The Project Manager/Customer Interface - Essay Example

The Project Manager/Customer Interface Introduction Project management is a crucial part of any project that requires a lot of keenness when dealing with the customer. The project manager is required to know each and every personnel, policies applied, and if there are any changes in the policies involved in the process. Before initializing a project, it is the duty of the project manager to gather facts about the customer’s situation. Despite previous relations between the customer organization and the service organization, meetings should be held to determine if there were some changes in the organization. Changes may occur to the customer’s policies, or the personnel who are supposed to handle negotiations between the two parties. There are, however, cases in which the contractor has been in a good relationship with the customer previously, leading to assumptions in the process, as well as informal handling of activities in the project. This may lead to misunderstanding between the customer and the contractor, causing project failure. This paper gives a brief summary of a case study, indicating how a project can be compromised by changes in the customer’s policies, responsibilities, and personnel, in case the project manager fails to monitor these changes. It also discusses the various qualities that a good project manager should have in order to maintain effective customer relationship. Case study summary The case involves two organizations; Nita Light and Power (NLP), and Special Products and Integrated Services Division (SPIS). The two companies had a good relationship in the past, as SPIS had performed a number of services for NLP successfully during the 1980’s. In 1989, NLP needed three of its generators to be serviced. Therefore, NLP got into a contract with SPIS. They developed a fixed price contract which initially totaled to $500,000 (Filliben and Colley 470). Before the project could commence, Reggie Brown, the project manager, noticed a problem in time allocation of the badging process. He immediately contacted Sam Goodsen, NLP’s site manager about his concern. So, Goodsen requested for the budget and the schedule for the process and gave a go ahead for the time-and-materials billing. This transformed the project to a time-and-materials and Brown’s concern about time delay was resolved (Filliben and Colley 471). The badging process, which involved a series of tests, was conducted by NLP since the utility did not want to involve SPIS in the process. This became a problem because it took longer and the generators were not handed over to SPIS on time. Brown realized that this was going to affect the overall cost of work due to the delay, so he tried to clarify the situation early in order to avoid any future issues. His request for some of the SPIS staff to be released, while waiting for the generators, was turned down by NLP, saying that the generators would be available shortly. With time, the work load increased, the number of technicians doubled, and most importantly, the budget increased to approximately $1,500,000, despite its initial cost of $500,000. The process took 22 days longer than expected. Moreover, NLP had changed its purchasing procedures to a decentralized program, which was quite formal than the previous procedures, that SPIS was familiar with. Since NLP did not inform the contractors, SPIS proceeded to follow the same procedures as it had been using before (Filliben and Colley 471). When the entire process was finally complete, and the bill was presented, it amounted to $1,600,000, which was to be paid within 60 days. 90 days had passed with still no word from the customer. Brown considered that it was probably because of the massive paper work that had been sent along with the bill. He contacted them and they responded by paying $1,200,000 leaving out a balance. A meeting was then held to discuss this situation (Filliben and Colley 471). The negotiations did not go too well as utility’s committee, who were new players in the process, argued that the contract was initially a fixed price contract, and that the price was too high from what had been initially agreed upon. Other issues such as overloading the project with staff arose. The frustrating negotiations lead to increase in the charges (Filliben and Colley 472). SPIS officials believed that the argument was due to lack of technical understanding by the commercial representatives that NLP sent to negotiate. They insisted on dealing with the utility’s technical personnel as they had before, whereby they later found out that the utility’s technical personnel and commercial persons had never met to discuss the invoice (Filliben and Colley 472). In the end, $650,000 was outstanding on the bill, but NLP offered $400,000. The contract manager at SPIS knew that she had to maintain the company’s long term relationship with the customer. Therefore, a compromise was made. With consideration of future contracts with the customer, as well as the company’s competitors, she sought other ways to deal with the shortfall (Filliben and Colley 472). NLP’s next project was worth approximately $8 million. This contract had new terms and conditions that greatly favored the utility. Despite SPIS’s efforts to post suitable proposals to the utility, they received no response for almost 18 months. The SPIS proposal was accepted by the technical staff and it offered the best price, but the contract was still not offered to them all at once. Instead, NLP offered the contract to Westinghouse since they agreed to the utility’s terms and conditions. Relationship between SPIS and NLP had grown weaker, and it was now an uphill battle for SPIS to correct the mistakes made, to restore their relationship (Filliben and Colley 472). Questions 1. What did Brown and BWNS do well in this situation? Before the project had been initialized, Brown realized that there would be delays since he realized the badging process would take longer than the allocated time. He took the right action by relaying his concern to NLP’s site manager, Stan Goodsen. He further explained that the process could not have been completed under the original terms. If he had not communicated this, problems were bound to arise since the utility’s officials would have blamed the delay on SPIS. Furthermore, BWNS presented Goodsen with the budget and the schedule, who, in turn, gave the go ahead to conduct a time-and-materials billing. This was helpful because the memo that Stan Goodsen had released, assuring them that the contract had been switched to time and materials, was presented to NLP’s negotiation representatives (Filliben and Colley 471). Brown, as project manager, also attempted to clarify the situation, when he recognized that the cost of work was going to exceed what had been agreed upon due to the delay in handing over of the generators by the utility. He made a wise decision by trying to address this situation, knowing that it would bring problems in the course of the project. He requested that some of the SPIS staff be sent home while waiting for the generators to be ready. Despite his effort, the request was turned down (Filliben and Colley 473). Brown ensured that there was communication to NLP’s representatives as he sent letters with details about the situation to the people identified as the utility’s representatives in the original purchase order. This provided assurance that the personnel were aware of the progress, and any other situation that arose (Filliben and Colley 471). It is important to keep detailed documents on any decisions made, or any changes made during an ongoing project. BWNS ensured that they kept a document containing details of the changes that were made during the process, giving them leverage during the negotiations (Filliben and Colley 472). After posting the bill, which was supposed to be paid after 60 days, BWNS still had not received a reply until 90 days. Reggie Brown thought that the bill was sent along with massive paperwork; hence he did not pressure the utility, indicating patience and perseverance as any manager should. Finally, despite the fact that NLP did not pay the bill in full, the contract manager for BWNS had to cope with the situation since there was the need to nurture their long term relationship (Filliben and Colley 473). a. What could have been done better? Reggie Brown posted his concerns, containing the details about the situation to the individuals identified on NLP’s original purchase order as representatives. The only response was from Goodsen, but not the representatives themselves. He should have taken time to ensure that the message got to the representatives. This indicates that assumptions were made, that all the players were informed of the situation, while, in the real sense, it was not the case (Filliben and Colley 472). It is later discovered that the communication was only to the technical people but not to the commercial personnel, who were the negotiating representatives for the utility. The utility’s technical personnel never met with the commercial personnel to discuss the invoice. When dealing with a large project, it is important for the project manager to address some issues personally, rather than sending letters. This shows a sense of urgency and seriousness in the matter to be addressed (Filliben and Colley 471). 2. Factors outside Brown’s control that interfered with his efforts to work with the utility The utility wanted to conduct its own separate badging process, instead of allowing SPIS to do so. This created delays in handing over the generators by the utility. Despite Brown’s efforts to address the short time that was initially allocated, work on the generators was behind schedule. This led to an increase in the work costs, exceeding the contracted amount (Filliben and Colley 473). Brown was also not informed of the new changes in the purchasing procedures. Initially the Contract Administrative Group, located at NLP headquarters, was responsible for the contract negotiations. At this time, the purchasing process was quite informal, but under the new procedures, individual generating plants were responsible for handling the entire purchasing process. Without this knowledge, the original purchase order was sent to the central office (Filliben and Colley 472). Another factor that interfered with Brown’s efforts was the control over the staff members. He had proposed that some of the staff members be released, while waiting for the generators to be ready. This request was, however, denied by NLP’s officials, indicating that the generators would be ready in a short time. BWNS, who had initially sent 40 engineers and technicians, now had close to 100 personnel on site when the project was at full swing. This led to increase in the costs, which would later cause problems during negotiations (Filliben and Colley 473). 3. Skills of an effective interface with a customer i. Knowledge of the customer: One should be aware about the details of the customer. If dealing with a large company, or organization, the structure of the organization should be well understood. The structure includes all personnel involved in the service transaction, the decision makers, all the organizational policies, and any change from previous interactions that affects the current transaction. This ensures that minimal or no misunderstandings between the customer and the contractor (Filliben and Colley 471). ii. Control of the customer: There exist cases whereby the customers’ demands are more than the contractors can handle. Customers may also come up with terms that are not stated in the contract. Customer’s preferences may keep changing throughout an ongoing project; therefore, proper control of the customer’s needs should be addressed. The customer should be made aware of the situation, with reference to the initial contract (Filliben and Colley 473). iii. Perseverance: An effective customer interface is supposed to persevere through some of the customer’s demands. At times, the customer may appear unreasonable, but, achieving what the customer wants helps in building trust from a customer. This is a foundation for achieving a good customer relationship that the customer would rely upon when it comes to future contracts (Filliben and Colley 473). a. Was the project successful for BWNS? The project did not appear to be successful for BWNS since they did not achieve their goal in terms of profit. The overrun had serious, long term consequences on BWNS’s relationship with NLP Green Meadow. Not only did it cost them a potential contract worth $8 million, it also made them vulnerable to their competitors. Green Meadow decided to award the contract to Westinghouse, which was SPIS’s competitor, despite the technically advantageous and reasonably priced proposal that SPIS offered (Filliben and Colley 470). Westinghouse, which appeared to have performed quite a good job, would become more favorable than SPIS. This made it a difficult task to try and correct the broken relationship between them and NLP (Filliben and Colley 472). Conclusion The case study indicates very important aspects and key issues that may arise in project management, due to complications with the customer. This case clearly indicates that one of the most crucial aspects in successful project management is the maintenance of a healthy relationship between the customer and the contractor (Filliben and Colley 472). However, a good long term relationship can be a very sensitive concept that should be properly monitored. Over time, the two parties may get used to working in a certain way, but there comes a time when changes affecting the working procedures have to take place. It is the duty of the project manager to have the facts about the decision makers in the organization, and to monitor any changes in the policies or responsibilities of the organization (Filliben and Colley 471). A good project manager should exhibit a sense of formality when dealing with the customer. This implies that the relationship with the customer should remain formal. The procedures followed when performing a project or service should be up to standard and professional, such that, every event or activity is well documented for future reference (Filliben and Colley 473). Another important aspect in project management is communication. One of the reasons why the SPIS did not achieve success was due to lack of communication between the technical personnel and the commercial personnel. Communication should be established with everyone involved in the process, despite how much tension may exist between the parties. Work cited Filliben, E., and Colley, E. R. “Case study.” The Project Manager/Customer Interface. 1993. Print. Read More