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The Project Manager and Negotiating Contracts

When a project requires outside vendors and contractors, the project manager should be in charge of handling the contract negotiations. A company should empower him or her to complete transactions to get the job done. If a project manager must wait for each negotiation to be approved, or if the manager does not even participate and therefore does not have the knowledge he or she needs to effectively oversee the use of outside resources, the project can go offline and maybe even end in disaster. When the project manager does negotiate contracts, there are some things that she or he needs to remember. One of the most important things to do is research ahead of time. Other important things to know are desired terms, data to back them up, and what will require a walk out.

Research is the single most important thing a project manager can do before walking into a contract negotiation. Preliminary bids, as well as a working knowledge of what the current prices and values for the type of work sought is necessary to get a good value for your project’s resources. After all, you must keep the project on budget and try to keep the cost under control. If you do your research ahead of time, not only can you submit a reasonable budget that is easier to stick to, but you will also be able to come into the negotiation armed with how much is reasonable for a contractor to charge.

In addition to being a good preparation, research also helps a project manager determine what terms he or she feels are acceptable for the contract. Knowing what terms are preferable (such as when the work should be done, the right to inspect for quality and have insufficient work redone at a reduced cost, cost, and terms setting forth what will happen in the case of late delivery or a failure to deliver) to your company gives your negotiating space. It also lets the contractor or vendor know that you mean business.

Just as in the initiating and planning phases, when project management needs to have data to back up the need for the project or substantiate the reasons for a course of action, going into a contract negotiation requires that data is provided to back up your claims. It is a good idea to have preliminary bids from two or three contractors so that you can show them to other businesses with whom you are working. Show your sources, and explain why you think a certain price or certain terms are fair. You are more likely to strike a good bargain when those across the table are confronted with hard evidence.

Finally, a good negotiator is willing to walk out. While it is likely that the project manager will have to compromise on something, it is important to know beforehand what is unacceptable. Especially if there are a few choices in vendors or contractors to use, walking out can be a valuable tool. If the contractor sees that someone is truly ready to walk, the chances of reaching a more equitable and satisfying compromise increase.

After finishing the negotiations and settling on terms, make sure all the paperwork is properly handled and the information is entered into the project management software program. This will help the project manager keep track of everything.

Article by Remedysoft, Inc.
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