Last time we looked at the different times in a contract where you would be scheduling payments. Today, I wanted to write a bit about the different types of payment you could factor into your work with vendors to give you some variety with how you structure payments.
Before we start, make sure to discuss any payment plans with your procurement and finance teams, so you don’t end up committing your company to something that you really shouldn’t! In my experience, contracting and procurement are really outside a project manager’s pay grade – organisations generally want the specialists involved, and most project managers would not have authority to sign contracts.
However, it’s worth knowing about the different payment options out there, so you can mention them in conversations with the right people if they are relevant to how you think your project would be best served.
Here are some options to consider for your next project procurement activity.
1. Uptime/availability payments
This is something to build into service level agreements. In the past, my projects have needed to set up SLAs, and uptime payments were built into those.
In essence, vendors get an incentive payment for keeping the service available instead of penalty clauses for downtime.
You could use this principle to build in payments for services or support being available, and you could have various thresholds that trigger different payments. Or you could put penalty clauses in for downtime, but that’s not so good for relationship building. The management at my last company was very much against punitive clauses as they believed it did not incentivise a partnership relationship and was too much centred on blame.
If you do put these clauses in your contracts, make sure you also document how you claim the payments. For example, for uptime incentives, if I remember rightly, we had to claim them, and sometimes for the value offered, it wasn’t really worth the admin… so think that through before you write them into contracts.
2. Performance payments
I haven’t used these personally in projects, but I believe they are common in construction (are they? Let me know in the comments).
This would be a payment related to hitting a particular performance threshold, perhaps delivering early on a particular milestone, or reaching some kind of target. When we pay for services, there are often performance-based payments built into the schedule. You’ll have seen these, too if you do any kind of online transaction processing. For example, I signed up for a service linked to my personal website that allows me to have up to 10k of transactions per month at a flat rate fee, and then if I go over that, the next tier of payment-based payments kick in. Payment is based on how many transactions you put through the system.
That could be relevant for your project if you are launching a service where volume or number of transactions or units processed would trigger an additional payment or an additional discount.
You could find any number of ways to incentivise vendors. For example:
In addition to the ones I’ve already mentioned above. Anything that reduces overall cost of the service or product could be passed on to the client (your project), and there could be an incentive payment linked to that – ideally something that is beneficial to you both, not just cost-cutting for cost-cutting’s sake.
Have you used any of these payment methods on your projects? Let us know in the comments!
How do you pay for stuff on your project? We talk about preparing a procurement plan, but what are your options?
I’ve always found that having clear payment terms and a structure for the payments makes planning a lot easier. When I know when invoices are due or what deliverable is attached to what payment milestone, I can queue up conversations with Finance so they are ready to pay what is often a sizeable invoice.
There are 3 phases to consider when structuring a payment plan for your project:
This is how they look when you put them into practice.
Before the deliverables are fully complete
This is the project execution phase, the stage where you are working collaboratively on creating the deliverables.
This is where my contracts often have stage payments so the vendor gets something before the end – useful for keeping motivation high and helping them pay their costs on a long project. After all, they need to be able to operate their business to support yours.
Generally, you’d want to make those payment milestones meaningful and relevant to the project. For example, you could set the payments to go out on completion of milestones that start generating benefit for the project.
Alternatively, do what we did and just split them by project lifecycle stage, so a payment is due on completion of the discovery/scoping and requirements finalisation, then another one during build and the final one on completion.
On the largest contract I’ve been involved with, we had multiple delivery point payment milestones as it was a long project.
When the project deliverables are fully complete
This is the point where you’d do the final payments related to the services or goods they are providing on the project.
All the doing is done, so you pay them for the work delivered. In practice, this is often the final stage payment.
Post-project follow up
There might be post-deliverable payments to make, for example any maintenance costs or ongoing service contracts that come into effect once the main delivery part of the project is wrapped up.
Perhaps this is a payment point that then initiates another round of payments for Phase 2 or subsequent work, or you might have written into the contract a mechanism for paying for additional work through change control.
At this point, if the project is done, you’d normally be handing over any open contracts to the operational team who will deal with the ongoing supplier relationship moving forward. Just document what you know and hand it over to them with any paperwork.
Ultimately, commercial relationships need to be beneficial for both parties, so it is helpful to work with the supplier in partnership to work out a reasonable payment scale. We involved lawyers on both sides to draft out the documentation and help with the negotiation because it was a big investment and we wanted it to be right.
Putting the time and effort in to working out suitable payment milestones, stage payments, processes for change and so on meant that the working relationship going forward was pretty smooth. Both sides knew what to expect and we had documented approaches for dealing with changes and disputes. Plus, from a project management perspective, I knew exactly what would trigger a stage payment and I could plan for the acceptance paperwork so we were ready.
Mostly on projects we think of ‘resource’ costs and ‘resources’ as people. Because mostly, with the majority of office-based, corporate-led projects, what we need to get the work done is people’s time. And people are expensive.
Meetings in particular are often left out of the time-budget. We’ve factored in the cost of the hours required for them to deliver their tasks, but not for them to show up to project team meetings, lessons learned calls, extra meetings because something in someone else’s area has gone wrong, and so on.
So factor in enough buffer time for the overhead of meetings for resources that are booked out to do work on the project.
But what about the other things we need to cost out in project budgets that aren’t people’s time? There is a whole host of smaller (and bigger) costs that it is worth building into your financial planning if they are relevant to you – because even the small costs start to add up when you are asking for ‘real’ money (versus people’s time which is wooden dollars if they are internal resources).
Here are 12 non-labour costs that you might incur on your project.
1. Room hire and hospitality
In my last job, we had open plan office space and very few meeting rooms. They were reserved for the exec, and it was difficult to book them. Even if we did book them, I remember being bumped out of a room because someone more important than me needed it (they did give me notice, to be fair).
Room hire costs might be something you need to factor in, and with that comes catering for people attending.
In fact, it’s not just meetings. On one project, the team had a portacabin on site as their project war room. That was a space we had to pay to hire.
2. Event hosting
Event hosting also falls into the bracket of room hire and hospitality – but it’s not necessarily project stakeholders attending.
Perhaps you have clients who need to see the new release of a software product. Perhaps you’re running an industry conference as part of the product launch. Perhaps you have training events for internal staff who need to travel and be fed when they arrive.
Training events might also incur the cost of producing materials for the delegates or paying an external trainer, as well as hire for the AV kit in the room.
3. Admin support
Sometimes projects require admin support.
You could buy in a VA (virtual assistant), or even buy access to an AI-powered assistant for meeting note taking or meeting booking, and all the many other things AI can do for you these days.
You may also need transcription or translation services, depending on what you are working on and who is involved.
4. Travel and accommodation
On my first project in my last job, there was a lot of travel for the implementation teams. They were out on the road 4 days a week during most of the go live periods, supporting locations to implement new processes and tools. As a result, we had huge expense bills for petrol, rail travel, accommodation and food.
Fortunately for me, most of it went through the corporate expense booking system so all I had to do was add the numbers to the budget at the end of every month. It was part of the cost of doing business and keeping the project going.
These days, we travel less for work and do a lot more remotely, but you may still have to factor in days out of the office and on the road for some team members.
In addition, your in-house guidelines might allow for per diems or expense allowances for colleagues out and about. Be clear on whether you have your own internal rates or are using industry published guidance for these so you don’t have any queries when people submit their expenses.
Technology costs crop up even in projects that are not tech-led.
For example, you might need to access webinar tech to deliver training, or buy an online learning package. Even loading training videos to your existing online learning platform might incur a fee.
Most of the tech costs I have been involved with on projects come from having to buy hardware items or software licences. Those items rack up the cost, but they are often clearly known and factored into the budget from the start.
In addition to those items above, you might also have these on your projects:
Link these costs to the person who is incurring them in the work package so they can be accounted for appropriately in the budget.
Have you ever been caught out with a project cost (and was it on the list above)? Share your non-labour common expense items in the comments below!
I’ve chosen a bad headline for this article: I have an issue with assigning tasks – it doesn’t feel like the collaborative, co-created environment I would like to work in. Ideally, we’d meet as a team to do some planning, have a workshop or two and then tasks would be selected by the right people. If we had Kanban boards, team members would be able to select what they want to work on – because as long as they are working on something, the board would manage the priorities and it would be all good.
However, sometimes on projects you do need to reach out to people and assign them work, even if you ask nicely. Sometimes it happens because it’s obvious who is going to do the work because there is only one person in the organisation who can do it anyway.
Let’s take ‘assigning’ in the broadest possible sense, so it doesn’t mean ‘expecting people to do stuff on a project without engaging them’. Because regardless of whether the work is obviously destined for them, it’s always polite to ask.
Here are 5 considerations to take into account when distributing tasks to team members.
They have to have the right skills. If you are looking for colleagues to contribute to your project, consider the tasks they are going to be doing. The person who ends up with the task has to have the skills to carry it out.
Of course, there are exceptions to that, and we often use people working through an apprenticeship or less experienced staff to complete tasks as part of their on-the-job learning. They will be supported by an experienced colleague, but if you don’t learn, you’ll never get the confidence or skills to do it yourself in the future. Factor in additional time, support or training budget if necessary so you can make sure the people taking on tasks are equipped to do them.
People need to be budgeted for at different rates. Consider the cost impact to your budget if you assign tasks to people who are expensive!
People’s availability is a constraint on your project timeline. If the person allocated to the task is on holiday, they won’t do it, and the task will be late. That might be fine – perhaps you have the flexibility to schedule around the best person for the role and the work can wait until they get back.
Perhaps you have a fixed date to hit and need to find someone else.
Does it matter these days? I think it depends on the role. If I want in-person, classroom based train-the-trainer training so I have a team equipped to go out and deliver on site training, then I do need them to be within travelling distance.
If it’s a graphic design job, they could be anywhere.
Think about where the team members are based and whether that matters to the task in hand.
5. Cultural add
I was talking to someone the other day about one of their colleagues who was considered a ‘toxic cultural fit’.
The challenge with cultural fit is that it can be interpreted as simply hiring people who look like you and think the same as you, so they slot neatly into the environment without disruption. That’s not what this is about. Consider ‘cultural add’ instead. We want diversity of opinions. We want new ideas and different interpretations. We want disruption and challenge.
The people on your team should lift you up and make the team, and the solution, better.
What do you consider when working with your team to divide up the responsibility for tasks? Is there anything else you take into account? Let us know in the comments!
I’m lucky in that the projects I am working on at the moment have a requirement for resource time, but we can manage the work in-house so we don’t need to invest in anything else. However, in the past I have managed projects with substantial budgets – and also those with small budgets.
Personally, I think that managing smaller budgets is harder because there is less wiggle room to lose a small amount in the rounding, but we have to work with what we have.
When something on your project changes and your budget is reduced, you might have to look at creative ways to make the money go further. Here are some suggestions.
Find angel investors/donors
OK, let’s get this one out the way first! I got this example for the Project Management For Musicians book by Jonathan Feist, and it’s clear that it won’t work for all kinds of projects. I couldn’t run an SAP deployment by finding a lovely benefactor who just happened to want to sponsor an ERP implementation from the goodness of their heart.
But if your project is to run an event, stage a show, or something similar, perhaps this is an option for you. For example, if a benefactor donated a certain amount, they could get a free ticket to the gig.
I’m sure much of the world of PR and event management taps into this option all the time. If you do go down this route, just be sure to make sure whatever you do falls within the ethics guidelines of your organisation as you don’t want to be seen as taking or giving bribes or hospitality gifts that could get you and your company into trouble.
I’m including this one really as a prompt to ask you to think creatively about the situation you are in and what might address it.
Do less: reduce the scope
The classic way to save money on a project is to do less. Look for chunks of the project that could be pushed into a Phase 2 or subsequent initiative.
Typically, if you remove scope, you are also removing cost because the work takes less resource to get done. Analyse what could be removed to save money but would have minimal impact on the end result. There probably isn’t much that falls into this category, but there might be something.
Do different: change the scope
Another common way to reduce spend on a project is to look at changing the scope to deliver the goals in a different way. What about these switches:
What else could you switch? Let me know in the comments.
If your project involves buying in goods or services, you could also consider changing those providers. Perhaps another vendor would be cheaper, especially if you looked further afield.
Depending on the work, changing vendors could be more expensive, especially in the short-term. Pulling experienced contractors who know your business off a project and replacing them with remote contractors will have a learning curve, even if the skillsets of the two consulting firms are identical. Factor that in before you make any proposals.
Alternatively, consider the cost of bringing the work in-house. Would it be cheaper to hire someone on a fixed term contract than it would to get a supplier to do the work?
Bring benefits forward
Another option would be to look at how the project could be reordered to bring in some benefits earlier. For example, with a product launch, could you get a beta version out early to start bringing in some income that could be offset against future improvements.
If the deliverables can start bringing in some cash, that could change the financing of the work and improve the budget situation on paper, which might free up resources or investment for the next wave of development.
These are just ideas, and I hope you don’t have to use them!