1. Introduction to Danish IT contracts and IT law
IT contracts spring 2017
Lars Ingemann, IT-University of Copenhagen,

2. Introduction to Danish IT contracts and IT law
A program specifies what the computer must do – also in special cases such as user left mail address blank
A contract specifies what the parties must do - also in special cases such as delays, customer doesn't provide domain experts, bankruptcy, war
Contract principles
Fundamental principles in Danish contract law
IT contracts
Two cases of disputes
Danish IT contracts and acquisition
The ‘old’ Danish standard IT contracts: K33 and K18
The ‘new’ Danish standard IT contracts: K01, K02 and K03
K02: list of appendices and timeline in the contract
Acquisition process (public and private sector)
Typical situations – how to handle?
Additional readings

3. The Contract Act (“Aftaleloven”)
The Contract Act, The Sales of Goods Act and Contracts
The Contract Act (“Aftaleloven”)
Offer and reply to an offer is binding (rights and duties)
An oral offer is as binding as a written offer
The Sale of Goods Act (“Købeloven”)
An agreement of delivery of an “item” for payment
Consumer purchase is different from trade purchase
Contract
Written agreement – easer to prove what was agreed

4. Contracts Common practice for it contracts also include:
Delivery: when has delivery taken place (payment and transfer of risk)
Breach: The agreement is not honored, i.e..
Delay
Defects (trade purchase: duty to investigate / examinate )
Rights at breach:
Terminate the purchase (object and payment are returned)
Remedy or supplementary/replacement delivery
Proportional reduction of price
Compensation (if a party has incurred a consequential loss)
Disputes (if parties cannot reach a settlement)
Courts, Arbitration or Mediation
Common practice for it contracts also include:
Penalties (payment for delayed delivery or defects)
Changes to the contract
Duty to investigate – done through testing and warranty period
Termination requires that the defect is not immaterial (material breach)
In trade purchase the supplier has a right to remedy, but not an obligation
Disputes: Courts (public and length), Arbitration (faster, not public) can be binding or not. Mediation (not public, tries to find win-win)

5. Danish IT contracts – regulation of
Requirements and solution
Defects (according to requirements and reasonable expectations)
Use of subcontractors
The duties and rights of the parties
Delivery schedule (clarification, analysis, testing..)
Testing
Rights at breach
Change procedure for contract
Other events (strike, bankruptcy, acts of god…)
Interpretation and precedence
Dispute resolution
Dispute interpretation at the courts: (1) mandatory rules in legislation/laws, (2) specific clauses in contract, (3) general clauses in contract, (4) customs and industry customs, (5) governing laws in the area and (6) former rulings
The Sales of Gods Acts states that customs has precedence

6. Two cases of dispute – lecture discussion

7. K33 The ‘old’ IT contracts K18 Bonnerup report
The history of the Danish standard it-contracts…
K33
(1987)
The ‘old’ IT contracts
K18
(1992)
Bonnerup report
(2001)

8. The ‘old’ Danish standard it contracts: K33 and K18
Originally the majority of IT acquisitions was done under the governmental standard IT contracts known as K33 and K18
K33 (1987); “Government standard contract for computer turnkey delivery – joint delivery of hardware, bespoke and standard software”:
Developed for large projects of bespoke turnkey computer systems
Not suitable for prototype development or phase acquisitions
Not usable for separate acquisitions of software and hardware
K18 (1992); “Government standard contract for standardized computer systems”:
Same area of use as K33 but intended primarily for minor acquisitions

9. Advantages and disadvantages of K33 and K18
The contracts was very thorough and detailed
They regulated a lot the relevant subjects
The contracts was complete (ready to use) and the content was known by the professional parties in the market (also used in the private sector)
Disadvantages:
Was not a light read
Was hard to read and understand for non-lawyers
Placed a lot of burdens on the supplier
Was the cause of conflicts in the projects
didn’t contain any conflict resolution models
Didn’t contain any change procedures
The Bonnerup report (2001) call for new and more flexible contracts to support phased delivery of large projects.

10. K33 K01 The ‘old’ it contracts The ‘new’ IT contracts K18 K02 SL-07
The history of the Danish standard IT-contracts…
K33
(1987)
K01
(2004)
The ‘old’ it contracts
The ‘new’
IT contracts
K18
(1992)
K02
(2007)
SL-07
Bonnerup report
(2001)
K03
(2012)
K04
(2017?)

11. Available in 2007: Innovations: Challenges:
K02 - “STANDARD CONTRACT FOR LONG-TERM IT PROJECT”
Available in 2007:
Replacement for K33
Covers hardware and/or software (standard or bespoke)
Long term project (3+ months), 1 or more phases
Primarily fixed price
Innovations:
Phased delivery, with part-delivery and testing of these
The test concept was enhanced
A ‘maturity model’ was introduced
Requirement specification and solution description from the supplier was merged into one appendix (delivery description)
Challenges:
As with K01 the appendices had to be developed
Operations could be part of delivery, but required a full operations contract to be added (as appendix 7)
Maturity model was seldom used

12. K02 – List of content

13. K02 – List of appendices
Appendix 7: operations could be part of the delivery with a full contract in the appendix
Appendix 3: Now contains requirement specification and solution description
Appendix 14: Testing now includes:
Factory test
Installation test
Partial delivery test
Acceptance test
Service level test

14. clarification phase maintenance & support delivery
K02 – the timeline in the contract
clarification phase
maintenance
& support
delivery
Withdrawal?
Part delivery #1
Part delivery #2
Signature
Warranty
end
Part delivery tests
Contract end
Acceptance test
Important milestones in the K02 contracts:
The customer can choose to withdraw after the clarification phase (seldom used)
The customer can start to use the system after part delivery (very often used)
Remedy of defects are ‘free of charge’ until end of warranty (often 12 months from acceptance test)

15. Acquisition process (public sector)
Restricted tender
Contract Notice
Pre-qualification
(often 5 suppliers)
Tender material
Final
Offers
(BAFO)
Evaluation
Historically most common tender process in government:
A contract notice is published in the EU (TED)
Interested suppliers submit an application for pre-qualification with relevant references of similar deliveries and information on company financials etc.
The most relevant suppliers are prequalified and invited to submit their offer
The tender material consists of the draft of contract and appendices and tender procedures
The suppliers submit their offers as completed appendices and reservations (if allowed). (BAFO = Best And Final Offer)
Offers are evaluated as stated in the tender material and contract signed.

16. Acquisition process (public sector)
Negotiated
tender
Contract Notice
Prequalification
(often 3 suppliers)
Tender material
INDO1
Negotation
Evaluation
Final
offers
Tender procedure for selected industries, and now open for central government
First phase (prequalification) and last phase (evaluation) identical to restricted tender. However often only 3 suppliers selected for the process.
Suppliers submit an initial offer (INDO1 = INDicative Offer 1)
This offer is negotiated and tender material and offers adjusted
There can be several indicative offers; INDO1, INDO2, etc. in the negotiation phase. Number of suppliers can be reduced (down-selection)
The customer declares end of negotiation and suppliers submit the final offers (BAFO = Best And Final Offer) that are evaluated and contract signed.

17. Go back to other suppliers
Acquisition process (private sector)
Private sector tender
RFI
Shortlisting
RFP
INDO1
Negotation
Selection
Final
offers
Go back to other suppliers
during process
The process is very similar to negotiated tender, with some significant differences
Terminology: RFI (Request for Information), RFP (Request for Proposal)
Selection of the supplier is less formal and can be based on more subjective criteria's (who do we like? Who do we feel confident about?)
Down selection is often used
Customer can go back to suppliers that have been ‘put on hold’ through down-selection

18. Additional readings (english)
The Danish Contract Act.pdf (“Aftaleloven”).
K02 contract and model appendices
Danish standard it contracts can be found here: :
K01 and K02 are available in English (unofficial translation):