Arbitrating the Outsourced

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Arbitration is the hearing and determination of a contract dispute by a referee. It exists to protect you from monetary losses, and it’s available for a number of reasons ranging from simple disagreements to outright contract violations.

Two good example reasons are when outsourced work just isn’t up to par, or when a service provider attempts to pass of someone else’s work as his own.

Yet this protection too, varies across outsourcing services, as some of them offer arbitration for all types of outsourced jobs (fixed-fee jobs and per-hour jobs), specific jobs only (fixed-fee jobs or per-hour jobs, or jobs costing over a certain dollar amount), or worse, no jobs whatsoever. You are advised to avoid services that offer no arbitration.

Even though arbitration is often the last thing you want to encounter, it’s comforting to know it’s available in the event you need it. Those events may include (but aren’t limited to):

• When a provider turns in low-quality work, and expects you to pay for it anyway.
• When a provider misses a critical deadline and again, expects you to pay the same amount of money quoted in an outsourced project that would have met a deadline.
• When a provider uses 3rd party material without your permission, and places you at risk for copyright violations.
• When a provider makes insufficient progress during a milestone, and you simply want out of a deadbeat working relationship.

Current events can be found in our Outsourcing Arbitration News section.

Under no circumstance, should you ever feel obligated to pay for outsourced work that isn’t what you expected. That’s when things like contracts, escrow and communication play their strongest roles. Use them to validate your decision for non-payment, and request arbitration to either get your provider to comply with what’s in a contract, or to end the contract altogether.

External Resources:

1. Arbitration in a Nutshell
2. The Principles and Practice of International Commercial Arbitration
3. How Arbitration Works: Elkouri & Elkouri