Project management process maturity and contract negotiation – Part 1

In this first part of a four part series I will investigate and discuss how project management process maturity within an organisation might impact on contract negotiations.

In each part I discuss one of the four quadrants in the diagram above including both perspectives from the procuring organisation as well as the supplier in the negotiation process, as there are different impacts depending on which perspective you are.

It is also worth noting that the way that each organisation – procurer or supplier are perceived may also be different based on the industry in which the organisations operate.

We are firstly going to look at Quadrant 1 where the project maturity process level s are low and it detracts from the contract negotiation process.

Low project management maturity within the procuring organisation

If there is low project management maturity processes within the procuring organisation this can lead to problems with requirements and scope definition.  There is not likely to be robust process in place to ensure that either business cases or requirements’ gathering is carried out at the correct level.  This in turn would impact on the ability for tender documentation to be clear and concise.  What is more likely to occur is that it would be obscure/high level and incomplete.

There may also be issues with the decision making processes around what is and isn’t in scope for the project.

Detracts from the procuring organisations negotiation process

The impact on the procuring organisation is that they are likely to be faced with little or no room to negotiate a contract.  This is due to the lack of completeness of their tender/procurement documentation.

They will not have much ability to trade off items or negotiate on price because they will not know what they don’t know about their overall requirements and may be missing.

The procuring organisation is likely, in this instance to take on a vendor who ‘sells’ them on their solution rather than it being truly weighed up as meeting the organisations needs based on solid requirements and tender documentation.

Low project management maturity processes within the supplier organisation

If there is low project management maturity within the supplier organisation this will lead to difficulties in responding to tender requests.  There may be issues with obtaining quotes from the relevant areas proving input into the tender or quote material.  Costs may be overlooked and not included in the pricing model proposed.

Documentation and quote material may be poorly put together and submitted in an incomplete fashion.

Detracts from the supplier organisations negotiation process

In the negotiation process this low project management maturity leaves the supplier organisation in a tenuous place in negotiating a contract.  They are likely to not feel comfortable negotiating as they instinctively know that they haven’t included costs in their quote or tender and so they will be unwilling to move on pricing.

They may also be unprepared for negotiating, as their project maturity level doesn’t assist with them being fully organised to meet the contract negotiation process in a complete and organised way.   Their negotiating may be erratic.

Overall outcomes

Low project management maturity processes have a detracting effect on contract negotiating to the detriment of either organisation.  The impact of this is that it most likely sets up a Lose/Lose scenario for each organisation.

 

Karen

Written by Karen Munro