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What Is Included in a BPO Contract?

By Theresa Miles
Updated May 16, 2024
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A business process outsourcing (BPO) contract typically includes defining statements, a scope of work, performance measures, and boilerplate that addresses breaches, nonperformance, and recourse. Each BPO contract also establishes how the unique relationship between the contracting parties will be conducted. As such, there is no single contract template that can encompass all of the issues inherent in every BPO relationship across every type of project.

Outsourcing contracts cover a wide range of projects that involve offshore and domestic third-party companies. A BPO contract between a domestic and a foreign company will look quite different from a contract between two companies located in the same country. For example, the foreign country where the work will be done might assess a special tax on this type of business, and the contract would need to address which party absorbs that cost. Likewise, contracts across different types of BPO projects will address project-specific issues. For example, a contract to outsource payroll will look much different than a contract to outsource building security.

Controlling for these types of unique aspects allows for a discussion of certain features that the average BPO contract contains, regardless of context. The contract first defines terms and makes basic contractual statements. Definition of terms that are used in the contract can be particularly important in transactions across international borders. The statements section names the parties, defines the length of the contract, indicates the fees involved or points to a fee schedule, and enumerates the goals and principles that govern the relationship as the parties work together to manage the project. This iteration of goals and principles sets a basis for equitably modifying the contract if circumstances require without having to stop work and renegotiate.

The BPO contract, in most instances, is a performance-based contract. The next section of the document will typically define the scope of work. This section specifically states exactly what the BPO service provider is responsible for handling. Most importantly, it defines the deliverables, or what qualifies as complete service delivery under the contract that will entitle the provider to payment.

A typical BPO contract then sets performance measures. Tasks are benchmarked according to a timeframe. Minimum levels of service quality are established that can serve as measures for performance satisfaction across tasks. This section will also address periodic reporting on the status of the project from the service provider to the client as well as escalation procedures if problems arise that need to be addressed directly by the client company.

The final section of a BPO contract will contain all of the boilerplate and legalese needed for the contract to be effective in applicable jurisdictions. Chief among these clauses are guarantees of confidentiality, non-competition, and ownership of work product. This section will also establish occurrences that constitute a breach of the contract and set procedures for legal recourse.

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