Manage with Contracts for Project Success

Problem:

Many, many projects end up over budget, late and not completing all the scope expected of them. They are not successful.

I believe this is often due to lack of clarity in the roles of your project team and of your contractors.

See my previous post for details regarding defining team roles and responsibilities.

Solution:

It is very important that your team knows what they are supposed to do, who is doing what, when they are supposed to complete it by and how much their component should cost.

You should define the roles of your team clearly, and you should define the scope of your contracts clearly.

Manage with Contracts

As a project manager, I have found the following two methods give the best results.

Contract out with only a small management team:

Have a small team of direct team members and contract out all the rest. This has meant having just a small team such as:

  • Project manager
  • Assistant project manager
  • Administration assistant
  • Procurement officer
  • Works inspector (who also covers safety inspections)

With the main deliverable tasks of the project being done by other companies, it has meant I could keep those tasks in control due to the contracts I had in place with those companies. Each company worked to a specific scope specified in their contract agreement with me. This defined deliverables, cost, schedule, and the quality required.

If the contracted company does not deliver on time, or to the quality defined, they get paid less, or have other penalties or requirements to do something to rectify the issue. That company is protected by having a contract in place, so if I add or change the scope, or delay in providing information, they can ask for more money or an increase in schedule or both.

Of course for this to work you need a very well written and clear scope and contract documents in place. However, if the scope and contract are well written and clear, without onerous terms put on the contractor, it can lead to a good outcome for the project while still allowing the contractor to make a reasonable profit. Because the contract is in place it provides motivation for that contracting company to complete the works for your project rather than putting other work as a higher priority. Having liquidated damages or a similar penalty for late delivery also helps motivate the contractors to prioritise your project.

I think this minimal management method does not work well for projects with unclear scope or with scope that has a high chance of changing significantly during the project. It is also difficult to manage when there is insufficient information about the project location (e.g. for brownfield projects where works will interact with existing infrastructure, unknown underground services etc.). In these cases you need a lot more staff on your management team (more project engineers, site inspectors, design and scope coordinators etc).

Contract internally within your company

If you cannot contract out most of the project work into clearly defined packages, then the other alternative is to keep more of the work “in house”.

I find this is where many projects go over budget and over schedule. Internal staff are often not held accountable for the amount of time they spend on your project, and so end up booking more time than necessary to it. In fact for large projects I have seen many cases where company staff book to that large project just because they have no other project to book to, even though they did little or no work on that large project.

Using staff from within your company for more roles only works well if you give those people clear scope, roles, responsibilities, deliverables lists, schedule and time/cost budget.

Again, this is why Clear Project Roles and Responsibilities are Important.

I find that your project can be more successful if you treat each project team member as a contractor. Write their role brief, get them to review and agree on it and also agree on the schedule and time budget. Allow them to make changes if necessary. Then both you and that person (and possibly their manager) should sign that document.

It won’t be as effective as a contract with an external company because you won’t have legal or cost penalties that you can apply against them. However you should find that these internal people treat your project with higher priority and more importance than other projects that don’t do this. You will also have the advantage that if the scope changes, you can deal with that without actual contract penalties and costs like needed for an external contract.

Another advantage you will have with the internal staff is that you can link the role brief document to your internal project management system and manage and coordinate the allocated tasks there.

You do have a good project management system allowing allocation and coordination of tasks don’t you? If not you should consider using something like Monday, Asana, Teamwork, Basecamp, Freedcamp, Ora, or even Trello.

Lesson:

You should define the roles of your team clearly, and you should define the scope of your contracts clearly. Putting a lot of the project work out to contract is one way, with the benefit of being able to control the schedule and cost by applying contract terms.

Alternatively, make contract agreements with your internal staff, and get them to agree with their scope of work, deliverable dates, costs and quality.

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2 thoughts on “Manage with Contracts for Project Success”

  1. Hi!
    If you plan to update this post, make sure to include Bitrix24.com on the list. It’s the world’s most powerful free all-in-one solution for remote work.

    Reply
    • Thanks for the suggestion Ivan.
      I have plans to review lots of different project management systems.
      I hadn’t checked Bitrix24 before but I just did now and it looks good, with lots of features.
      I have added it to my list to look at in greater detail later.

      Michael

      Reply

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