Scenario:
ACME Development Corporation (ADC), a developer of custom homes and apartment complexes, has decided to standardize its project management practices and processes across its national organization. The goal is to standardize with one single project-scheduling tool and to have the tool installed and be operational within 90 days. To this end, the company is forming a central project management office (PMO).
Contract types
Firm fixed price
Fixed price with targets
Fixed price at cost
Time and materials
Cost sharing
Cost plus
What kind of contract will you pursue for each of the following purchases related to this project?
Hiring technicians to install and configure the software for your environment
For this type of work I would engage in a service contract which will specify the specifications of the software in question and the work that needs to be done by the technicians. The fixed price at cost contract would make most sense here (Kerzner 2009). This would evidently come out with the right clauses to ensure that the software installed is done correctly and that all related costs are addressed accordingly. The contract addresses the purposes and functions of this project in the sense that it provides for the proper payment of technicians who are carrying out the task but also provides the company with protection against any form of abuse or carelessness.
Hiring a training entity to teach the student PMs the mechanics of using the new tool
For this task I would choose the Time and materials contract. The contract here would be a service contract specifically tailored to what is required to be taught and what needs to be explained to the students. The Time and materials contract makes more sense here as one can assess what needs to be done to teach the students by time and also covers the materials for the project. The selected contract meets the project objectives in the sense that it assesses the time required for the training as well as the materials which need to be purchased to make the training effective.
Buying a new server and software to run the tool and house the project database
For this job, the Fixed price with targets contract makes most sense as one can specify what needs to be done to install the actual server, run the tool and house the database (Nokes, Kelly 2007). The contract should also include a service provision for a maintenance agreement. Here the costs are quite inflexible so a fixed price contract makes much more sense in this respect apart from also addressing the issue of price variations. Some risks can also be experienced here especially with regards to sudden changes in price during the order period so it is important to include specific clauses in the contract on this rather sensitive issue.
Hiring tool usage experts to transfer knowledge to the student PMs about the use of the tool on the job for the first 60 days after going live
Again the Fixed Price with Targets is the right contract option to take here as it enables the company to assess the cost for these experts engaged to transfer the knowledge in question. This type of contract will contain a specific inbuilt provision for targets which will ensure that these are properly met and adhered to. Risks in this area include the possibility that students will not immediately understand what is required of them so extra training would need to be undertaken but that can always be addressed with specific clauses in the contract in question.
Planning for the removal and disposal of the scheduling tool software and hardware that are no longer to be used
Finally the contract which is most suited to this task is the Firm fixed price contract where the price for the task in question is assessed correctly and the time frame to remove the software and hardware is calculated accordingly. This is quite a straightforward operation so it is essentially easy to ensure that the contract stipulates what needs to be done and that everything goes in accordance with the plan. Removal of software is usually not such a big deal and can be achieved quite simply and without much hassle so the contract in question need not be too onerous or demanding.
Summary:
All these contracts have specific provisions which are suitably attuned to the tasks in question. While there may be certain advantages in the implementation of certain contracts for particular tasks when compared to others, the trick is to strike the correct balance (Lock 2007). With such a vast project as the one contemplated here (building of apartment complexes), it is important that every contract is properly worded and eventually implemented. It is important to note that when contracts are drawn up, these are drafted as foolproof as possible to eventually ensure that nothing goes awry or amiss. When one is engaged in the purchasing of hardware or software, the fixed price contract option is probably the best one as it gives a clear indication on what is required. However the other contracts also have their own particular strengths and weaknesses so it is important to assess the case as much as possible to come out with the best possible match. All these cases discussed here have particular situations and contracts can be applied accordingly but those which match the best are recommended. It is obvious that hardware and software installations and the relevant training to use them properly require properly applied contracts with strict deadlines and task descriptions which are clear and concise.
References:
Kerzner H (2009); Project Management: A Systems Approach to Planning, Scheduling, and Controlling; John Wiley and Sons
Nokes, Kelly (2007); The Definitive Guide to Project Management: The Fast Track to Getting the Job Done on Time and on Budget ; Prentice Hall
Lock D (2007); Project Management; Gower Publishing
