Tracking a project budget is one of the key responsibilities of a Project Manager. Vendor overspending can be one way that a project budget can very quickly end up looking like a train wreck. Overspending can occur quickly, as work is being carried out on a daily basis.
Do you have correct monitoring and tracking in place?
Vendor overspending is a common thing, from my experience. Whilst we want to trust that our vendor is doing the right thing by us and our project, their ultimate aim is to make money.
That’s why they have supplied you with the system or resources for your project. Because of this they can oversupply resources, or undertake unnecessary work in order to bill hours to your project.
How to manage external vendors so that they don’t overspend
What sort of tracking will you need in place in order to monitor the costs the vendor is billing you for? Maybe it is simply a matter of asking for a weekly report showing billable hours and output.
This sort of tracking works for the reason that it keeps the vendor honest. If they are overspending you have only a week’s worth of spending to discuss. But if you wait until the end of the project due to not tracking their spending, you will find a much larger overspend.
Vendor overspending happens when there is not sufficient tracking and monitoring of their spending in place.
What do you do if you have vendor overspending?
First of all, raise it as an issue with them. Don’t be afraid to call a meeting with both the Project Manager from the vendors’ side and or their Senior Management. Be specific about why you think they are overspending.
Go back to your original agreement with them and show that spend estimate in contrast with the current spending. Highlight the differences.
Don’t be afraid of conflict. It’s a place to negotiate an outcome.