Project management process maturity and contract negotiation – Part 2

In this second part of a four part series we are going to look at Quadrant 2  in the diagram, where the project maturity process level s are high and it detracts from the contract negotiation process.

In each part of this series I discuss one of the four quadrants in the diagram 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.  The size, stability and tenure of the organisation will play a part in the maturity of its processes.

 

High project management maturity within the procuring organisation

When the organisation has a mature project management process this will usually mean that there are strong processes for requirements gathering and creation of project based documentation such as Request for Quote’s (RFQ’s) or Request for Tenders (RFT’s), and this means that the information contained in these documents will be detailed.  Documentation overall will be detailed.

In these organisations you will find that the requirements gathering, procurement and governance processes will all be strongly process driven, with skilled staff undertaking and monitoring them.

This sort of maturity level is likely to be found in large and complex organisations and the complexity of the project management process will be apparent no matter the size of the project being undertaken.

Detracts from the procuring organisations negotiation process

This impacts on the negotiation process in a negative way because you may find that pricing from the supplier organisation will be higher and there are more likely to be a group of larger players involved in the procurement/tendering process.

This will be because the tenderers might have the view that:

  • The supplier organisation, due to its size and maturity, can afford to pay more for the services it wants
  • They may take longer to pay due to the maturity of their processes
  • There is a lot more involved in the negotiations because of the maturity of the organisations processes, impacting on the time it will take for negotiations to be complete, and
  • The tenderer is more likely to be competing against substantial and well prepared players (competition tenderers) in the field.

 

High project management maturity processes within the supplier organisation

If the project management maturity level in the supplier organisation matches that of the procuring party then this will make the entire tendering process easier.  Both groups will work from the same base and understand the requirements of each other.

The supplier organisation will be well prepared and know what is required from them as the supplier in the tendering and project management space.  Their documentation and process to get to tender is likely to be more thorough and organised.  This will show in their documentation and place them in a position to be seen as having an edge, due to knowing what they are doing.

Detracts from the supplier organisations negotiation process

Where this high project maturity level detracts from the supplier organisations negotiation process is that if their project management levels are seen to match that of the procuring organisation, the procuring organisation treats the supplier as an equal and will be less willing to negotiate with them.

The procuring organisation may believe that the supplier organisation will have thorough understanding of their costing model and will not need to move from that in order to obtain the work.  It may also put them in a place of favouritism in the procuring organisation, which in itself leaves little room for negotiation.

 

Overall outcomes

High project management maturity processes have a detracting effect on contract negotiating to the detriment of both organisations.  The impact of this is that it most likely sets up a Win/Lose scenario favouring the procuring organisation.

Part one of this four part series can be found here.

Karen

 

Written by Karen Munro