18.  ESCROW13

18.1.  The Service Provider shall [not less than [ten (10)] Working Days [before [specify time] or such other periods as the Authority may require] deposit the Source Code of such part of the Software that consists of Deposited Software in escrow with [insert name of escrow agent] on the basis of the [appropriate standard agreement or on such other terms as the Authority, the Service Provider and [insert name of escrow agent] shall agree][terms set out in Schedule 11 (Software)].  [The Service Provider shall ensure that the deposited version of the Source Code is the current version of the Deposited Software and that the deposited version is kept up-to-date as the Deposited Software is modified or upgraded.  [The Service Provider shall pay the initial storage fees under the escrow agreement and the Authority shall pay the release fees.]14

18.2.  Where the Service Provider is unable to procure compliance with the provisions of clause 18.1 in respect of any Third Party Software, it shall provide the Authority with written evidence of its inability to comply with these provisions and shall agree with the Authority a suitable alternative to escrow that affords the Authority the nearest equivalent protection.  The Service Provider shall be excused from its obligations under clause 18.1 only to the extent that the parties have agreed on a suitable alternative.

18.3.  In circumstances where the Authority obtains the release of the Source Code from escrow, the Service Provider hereby grants to the Authority a perpetual, assignable, royalty-free and non-exclusive licence to Use and support the Source Code version of the Deposited Software to the extent necessary for the receipt of the Services or any replacement services or the Authority's normal business undertakings.

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13 The Authority will not usually have access to the source code of Software licensed to it: the Software will be supplied in binary code form.  There are certain instances such as Service Provider breach or insolvency where access to source code may be required by the Authority in order to ensure continued receipt of the Services or Replacement Services.  For these reasons the Authority may want to ensure, in particular, that the source code of Specially Written Software owned by the Service Provider will be put in escrow.  Note that if the Specially Written Software is transferred to the Authority pursuant to clause 17 (Project Specific IPR and Specially Written Software) the Authority will automatically have possession of the Source Code, which precludes the need to place it in escrow. It will be the exception that source code for applications other than the Specially Written Software will be deposited.  Commercially available software is unlikely to become unavailable even if the software house becomes insolvent as there will usually be a purchase of its business or assets and the software will continue to be available and supported.  However, it will be necessary to conduct an assessment of the risks on a project basis.

An escrow arrangement requires the Service Provider to deposit the source code with a third party escrow agent.  The terms of the escrow agreement between the Authority, Service Provider and escrow agent will specify the circumstances under which the source code can be released to the Authority.  Schedule 11 (Software) should set out the escrow terms, including the release events, timing and regularity of updating the software, verification of software and the costs of initial storage fees, release fees and recurring fees.  

Clause 18.2 covers the situation where the Service Provider is unable to put the source code of Third Party Software in escrow.  The Authority will clearly want to check the economic standing of the third party licensor and understand the extent to which the other parts of the ICT Environment are dependent on the Third Party Software in the event that the third party became insolvent.

14  Guidance:  The time frame for the deposit of the source code will depend on what software it relates to and when it is available.  The Authority could require evidence that the source code has been deposited as part of its due diligence exercise, completion agenda, as a condition precedent or as part of any testing.