Project Management Institute

Engineering Services Companies

A Client's Simplistic Approach to Understanding

by Ray W. Posey

Over the years, I have witnessed and been party to several tongue lashings directed towards various engineering service (A/E) companies. These criticisms have centered around dissatisfaction or misunderstandings regarding the poor quality of services provided and seeming lack of responsiveness to rectify the situation appropriately.

So intense has been this dissatisfaction that occasionally the client may consider holding up payment for work that has not been done in accordance with expectations; requesting that it be done over, done right, and at no additional cost. Although such action may be justified in certain cases, as a client, I feel that we may lose out if we do not consider the issues with some empathic precepts in mind. The precepts may be summarized as follows:

The Workman Is Worthy Of His Hire

An equitable balance in responsible expectations must exist between the service company and the client company. The service company should be viewed as a resource in which services of reasonable quality are provided in exchange for compensation of equivalent quality; e.g, if you are paying for a specialist, you should expect to have the services of a specialist; if you are paying for a technician, then you should not expect to have the services of a specialist.

Employees of the service company may be viewed as experienced, innovative, productive and competent. If the employee has been with the company for less than five years, he may be highly motivated and aggressive. This tendency usually diminishes as he finds his place in the organization and feels secure in his job. Employees who do not come up to standard expectations are usually discharged within their first year with the company - employment is very competitive. An exception may exist for the high quality standards when workload is high, the service company may have to hire “bodies” to fill their manpower needs. These folks are usually replaced as soon as workload permits or suitable replacements can be procured. Most of all, a service company's employees understand that they are to please the client. Overall, such a company's services, if evaluated on the basis of the quality of employees, can be perceived as a real asset and an invaluable resource - on call, as needed by the client.

Garbage In - Garbage Out

It has long been recognized that you cannot get something for nothing and anyone making such an offer should be suspect. For this reason, it is not usual for low bids to be automatically thrown out - especially if they are very much out of line with the others. This is a technique used for many large contracts where five requests for bids are put out, and upon receipt, the low and the high bids are automatically thrown out and the remaining (three) bids are evaluated further. We, in the untility industry, are plagued by the pressure to go with the lowest bid and then have to live with a product that is less than ideal or paying more in the long term for change orders, higher construction and maintenance costs. Although this situation can be minimized by utilizing a very detailed bid document, often as not, the cost will still escalate if an unreasonably low bidder is awarded the contract.

No One Is Perfect

No one but the idealist, the perfectionist, and the irrational expect for errorless performance. Imperfection is a human frailty that must be recognized and expected in communications, empathy, cooperation, and co-participation and therefore essential to a successful project. If the service company has erred, as can be expected within a certain limit, we, as the client, should assure before reacting that we do not share in some remote way responsibility for the error. We must be considered blameless if we are to expect success at the negotiation table. More often as not the client is more likely to make errors of omission rather than commission. Misunderstandings must be rectified promptly in order to minimize impact on the project.

We Are A Team

It must be recognized that project success is a team effort. A client is responsible for clearly defining what is wanted, the service company for seeing that the client gets what he wants or expects. (One must recognize that what is wanted may differ from what is needed. When this situation exists, it is the responsibility of the service company to identify the difference, and if the client persists, to comply.) An “us-against-them” mentality (philosophy) of doing business is not healthy, not responsible, and not professional. Of course, this point is obvious, but too often forgotten when differences appear and negotiation processes ensue. We all have responsibilities as professionals to deal fairly and equitably as clients or as service companies. It is, therefore, incumbent for us to remind ourselves of these principles when anticipating negotiations, rather than pursuant to them.

No Honor Among Theives

I know, or at least have heard, that there are unscrupulous companies out there offering engineering services. However, it is doubtful that there are any of the big boys on the list of illegitimates. Although problems may exist, more than likely the problem lies in the area of project management rather than company management. Some considerations that we as a client may be aware of are:

1. If the service company workload is particularly slack, you may find that he will put all of his heavies onto your project. These high-dollars specialists bring in the high dollars to the company. This situation is more prevalent on cost-plus contracts.

2. When workload is high in the engineering ofice, you may find yourself with the dregs of the organization. This situation is more prevalent on large-long duration projects.

3. Man-hour padding - A problem which is difficult to control from within the service company and even more difficult to detect from outside the service company by the client. Basically, I feel that it is fair to say the more matrixed an organization is, the more manpower padding can be expected. I suspect that one of the most effective ways of monitoring this area is to know who is working on your project, what they are doing on the project, and evaluate their hours charged to the percentage of work completed during any report period.

4. Illegitimate service companies are apt not to accept responsibility. This is evidenced by reviewing their specifications and contract documents where every avenue of error or omission is “weasel worded” such that the engineering company itself is left blameless, without fault.

5. Threats to stop work - Although it is only natural to expect that if a client says he is not going to pay, the service company will respond by stopping work on the project; these, of course, are extreme positions and avoidable since the negotiation process should determine the resolution of the conflict - and if so agreed, a client credit can be posted - no problem.

Although the service company should be notified of the client's dissatisfaction in specific terms and in a timely manner, invoices should continue to be paid and the negotiations process can proceed without any rush. Remember, the client has the upper hand; he has the last word, He is invoiced after the services are rendered and at project closeout may still have several invoices in his in-house approval cycle. If he chooses to withhold, surely this is the time for doing so. But even yet, the withholding strategy should be avoided unless retention is provided for in the contract.

6. Unwillingness to share expertise - Many service companies have developed a certain level of expertise in project management, processes, and discipline activities. The legitimate companies will usually share this know-how with the inquisitive client and may even set up a training program.

The legitimate service company can thus be viewed as one which is dedicated to an ethical approach in providing his services, while the illegitimate service company is dedicated only to the selling of man-hours.

Notice - If the service company is considered unscrupulous (illegitimate), get rid of it.

Illegitimacy is not only known to exist among service companies, but applies to clients as well! I know of a refining company who has a reputation for bleeding its service companies. The bad reputation this refining company made during the depressed times of the latter 70's early 80's will not soon be forgotten and service companies contemplating doing business with them will do so cautiously.

Many Are Called But Few Are Chosen

It has been written that “professionalism is not a gift; It is a wage earned by education, effort, performance, and dedication.” One measure of professionalism is responsiblity or accountability. When so viewed and applied to providing professional services, such as an engineering service company, there is an implied obligation for client (customer) satisfaction. As clients, when we choose a service company, we expect satisfaction. It is not a point in our contract, it is assumed behavior presumed on the basis of contracting the services of a professional. It is, therefore, not the service company's prerogative to satisfy itself, rather to satisfy the client company. It is this force of ethic which motivates the legitimate service company to perform to highest efficiency, integrity, and quality. Without these attributes, a company has little to offer by way of professional services. It is upon such attributes that a reputation is formed, judged, and maintained or destroyed. Therefore, any reputable service company will make every effort to maintain these attributes within its relationship with clients.

This is not to infer that the client should not be corrected or client changes should be incorporated without monetary impact. Just the opposite - professionalism requries that the work be provided according to bilateral approval - or negotiations ensue. Either way, a win-win position should be achieved; even if winning may mean for the service company losing money, but retaining its respectability - its reputation.

At this point, it should be realized that for decisions concerning money, specifically the loss of same, senior management involvement is usually necessary. Therefore, if you are the client and you are dissatisfied and the point of contention is going to be one where the service company will lose money or not make money, you should not expect to resolve the issue at the service company's project level. More than likely, resolution will follow negotiations between client and service company managements.

The Client Is Always Right

Over the years, it has been my experience that the service company will give in if their management is conviced that they have some responsiblity for the issue under debate. This seems to be assured in order to retain their reputation and respectability, especially on cost plus contracts or when they want more business from the client (always the case). As clients, it is we who have the right to expect satisfaction; it is we who will normally have the upper hand. However, to use this position as license for beating on our service companies is only justifiable in extreme and rather remote cases.

Although the message is “simplistic,” I trust that the precepts I have developed and summarized herein may prove to be thought provoking and useful. Hopefully, these precepts will serve as a reminder that as professionals, we are dependent upon one another and obligated to perform in a reasonable, predictable manner when conflicts arise.

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.

THE PM NETWORK December, 1987



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