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The Project Startup and Project Contract II (Practical Project Management Series)

The Project Startup and Project Contract II (Practical Project Management Series). This time the second part of the project startup and in particular getting to a contract.

The contract is normally your starting point as Project Manager. Contracts can range from a Statement of Work (SoW) from a few pages to very large documents with many attachments.

The process in order to create a contract is made up of a number of steps:

  1. The client invites a number of suppliers to make (Request for Proposal, RFP) an offer.
  2. The supplier provides based on the information provided a quote which is also contains a proposed solution. Internally, a solution manager involves all competencies needed for aprtial solutions and budgets.
  3. Once all competencies have contributed their share a total solution is composed by the solution manager.
  4. The next step is that the solution manager performs a risk analysis together with quality management, the legal department (terms & conditions), pricing etc. to compose the final quote.
  5. When the negotiations between client and supplier have been completed successfully, it is time for the contract signing.

The above described process takes almost always longer than anyone would want to and because of the deadline that is made by the client for submitting the tender, the pressure is often extra high at the end of this tendering process.

The form of contract is often of a ‘best effort’ or an ‘obligation of result’. This is a very large and essential (legal) difference! With ‘best effort’, the client does not give a ‘carte blanche’ to the supplier. In the contract are normally hours and cost estimates of the effort. It is usual therefore that the responsible Project Manager informs the client in advance that imminent breaches of hours and / or costs will/might occur.

A contract is, like many aspects of the project, subject to change. This implies that change management needs to be applied as well. However, a contract (normally) does not fall within your span of control  which implies that contractual changes can not be handled by you. As Project Manager in larger enterprises several separate specialists have to be involved (such as the legal department, pricing and quality management) in case of contractual changes.

Particularly in terms of impact contract changes must be considered very thoroughly. Think about legal, principles, solution direction, cost, lead time, etc. It could be that the change for example will undermine the proposed solution completely with all its consequences (back to the drawing board and again through the quotation process)!

The next time I will go on with the analysis of the contract through the eyes of the Project Manager.

This is the third blog of Lex van der Heijden on practical Project Management. For questions / comments I can be reached via [email protected] and LinkedIn