications system procurement transactions. Obviously, each of these concerns in turn entails myriad component details, all of which should also be addressed. Successful completion of the process requires timely attention to all aspects of the deal. As daunting as all this may sound, it can be done, especially if you take advantage of experienced advisers who know the ropes.