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Flashcards in Chapter 12 Deck (32):

Outsourcing Project Work

Cost reduction
Faster project completion
High level of expertise


Outsourcing Project Work

Coordination breakdowns
Loss of control
Interpersonal conflict
Security issues


Project Partnering & Outsourcing


A process of transforming contractual arrangements into a cohesive, collaborative team that deals with issues and problems encountered to meet a customer’s needs.
Factors favoring partnering:
Existence of common goals
High costs of the adversarial approach
Shared benefits of the collaborative approach


Project Partnering & Outsourcing (2)

Assumes that an adversarial relationship between the owner and contractor is ineffective and self-defeating.
Assumes that both parties share common goals and mutually benefit from the successful completion of projects.

Power struggle – of change – push against me
When we looked at handing out information as currency – project management can be highly politicized – from the real – it can be exciting and fun or as part of a change approach – does not work
Depends on what comes from the top.


Best Practices for Outsourcing Project Work

Well-defined requirements and procedures.
Extensive training and team-building activities.
Well-established conflict management processes in place.
Frequent review and status updates.
Co-location when needed.
Fair and incentive-laden contracts.
Long-term outsourcing relationships.


Partnering Approach

Mutual trust forms the basis for strong working relationships.

Shared goals and objectives ensure common direction.

Joint project team exists with high level of interaction.

Open communications avoid misdirection and bolster effective working relationships.

Long-term commitment provides the opportunity to attain continuous improvement.


Traditional Approach

Suspicion and distrust; each party is wary of the motives of the other.

Each party’s goals and objectives, while similar, are geared to what is best for them.

Independent project teams; teams are spatially separated with managed interactions.

Communications are structured and guarded.

Single project contracting is normal.


Partnering Approach (2)

Objective critique is geared to candid assessment of performance.

Access to each other’s organization resources is available.

Total company involvement requires commitment from CEO to team members.

Integration of administrative systems equipment takes place.

Risk is shared jointly among the partners, encouraging innovation and continuous improvement.


Traditional Approach

Objectivity is limited due to fear of reprisal and lack of continuous improvement opportunity.
Access is limited with structured procedures and self-preservation taking priority over total optimization.
Involvement is normally limited to project-level personnel.

Duplication and/or translation takes place with attendant costs and delays.
Risk is transferred to the other party.


Communicating With Outsourcers

STRATEGY 1: Recognize organizational cultural differences

STRATEGY 2: Choose the right words

STRATEGY 3: Confirm your requirements

STRATEGY 4: Set deadlines


Sustaining Collaborative Relationships

Establish a “we” as opposed to “us” and “them” attitude toward the project.
Co-location: employees from different organizations or department work together at the same location.
Establish mechanisms that will ensure the relationship withstands problems and setbacks.
Problem resolution
Continuous improvement
Joint evaluation
Persistent leadership
“We” is the key!


Why Project Partnering Efforts Fail

Causes of Partnering Failures
Senior management fails to address problems or does not empower team members to solve problems.
Cultural differences are not adequately dealt with so a common team culture never develops.
No formal evaluation process is in place to identify problems and opportunities at the operating level or to assess the current state of the partnering relationship.
A lack of incentive for continuous improvement by contractors participating in the partnering relationship.


Project Completion-Celebrating Success

Conduct a joint review of accomplishments and disappointments.
Hold a celebration for all project participants.
Recognize special contributions.


Advantages of Long-term Partnerships

Reduced administrative costs
More efficient utilization of resources
Improved communication
Improved innovation
Improved performance


The Art of Negotiating

Project management is NOT a contest.
Everyone is on the same side—OURS.
Everyone is bound by the success of the project.
Everyone has to continue to work together.


The Art of Negotiating
Principled Negotiations

Separate the people from the problem
Focus on interests, not positions
Invent options for mutual gain
When possible, use objective criteria


The Art of Negotiating
Dealing with Unreasonable People

If pushed, don’t push back.
Ask questions instead of making statements.
Use silence as a response to unreasonable demands.
Ask for advice and encourage others to criticize your ideas and positions.
Use Fisher and Ury’s Best Alternative To a Negotiated Agreement (BATNA) concept to work toward a win/win scenario.


Managing Customer Relations
Customer Satisfaction

The negative effect of dissatisfied customers on a project management firm or team’s reputation is far greater than the positive effect of satisfied customers.
Every customer has a unique set of performance expectations and met-performance perceptions.
Project managers must be skilled at managing both customer expectations and perceptions.
Don’t oversell the project; better to undersell.
Develop a well-defined project scope statement.
Share significant problems and risks.
Keep everyone informed about the project’s progress.


Preproject ActivitiesSetting the Stage for Successful Partnering
Selecting a Partner(s)

Voluntary, experienced, willing, with committed top management.


Preproject ActivitiesSetting the Stage for Successful Partnering
Team Building: The Project Managers

Build a collaborative relationship among the project managers.


Preproject ActivitiesSetting the Stage for Successful Partnering
Team Building: The Stakeholders

Expand the partnership commitment to include other key managers and specialists.


The Met-Expectations Model of Customer Satisfaction

When performance falls short of expectations (ratio 1), the customer is very satisfied or even delighted.

Perceived Performance / Expected performance


Project Manager Roles

Navigate unfamiliar surroundings

Use persuasion to influence


Project Manager Roles

Understand two diverse cultures (parent and client organization)

Align with the powerful individuals


Project Manager Roles

Determine the important relationships to build and sustain outside the team itself

Determine the important relationships to build and sustain outside the team itself


Project Manager Roles

Understand the strategic objectives of the client organization

Align new ideas/proposals with the strategic objectives of the client organization


Project Manager Roles

Motivate client team members without formal authority

Provide challenging tasks to build the skills of the team members


Procurement Management Process

Planning purchases and acquisitions
Planning contracting
Requesting seller responses
Selecting sellers
Administering the contract
Closing the contract



A formal agreement between two parties wherein the contractor obligates itself to perform a service and the client obligates itself to do something in return.
Defines the responsibilities of the parties, spells out the conditions of its operations.
Defines rights of the parties to each other.
Grants remedies to a party if the other party breaches its transactional obligations.


Types of Contracts
Fixed-Price (FP) Contract or Lump-sum Agreement

The contractor with the lowest bid agrees to perform all work specified in the contract at a fixed price.
The disadvantage for owners is that it is more difficult and more costly to prepare.
The primary disadvantage for contractors is the risk of underestimating project costs.
Contract adjustments:
Redetermination provisions
Performance incentives


Types of Contracts
Cost-Plus Contracts

The contractor is reimbursed for all direct allowable costs (materials, labor, travel) plus an additional prior-negotiated fee (set as a percentage of the total costs) to cover overhead and profit.
Risk to client is in relying on the contractor’s best efforts to contain costs.
Controls on contractors:
Performance and schedule incentives
Costs-sharing clauses


Contract Changes

Contract Change Control System
Defines the process by which a contract’s authorized scope (costs and activities) may be modified:
Tracking systems
Dispute resolution procedures
Approval levels necessary for authorizing changes
Best practice is the inclusion of change control system provisions in the original contract.