Contract Management Mechanism

THE CONTRACT MANAGEMENT MECHANISM

Effective from 22 March 2006, updated 1 June 2007 (Issue 2)

If you wish to invoke this Contract Management Mechanism at any time, please contact the BT team with whom you are negotiating the Contract for your specific product.

Background to Contract Management Mechanism

The Contract Management Mechanism (“CMM”) Undertaking  relates to the requirement to agree a process for Communications Providers and BT to address issues that arise when negotiating terms and conditions of SMP Products (as defined in the Undertakings). This document sets out the agreed process.

The CMM was set up to provide Communications Providers with an efficient and effective way to escalate and resolve issues that arise when negotiating terms and conditions of supply with BT.  The CMM is a tool that can be used to assist  Communications Providers to negotiate reasonable contracts from a commercial and competition law perspective in markets where BT has significant market power (eg. where appropriate terms and conditions that emulate those that would prevail in a fully competitive market).  As part of the 2005 Telecoms Strategic Review BT signed an undertaking to provide the CMM.

The CMM was reviewed at the end of 2006 in accordance with the original clause 4 which provided that a review would be undertaken within nine months of the CMM coming into effect.  Some minor changes were agreed following that review.

If you would like to access the version 1 of the CMM it is available here

1. Definitions

"SMP Products" means SMP Products as defined in the Undertakings provided by BT to Ofcom, dated 21 September 2005 and effective 22 September 2005;

"CMM" means this Contract Management Mechanism.

"Communication Providers" means electronic communication providers who purchase services from BT;

2. Scope

2.1     The CMM will apply to all issues arising out of the negotiation of terms and conditions for BT contracts of supply for SMP Products in relation to:

(a)     a Reference Offer for new SMP Products; and

(b)    the review or variation of existing terms and conditions for SMP Products in accordance with the relevant contract (ie. the contract in place between BT and the Communication Provider governing provision of the service) or as a consequence of a regulatory right of either party; and

(c)     provisions covering the way in which a contract is reviewed or varied eg. where one party has a unilateral right of variation, or provisions covering the position where a CP has objected to terms and conditions it is being asked to sign up to.

Although a dispute can be raised on a specific term or condition under a contract as referred to above, the CMM will take account of the overall context in which those terms and conditions sit.  Communication Providers and BT recognise that to make a decision as to what would be considered a reasonable term or condition under the contract, the contract as a whole will have to be taken into consideration.

2.2     The CMM will relate to all contracts for SMP Products or any initiative which seeks to consolidate the contracts for a number of SMP Products eg. by way of a Master Services Agreement.

2.3     Implementation of the CMM will be on an issue and / or issues specific basis and only after negotiations on the issue(s) have reached an impasse.

2.4     The CMM can be invoked by one or more Communication Providers and BT undertakes to comply with it if it is invoked by a Communication Provider.  Use of the CMM is optional for Communications Providers.

3.      The Contract Management Mechanism

3.1     The parties to a dispute shall use their reasonable endeavours to resolve the dispute and shall have a period of 30 days from the date the CMM is invoked, to escalate and discuss the issue internally. 

3.2     If the dispute is not resolved within 30 days of the matter being raised, the parties may agree to either:

(a)     refer the dispute to a mediator in accordance with paragraph 3.3 below; or

(b)     pursue any other dispute resolution forum which the parties agree is appropriate; and

BT shall pay 50% of the costs of the mediator or such other dispute resolution forum subject to the maximum cap set out in paragraph 3.6 below.

3.3     If the dispute is referred to a mediator:

(a)     the mediator will be appointed by agreement of the parties to the dispute. If the parties fail to agree within 3 days of a proposal by one party, the mediator will be appointed by the Chartered Institute of Arbitrators’s ‘Independent Dispute Resolution Service’;

(b)     all negotiations connected with the dispute will be conducted in confidence and without prejudice to the rights of the parties in any further proceedings; and

(c)      the mediation process shall be as set out in the agreed document entitled ‘The Contract Management Mechanism (CMM), Cost-controlled Mediation Procedure’

3.4     Subject to paragraph 5 below, if the parties to a dispute are not prepared to agree to it being referred to a mediator or fail to reach agreement within 2 months of the mediator being appointed then either party may refer the dispute for early neutral evaluation. If the dispute is referred for early neutral evaluation:

(a)     the expert will be appointed by agreement of the parties to the dispute.  If the parties fail to agree within 3 days of a proposal by one party, the expert will be appointed by the Chartered Institute of Arbitrators’s ‘Independent Dispute Resolution Service’; and

(b)     all negotiations connected with the dispute will be conducted without prejudice to the rights of the parties in any further proceedings; and

(c)     the process for the expert non-binding decision shall be as set in agreed document entitled ‘The Contract Management Mechanism (CMM) Early Neutral Evaluation Procedure’ ; and

(d)     where appropriate, the expert shall be guided in reaching a decision by the need to achieve terms and conditions that emulate those that would prevail in a fully competitive market; and

(e)     the expert shall be free to consult Ofcom on matters of regulatory policy relating to the dispute. 

BT and the Communication Provider shall each pay 15% of the cost of the expert.  The expert shall allocate the remaining 70% of the experts cost to either or both parties as appropriate taking into account the outcome of the matter and the conduct of the parties.

3.5     If the parties engage the Chartered Institute of Arbitrators’s ‘Independent Dispute Resolution Service’ under this Contract Management Mechanism then the framework documents referred to at 3.3(c) and 3.4(c) shall apply to that engagement.

3.6     The payment of costs under paragraphs 3.2 and 3.4 above shall be subject to a maximum cap of £10,000 for each party per dispute and £500,000 for each party in total per annum across all disputes covered by the CMM.

4.      All disputes shall be eligible for mediation or other dispute resolution forum in accordance with paragraph 3.2.  Where there is a dispute relating to the following categories of issue then unless agreed otherwise by the parties, that dispute shall not be eligible for early neutral evaluation:

(a)     pricing and payment terms;

(b)     limitation of liability or exclusion of loss provisions (save to the extent that they relate to clauses with uncapped liability on the part of the Customer);

(c)     regulatory policy;

(d)     network security or integrity;

(e)     fraud or issues relating to artificial inflation of traffic;

(f)      network policy;

(g)     credit vetting policy and terms (but not the process or application of them);

(h)     termination rights:

(i)      relating to insolvency or ceasing to trade;

(ii)      relating to repeated or persistent breach;

(iii)     which provide the party in breach with the opportunity to remedy that breach;

(iv)     for convenience; and

(v)      relating to change of control of BT or change of legal ownership of BT.

(i)      intellectual property rights; and

(j)      third party financial or performance guarantees

Any other issue (including issues relating to forecasting and service levels) will be eligible for early neutral evaluation.

5.      Nothing in the CMM shall prevent a party from referring the dispute to Ofcom in accordance with any right (if any) that party may have.

6.      Ofcom may, on giving written notice to the relevant parties exclude any issue from being referred under the whole or any part of the CMM in circumstances where, taking into account the significance of the issue, Ofcom considers the use of the CMM (or such part of the CMM as is to be disapplied) to be an inappropriate mechanism for attempting to resolve the matter. In such cases, the CMM shall be deemed amended as appropriate to give effect to Ofcom’s written notice.

7.      This CMM shall be subject to a review at the later of:

(a)     twelve months from the 1 April 2007; or

(b)     six months after the CMM is first used.

The review shall be carried out by BT and any Communications Providers who wish to participate in that review to determine the effectiveness of the scheme as envisaged by the original undertaking.