Acceptance, guarantee, and system maintenance in contracts for the implementation of automation and robotics

Implementation of automation and robotization in the enterprise is a complex and extremely expensive process, that takes a long time and is associated with several risks. The consequences of project failure and possible litigation may exceed the value of the contract itself and become painful for both parties. That is why it is so important to have the correct contract that properly protects the interests of both parties.

When a single supplier is entrusted with comprehensive implementation of automation in an enterprise, the implementation contract covers many elements and stages, often combining features of a contract for specific work, a supply contract, and a contract for the provision of services. Most often, the subject of the contract in such cases is the design of the entire system according to the customer’s requirements, i.e. delivery of automation components and other devices, their assembly and installation, start-up and multi-stage testing, and description of acceptance procedures. An implementation contract may also specify many other elements, such as a guarantee for the delivered automation, hardware, and software, or the performed implementation work, rules of support during system start-up, training for the contracting authority’s personnel, as well as the provision of support services and a guaranteed level of installation availability after the completed implementation.

The article presents three elements of the contract for the supply, implementation, and launch of automation, i.e. acceptance of delivered system components and completed works, as well as the rules of guarantee and support services (maintenance) provided by the contractor.

Partial and final acceptance

Minimizing the risk of failures and disputes in automation implementation processes is ensured by the proper preparation of the Functional Design Specification (FDS) document. The document is usually created in the first phase of contract execution. It defines the scope of the entire project, as well as the strategy for its implementation, describing the implementation and launch plan (schedule) and the processes (stages) to be accepted and their deadlines.

Depending on the specifications of the project and decisions made by the parties, the automation system may be subject to final acceptance as well as partial acceptance covering selected installations, stages, or elements of the system. Application of the partial acceptance procedure does not exclude the final acceptance of the whole implemented installation, which should be independent of the performed partial acceptances. The contracting authority should have the right to raise objections during the final acceptance process, even in the absence of objections in the previously performed partial acceptances. The stages subject to partial acceptance should be defined by the parties in the contract or the FDS.

The condition for the acceptance of the system or its components is to conduct tests to verify the correctness of the implementation. It is in the interest of the parties to regulate at the stage of signing the contract, possibly as part of the FDS, the detailed principles of the planned tests as well as the obligations and roles of the parties in this respect. In the first place, the process of testing the system should take place on the contractor’s side. A good practice is to present the ordering party with the results of the conducted tests together with information about the adopted testing method and used test scenarios. Next, the tests should be conducted by the contracting authority with the contractor’s active participation. In the contract, the contracting authority should ensure that it has the right to test the delivered installations and other results of the contractor’s work using any techniques, including the assistance of specialist third parties.

The final acceptance of the system may be preceded by the post-implementation care period, often referred to as the “stabilization period”, in which the contractor provides support and assistance services in the first phase of using the implemented installation. The contractor’s support by specialists during this period is particularly important since the system is not yet properly stabilized, but already in production and any failure or interruption in its operation may cause measurable losses to the customer. During this period, it is worth ensuring the presence of specialists at the installation site to enable a quick response in the event of a system failure, as well as an appropriate stock of spare parts. The contract should precisely regulate the level of support during the stabilization period, specifying the reaction and repair times, as well as the consequences of failing to meet them (contractual penalties).

The stabilization period usually depends on the type and scale of the deployment, but should not be less than four weeks. Providing support during this period generates costs on the contractor’s side, who must secure an adequate support team, so the length of the stabilization period is reflected in the implementation price.

After the end of the stabilization period and verification of removal of all defects and faults reported during this period, the parties should proceed to the final acceptance of the system. The signing of the final acceptance protocol by the ordering party should also depend on providing the ordering party with as-built documentation, instructions for use of the system for the ordering party’s personnel, and fulfillment of other conditions specified by the parties in the agreement.

Guarantee for the delivered automation system

Guarantee terms and conditions for delivered automation and robotics solutions, offered by various suppliers, differ from each other and are often one of the factors determining the selection of the offer. It is in the interest of the ordering party that the contractor provides a guarantee for the work performed and all materials, components, equipment, and software supplied, and that the guarantee terms are precisely regulated.

Providing a guarantee for the delivered system elements, completed works or implemented software is voluntary and depends on the supplier’s will. To provide the ordering party with a guarantee to remedy defects or faults in the delivered system, the contractor should make an appropriate guarantee statement, which defines the obligations of the contractor (guarantor) and the rights of the ordering party in such cases. The guarantee statement is usually part of the contract, but may also be a separate guarantee document.

In the terms of the guarantee, particular attention should be paid to the exclusions of the contractor’s liability under the guarantee. Cases of disclaiming liability should be formulated precisely and cannot leave the contractor the freedom and discretion to evade liability under the guarantee. In practice, the supplier is not liable under the guarantee for defects caused by the use of the system contrary to the documentation and in the case of independent modification of the system by the customer. Therefore, it is important to secure in the contract the transfer of the appropriate documentation by the contractor, which includes the rules for use and maintenance of the implemented automation, as well as making any repairs or modifications to the system with the consent of the contractor (guarantor). The guarantee does not usually cover defects or damages resulting from the natural wear and tear of the installation.

Irrespective of the guarantee, the purchaser may assert his claims under the statutory warranty. The liability of the supplier for defects (physical or legal) of the supplied elements of the system results from the provisions of law and does not depend on the supplier’s will. Importantly, the buyer may exercise rights under the warranty for physical defects of the goods regardless of the rights under the guarantee, and exercise of rights under the guarantee does not affect the liability of the seller under the warranty. It should be remembered, however, that liability under the warranty in relations between entrepreneurs may be limited or excluded, which is more and more often used by suppliers. Therefore, it is important to secure the interests of the ordering party in the form of a guarantee and a solid service agreement.

Maintenance services are used by ordering parties regardless of the quality of the guarantee obtained. These two institutions differ in many ways. First of all, it is chargeability. Maintenance (support) services are provided for a separate remuneration, often in a considerable amount, while the guarantee is usually included in the remuneration for the delivery and start-up of the system. The main difference – which directly results from the chargeability – is the scope of benefits provided by the contractor. A guarantee usually covers a narrow range of entitlements for the ordering party, limited to the removal of defects and faults resulting from system causes. The scope of benefits in the case of maintenance is virtually unlimited and depends solely on the agreement of the parties.

System maintenance

Any interruption in the operation of the installation or its elements causes real losses to the company, which are difficult to estimate. To ensure constant readiness of the contractor’s specialists and fast response and repair time, as well as a guaranteed level of availability of the system, the ordering party must make use of the contractor’s support services. The scope and terms of provision of support services may be regulated in the implementation contract or a separate service contract. The framework conditions for the provision of support services are usually presented by the supplier in the offer for the implementation of the system, and they are often the factor that determines the choice of the contractor – the one who offers the best support conditions after the implementation has been completed.

The range of support services offered by suppliers is very wide, starting from monitoring the system and debugging it, through servicing the system and robots, to providing spare parts or ensuring an appropriate team of specialists to meet the needs of the ordering party.

The service contract is extremely important from the point of view of the ordering party. Proper maintenance of the implemented solution can ensure its efficiency and performance. The contract should, above all, precisely define the scope of services provided by the contractor within the agreed remuneration, but also the level of support services, including response times, repair times, or the use of temporary workarounds. The only form of enforcement of contractually agreed support times by the ordering party are properly regulated contractual penalties for delay.

Summary

The contractual provisions concerning acceptance and guarantee or provision of support services after the completion of implementation are not part of the so-called essentialia negotii of contracts, i.e. the basic issues related to the implementation of a contract. However, proper regulation of these issues ensures proper execution of the implementation project and allows to avoid potential disputes.

Author: Maciej Dudek, attorney at law at LSW Lesnodorski Slusarek and Partners.