Project Management Institute

Project management as a vendor

by Patrick McHugh, PMP


IN RECENTYEARS there have been drastic increases in focus on and results from the project management discipline. Organizations are gaining better control over project scope, estimates, risk, quality, team building. There are associations, courses, certifications, and conventions devoted to project management. However, most material regarding project management glosses over a key difference that professional services organizations face every day: project management as a vendor.

As companies become more “projectized,” two types of teams are created to complete work:

Internal teams, where a company assembles people from various departments to complete a task

Mixed teams, where a company contracts with an external consulting organization to complete or help complete a task. The mixed team consists of the vendor's project manager and consultants, and may include the customer's internal resources. This team reports to a customer project manager and project sponsor.

Both types of teams have the same challenges of gathering business requirements, identifying and controlling scope, setting and hitting completion dates, managing risk and issues, and ultimately achieving customer satisfaction. But the mixed team faces additional complications, which makes managing it so much more difficult. Let's identify a few of these project management obstacles so that the mixed team can better prepare and react when these obstacles are encountered.

Contracting. Internal teams don't have to deal with legally binding contracts. On the other hand, the mixed team must be extremely specific with the customer regarding scope, deliverables, and expectations, since these details will be legally enforced in the contract. Therefore, the mixed team must take great care in creating a specific and attainable contract to set and meet customer delivery expectations and internal profitability goals.

Consulting companies are tempted to use time-and-material contracts, because they limit the risk of overruns. However, this type of contract may position the consulting organization as a “body shop” that doesn't deliver tangible value to justify the cost. Furthermore, the customer may become motivated to micromanage every hour to maximize benefit and limit cost. Fixed-fee contracts are riskier in terms of cost overrun potential, but they will set a clear expectation of total cost vs. delivered benefit. Also, with fixed-fee projects the customer doesn't care about hours worked, as it's the vendor's responsibility to fulfill the contractual obligations regardless of required work hours.

Patrick McHugh, PMP, is a project management consultant in NCR's Professional Services group, specializing in data warehousing. He has experience in the consumer-packaged goods, financial services, insurance, and telecommunications industries.

Project estimating is particularly troubling for the mixed team. Most project management material suggests an estimating process by which the project management team determines requirements, assembles team members, and finally identifies tasks and work estimates. This is a nice concept, but it doesn't fit the consulting environment very well. In a common and worst-case scenario for the mixed team, the Request for Proposal (RFP) shows up a couple of days before the proposal is due, it has unclear requirements, there is the specter and pressure of competition, and potential team members are scattered around the country on billable projects. So the vendor's project management team is forced to deal with quick, imprecise price estimates that become the contractual basis for project profitability—quite a scary thought!

Customer Internal Obstacles. The more a project requires customer participation, the more obstacles the project team will encounter. This is true for both types of teams, but especially painful for mixed teams, since these barriers are difficult to predict as outsiders, delicate to resolve, and devastating to project progress and profit margin. The vendor's project manager must be able to quickly determine organizational, cultural, political, and technical barriers to success and to get around them. The project manager has to deal with the “ugly baby” dilemma, which is tactfully telling the customer project manager and sponsor that their organization is dysfunctional and will result in higher project costs.

Conflict Management. Conflict management is always a difficult job, but it is especially tough for the vendor's project manager in a mixed team. She must be very careful regarding what is said to the customer, since it will define customer satisfaction and purchase of future work. She must learn to “deliver the brick in a velvet glove.” She also must minimize negative opinions and comments about the consulting team, even if the comments are true, so that the perceived quality of the deliverable isn't prejudiced.

Justification of the Vendor's Project Manager. The customer usually assigns his own project manager, which often results in questioning the need for a separate, billable, vendor project manager. Some of the most compelling justifications for the vendor's project manager are as follows:

The customer has just bought a “sense of urgency,” since the vendor's project manager job is to push the project to timely completion, and can contractually force the customer to act and provide people.

The vendor's project manager is committed and focused full-time on the success of this project, where her customer counterpart often has other distracting responsibilities.

The vendor's project manager has specific skills in delivering this type of solution, can identify and mitigate risks due to experience, and is already familiar with the personalities and work styles of the rest of the consulting team.

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The vendor's project manager can be an outside evaluator, auditor, and “bad guy” on the project who doesn't face career repercussions for criticizing customer personnel.

The vendor's project manager can be a scapegoat to whom pressure or blame from the customer project sponsor or manager can be deflected.

Perceived Leader. The mixed team must prove that the customer project sponsor is a wise steward and leader for the organization by having him contract for this project. If this happens, the project sponsor will want to use the mixed team again and again. In order to make it occur, the mixed team has to not only deliver a valuable solution, but also ensure that the project sponsor is perceived as the leader. If the mixed team is perceived to be the leader, the customer doesn't “own” the project, and any promotion of the project by the mixed team will appear as self-serving sales propaganda. But often the vendor's project manager is faced with a customer who doesn't have the skills, desire, or vision to be the leader. The customer may be too timid to direct meetings, or not have enough experience with the product to be an effective evangelist. Therefore, the vendor's project manager is forced to step in and be “lead sled dog without being in front.” She must prepare the customer project sponsor and manager to lead meetings, provide them with information to promote the project, and provide suggestions that they can use and publicize.

Another interesting twist on this topic is authorship of deliverables. Some customers feel that when a consultancy puts its name and logo on project documentation, it is an attempt to market itself and steal the spotlight from the project sponsor. In this case, the customer insists on very limited use of the consultancy's name and logo. Other companies feel that the consultancy's name and logo is a mark of partnership and quality, since the consultancy is one of the best in the world in this particular field. Authorship of deliverables is a fine point that should be discussed upfront with the customer project sponsor.

Definition of “We.” The mixed team faces a challenge in the definition of “we.” When a customer team member says “we,” is he talking about the entire mixed team, or only the customer side? When the vendor's project manager asks, “What tasks must we complete in this project?” is she referring to activities the consultants must perform to meet contractual obligations, or is she referring to activities that must be done by anyone for overall project success? It is extremely important to make sure that, upfront, everyone in the mixed team defines “we” and the “project team” as all-inclusive. If you don't, the consulting team may identify tasks that “we” (the consulting organization) have to complete, but totally skip over critical tasks and dependencies that the customer must meet, resulting in delays and the customer asking, “Why didn't you tell me this has to be done?” If “we” (the consultants) succeed by fulfilling our contractual obligations, but “we” (the entire project) fail to meet customer expectations, then everyone has failed.

Furthermore, the vendor's project manager should strive for the mixed team to have a true “we” attitude. The best case is when both sides of the mixed team know and respect each other and create a high-performing, friendly team. The worst case is when the environment breaks down into “us” and “them,” creating potentials for name-calling, blaming, abandonment, and betrayal. Lunch is a good barometer of this. If the vendor's project manager asks the customer to lunch, and the customer immediately and always assumes that the vendor will pay, then the customer still sees the vendor as “them,” who is always trying to sell and bribe the customer. On the other hand, if the customer usually expects to pay, this is an indicator that the customer treats the vendor the same as anyone else within the company and might actually enjoy the companionship.

Third Parties. Oftentimes multiple vendors are engaged to complete one project. These other vendors (third parties) either contract directly with the customer or are subcontracted under the prime contractor; either case is very tricky for the prime vendor's project manager. The third party is understandably motivated to be valuable to the customer in order to win repeat business, and this doesn't necessarily include being valuable to other vendors. It may result in either the third party promoting itself at any available opportunity or abandoning the prime contractor in a crisis situation. The vendor's project manager has to be very wary of conversations between the third party and customer, since the third party may be disparaging the vendor's people or deliverables in an attempt to win over the account.

Best Practices Knowledge. Consultants are hired because they have experience with similar projects in similar industries, but customers always insist that consultants sign nondisclosure agreements so that the consultants can't take the business secrets of this customer to a competitor. But that sets up a paradox: customers hire consultants to tell them about competitors but expect that consultants won't tell their competitors about them.

Communication. Since the vendor is an independent organization with profit as a motive, there frequently is a necessity for vendor-only closed-door meetings that have to be at the customer's location. Unfortunately, this will create an antagonistic atmosphere, because the vendor created the “us/them” situation and is obviously discussing something negative about the customer. This situation is inevitable and must be handled carefully.

Another interesting dilemma is how many “warts” the vendor should show. In the internal team scenario, all team members and end customers work for the same organization, so problem areas are known and frequently made into jokes. But in the mixed team environment, both sides want to hide problem areas in order to project an image of a world-class, quality organization. But in the mixed team, it's inevitable that warts will eventually show, and the question is how to handle them. We would all love to be perfect people working on a perfect team for a perfect organization, but that just isn't true. If the vendor shows all of her problems, then she looks like an idiot that the customer was foolish for hiring. But if the vendor doesn't show any imperfections, then the customer knows she's being superficial, or lying. The vendor's project management team must strike the right balance between these two. Another implication of this is that the customer's warts will become the mixed team's problem, and the customer will feel more comfortable addressing these warts if the consultancy members admit that they're “human” as well.

MANAGING A PROJECT is challenging enough, but doing so with a mixed team has its own unique set of problems. I hope that I have identified some of these problems so that you won't be blindsided by them. There is no magic formula for solving these issues, but identification, communication, and trust are essential. The vendor project manager must ensure that the customer understands that these issues will directly affect the timely success of the project, and the vendor project manager and the customer must work together to mitigate the risks. ■

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

PM Network August 2000



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