In Phase or Project Closure phase, can you close a project if the 3rd party contractor has not received payment? (For example, you have done all the paperwork to request payment, but the organization
I see my question was abbreviated. For example, you have done all the paperwork to request payment and met the requirements and everything else in the Closing phase), but your company has a 90 day payment policy. So, if you close the project before the vendor gets check in hand - can you still close the project? Saving Changes...
Paul AzanorProject Consultant| Lagos NigeriaIkoyi, Lagos, Nigeria
The project is not considered, as closed until all payment are made. After payment is made the "Conduct Procurement" process is formally brought to a close with a formal notice/closing letter announcing the end of project. Saving Changes...
Sripriya NarayanasamyAuthor, Say Yes to Project Success| Director, KeyResultzChennai, Tamilnadu, India
Definitely the project is not closed till the procurement is closed Saving Changes...
It will depend on your organizational policies. Where I work, payment is completely invisible to the PMs. The PMs are responsible for completing the defined deliverables, while payment is a completely different department. If I couldn't close a project until the check cleared, I would never close projects.
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1 reply by Alisa Shapiro
Jul 16, 2019 2:00 PM
Alisa Shapiro
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Hi Keith,
I agree; same thing in my organization.
I should have clarified my question. According to PMBOK 6.0, what is the correct answer?
My projects have been run along the same lines as Keith's. My projects have been based on the accrual method where expenses and income are recorded in the period they are earned. I have not dealt with cash method projects where expenses and income are recorded in the cash flow period.
Think of it as a transfer of responsibilities: once the accounting is completed, it's up to Finance to worry about collection and accounts closure. Saving Changes...
It will depend on your organizational policies. Where I work, payment is completely invisible to the PMs. The PMs are responsible for completing the defined deliverables, while payment is a completely different department. If I couldn't close a project until the check cleared, I would never close projects.
Hi Keith,
I agree; same thing in my organization.
I should have clarified my question. According to PMBOK 6.0, what is the correct answer? Saving Changes...
Alisa,
Reading over Section 4.7, I would say that the project cannot be closed if you have not completed the paperwork to request payment, yet the vendor may not necessarily have to receive the payment prior to closure. It states that all procurement documentation is collected, indexed, and filed, and that payment records are catalogued, but it does not say that final payment is closed out.
I believe this is due to the variety of types of contracts that exist. For example, a 3rd party vendor contract may not be specific to a single project, but might span multiple simultaneous projects such as procuring bulk materials, or the contract may span multiple phases of a program, broken up into different projects. Another example is where the end-customer procures items directly through a side contract from their preferred vendor, which are provided to the prime contractor.
The PMBOK tries to cover the entire range of possibilities, but is limited in scope to the project boundaries. We would naturally expect that an ethical business would need to assure payment is complete, but what complete means to the project scope might be different from what it means to the enterprise as a whole. Sometimes reading the PMBOK, they seem to leave out things we know are important, but it is just that they fall outside the PM boundaries. Saving Changes...
Thank you for your thorough reply Keith. Greatly appreciated. Saving Changes...
Anton OosthuizenSenior Business Analyst / Project Manager| Self EmployedPretoria, Gauteng, South Africa
The definition of done is different depending on the organization and contract. Like all acceptance, prior to final acceptance the criteria that determine whether you are done with the project should be defined upfront. As Keith pointed out there are many organizations where the procurement/payment process is segregated from the actual project which means that the project can actually be completed. Saving Changes...
Sergio Luis ConteHelping to create solutions for everyone| Worldwide based OrganizationsBuenos Aires, Argentina
One thing is the "by the book" and other different thing is the reality, as you know. I was on both sides of the desk. I agree with Keith, Stephan and Anton. Mainly is a matter of organizational policies. It is a hard situation depending on the level of engagement you took with the provider. I understand because i lived situations like this. But as somebody said me "business are business". Because of this type of situations one of the things I do is to put all related to procurement on the table at the very begining due to in countries where economic situation is hard i do not like to face this type of situations. But that is personal because at professional level if the providers acceted the conditions it was they decision not mine. Saving Changes...
SANDEEP KUMAR MISHRAProject Manager-Planning & ManagementNew Delhi, Delhi, India
Why we care about 3rd Party contractor, we need to close the accounts of first party contractor by taking no dues certificates from all type of sub-contractor or hold his payment by giving them a notice with target to close with the third party. If first party is unable to close the account of third party we can pay as per actual work in their scope and close the projects to avoid any legal claim. Saving Changes...
