The contract type determines the level of effort and the skills needed to manage the contract. The manager of supplier contracts develops detailed specifications and assures compliance to these specifications. The manager of vendor contracts assures the contractors that bid the work have the skills and capacity to accomplish the work according to the project schedule and tracks the vendor’s performance against the project needs, supplying support and direction when needed. The manager of partnering arrangements develops alignment around common goals and work processes. Each of these approaches requires different skills and various degrees of effort.
Items that take a long time to acquire—long lead items—receive early attention by the project leadership. Examples of long lead items are equipment that is designed and built specifically for the project, curriculum that is created for training a new workforce, and a customized bioreactor for a biotech project. These items might require weeks, months, and sometimes years to develop and deliver to the project site. Long lead items that are procured through the normal procurement cycle may cause delays in the project, and the project team identifies these items early to begin the procurement activities as soon as possible.
After the contract is awarded, the project team tracks the performance of the contractor against performance criteria in the contract and his contribution to the performance of the project. Typically, the contractors deliver the product or service that meets the quality expectations and supports the project schedule. Typically, there are also one or two contractors that do not perform to project expectations. Some project managers will then pull out the contract and attempt to persuade the contractor to improve performance or be penalized. Other project managers will explore with the contractor creative ways to improve performance and meet project requirements. The contract management allows for both approaches to deal with nonperforming contractors and the project team must assess what method is most likely to work in each situation.
Building Support with Vendor on Chemical Plant Project
Eastman Chemical was building a new plant at their Kingsport, Tennessee location when a critical vendor began falling behind schedule. The project team analyzed the situation and determined the vendor had taken on more work than it was capable of completing by the project’s required due dates. This was an important vendor to the project and any delay in delivery from the vendor meant a delay in the completion of the project.
The project manager and Eastman executives flew to the vendor’s plant in New Jersey and brought a large bar graph of the project schedule. The discussion focused on the critical project dates and the importance of the equipment delivery dates. Eastman offered technical support to the team and resources from the project to expedite the delivery. During lunch, Eastman executives and managers from the project walked with the plant manager around the plant floor, talking with the skilled labor working on the equipment. Eastman managers left Eastman hats and other small gifts as tokens of appreciation for their effort in supporting the Eastman project.
The effort by the Eastman project team to improve the vendor’s schedule performance was successful. The vendor was able to make critical dates and the project completed on time.
Managing contractor performance on a project is as important to the overall project outcomes as the work performed by the project team.
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