GPM First
Chapter 12 of Project Management for Supplier Organizations (978-1-4724-1109-9) by Adrian Taggart

Marketing in a Project Environment

Chapter 12

If a company does not have a market they do not a business; this holds true irrespective of the technical excellence of their product or indeed the quality of their management team. It is a truism for any business.

Marketing ensures organizations put the right product in front of the right customer at the right time, and its success is essential to any ongoing business.

The traditional activities of marketers involve identifying potential customers, establishing a relationship with them, understanding their needs and directing product development.

All these apply to marketing within the project environment but as we shall see there is a particular emphasis on the establishment of customer relationships and facilitating the communications that are so essential to effective project management.

Marketing in Project and Non-Project Environments

Firstly, let us consider marketing in a non-project environment. By way of an example let us recall the washing machines discussed in Chapter 1. The product is highly evolved and mature, having been refined over many years of experience of servicing, and listening to, the same type of customers.

The customer base for washing machines is made up of individual customers, as opposed to businesses. These customers will be knowledgeable about the product and its use. They will also know the supplier and its competitors and many will exhibit ‘brand loyalty’ and favour our supplier with repeat business.

In turn the supplier knows a great deal about the buyers; the typical ages, gender bias, what magazines they read, what television they watch and websites they visit. This enables them to know how, and where, to contact them. Each sale will be an entirely private affair between supplier and customer and although the value of each transaction is modest, there will be numerous transactions.

Contrast this with the unique products and transient relationships of the project environment, again, discussed in Chapter 1. By way of an example let us return to the creation of a major sports stadium. The customer base for such a product consists of a small number of varied businesses and commercial enterprises that could be located anywhere in the world. Orders are small in number but of enormous individual value. Since purchase of such a product is infrequent, the experience and knowledge of the individual customers, most likely, will be low in relation to both the product and also the market and potential suppliers.

Similarly, in the absence of regular business, the potential suppliers, most likely, will know little about individual potential customers, including their identity. Further, given the size and nature of sports stadia, we can expect the relationship between the parties, and the nature of the work, to become a matter of enormous public interest, especially if public money is involved. The job of a marketer within a project environment is a very different challenge to that faced by one within a non-project environment and the contrast is summarized in Table 12.1.

 
Table 12.1 Contrast of typical market environments for project and routine operations

Environment

Project

Routine operations

Trade type

Mostly B2B

B2C and B2B

Nature of product

Bespoke/unique

Standard/off-the-shelf

Frequency of ordering

Low

High

Value of contracts

High to very high

Low to medium/high

Likelihood of repeat orders

Low

High

OO-SO relationship

New

Long established

Buyer knowledge

Often low

Often very high

Environmental influence, i.e. political

Often high

Usually very low

Roles and structure of actors

Often vague and transient

Established

Funding provided by

Often a third party

Client

Putting Potential Owner Organizations and Supplier Organizations in First Contact

As with all marriages, in the very first instance, the parties have to make contact with each other. As we have indicated, this can be very difficult.

For very large public projects, at the outset, it may be clear that there will be a project but unclear who the parties, such as the Owner Organization (OO), will be. The perception of a need, for example for enhanced airport capability, exists way before developers and other actors are identified. In such instances who does the Supplier Organization (SO) approach to express their interest?

For more modest and private projects, e.g. a manufacturer building an extension to its factory, the identity of the client is clear but the existence of the potential project may not.

This is the situation that prospective SO find themselves in and to a marketer their most precious asset is their network. Through this informal web of contacts they are constantly on the lookout across this unstructured and vague environment for first clues as to the identity of potential projects and

OO. It is this activity that has been described by some as ‘scanning the milieu’ (Cova et al., 2002).

As with single boys and girls looking for prospective partners, it is helpful to go where you think other like-minded parties go and this often involves clustering around a common interest.

For prospective Owner Organizations (OO) and Supplier Organizations (SO) there are two important types of clusters; technology and geography.

Civil engineering, IT and transport are examples of different technologies that have dedicated magazines and trade fairs.

The second cluster, geography, can involve magazines and trade fairs but can also involve trade missions sponsored by the governments of respective countries. For more modest SO, local trade organizations and Chambers of Commerce can also help sustain the vital network of contacts.

Advertisements, articles and trade stalls provide the Supplier Organization (SO) with opportunities to demonstrate their achievements with previous projects in the hope of attracting Owner Organizations (OO) with relevant projects or, alternatively, to encourage potential OO to sponsor new projects requiring the SO special skills. Magazines have the advantage of a wider coverage, whereas trade fairs have the advantage in that they facilitate early face-to-face dialogue.

Although it is usually the SO who instigate first contact via advertisements, it is customary in some industries for the OO to advise of a new project in the appropriate magazine.

The geographical context becomes particularly important for those SO supplying very high value products, for which the demand is very intermittent. The need for their prospective market to be as large as possible can involve them operating on an international scale, requiring them to establish sales and marketing offices, or agencies overseas. This presence facilitates ‘face-to- face’ meetings and ‘word of mouth’ communication, and the establishment of personal relationships; a vital precursor to business in many cultures. Large organizations can invest enormous sums of money servicing such a facility, over many years, before even the merest hint of a major project comes along.

There are other mechanisms that help introduce prospective Owner Organizations (OO) and Supplier Organizations (SO). Consider the following.

The Internet is having a dramatic impact in this arena. Even the most modest SO will have a website that advertises its competency and capability. In return, any prospective OO can simply access a search engine to discover a plethora of prospective SO. So dominant is this becoming that many SO will invest considerable resources on ‘Search Engine Optimization’ to ensure that they feature highly in any such investigation by an OO.

There are organizations that have identified the commercial opportunities presented by needful parties. These are the project environment equivalent to a dating agency and will ‘scan the milieu’ on behalf of the prospective SO and, for a fee, will pass on any opportunity so discovered.

Under EU anti-corruption legislation, any prospective Owner Organization (OO) spending public money must advertise their intention to all prospective Supplier Organizations (SO) in Europe and invite their bids. This is done by putting a notice in the Official Journal of the European Union (OJEU). Such ‘OJEU notices’ provide a valuable resource to SO.

An important element of a marketer’s network is ‘Approved Suppliers’ lists. Many large organizations maintain lists of SO who can demonstrate good service and they will be automatically invited to bid for any new opportunity. These lists are more common when the requirement is less bespoke or infrequent, however many prospective SO actively seek approval to be included in them.

Defining What the Owner Organization Wants

A very real difficulty at the start of a project is that the Owner Organization (OO) may not be wholly clear what it wants. Further, if the OO is at the early stages of its lifecycle, especially if it is prior to endorsement of the business case, it may be uncertain that its project will go ahead at all.

In such instances it may need the assistance of a prospective Supplier Organization (SO) to decide and articulate exactly what is required. Often, the cost estimates within an OO business case are derived from quotations from prospective SO.

Such instances present both an opportunity and a threat for the prospective SO. An early opportunity to influence the definition of the work can put it in a very strong position. Firstly, it is able to establish close working relationships with the personnel within the OO. People buy from people and a familiar SO will have an advantage over one that is unknown. Secondly, the opportunity to influence the stated requirement enables the prospective SO to shape it towards a solution that it can meet but which its competitors cannot. (Happy is the SO salesperson who is asked by the OO to help write the specification for the subsequent ‘Invitation to Tender’.) In extremis, the SO may be able to persuade the OO to deal with it on an exclusive basis and not contact alternative SO.

The threat in such an instance is that the assistance provided to the Owner Organization (OO) may incur a considerable cost and there is no guarantee that the OO will place an order with the SO. The OO may choose not to proceed with the project or alternatively at the eleventh hour decide to favour another SO.

‘He who pays the piper calls the tune’ and so, although the SO will strive to exert influence, it is the OO that will actually decide whether and how the project proceeds. In doing so a number of details need to be addressed. Consider the following.

Degree of Definition

There are two ways in which an Owner Organization (OO) can define its need.

The first could be described as a ‘duty specification’. Here the OO is not describing what the product is, but the effect that it will ultimately achieve, i.e. the duty it needs to service. An OO buying a pump may just specify the delivery pressure and flow rate, for example.

The second instance could be described as ‘detailed specification’ and is a precise description of what is to be supplied. In the example of the pump, this will involve specifying pipe diameters, motor capacity, electrical wiring details, paint type and colour, etc.

There are pros and cons with each.

For the Owner Organization (OO), the ‘duty specification’ is cheap to produce, and insulates it from any errors made in a ‘detailed specification’. However, it does sacrifice significant control over what exactly it eventually gets. Also, comparing competing bids against a ‘duty specification’ can be tricky.

For the Supplier Organization (SO), responding to a ‘duty specification’ can involve minimal cost and risk since it offers a greater opportunity to deliver a known product (though if no known product exists then the cost and risks of responding may be significant).

Procurement Chain

Should the Owner Organization (OO) engage just one Supplier Organization (SO) on a ‘turnkey’ basis, or should it deal directly with each of the low tier suppliers, or should it have a hybrid that combines elements of both?

The pros and cons of this important decision were addressed in Chapter 9.

Reimbursement Type

Chapter 10 addressed the various options for determining the amount of consideration the Supplier Organization (SO) will receive, and the very different SO behaviour that each encourages.

It is a matter the Owner Organization (OO) must consider carefully.

Process of Supplier Organization Selection

The Owner Organization (OO) must make a decision about how it will select the favoured Supplier Organization (SO).

It may adopt an open and extensive competitive bidding process that engages as many SO as possible, from whom the cheapest compliant bid will be selected. By this the OO enjoys the benefit of a low price that will result from the competition, but there are drawbacks to this approach.

In selecting the lowest priced bid, the OO is seeking to identify the SO offering the best value, i.e. the best product for the minimum price. However, by favouring just the cheapest bid it may well select the SO that is most prepared to accept extreme risks, provide the minimum quality, treat its suppliers badly and hence is the SO most vulnerable to bankruptcy and bringing chaos to the project of the OO.

The opposite of an open and competitive bid is a ‘single tender action’, or a ‘negotiated contract’. By this there is no competition; the Owner Organization (OO) deals exclusively with just one Supplier Organization (SO) in the development of the project. A contract is established by direct negotiation with the SO for the supply of its services.

Again there are pros and cons.

For the OO a negotiated contract avoids the time and cost of a protracted bidding process and the need to engage with, and assess, many competing suppliers. However, it is difficult for the OO to demonstrate subsequently that the decision was neutral and that the SO was not favoured for any inappropriate reasons. For large and public organizations demonstrating the latter can be a major requirement.

For the favoured Supplier Organization (SO), and each of the competing Supplier Organizations (SO), the cost of following a competitive bidding process is considerable. Ultimately these costs must be met by current and future OO, as overheads within the price offered. To mitigate these, many SO will be prepared to return to the OO part of any savings achieved by the ‘negotiated contract’. Also, faced with competing bids, to win the contract the SO need only just undercut its competitors, which may have the effect of taking the price higher than would have been offered within a negotiated contract.

In practice there are a number of different formal and semi-formal selection processes that can be adopted. For instance there may be a competitive bid only amongst specially selected and invited SO.

Defining What the Supplier Organization Can Offer

Outside of the project environment, Supplier Organizations (SO) supplying ‘off-the-shelf’ products avoid much of the technical risk of the product not being fit for purpose since the product is already established, and the marketer mostly focuses on identifying customers for that product.

This is not the reality for a SO within the project environment that is offering bespoke products. Here the likelihood of supplying something that does not work or is not fit for purpose is considerable.

This risk is best mitigated pre-contract, by steering the requirement of the Owner Organization (OO) to fit as closely as possible to an established product or service of the Supplier Organization (SO). In contrast, most likely, the OO will be steering the requirement to fit its ‘unique endeavour’ and away from a standard product.

The fact that a SO is prepared to operate within a project environment demonstrates that it is prepared to bear a degree of this technical risk, however, the amount is a judgement it must make. Each SO is able to offer an envelope of capability shaped around familiar, even standard, products and processes. This envelope can be stretched away from the familiar to embrace the bespoke but the further the stretch, the higher the risk of failure.

Product Development

Any bespoke deliverable will require a degree of product development.

Some Supplier Organizations (SO) will anticipate the requirements of potential Owner Organizations (OO) and engage in proactive R&D activities. Others may choose to do it only in response to a specific enquiry. Each approach has inherent risks. The former may not secure any customers; the latter may not lead to an order.

However, if significant development is required, it is unlikely the OO will allow many SO to bid because of the cost of responding to similar queries from a number of parties. Also, the more bespoke the requirement the less likely the product can be fully defined at the outset. This will lead the OO away from Firm Price contracts towards Cost Plus which may be deemed an advantage to the SO.

The implication of this last point is that the Owner Organization (OO) may be prepared to share some of the development risk and even assist in the product development. This may be necessary if the risk of either technical failure or pre-contract termination is too much for the Supplier Organization (SO) to bear alone. Such arrangements can be of enormous attraction to SO, especially if it involves the SO developing capability and experience that will be attractive to other OO.

Use of Subcontractors

Often, an extension to the range of goods and services that can be offered by a Supplier Organization (SO) can be achieved simply, and at low risk, by augmenting it with products or services supplied by others. By this, risk is transferred to the subcontractor and away from the SO in question.

Very many SO secure huge advantage just from close relationships with an Owner Organization (OO), and simply supply goods and services that they procure in their entirety from elsewhere.

There are, of course, drawbacks. Firstly, if and when the OO realize that they can deal directly with the subcontractor then the business opportunity for the SO disappears (and often the relationship). Secondly, the SO retains full obligation for the goods and services it supplies and so bears the risk of any failure on the part of the subcontractor. If they do not have the technical or administrative capability to properly supervise the subcontractor then it is difficult for the SO to manage or mitigate this risk.

An alternative course of action is to engage a third party, not as a subcontractor but as a partner.

Aggregations of Supplier Organizations

In many instances, Supplier Organizations (SO) that do not have all the skills and facilities to satisfy a contract choose to form an aggregation of companies that collectively do have the capability. Thus a joint venture or consortium, described in Chapter 9, is formed.

This allows the SO to greatly increase its potential market without the risks of engaging major subcontractors, though it will inherit some liability for the performance of the other syndicate members, and its ability to mitigate this is limited.

Commercial Considerations of the Supplier Organization

In addition to the technical aspects, it is appropriate for the prospective Supplier Organization (SO) to consider the commercial basis upon which it will engage with the Owner Organization (OO).

More often than not it is the OO that is in the dominant position and will own the decision as to what commercial terms will be offered, but the SO owns the decision as to whether it will accept them.

Although it is tempting to leave decisions about commercial terms to closer to the negotiation of a contract, it is not in the best interests of the SO to pursue work, at great expense, solely on technical considerations only having to later reject a contract on the basis of unacceptable terms.

An early investigation is warranted.

Corporate Strategy of Supplier Organization and Fringe Benefits

We have established that the objective of the Supplier Organization (SO) is to make money by delivering contracts at a profit.

A straightforward interpretation of this will always have the SO pursuing the most profitable work. This is a good philosophy to adopt but there are other considerations.

As we have discussed, unlike Owner Organization (OO) project teams, SO are almost always permanent organizations. They seek to make money today, but also money tomorrow, on future contracts, so it can be appropriate to sacrifice short-term profit for the prospect of a larger long-term profit. Consider the following:

  • An OO may be prepared to work in partnership with a SO to develop new products or techniques that may subsequently provide the SO with significant sales opportunities.

  • Although an individual contract may not offer much by way of profit, it may provide an opportunity for the SO to become an ‘approved supplier’ to an OO, which will entitle it to bid for future, perhaps more lucrative, contracts offered by the OO.

  • An OO may be based in another country and an individual contract may provide an opportunity for the SO to establish a presence and reputation in that country.

 

Ultimately, commercial organizations must speculate to accumulate and undoubtedly there are instances when each of the examples offered above would justify a small (or even negative) profit margin. This would be of particular relevance if securing access to new products or markets in question was part of the overall commercial strategy of the SO.

However, very great care is warranted here. The promise of ‘jam tomorrow’ has been responsible for very many significant losses on behalf of suppliers and any SO sacrificing short-term profit for the promise of a future, unquantifiable benefit is advised to proceed with great caution.

The Start of a Relationship

Marketing is just the start of what, hopefully, will be a long and mutually beneficial relationship between an Owner and Supplier Organization and this is aided by a strong personal relationship between those involved.

Much attention within books on project management is devoted to the discipline of stakeholder management; the influencing of those parties who affect or are affected by the project. The amount of such attention stands testament to just how important it is to get such relationships right.

The same principles apply here and, for the Supplier Organization (SO), there is no more important stakeholder than the Owner Organization (OO).

A good relationship increases the chances of securing the contract; increases the chance of that contract being on more favourable terms to the SO; makes the subsequent life of the project manager within the SO so much easier; and increases the likelihood of favourable extensions to the contract.

Many cultures, particularly non-western cultures, place great store in the value of such personal relationships, and prospective SO in these circumstances are often surprised at the amount of time and energy that they must invest in establishing such relationships long before a potential order materializes.

It is helpful if such relationships are at various levels. Consider the following:

  • During contract execution the prime point of contact between the parties will be between their project managers. This relationship is necessarily formal and is sometimes not the best forum to discuss delicate and contentious issues. The ability for senior managers of the parties to engage with each other, preferably informally, to explore these issues is a very valuable facility.

  • Having a few people intimate with the OO allows a broader perspective on subsequent decisions such as the ‘Bid/No Bid’ decision.

  • The departure of a key team member is less traumatic if the relationship is multi-layered.

 

The ‘Bid/No Bid’ Decision Gate

The conclusion of the Marketing phase is the ‘Bid/No Bid’ Decision Gate, when a prospective Supplier Organization (SO) must decide whether to invest resources in compiling and submitting a formal offer for a prospective contract.

This presupposes that there is a formal SO selection process requiring formal bids since, in the case of a ‘single tender action’, there is no such obvious point. However the sense of the gate applies in all circumstances. In practice, any marketer considering a potential project is always alert to the question ‘is it worth carrying on?’. Early termination is often the appropriate response, long before any ‘invitation to bid’ is offered.

The gate decision is based upon a comparison of future cost and benefit.

The benefit is the combination of the likelihood of securing the subsequent contract and the price (consideration) to be gained from its execution. Whereas the costs are those future costs to bid for, and subsequently execute, the work (those costs incurred up to this point in time can be dismissed as ‘sunk costs’).

The techniques for estimating of costs will be dealt with in the next chapter, but the likely price and the likelihood of winning the bidding competition are subjective judgements that must be made by the marketer.

As discussed in Chapter 4, this first Decision Gate within a lifecycle is the most important, and for the SO it is wholly reliant upon the marketer and their judgement of how much influence they can exert over the perspective OO relative to that of competing SO, as well as what others are likely to bid for the work.

Notes

[1] Usually, the product is the unique element of a project but this is not always the case. For instance a project may be initiated to create a standard product but to do so using a different manufacturing technique, or by using alternative equipment, or in a different location. In each of these cases the challenge is to do something which has not been attempted before and as such the word ‘unique’ is applicable and hence the use of the word ‘project’ justified.

[2] The troubled facility created for the 1976 Olympic Games in Montreal, the chaotic preparation of the stadia for the FIFA World Cup in Brazil in 2014 and the reconstruction of Wembley Stadium in 2007 are notable examples in this respect.

[3] Many readers will be employed by organizations that deliver successive projects and the completion of one project does not lead to termination of employment. These types of organizations are referred to as ‘matrix’ organizations and have special characteristics, some of which they share with organizations engaged in non-project work. They will be addressed in some detail in Chapter 2 but for the purposes of this chapter it is appropriate to consider what may be referred to as a ‘pure project’, like our stadium project, a characteristic of which is its temporary management structures.

[4] In practice, the involvement of individual project team members is even more volatile than the life of the overall project team. Most likely, an individual will be a member of a sub-team which will only exist until the fragment of the project for which the sub-team is responsible, is complete. For this reason the make-up of the overall project team is always changing.

[5] This may stretch the historical knowledge of some of our younger readers but suffice to say that after vinyl records, the favoured medium for storing music was a spool of magnetic tape contained within a plastic case; the cassette tape.

[6] The various levels of project success and the interplay between products and benefits is addressed in detail in Chapter 16.

[7] There are instances where organizations may choose to move in the opposite direction, and for good reason, but this book does seek to address their concerns.

[8] Ultimately, all expenditure is for the engagement of people since all material comes out of the ground (either mined or harvested) and at this point is free of charge.

[9] For the mathematically minded it is the integral of the earlier curve (area under the curve) and its gradient, or steepness is equal to the value of the previous curve, at any individual point in time.

[10] The name derives from ‘S’ being an abbreviation for ‘Summation’, since these curves are most properly referred to as ‘Summation Curves’. This explains why, very often, real ‘S-curves’ do not look much like an ‘S’. The important features are, firstly, that it is always ascending (the cumulative expenditure never reduces) and, secondly, the gradient, on a large scale, is shallow-steep-shallow, even though locally, on a finer scale, there may be some variation in gradient.

[11] The decision made at the gates involves the marginal benefit and marginal cost. Actual expenditure to date is ignored on the basis that it is a ‘sunk cost’ and cannot be recovered in any case. This is a reason why, especially at the later Decision Gates, a project may be continued with, even though the total benefits may be exceeded by the total costs.

[12] Further detailed analysis and comparison of strategic and tactical control is offered in Chapter 16.

[13] There is again an analogy to our own lives. Shakespeare once famously wrote about the ‘Seven Ages of Man’ and yet Hinduism talks about the four stages of man. Each is describing the same life; the same journey from cradle to grave, and yet they choose to decompose it in different ways, each to reflect their own understanding and their own emphasis.

[14] Readers may wish to note that in some countries, most notably the United States, the mandate document that bears the authorizing signatures is a ‘Project Charter’. This is a standalone and separate document that will refer to a Business Case.

[15] Some care is required here because there are some obligations of the SO that may not be explicitly stated in the contract. For instance, in any case, the SO is obliged to provide goods of ‘merchantable quality’ and this will confer ‘implied terms’ on the SO.

[16] The analysis is more straightforward if we assume the contract is of ‘Firm Price’ type (see Chapter 13).

[17] Some OO manage major assets and infrastructure (rail, water and telecommunication networks) and are constantly commissioning projects to create or refurbish assets. For them, projects are an ongoing feature, but they are the exception. For most OO their involvement in projects is sporadic.

[18] Like the lifecycle offered in Chapter 5, the lifecycle offered here is a model. To be useful, models need to be simple, however their principal weakness is always their simplicity. The nature of procurement is such that there are a great many combinations and permutations of payment terms, contract types, and the like that can result in variation in the exact Decision Gates and phases that apply. The model is offered as a generic model to assist in the understanding of what appertains to most SO, most of the time. Real examples may, and will, vary.

[19] Some legal obligations of the SO do live on beyond this point, for instance its obligations for latent defects.

[20] It should be noted, however, that this is not always the case. Acme Pool Services is selected on the basis that, unlike the Owner Organization (OO), it is experienced in the construction of pools. It has skills, equipment, knowledge, expertise and contacts that enable it to manage the building of the pool far better than the OO, such that it may well be able to do the work for a considerably cheaper sum and some of this saving may be passed onto the OO in which case the second scenario is both easier and cheaper for the OO.

[21] There are variants that do not contain such an agreement but are less attractive to the OO.

[22] The exact sharing of risk is determined by the wording and quantifications within each specific contract. The arrangement within a continuum offers an approximate guide only.

[23] Ideally such negotiations should be embraced as early as possible and not wait for the final phase but practicalities often result in them being held to the end.

[24] For example some EU legislation imposes constraints on publicly funded projects.

[25] Discrete probability distributions for time or cost of a project are rarely symmetrical. It is almost always the case that it is more likely to cost more, or last longer, than the ‘most likely’ figure, than less, i.e. the mean is very likely to be greater than the mode. This results in a distorted distribution curve with a longer tail to the right of the mode. It is for this reason that the single estimate derived by the three-point estimating technique is usually greater than the mean and a more representative figure of the overall distribution.

[26] Or other entity such as Work Package.

[27] The use of Product Breakdown Structures and Work Breakdown Structures (WBS) will be addressed comprehensively in Chapter 14.

[28] There is an opportunity to withdraw an offer by the offerer, before the expiry of any validity period, but it is limited and different legal systems have different approaches. It is, for instance, an area of inconsistency between English and Scottish law.

[29] For an OO the ‘why’ is addressed within the Business Case and the ‘Project Background’ section of their PMP is informed by this.

[30] This ‘locking’ of the estimate is sometimes referred to as ‘baselining’.

[31] It is the case for project control as it is for planning. ‘Scope creep’ (doing something that was not intended) impacts upon duration and cost and, without a scope baseline, ‘scope creep’ cannot be recognized and hence project cost and duration cannot be controlled.

[32] For projects with very large physical deliverables, such as machinery, many practitioners choose to draw up a PBS (Product Breakdown Structure) that decomposes the deliverable into discrete parts, as a prelude to creating the WBS.

[33] A Work Breakdown Structure Dictionary is a textual document that supports the WBS by containing additional information about individual Work Packages.

[34] ‘Cost’ is a complex entity and care is required here. Chapter 17 refers.

[35] Such ‘house standards’ will be key elements of the project management method adopted by the SO.

[36] Although presented in the context of management of resource, since time and cost are inextricably linked, they can be thought of as time or cost management techniques, depending upon the context.

[37] To many, this four-part cycle is known as the ‘Deming Cycle’ or the ‘Deming Wheel’ on the understanding that it was originated by W. Edwards Deming. However, in his book Out of the Crisis, Deming (1982) himself attributed the original design to W.A. Shewhart.

Others, such as Ronald D. Moen and Clifford L. Norman (2010) differentiate between ‘Deming’s Wheel’ and the PDCA cycle, attributing the latter to a reworking of Deming’s work by a group of Japanese executives after receiving a presentation by Deming in the 1950s.

[38] This can be considered as an example of the ‘Hawthorne Effect’ (Buchanan and Huczynski, 2004).

[39] As discussed in Chapter 7, through the life of a contract the SO has progressively less influence over the gate decisions than the OO. For example, once the contract is signed the opportunity for the SO to terminate the contract is negligible.

[40] For convenience we will consider a Firm Price contract.

[41] If the estimated cost within the baselines of the PMP is less than that within the pre-contract sales estimate it is inconceivable that SO management would not insist on the former being adopted as the target cost.

[42] Although it is easy to refer to just cost, the real goal of the SO is profit and so there is a pressing need to manage and control revenue, both in terms of expediting payments to which the SO is already entitled, and also maximising the amount of entitlement. The latter will involve the SO’s PM acting as a marketer and salesperson seeking out new opportunities within the context of the existing OO and project. Such activity is akin to the ‘farmer’ aspect of selling as opposed to the more conventional ‘hunter’ aspect, as addressed in Chapter 13.

[43] To some extent this is because this strategic level of control is not as easy to exert within an SO because, once a contract is signed, the SO has no option to withdraw.

[44] It is said that project managers spend upwards of 90 per cent of their time simply communicating with others (Heldman, 2009).

[45] Care is required here since some projects will have their own contractual requirements that may not be adequately serviced by the existing facility.

[46] This also helps to manage the risks associated with the unexpected departure of key project staff.

[47] Some practitioners also include the processes and documents required to manage change as being part of the Configuration Management System (CMS).

[48] For instance, to avoid potential for any contradictions such suites should, ideally, ensure that a requirement (such as a dimension) is only stated once, in one document, which is then referenced by the others.

[49] Or alternatively with a CMS imposed by a SO higher in the supply chain.

[50] Some recipients will receive a ‘Controlled Copy’ in which case they will automatically receive any subsequent updated versions. Recipients of ‘Uncontrolled Copies’ do not atomically receive updated versions.

[51] Further enhancement can be adopted when using a spreadsheet’s logic to colour the cells to indicate status (for instance: Green - Work Package has started/finished before its planned date Amber - Work Package has started/finished but after the planned date; Red - Work Package has not started/finished and it is after the planned date).

[52] The size (and hence number) of the smallest fragment into which the project is decomposed.

[53] Implicit within all these discussions of costs incurred by a SO, and their use in the strategic and tactical control of projects, is the assumption that costs can be attributed to each individual bespoke product. Those SO who currently only produce standard products and are looking to embrace the supply of bespoke products may find this requirement surprisingly onerous. This is because, currently, many will operate a cost collection system that uses only functional departments as cost centres and lack the facility to record costs against individual products. Converting such a system can represent a significant amount of work and may, for instance, include the need for employees to create timesheets. Cultural resistance can be expected as well as significant technical difficulties and additional complexity.

[54] Many SO choose to have a ‘Cost Management Plan’, as a subsidiary management plan within the PMP that contains such definitions and conventions.

[55] The precise point of commencement of the warranty period is defined within the contract in question.

[56] In some instances such access is an element within the original supply contract. It can be a useful negotiating token for the OO.

Reference

15 

Cova, B., Ghauri, P. and Salle, R., 2002. Project Marketing, Beyond Competitive Bidding. Chichester: Wiley.

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