Procurement Documents

About Digital Transformation by Theme

Katharina Koerner posts an article:

This article by Sona Sulakian, CEO of #Pincites, is a great resource for drafting AI-specific contract clauses. It discusses the importance of including a comprehensive AI addendum in vendor contracts to manage the unique challenges posed by AI integration. It suggests specific contractual clauses to balance responsibilities and protect the interests of both customers and vendors.

Link to article: https://lnkd.in/g-qHdmfM

The article covers clauses that address issues such as data ownership, usage rights, model training restrictions, compliance with laws, ethical AI usage, and liability for AI outputs.

* * *

Examples of contract clauses:

--> Require Prior Consent for AI Features:

This ensures that vendors cannot implement or offer AI features without the customer's explicit consent, maintaining the customer’s control over AI deployments.

--> Define Data Ownership and Usage Rights:

The clauses specify that all data provided by the customer, and outputs generated by AI, remain the customer's property, protecting their data rights and limiting the vendor's use of this data.

--> Prohibit Model Training with Customer Data:

This protects sensitive customer data from being used to enhance vendor’s AI models unless explicitly permitted, safeguarding proprietary information.

--> Mandate Compliance with Applicable Laws:

Vendors must comply with relevant data protection laws and industry standards, ensuring AI features are legally compliant and ethically managed.

--> Ensure Responsible and Ethical AI Use:

Vendors are required to demonstrate transparent and unbiased AI use, aligning their operations with ethical standards to mitigate risks such as unfair decision-making.

Set Limitations of Liability for AI Outputs:

Vendors are held accountable for any errors or damages arising from AI outputs, emphasizing the need for accurate and reliable AI systems."

Procurement Documents

About Digital Transformation by Theme

Waldo Jaquith writes:

In procurement, sometimes the government demands to be lied to.

Once upon a time, government had an exception for onerous procurement rules for software you could walk into a store and buy. If you wanted copies of Windows, fine, just buy copies of windows. They called it “COTS”: Commercial Off-The-Shelf software.

And that became a big loophole.

Within a short time, COTS wasn’t just $100 software licenses, it was also $10 million software products that certainly had never been on a shelf. Highly specialized stuff that might have 3–5 customers in the world. But, hey, it had the COTS label, so it was able to use that simplified procurement process.

Then these same vendors realized that nobody was checking what was and wasn’t COTS, so they started reselling custom software as “customized COTS.” So if e.g. Deloitte made a custom $50M Medicaid Management Information System for Ohio, they might call it COTS, resell it to Texas for $10M, and charge $40M for “customization.” COTS!

It took a while, but contracting officers eventually figured out this software was by no means COTS, and they started to get wary about the phrase “customized COTS.” But the vendors are no dummies, so they invented a new term: “configurable COTS.” It’s…the exact same thing actually.

My colleague Sean Boots has a test for the legitimacy of COTS that has become a standard: “If you can get a software solution to successfully meet your needs in one day, it’s a real COTS product.” I love this! I’ve preached it for four years.

Here’s my test for the legitimacy of the “configurable” bit of “configurable COTS”: Do you have to pay the COTS vendor to do the configuration, or can you pay another vendor or do it yourself? If you have to pay the COTS vendor, it is not “configurable,” it’s just custom software.

Actual COTS is great. Linux is COTS. Apache? COTS. Google Suite? COTS. Django? COTS. Microsoft Word? Famously COTS.

Fake COTS is a scourge on government technology. I dislike how vendors pull this trick on government, but the real fault lies with government.

When agencies publish an RFP *Requests For Proposals) with a literal 100 pages of detailed requirements for software and also require that it be COTS, they’re asking for something that does not exist. They’re asking vendors to lie to them. So vendors obligingly lie, because only liars can get contracts. Sure, I blame the vendors, but as with just about anything wrong with procurement, it’s ultimately government’s fault.

Remember: It’s only COTS if you can use it the next day and configure it yourself, otherwise it’s just sparkling custom software.