CONTRACTING FOR AI WEBINAR

The outsourcing landscape is shifting as AI moves from a tool to the core of service delivery. Insights from the recent GSA webinar from CMS, CRS & ISG highlight a critical need for transparent pricing, updated legal frameworks, and robust governance as "agentic" AI replaces traditional workflows.

1️⃣ The Move to Autonomy-Based Pricing Traditional FTE models are becoming obsolete. A new five-tier "autonomy level" pricing model is emerging, where fully autonomous AI execution can reduce resource costs by over 50%. "Intelligence tags" are now essential for transparency.

2️⃣ Urgent Contract Renegotiations Contracts older than three years likely predate the AI boom. Buyers must use renewals to lock in AI transformation milestones, ensuring that automation-driven cost savings are shared fairly rather than retained solely by providers.

3️⃣ Closing the "Responsibility Vacuum" Third-party models (like GPT-4 or Gemini) create a liability gap. Contracts must now explicitly define who is responsible when AI fails. Buyers are also using due diligence to track "concentration risk" across their supply chains.

4️⃣ IP Ownership and Customization Intellectual Property is a key battleground. Agreements must now clearly distinguish between a supplier’s Background IP (the model) and the AI-Generated Output, with buyers increasingly demanding ownership or exclusive licenses for bespoke results.

5️⃣ Liability Caps and "Kill Switches" Suppliers are resisting broad liability for AI errors, leading to specialized AI warranties for accuracy. To mitigate risk, "Kill Switch" clauses are becoming standard, allowing customers to immediately suspend AI services if they breach compliance.

6️⃣ Governance and the Human Element As AI agents gain deeper system access, auditability is paramount. Governance must evolve to monitor AI in real-time, while workforce strategy shifts toward upskilling—moving talent from repetitive tasks to high-value, judgment-based roles.