| Outsourcing, or sub-contracting large cohesive blocks of a business’ functions, has application in many aspects of commerce. Perhaps the most developed area is that of Information Technology, where outsourced facilities management contracts have been commonplace since the 1980s or before. The growth of PPPs and PFI projects in recent years has also expanded the amount and degree of outsourcing in the public sector.
VSH have certain expertise in the IT industry but have key knowledge of the use of outsourcing in the transport and logistics industry. Here we advise on everything from warehouse lettings, through delivery contracts to full service third and fourth party logistics contracts where a retailer buys a turnkey operation to get their goods from manufacturer or port of entry, through a storage/aggregation/cross dock site, to their outlets.
This type of contract requires a wide range of legal skills to complete successfully, including, for example:
• Land law - for the acquisition or letting of a site
• Employment law – often large numbers of staff are included in an outsourced operation and these will transfer between operators by operation of law when contractors are changed
• Insurance, liability and indemnity - very large inventory values can be involved and quite apart from ensuring that sufficient insurance cover is obtained, clarity on responsibility for goods as the transit through a distribution network is essential
• Intellectual property rights – in issues from the branding of outsourcing operator’s buildings and vehicles to licences to use complex customised warehouse management and delivery routing software
A key consideration when handing over an operation to an outsourcing operator is maintaining control over the important metrics of the operation whilst giving the operator operational freedom to maximise use of its specialist knowledge. This is achieved in two ways:
• Cost/price control – often quite complex structures are required to cope with variations in operational volumes whilst effectively sharing savings made by the operator as they become more experienced
• Measurement of operator’s performance through Key Performance Indicators or KPIs – these need to be easily measurable, simple, few in number and must match the needs of the customer’s main business, ideally having a direct financial impact on that business and, again ideally, combined with an incentive payment structure to ensure compliance
VSH lawyers are expert in all of the areas of law required to put together effective outsourcing contracts and have “coal face” experience of their negotiation, operation and enforcement.
For further information please contact:
john.davies@vshlaw.co.uk or
su.knowles@vshlaw.co.uk | 
