Get to the Core of Vendor Management Problems

Most failed projects begin with poorly defined requirements

Published: Wednesday, September 1, 2010 - 05:00

Organizations that struggle with outsourced projects which have gone bad or failed completely usually cite vendor management issues as the reason. It’s as if the vendor is always to blame, and the buyer is completely blameless. Rarely is this the case. Upon closer inspection, and in nine out of 10 instances, the root cause of these often-unspecified vendor management problems that allegedly lead a project astray can be traced to poorly defined requirements. Although clear requirements are at the foundation of any project, they are even more critical for outsourced ones where the rule of law, in the form of a contractual relationship, governs the nature of the relationship between buyer and seller.

The results of a new survey conducted by ESI International show that the top risks of concern to organizations when outsourcing can also be traced to poor requirements management (figure 1).

Figure 1: Top five risks for outsourced projects

Approaching requirements

The simplest way to attain better outsourced project requirements is to start by thinking about four things:

1. What do you need to buy? This is the project deliverable.

2. When do you need it? Establish a schedule for delivery.

3. How will you pay for it? Opportunities to withhold payment along the project life cycle should be built in to mitigate risk.

4. How do you know you ultimately got what you wanted? Establish a process for quality review, inspection, and acceptance.

The best start to improving your requirements is to begin with the right team. Utilizing an integrated project team (IPT) model is a proven way to ensure greater efficiencies in project delivery, and in turn, better results in project and program management. Of the three major roles of an IPT—the contract officer or subcontract buyer role, the business analysis function, and the project manager—it is the project manager’s job to ensure the four requirements questions are addressed in a clear, concise way.

Greater, not just due, diligence

In addition to forming the basis for success throughout the project life cycle, requirements must also be gathered diligently and expressed clearly so that an appropriate contract type can be selected and vendors will actually submit a bid when the request for proposal is released. For example, if the requirements are murky and a firm, fixed-price contract is to be awarded, expect that the vendors, if they bid at all, will cover their risk by increasing their price of delivery.

Yet, the ESI survey on outsourcing shows that organizations are not as diligent about requirements as they need to be. Only 26 percent say they always clearly define requirements. That means three-quarters of organizations come up short when managing a key driver of project success. Is it any wonder that most contract files are stuffed full of change orders?

Additionally, as business analysts carry out the process for writing requirements, from gathering and defining them, writing a first draft, conducting the stakeholder review, through to the final draft, they tend to go about the process the same way every time, thereby creating the opportunity to repeat faulty requirements-gathering methods. Let’s steer clear of the “blame the vendor” mentality and get to the heart of the problem: poor requirements mean higher costs, greater dissatisfaction, and delays. Rather than say we have a “vendor management” problem, let’s just own up to the fact that we have a “requirements-gathering and writing” problem. That’s a problem that can be solved fairly easily.

© ESI International, 2010.  Reprinted with permission.

About The Author

J. LeRoy Ward

J. LeRoy Ward, executive vice president for product strategy and management at ESI International, brings more than 33 years of expertise in project and program management to refining ESI’s portfolio of learning programs. He works closely with ESI clients worldwide to guide the assessment, implementation, and reinforcement of knowledge and skills that allow for the effective measurement and successful adoption of learning program objectives. For more information, visit www.esi-intl.com.