How to overcome the inevitable Conflict between you as a Project Manager and the Procurement Department?

What is the situation?

You want your project to be as successful as it can be and get the best implementation partner to ensure this outcome. The Procurement Department wants to get the cheapest option and save money.

This conflict is common and widespread. Also, Project Managers usually abide by this situation and do as much as they can within the constraints of internal procurement policies. However, this does not have to be the case. You as a project manager must do all that you can to ensure achievement of project goals and objectives. To ensure the highest Return on Investment as possible. Project manager should be the initiator of policy changes, he/she must question the existing rules and improve them to serve the company in the best way.

If you consider this carefully, the project manager in a Matrix organization is in a perfect position to call for these changes. His position is, depending on the value and importance of the project, higher than department managers in Procurement. His closest ally is project Sponsor who should be C level manager. With him/her on your side, you can change any rule or policy if you build a strong enough case.

How to resolve this?

My approach to this “problem” was to build the case in the worst case scenario. What if the cheapest vendor got the contract? What could realistically happen during the project and especially after the project is finished? And, what will be the end result? How much lower quality will cost us? How much bad, or not the best, solution will impact our expected results from the project? If you can relate to some problematic recent project, that will support your claims and analysis, even better.

Then, I create the scoring model that is not only good for this project, but is useful for future, similar projects as well. First one should be to eliminate the potential bad vendors. To allow only the ones that have the minimum requirements met. For the large complex projects, I used these qualification criteria:

Qualification Criteria

1. PMP/PRINCE 2 or similar certified Project Manager must manage the project
2. In the last three years the company had similar projects (field, size, duration, complexity…) delivered successfully
3. Solution proposed was implemented previously. Provide reference client list
4. Financial position is stable and revenue in the last three years is above…
5. …

After you get the proposals from the potential vendors, you need to select the best one. Usually, negotiations are focusing only on the end price. As a first and easiest thing you can do, and I highly recommend it, is to ask vendors to include the five-year Total Cost of Ownership. Then, compare proposals considering this total value. No one should be able to object to this approach and evaluation of proposals.

Second strategy, that is a little harder to implement and convince stakeholders to do, is to implement the scoring model when selecting a vendor. You need to carefully evaluate what are the criteria you want to score proposals on. And, of course, to define weight on each of the criteria. That is the difficult part. What you should do is to have three to five criteria. More than five will be hard to maintain and selection could become complicated if the difference in score is small. Less than three does not make much sense.

Example

What have I used as a scoring criterion? And, what were the weights on each of them?

1. Project Cost + TCO                                        50%
2. Solution Technology (Interfaces, Reports)        20%
3. Compatibility with existing IT architecture       15%
4. Internal expertise on solution/technology        15%

What was my reasoning for the above Scoring model?

First one is self-explanatory, so I will not go into details on that one.

Explanation

Second one I used to understand the expected lifespan of the technology behind the solution. How long it will be supported. Is this the best possible technology for this solution? Is this wide accepted technology or some exotic rarely used one?

Third one will make your internal maintenance cost high or low. If the solution is part of the wider solution base and will just be an additional part of the bigger picture, you should not expect any issues or higher cost during the production period. You will also have higher buy-in from the internal teams as they are familiar with the solution proposed. Finally, you will not add complexity to usually complex IT architecture in large companies.

Fourth one is securing the better performance of internal teams during the project. They will give better business requirements, IT will have a better understanding of the solution and provide you with better support and buy-in will be higher. And, the cost of additional training, certification, etc. will be avoided.