Project Contractors and Consultants
Often times on projects, the project manager must work with project contractors and consultants. These are outside professionals, consultants and other vendors required to finalize some of the project tasks. This enables the project manager to secure high-level professional resources. The key to success with contractors and consultants is setting up control mechanisms to ensure the work is finished on time and within budget.
Handled poorly, contractors and consultants can cause substantial budget overruns on your project and late finishes because their work is not completed on time. The worst of all circumstances is when the project manager does not establish the framework in which the contractor or consultant has to operate. It is worth the money to offer these outside professionals a small incentive for finishing on time and budget. You should also have your written agreement reflect a penalty if they are late or spend more than planned. Those steps give the contractor and consultant some “skin in the game.” That is, they have the same incentives you do, rather than simply focusing on maximizing their profits.
Project Contractors and Consultants: Steps
First, you should write a procurement Statement of Work (SOW) that contains the required scope of work, deliverables, duration, standards, conditions, and payment terms that the contractors and consultants will work under. For larger expenditures, you should find qualified contractors who can accomplish the tasks by sending them a Request for Quotation (RFQ) based on the SOW.
The SOW should include your payment terms. It is best to pay them based on measurable achievements, not by the hour or day. Depending on the type of work, you might use measures such as how many square meters are done or how many pounds are produced, etc. Always try to find a way to objectively measure the achievement. Paying by the hour is not the proper way to control project costs and will not help complete the project on time. For example, paying an IT contractor by the hour is a bad idea because he might spend days on a small issue to increase his fee. Payment should be based on measurable achievements like how many services are tested and running smoothly. These term should also include the incentives for on time and on budget completion and and penalties for failure.
Tracking the work of project contractors and consultants is very important to ensure the deliverables are submitted within scope, duration, and cost. Payments based on achievements controls the budget. You need to ensure the duration after controlling the cost. Penalties can be applied as a way to control the duration and motivate the contractor to finalize the work during the agreed upon time frame. Alternatively, you can establish incentives in the SOW like, “If the contractor achieves 40 square meters daily and completes the entire task in three days, the price will be $20 per human resource hour. The price will be $15 per human resource hour if the contractor completes the entire task in five days.” This will challenge the contractor and lead the project to success.