Part 5 of 7 - 2nd Book that Influenced My Project Management Career

 

This is Part 5 in a series about a second book that affected the development of my skills in the business of managing projects and program of projects    The book -  Human Factors in Project Management by Paul C. Dinsmore – published in 1990 by AMACOM-American Management Association.  

The series contains articles on:  1)  A Classical View of Project Management.    2)  Planning and Strategy.   3)  Project Interfacing.   4)  Using Managerial Time.    5)  Negotiations.   6)  Decision Making.  7)  Managing Changes. 

This article summarizes the key points in Chapter 11 – Negotiating and it provides commentary relating the content to PMI’s Project Management Book of Knowledge – 6^th Edition (PMBOK).

Project managers and team contributors continuously negotiation start and end dates and the resources required for executing direct and indirect project activities.   However, this type of negotiations is drastically different from the formal negotiations used by organizations - Buyers for contractual agreements for contracts with consultants and contractors – Sellers.  

Negotiations for selecting the most qualified Seller and for determining the contract costs follow the Buyers’ organized and repeatable processes, which are consistent with industry domain practices most common for the project scope.  

Dinsmore summarized the most common application of negotiations in a project environment:

• Contracts:  Projects can have multiple contracts for services and products, and each contract can have subcontracts for materials and labor.    Regardless of the contract acquisition method, the Buyer and Seller will negotiate the price, terms and conditions and technical requirement of the contract agreement. 
• Procurement:   Projects also procure services and materials to contribute to the execution of work, such as administrative office space, office supplies and services, and cleaning and maintenance services.   The Buyer and Seller will routinely expedite and negotiate delivery dates and timeframes that are correlated to changing project schedules.
• In House negotiation:  Some Buyer’s organization have labor contracts and work rules that affect work performed by in-house personnel assigned to projects.   Interpersonal attributes will have a great impact on meeting the needs of management personnel and personnel represented by a collective bargaining agreement.
• Negotiation with third parties:   Long standing organizational agreements and memorandums of understanding may affect how project work can be executed.   Planning and negotiating work will need to recognize the agreements and MOU to ensure requirements are met without impacting project plans.
• Claims and contract closeout:   Buyers and Sellers understand the final stage of contracts includes settlement of changes, claims and disputes.   Similar to the effort to start the contract, Buyer and Seller will negotiate acceptance of work, entitlement to changes, resolve disputes, and reconcile payments to complete the contract and terminate obligations.

Whether formal or informal, the negotiation process has three possible outcomes.   Dinsmore concisely describes the applications, methods, and the results for the Buyer and Seller on: A) Win-Win negotiations.  Mostly tailored to parties with intent to create and sustain a long work relationship.  The process creates give and take compromises that allow Buyer and Seller to focus on the benefits from the agreement.  B) Win-Lose negotiations.  This is most typical for parties that view the agreement as a sole one-time occurrence.   This is tailored to Buyer and Seller that want to demonstrate victory at the expense of the other.    C) Lose-Lose negotiations.   This is often associated with a Buyer and Seller with a history of strained negotiations and poor contract performance.  As a result, the parties take extreme and strong positions that neither can expect to actualize.  

Negotiations are most effective with a plan.   The plan will include: 

• Research and position statement:
• Pre-negotiations:   This consists of planning the strategy and tactics for the negotiations, including history between the Buyer and Seller, the company representatives required at the negotiations, schedule of meetings and negotiation dates, and the definition of several positions and outcomes that will be used active negotiations and post-negotiations,
• Active negotiations:   This consists of executing the strategy and tactics for conducting the negotiations and creating presenting facts and figure to present positions, alternate positions or counter-positions to initiate and complete the negotiation process.  
• Post negotiations:   This is the activities from the results of the negotiations, including recording the process and result in project records, and as needed, updating contract documents to clarify or change requirements.     

PMBOK references negotiations as part of Chapter 9-develop the team and control resources, Chapter 13-manage stakeholder, and Chapter 12. 

PMBOK Chapter 12 – Project Procurement Management identifies negotiation as a primary personal and team skill.   From project perspective, negotiation is a discussion aimed at reaching an agreement.  Procurement negotiation clarifies the structure, rights and obligations of the parties and other terms of the purchase so that mutual agreement can be reached prior to signing the contract…. Negotiation concludes with a signed contract document or other formal agreement that can be executes by both buyer and seller.

Commentary:   Most projects in the rail transit are subsidized with government funding.   As a result, the Buyer’s contract acquisition process is highly structured to ensure government requirements are met, including length of solicitation period, prevailing wage rates for labor, Buy America provisions for materials, defined percentages for subcontracting work to disadvantage and minority businesses, and a wide range of environmental compliance issues.   Each of these added requirements can lead to negotiations for changes at the pre-award, post award and closeout phases of Buyer/Seller contract. 

PMBOK Chapter 9-Project Resource Management offers several techniques for resolving team conflicts.   The tactics are transferrable to the to the negotiation process and include: A) Withdraw/avoid.  B) Smooth/accommodate.  C) Compromise/reconcile.  D) Force/direct.  E) Collaborate/problem solve.