PROJECT PLANNING <\/span><\/b>\u2013<\/span><\/b> Managerial Challenges<\/span><\/b>(Part 3)<\/p>\n Project Initiation – Contractor<\/span><\/b><\/p>\n This post is the third in a series of discussions regarding managerial challenges in project management situations.\u00a0 In this series, we focus heavily on the managerial aspects of program \/ project planning and<\/b> management<\/b>.\u00a0 This post addresses the starting point or initiation of the project.\u00a0 Part 2<\/a> discussed Project Initiation <\/b>in general.\u00a0 This post [Part 3]<\/strong> addresses considerations that are unique to contractors.<\/p>\n Owners often view contractors as a homogenous group or homogenous within the contractor\u2019s own organization.\u00a0 This perception is not correct, at least for contractors of any size or diversity.<\/p>\n Why does the same contractor behave differently on one job relative to another?\u00a0 Why does a contractor bid differently relative to past practices or experiences?\u00a0 Why is the contractor\u2019s price so high on this bid when it was so low on another bid?\u00a0 We expected the contractor to be competitive and they are not.\u00a0 Another scenario, we expected the contractor to not be competitive; but, they have the best proposal and bid.\u00a0 There are many potential reasons.\u00a0 The answer may reside in the project initiation process.<\/p>\n <\/p>\n For a contractor, project initiation<\/b> occurs twice.\u00a0 The initiation points are:<\/p>\n Each initation point has differing considerations.\u00a0 A few are summarized below.<\/p>\n Bidding – Decision to bid or propose on the work<\/span><\/b> – Assuming that contractors are in business to make a profit, the business development function must be managed in a disciplined manner.\u00a0 Typically, the annual budgeting process results in:<\/p>\n If a contractor has the amount of business established by their business plan, this contractor may bid abnormally high to avoid being selected.\u00a0 Further, the same contractor may try to minimize the cost of the bid for the same reason.<\/p>\n Hence, one initiation point is at the decision to bid.<\/p>\n <\/p>\n Contract Award<\/span><\/b> \u2013 The second initiation point occurs if and when the contractor is successful in winning the job [sometimes referred to as contract award].<\/p>\n At contract award (or similar point), the job is transferred (or handoff occurs) from the business development function to the project execution organization.\u00a0 This handoff, turnover or transfer represents another project initiation point.<\/p>\n Many contractors have a formal process and procedure.\u00a0 Clearly, it is the best interest of all stakeholders that this project initiation is done with professionalism.\u00a0 However, in practice, many execution problems have their origin in this initiation point or interface.<\/p>\n Key issues are:<\/p>\n <\/p>\n Additionally, the execution team must determine the correct baseline for management of the work.\u00a0 Simple (or not so simple) matters as the budget or cost estimate are problematic.\u00a0 Has all of the scope been priced into the budget?<\/p>\n Contractors can be the low price bidder because the estimator missed pricing some of the scope.\u00a0 If this is the case, the resulting problems can be enormous for all stakeholders.\u00a0 Often, construction disputes and claims have their origins in scope of work that was missed by the contractor\u2019s estimator.\u00a0 A high percentage of engineering and construction claims (80-90%) have their origins in scope of work definition disputes.<\/p>\n Professional project management requires a successful project initiation process.\u00a0 Lacking that, problems are sure to emerge.\u00a0 Happy reading and good luck in your project initiation challenges and endeavors\u2026<\/p>\n <\/p>\n It is important to note that McLaughlin and McLaughlin [M&M]<\/b><\/a> is not a law firm and is not intending to provide legal advice.\u00a0 M&M<\/b> <\/a>is a consulting firm providing (among other services) non-legal expertise in dispute resolution and litigation support.\u00a0 The Resource Center<\/b><\/a> is for the convenience of blog visitors and M&M<\/b> <\/a>does not offer this for commercial purposes.\u00a0 For further information on M&M<\/b><\/a> services, please see\u00a0<\/i>www.McLaughlinandMcLaughlin.com<\/i><\/b><\/a>.<\/i><\/p>\n <\/p>\n PROJECT PLANNING \u2013 Managerial Challenges(Part 3) Project Initiation – Contractor This post is the third in a series of discussions regarding managerial challenges in project management situations.\u00a0 In this series, we focus heavily on the managerial aspects of program \/ project planning and management.\u00a0 This post addresses the starting point or initiation of the project.\u00a0 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