If there’s anything that can get a project manager’s reputation into the toilet in a hurry, it’s contractual issues with vendors.  I’ve seen a few messy issues in my time, and I don’t wish this on anyone.  Fortunately there are things you can do on the front end to ensure it doesn’t happen to you.

Follow these 11 tips to ensure your projects stay out of contract purgatory.

1. Clearly Define Scope

This is the #1 source of project issues.  There is no substitute to writing a clear, concise scope of work, and the appropriate level of effort should be put in at the front end.

It’s always the peripheral items that cause the problems.  If it’s a building construction, drywall and plumbing is pretty clear to everyone.  Is the building permit application included?  What about landscaping?  Fire inspections?

The more effort on the front end by the client/owner, the better.  This can’t be emphasized strongly enough.

2. Align Vendor’s goals with yours

The vendor is providing a product or service to make a profit, and you are hiring them to further your corporate goals.  It’s simple, right?

If only the world were that simple.

Most vendors are probably happy if a project went smoothly, they made a profit, and then walked away.  That being said, most vendors also see your project as an opportunity to develop expertise, gain project experience, and so forth, which helps them win more work.  In addition, it opens doors for new relationships, or the revival of old ones.  Basically, the vendor’s management is probably more interested in the health of the company (i.e. where’s the next job coming from?) than any one project.  The client/owner should realize this.

On the other hand, the client/owner has priorities which usually don’t translate clearly to the vendor.  They are more concerned about selling a product, or in the case of a government agency, providing a certain service level.  Therefore traits like customer experiences, product quality, end user satisfaction, and the like are at the top of the scale.  In contrast to this, a vendor tends to see themselves as the technical expert.  The vendor might produce an amazing quality product, but miss features that result in marketability, user experience, and things of that nature.

The client/owner should clearly communicate all important features or factors which affect their final success criteria, and ensure these are written down at the outset of the project.

Simply put, when the vendors goals align with yours, synergies are created that will pay huge dividends in the form of project success.

3. Dig Deeper

When given a cost estimate by a vendor, ask for more information.

• Request a work breakdown structure.
• Obtain a review from a technical expert.
• Obtain multiple bids/prices.

4. Use Project Management Fundamentals

In addition to the tips already mentioned, put project management standards to use.  That’s what they’re there for:

• Create clear acceptance criteria for all deliverables
• Request tangible results early
• Use clear specifications
• Review interim deliverables

5. Divide the Project into Phases

By dividing the project into phases you can motivate a vendor to finish one phase in order to “earn” the next phase.  Also, when a vendor isn’t performing you have the option to replace them in the next phase.

The actual phase break down is dependent on project risk and methodology used.

6. Develop Strong Alliances

Take the attitude of seeking true vendor partners rather than one-off service providers.  Your project team can become accustomed to viewing vendors as disposable, interchangeable suppliers, which results in project changes when the vendor sees an opportunity to maximize their return on any one project.

When vendors have a strong relationship with a client/owner, they tend to see future work in the equation which makes them quick to correct small problems and accept small negative outcomes here and there.

7. Understand Task Dependencies

Even on projects where one is a technical expert, it is very hard to easily determine the impact on the project schedule when things change.  For example, let’s say a vendor was late delivering a report (couldn’t be!).  What happens to the next tasks?  Does the completion date change?  Can we start on something in parallel?  If you don’t study the dependencies before hand you won’t easily know the impact, and thus make good project management decisions.

8. Integrate Vendor Personnel

Whenever possible, form work teams that integrate the vendors personnel with your own.  This fosters better working relationships and minimizes culture clash between the two organizations.  Also, project risk is minimized due to the knowledge of what is being done at any given time.

9. Make Payments subject to Interim Deliverables

This is a great way to keep vendors motivated to finish individual phases, and keeps large work items moving.  Clear acceptance criteria should be established, however, or you can find yourself in an argument over what constitutes completion of the work.

10. Be Skeptical of Certifications

Although this was once a strong differentiator, today almost everyone has some sort of certification. Both employees and organizations (ISO, Six Sigma, CMMi, etc.) have a multitude to choose from, and it’s essentially a rite of passage nowadays.  Do the background homework to find out if the organization is still operating at that level, who renews the certification, and how often.

11. Use Probationary Periods

Just like employees often have a probationary period, use one for a vendor.  Give them a small project or a piece of a larger one before committing to a higher risk engagement.  Give them a clear evaluation criteria and a fair chance to succeed.

Do you have any other suggestions for Vendor Management? I’d love to hear about them in the comments section below.