Is Your VMS Geared for Complex Project Management?

467665039Boston’s Big Dig has its claim to fame not only as an ambitious and expensive megaproject involving hundreds of third-party vendors – but also for its mismanagement and failures. Projects have a way of failing, as per a study by PricewaterhouseCoopers (PwC). The company reviewed 10,640 projects across industries in 200 companies in 30 countries. PwC found that only 5 of the companies has a track record of 100 percent success with their projects. The Harvard Business Review analyzed 1,471 IT projects and found that all of them had cost overruns of 27 percent on average, with 1 in 6 having a 200 percent overrun, and a near 70 percent schedule overrun. Pretty dismal statistics!

We all know that project delivery demands a focus on time, cost and quality, giving equal importance to each of them. In spite of the commitment of the project teams, projects carry their own seed of failure within them. An estimated 40 percent to 60 percent of projects fail, in spite of all the agreements, contracts and penalty clauses incorporated into the contract. Outsourced projects are seen to fail four times more often than in-house projects. But the reason why projects fail are not far to seek.

Simply put, most projects fail because of one or more of these reasons:

  • Project teams and affected constituents lack involvement in project design.
  • Requirements of the project are not agreed upon by project sponsors.
  • Project priorities and requirements are not well communicated to participants.
  • Ineffective controls allow project scope creep.
  • Lack of attention to quality resulting from the absence of firm approval milestones.

As more companies are opting to maintain a lean employee workforce, and companies outsource portions of larger projects to avoid hiring specialized skills that will not be needed after the project’s completion, outsourcing of projects has become the norm rather than exception. This fact is further established when we consider the fact that for every dollar spent on agency contractors, two to four dollars are spent on outsourced projects. Most of the companies which provide these services operate with less than 10 employees.

Most projects are complex by nature and involve multiple activities and phases. Each major activity requires a different resource plan and schedules its activities in sequence or in parallel. All efforts will need to merge seamlessly into the end result, while accommodating all contingencies and dependencies. The pricing model for a given project activity may vary from time-and-materials to fixed price, deliverables-based payments; with some projects adopting a combination of pricing models. Projects usually combine multiple worker classes, who are different from each other in their status and hence need to be managed differently.

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Most vendor management systems (VMS), initially designed to support the use of staffing agency-supplied contract workers, have introduce new VMS modules to support the procurement of services and execution of SOW-based projects. Of course, not all VMS systems transcend beyond viewing the management of outsourced projects as a logical extension of traditional contingent workforce management. This approach limits the functionality of their program to supporting the payment of project resources using a time-and-materials model. Such systems apply processes very similar to the payment of agency-supplied contractors. For clients seeking assistance with complex projects that incorporate fixed price elements in which payment is based on achievement of defined milestones, this VMS approach falls short!

So, when we say that a VMS helps in managing a SOW project from start-to-end, what are we truly saying that the VMS should do? The answer is simple – VMS systems are designed to take the complexity out of engaging third parties to get work done. Its role is to simply the processes of sourcing and selecting third parties, establishing contractual agreements that reflect the agreements between parties, administering the selected vendors, efficiently tacking work performed, providing accurate and timely payments, minimizing risks associated with the use of non-employees, and verifying the quality of the services offered.

When applied to the support of complex projects, the best VMS systemscomplement the leading project management software, mitigating the “human element” causes of project failure. The capabilities to look for:

  • Provides built-in collaboration tools for the creation and issuance of a Request for Quotation (RFQ) that reflects the needs and interests of all stakeholders.
  • Facilities group reviews of vendor responses and joint decisions on vendor selections.
  • Breaks projects down into ‘work packets’ and suggests the most cost-effective worker type for each work packet. Automatically converts the successful RFQ response into Statements of Work for each work packet and vendor.
  • Includes on-boarding processes which ensure compliance with government regulations and corporate policies that apply to each worker class.
  • Supports the best pricing and terms structure for each project work packet, fully supporting fixed price projects with payments based on completion of milestones.
  • Manages the tasks and work schedules of different types of temporary workers.
  • Establishes and tracks labor- and expense-related budgets for all work packets as well as for the overall project, providing updates on actual spend against budget at every step of the way. Rejects charges against cost centers when an expense threshold or deadline has been met.
  • Employs “earned value management” (EVM) techniques to anticipate future issues or overruns, enabling mid-course corrections.
  • Captures and aggregates vendor performance data, deriving valuable insights to support business decisions and helps to plan future project cycles.
  • Provides a “program management module” that keeps all constituents informed and facilities ongoing communication and collaboration throughout the project.
  • Issues automated approval processes and reminders for end of contract, end of funding and end of purchase order date, missing timesheets, unapproved hours and project extension requests. Provides customizable reports and dashboards to report on all aspects of project progress.
  • Fully integrates with industry-leading project management applications, eliminating the need for duplicate entries or “limited visibility” reports.

When considering the use of a VMS to manage the human element associated with outsourcing your projects, test the system’s functionality against the factors indicated above. Develop use cases, and ask the vendor to demonstrate how the VMS will handle each case. Most important, enlist the participation of your line managers in developing the use cases and in selecting the VMS. Without their support, any system will fail to meet your company’s goals for outsourced project work.

MORE: Food for thought when considering a VMS

Lalita Vempati

Lalita Vempati
Lalita Vempati is a marketing communications specialist at DCRWorkforce. She has extensive experience in managing operations, human capital and training and development.

Lalita Vempati

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One Response to “Is Your VMS Geared for Complex Project Management?”

  1. […] projects. Each VMS has its own standards and parameters in the support it offers to this end. Read my other post, to know more about the kind of support a really capable VMS can offer to the management of a SOW […]

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