Managing service disruptions during the COVID-19 pandemic

As companies adapt to protect their workers and customers from the spread of COVID‑19 using work‑from‑home (WFH) and other social distancing policies, their systems and networks are likely to be strained in ways that have never been fully tested. Technology suppliers, themselves coping with COVID‑19, may not adjust to the changing circumstances as quickly as necessary without impacts on their customers. If your organization is experiencing service disruptions, it may be appropriate to take one or more of the following steps.

Confirm demarcation of responsibility

Check your contract or operational manuals to confirm that the technical problem is actually the supplier’s responsibility. Sometimes service arrangements are not entirely clear on this point, or they anticipate that the customer has retained certain responsibilities, such as maintaining a separate back‑up server or installation of software. More frequently, the supplier’s performance is dependent on something your organization was supposed to do (such as selecting system configurations or settings) or make available (such as providing operational data). Your organization may have to address a problem on your side of the demarcation point to enable the supplier to perform without disruption.

Request remedial action

Get in touch with the designated supplier representative to notify them of the issue and ask for their plan (with a timeline) to resolve it. If they are not responsive, they may be scrambling too, or may have limited connectivity due to capacity limitations or changes to the supplier’s systems, or that person’s WFH set‑up. The representative may be dealing with a personal situation involving COVID‑19. The situation calls for an escalation in the communication chain. Go directly to a more senior person in the supplier organization to address the issue.

Determine whether there has been a deliberate suspension of service

Be prepared if the supplier has suspended the affected service, either by exercising a contractual right to suspend, or by suspending service in breach of contract. Some contracts (e.g., for software-as-a-service) allow the supplier to suspend services for a variety of reasons, such as overdue/missed payments, misuse of the services by the customer or the occurrence of a security incident. To ensure service continuity, your strategy for addressing a suspension during a crisis may be different than during ordinary circumstances, requiring you to take steps or make payments you would not usually consider. If you believe the suspension was done in breach of your contract, keep in mind the points on dispute resolution below.

Trigger business continuity or disaster recovery plans

Confirm that the supplier has initiated their business continuity or disaster recovery plan if a triggering event has occurred. Do not assume the supplier is aware your organization has been impacted by a service disruption. In some contracts, the supplier has discretion to decide whether the situation is considered a triggering event. Recovery point objectives and recovery time objectives typically are calculated from the date and time the event is declared. The sooner you communicate the impact of a disruption to the supplier, the sooner contingency plans will (or should) be executed.

Identify and manage project delays

Now is a good time to check in with project teams (yours and your suppliers) to plan for anticipated delays caused by COVID‑19 if remote access or other accommodations are not enough. Many contracts for technology implementations include project milestones, together with payments for their successful completion, and remedies (e.g., liquidated damages) for delays. Once you have enough information to determine the extent that milestones may be impacted and whether the supplier should be excused from any deadlines, use the change order process proactively to make any contract adjustments before it turns into a dispute.

Monitor and report service levels and incident management

If your supplier has started missing service levels for ongoing services, prioritize the supplier’s incident management response and root cause analysis obligations. Suppliers usually report their service level performance sometime after the end of the month that is being measured, but do not wait until then to communicate with them about impacts on your business. Log incidents using the reporting tool or mechanism specified in the contract and follow the incident management process closely. Given the broad impacts of COVID‑19, it may be necessary to focus on acceptable workarounds rather than permanent resolutions in the short‑term.

Use change order procedures effectively

Not all service issues need to result in a dispute with your supplier. In some circumstances, you and your supplier will discuss and come to agreement on appropriate modifications to the contract (e.g., to timelines for ongoing projects). When having these discussions with your supplier, the best practice is to go through the established change order procedures set out in your contract. These procedures usually include prescribed timelines and requirements for submissions, provisions for types of changes that are required or may be rejected, and often pricing principles. Negotiating outside these procedures could put you further behind in the process, especially if you cannot reach agreement.

Consider force majeure

Performance relief for force majeure events is often not hotly negotiated, but at times like these they become some of the most scrutinized contractual provisions. Please refer to our recent bulletin on interpreting and applying force majeure clauses.

Engage in dispute resolution where necessary

Pragmatism in maintaining your operations in the short‑term does not require you to waive your contractual rights and remedies in the long‑term. While working to resolve service disruptions, keep accurate records of the disruptions, the impacts on your business and your correspondence with the supplier. Get advice from a litigator on maintaining privilege and avoiding prejudice in your internal and external communications. Insist on clear communications from the supplier. If appropriate or necessary, trigger formal dispute resolution proceedings with your supplier in order to protect your interests and encourage supplier compliance.

Read all our coronavirus-related updates on our COVID‑19 guidance for organizations resource page.

To discuss these issues, please contact the author(s).

This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.

For permission to republish this or any other publication, contact Janelle Weed.

© 2020 by Torys LLP.
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