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Facilities management agreements

Resellers engaged in the business of reselling facilities management services on behalf of a wholesaler will need to enter into a reseller agreement with the wholesaler that clarifies the rights and obligations of each party. A subsequent end user facility management agreement will also be necessary, and this agreement will clarify the rights and obligations between the reseller and each end user client. It is simply too risky to engage in the resale of facilities management on a mere handshake arrangement. Handshake transactions are generally fraught with risk.

Facilities management can take a variety of forms, providing a whole array of lucrative sales channels and corresponding revenues streams for resellers to choose from. By no doubt the most common form of facilities management is the management of server warehousing and hosting facilities. Other forms of facilities management relate to, amongst other things, business and disaster recovery, which may provide shared facilities that house an organisations own backup equipment, or even live or mirrored data via a dedicated arrangement.

While each facilities management agreement will differ according to the specific transaction to which it relates, there are a number of common issues that spring up in facilities management contracts that resellers should be aware of.

First and foremost facilities management must be distinguished from traditional outsourcing agreements. The latter usually relates to the contracting out of services to a service provider who supplies the relevant facilities (hardware, software etc), while facilities management, conversely, requires a service provider to manage an organisation’s existing facilities.

For resellers, the prime issue that should be negotiated in favour of the reseller is the passing of liability and therefore risk, to the wholesaler. Contrary to the standard pro forma contracts that will be provided by the wholesaler, the reseller should negotiate the exclusion of its potential liability, to the extent possible by law; it is important that this liability be deflected by the reseller in both the wholesaler and end user contracts. Indemnification is another useful tool that resellers can use to alleviate their exposure to the risks that can arise in the facilities management channel.

Another major issue is the need to operate within the confounds of the wholesaler agreement. Resellers should not guarantee better service levels than are guaranteed by the wholesaler. The service levels should set out the performance standards that are to apply, specifying precisely what kind of services are to be provided, how often, and how the service is to be delivered and measured. These performance standards are usually accompanied by contractual mechanisms to measure successful delivery, fault reporting and resolution procedures that are to be engaged if service levels are not met.

Resellers should also be mindful that customers will often request access to the wholesalers facilities, and will often look to negotiate rights to audit the wholesaler to ensure compliance with quality assurance practices, privacy matters, physical security and e-security protocol and related matters. Where the facilities contain private, confidential or otherwise sensitive material, which they almost always will, it will be in the resellers best interests to source out a wholesaler that is proficient and reliable and able to satisfy the end users concerns against the leakage or destruction of data.

To get the most our of your reseller arrangement, consult a competent lawyer who understands your concerns.

Disclaimer: This column is for general informational purposes only. It is not legal advice nor is it a substitute for legal advice. Readers should seek legal advice on their own particular circumstances. Alan Arnott is a technology & telecommunications lawyer with qualifications in computer science and law with Arnotts Lawyers Jones Bay Wharf in Sydney. For more information, please visit