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Project Management Software
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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