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Before You’re Bound Forever…

 

Project Business Management

SERIES ARTICLE

By Oliver F. Lehmann

Munich, Germany

 


 

“Make sure before you’re bound forever,
That heart and heart will find together.
When folly’s gone—remorse lasts long.”
– From “Song of the Bell” (Friedrich Schiller)[1]

Summary

In Project Business Management (PBM), companies come together to do projects as customers, contractors, and in other roles. PBM is high-risk business for all these parties involved. Many risks are linked with the mutual obligations among the contract parties, in which shortcomings and problems, but also refusal to meet obligations of one organization may translate into problems or even crises for others.

Careful selection of the organizations, with which one is prepared to have a contract, is therefore a key element of success in project business. A simple collection of selection criteria done early in the project may help ensuring that the right questions are being asked before decisions are made that have implications far into the future.

Cross-Corporate Projects

Project Business Management (PBM) describes projects as cross-corporate endeavors that bring together independent organizations as buyers, sellers, and other forms of business partners. Together they form Project Supply Networks (PSNs) that may work very well to the benefit of all members involved and bring the project to a successful end.

Often, they don’t.

In its simplest form, a PSN may consist just of a customer, a contractor and a contract between them. In other projects, PSNs grow into complex and often very opaque networks with lots of organizations involved in various roles, such as customers, contractors, subcontractors, consultants, freelancers, providers of personnel services, consultancies, and many more.

Figure 1 visualizes the basic structure of a still simple PSN.

Figure 1: A simple example of a Project Supply Network (PSN) with a customer and five sellers over two tiers.

PSNs are often very dynamic as the engaged parties may change their roles over time. A prime contractor today may become a subcontractor tomorrow, while one of the subcontractors assumes the responsibility of the new prime contractor. Contractors may leave the PSN, when their work has been done or even earlier, when the contract has been cancelled. Other contractors join the network late in the project, because that’s the time when their contribution is needed first.

PSNs can also become opaque. In many of them, nobody knows for sure, which organizations have become an element of the project, particularly when no one assumes the responsibility to oversee, supervise, and manage all parties in the project and also the interfaces between them. Customers often believe that a contractor performs project work with own resources, when it actually has been forwarded to one or more subcontractors, and they may subcontract it further.

Strange situations can occur in PSNs. To give an example, Figure 2 depicts a situation that occurred in a project of one of my clients: A project customer (Company A in the diagram) contracted a vital part of their key project to a Company B, that in turn contracted out the most difficult pieces of work to Company C as a subcontractor, without knowledge and approval of Company A.

Figure 2: A situation from real life, in which a subcontractor in a project was a business unit of a direct competitor of the project customer, who was not aware of that.

When the customer finally found out that a third company had become a provider in their project, they were especially shocked to learn that Company C was a 100% subsidiary of their most direct competitor, who from time to time filled idle capacities with third party business.

They found that out late in the project, when dependencies were too strong to simply change the supplier. In the role of a subcontractor, Company C learned a lot about details of the project and the general approach taken, which allowed them to adjust own strategies to remain competitive.

More…

To read entire article, click here

 

Editor’s note: This series of articles is by Oliver Lehmann, author of the book “Project Business Management” (ISBN 9781138197503), published by Auerbach / Taylor & Francis in 2018. See author profile below.

How to cite this article: Lehmann, O. (2019). Before You’re Bound Forever; Series on Project Business Management; PM World Journal, Vol. VIII, Issue I (January).  Available online at https://pmworldjournal.net/wp-content/uploads/2019/01/pmwj78-Jan2019-Lehmann-Before-Youre-Bound-Forever.pdf

 


 
About the Author         


Oliver F. Lehmann

Munich, Germany

 

 

 

Oliver F. Lehmann, MSc., PMP, is a project management author, consultant, speaker and teacher. He studied Linguistics, Literature and History at the University of Stuttgart and Project Management at the University of Liverpool, UK, where he holds a Master of Science Degree. Oliver has trained thousands of project managers in Europe, USA and Asia in methodological project management with a focus on certification preparation. In addition, he is a visiting lecturer at the Technical University of Munich.

He has been a member and volunteer at PMI, the Project Management Institute, since 1998, and served five years as the President of the PMI Southern Germany Chapter until April 2018. Between 2004 and 2006, he contributed to PMI’s PM Network magazine, for which he provided a monthly editorial on page 1 called “Launch”, analyzing troubled projects around the world.

Oliver believes in three driving forces for personal improvement in project management: formal learning, experience and observations. He resides in Munich, Bavaria, Germany and can be contacted at [email protected].

Oliver Lehmann is the author of “Situational Project Management: The Dynamics of Success and Failure” (ISBN 9781498722612), published by Auerbach / Taylor & Francis in 2016 and ofProject Business Management” (ISBN 9781138197503), published by Auerbach / Taylor & Francis in 2018.

To view other works by Oliver Lehmann, visit his author showcase in the PM World Library at https://pmworldlibrary.net/authors/oliver-f-lehmann/

 

[1] Own translation from the German original