(“Originally published on SIA Staffing Stream, September 05, 2014.”)
Boston’s Big Dig has its claim to fame not only as an ambitious and expensive megaproject involving hundreds of third-party vendors – but also for its mismanagement and failures. Projects have a way of failing, as per a study by PricewaterhouseCoopers (PwC). The company reviewed 10,640 projects across industries in 200 companies in 30 countries. PwC found that only 5 of the companies has a track record of 100 percent success with their projects. The Harvard Business Review analyzed 1,471 IT projects and found that all of them had cost overruns of 27 percent on average, with 1 in 6 having a 200 percent overrun, and a near 70 percent schedule overrun. Pretty dismal statistics!
We all know that project delivery demands a focus on time, cost and quality, giving equal importance to each of them. In spite of the commitment of the project teams, projects carry their own seed of failure within them. An estimated 40 percent to 60 percent of projects fail, in spite of all the agreements, contracts and penalty clauses incorporated into the contract. Outsourced projects are seen to fail four times more often than in-house projects. But the reason why projects fail are not far to seek.
Simply put, most projects fail because of one or more of these reasons:
As more companies are opting to maintain a lean employee workforce, and companies outsource portions of larger projects to avoid hiring specialized skills that will not be needed after the project’s completion, outsourcing of projects has become the norm rather than exception. This fact is further established when we consider the fact that for every dollar spent on agency contractors, two to four dollars are spent on outsourced projects. Most of the companies which provide these services operate with less than 10 employees.
Most projects are complex by nature and involve multiple activities and phases. Each major activity requires a different resource plan and schedules its activities in sequence or in parallel. All efforts will need to merge seamlessly into the end result, while accommodating all contingencies and dependencies. The pricing model for a given project activity may vary from time-and-materials to fixed price, deliverables-based payments; with some projects adopting a combination of pricing models. Projects usually combine multiple worker classes, who are different from each other in their status and hence need to be managed differently.
Most vendor management systems (VMS), initially designed to support the use of staffing agency-supplied contract workers, have introduce new VMS modules to support the procurement of services and execution of SOW-based projects. Of course, not all VMS systems transcend beyond viewing the management of outsourced projects as a logical extension of traditional contingent workforce management. This approach limits the functionality of their program to supporting the payment of project resources using a time-and-materials model. Such systems apply processes very similar to the payment of agency-supplied contractors. For clients seeking assistance with complex projects that incorporate fixed price elements in which payment is based on achievement of defined milestones, this VMS approach falls short!
So, when we say that a VMS helps in managing a SOW project from start-to-end, what are we truly saying that the VMS should do? The answer is simple – VMS systems are designed to take the complexity out of engaging third parties to get work done. Its role is to simply the processes of sourcing and selecting third parties, establishing contractual agreements that reflect the agreements between parties, administering the selected vendors, efficiently tacking work performed, providing accurate and timely payments, minimizing risks associated with the use of non-employees, and verifying the quality of the services offered.
When applied to the support of complex projects, the best VMS systems complement the leading project management software, mitigating the “human element” causes of project failure. The capabilities to look for:
When considering the use of a VMS to manage the human element associated with outsourcing your projects, test the system’s functionality against the factors indicated above. Develop use cases, and ask the vendor to demonstrate how the VMS will handle each case. Most important, enlist the participation of your line managers in developing the use cases and in selecting the VMS. Without their support, any system will fail to meet your company’s goals for outsourced project work.
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