Situational Project Management: The Dynamics of Success and Failure by Oliver F. Lehmann

Author:Oliver F. Lehmann
Language: eng
Format: epub
Publisher: CRC Press Taylor & Francis Group
Published: 2016-07-24T16:00:00+00:00

Figure 3-10 Risk allocation is based on two things: obligations of the customer and obligations of the contractor.

One problem that I saw during the bidding processes was that the rates Vole offered to Shrew Corp. were ones that I considered too low. Vole Inc. assumed that it would perform the project with its own staff and could run the project as a small-margin business without making a loss but as a way to open the door to Shrew, providing the opportunity to generate future business. I considered this “low-balling” approach dangerous. Shrew’s requirements for the trainers were quite challenging, especially regarding formal education and the command of foreign languages on the level needed for seminars, and the risk that Vole’s staff would not be accepted was quite high. My recommendation was to offer higher rates and, if the customer would not accept them, consider it to be a business that one should happily give to competitors to keep them busy and focus instead on developing more attractive business with other customers. This was not the decision that the company made; Vole offered at a low price. This is an observation that I have made repeatedly in customer project business during business development with new customers. Once a lot of time, effort, and energy has been put into winning the contract, fear increases of losing the competition and then having to explain to management why one has invested so much in the customer.

Vole Inc. finally won the contract, and the proposal manager became the project manager, because the company had no other person free for the job. My warning came true, the customer did not accept the employed trainers, and Vole had to find self-employed trainers on the market to replace them. These trainers’ daily rates were about 50% over the rates that Shrew Corp. paid to Vole Ltd. After about nine months, Vole Ltd. found out that no follow-up business was to be expected. It then tried to get released from the contract, but it took another nine months to convince the customer to terminate the contract. I talked with customer representatives after this time, and Vole’s reputation was then not positive for any future business. If a contractor needs to perform a project for a customer with too scarce resources, the customer will at the end of the project not remember the great service received for an inexpensive price, but it will remember a company that rushed from one problem to the next.

The lesson from this example: The project manager in a customer project is also a manager of a business relationship that the parties entered for mutual benefits. The tasks of paying attention to these benefits and balancing the often competing expectations and requirements of both parties is another difficult responsibility in this position. It requires specific practices and separates it from the position of a project manager in an internal project.

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