We, at Turlon & Associate, have blogged and written about the parallels of vendor management and project management in the past. One thing that has come to light is the dependency of vendor management to project success. For example, in the Irish Public Sector, some folks would say that without a diligent Vendor Management Practice in place, no project will ever be successful. So what does this mean … let me ask the question this way … is Vendor Management the enabler for Project Success or should Project Managers be now called Vendor Managers? Sure, there are parallels between the two disciplines such as the monitoring and controlling the contract and project is a continual process. This process effectively assesses performance of the contract for the vendor and is associated with each phase of the project.
Various tools and techniques are used to ensure that a true assessment of the vendor performance is assessed periodically and that corrective and preventative measures are taken to ensure the project is in control. There is a focus on the project manager to be able to
- Understanding contractual nuisances and how these can enable project delivery patterns.
- Developing robust procedures to ensure that vendors are properly analysed before approval and to ensure they are managed appropriately after they are approved.
- Influencing the factors that create changes to the vendor delivery plan.
- Determining when changes have occurred and how these changes affect the delivery plan and execution of the outcome.
You can argue that these are very much part of the project management cycle but like every argument there is a counter argument and that is that this is really the core assets of vendor management.
When we examine some the parallels of vendor and project management, here are some of the control tools that are part of both disciplines:
- Variance Analysis: – A variance is defined as any schedule, technical performance or cost deviation from a specific plan. Variances are used by all levels of management to verify both the budgeting system and the scheduling system. The reason for incorporating both schedule and cost variances are as follows:
- Cost Variances: – This compares deviations only from the budget and does not provide a measure of comparison between work scheduled and work accomplished.
- Schedule Variances: – Scheduling variances provide a comparison between planned and actual performance but does not include costs.
The combination of both sets of variances allows projects to understand gaps that may exist for different types of scenarios or situations. There are two primary methods of measuring variances:
- Measurable Effort: – Discrete increments of work with a definable schedule for accomplishment, whose completion produces tangible results. An example here would be percentage of activity work that is complete towards the delivery of a certain milestone of goal.
- Level of Effort: – Work that does not lend itself to subdivision into discrete increments of work. Example here is facilitation work such as project support or control. These need to be measured and is accounted for by the number of man-hours that the activity takes up.
Variance analysis is the detection and understanding of gaps that appear with baselined schedules and budgets. The tool that we will use for variance analysis is earned value and this is discussed in a later section. The goal of variance analysis is to develop an integrated reporting system that provides the basic by which cost and time can be measured. The system of earned value ensures that both cost budgeting and performance scheduling and constructed and presented together.
- Change Control: – This change control involves managing and measuring the impact of changes to the following to the plan and the essential thing here is to ensure that there is a plan of action for whatever needs to be managed:
- Scope = Deliverable Orientated Structure
- Time = the milestone / bar chart
- Budget or Resourcing = The responsibility matrix
- Quality = The Critical Success Factors
- Risk = The risk / issue log
Experienced project managers know that change is inevitable and there are many consequences of failing to manage project changes. Some of the project not managing change is that the vendor / contract runs in disrepair.
So let talk a little again about vendor and project management. The success of the vendor drives the success of the project and without good vendor management, there is no such thing a good project management