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Managing Projects, Vendors, and Ulcers

August 16, 2008 | Author: PM Hut | Filed under: Contract Administration & Close-out, Procurement Management, Risk Management

Managing Projects, Vendors, and Ulcers
By K Raghunathan

One of the biggest reasons for project schedules going awry (and Project Managers sporting ulcers) is the involvement of third-parties and their inability to perform as per their commitments. The third- parties could be vendors supplying equipment and services or statutory bodies such as local government; they could even be internal functions such as HR, Finance and Administration too. This is despite the SLA’s given out by the third-parties for their performance. Under these circumstances, what does a Project Manager do? The obvious response of cutting the third-parties out completely is not a sensible option today.Firstly, it is necessary to recognize there is a risk associated with the performance of a third-party. The risk is more or less depending on the third-party’s track record and the protection built into the contract. How is then the risk mitigated? It involves interacting with the third-party on its side of the turf and not on play the ball at the SLA interface (the normal buyer-seller interface). At the SLA interface, when the third-party fails to perform, it is already fait-accompli. The trick is to have checks on the third-party behind the line which would alert us to its non-performance before it actually happens, as far as possible.

To give an example, in the past, we ordered a bunch of PC’s from a premier vendor in the beginning of March to be delivered later in the month. We needed these PC’s for a project where we had accepted penalty clauses for delays with our customer. Usually all vendors are flooded with orders in March and hence there was a definite risk of the vendor not shipping the PC’s as promised in March. During the order placement and price negotiations, we got a direct line to the vendor’s factory. After a week of placing the order, we used our factory line to check shipment status. We learnt that the factory’s monthly production schedule and allocation did not include our order at all! We got back to the vendor’s sales function and made enough noise to get our order scheduled for shipment in March. That’s not all. When the shipment was finally made, we actually tracked the truck all the way from the factory to our premises to guard against any delays in transportation - a very likely prospect since the shipment moved across several state/toll boundaries. Inspite of all the care we took, we still ended up paying penalty for a week’s delay. Had we not taken the ball and played it in vendor’s court, the delays would have been much more.

Of course, if the third-party has an unblemished track-record of performance, perhaps one can deal at SLA interface without running too much risk of nasty eleventh-hour shocks. The extra price one may be paying to a proven vendor could be seen as the cost of mitigating the risk of non-performance of a as-yet-unproven vendor, other things being equal. This could even become the basis for looking at the price differential between a proven and an unproven vendor!

K Raghunathan is an IT professional with wide ranging interests in software definition and production, particularly passionate about processes of requirements gathering, architecting and designing software systems. His extensive and continued involvement in projects and quality processes gives him the practical insights that he shares on various forums. Working as Technical Advisor to Blue Star Infotech and as CIO of Blue Star Ltd. he sees himself as a strong spoke-person for users within IT and in simplifying technology induction. Raghunathan runs a professional blog: KRag’s Weblog, and can be contacted by email through kraghu@bsil.com.

Blue Star Infotech (www.bsil.com) specializes in providing product engineering services on Microsoft and Java technologies with a significant presence in Healthcare and Travel and Hospitality verticals. It is also engaged in rolling out enterprise solutions from industry leaders.

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