Third party suppliers, vendors, contractors, subcontractors, and consultants provide products and or contracted services to perform agreed works on a project. Several factors must be taken into consideration for working successfully with suppliers and vendors on a project. For example, various levels of sophistication for a given project supplier and vendor management in may exist.

The type of practice expected to use will depend to a large extent on the size and complexity of the project and the organization. Within large organizations, it may be necessary to go through a supplier/procurement management team and adhere to strict processes to contract for the services or goods required for a project. In smaller organizations, the process may be handled by one person or a small team. Different procurement processes may need to be followed, depending on the size of the project.

Can you leverage an already existing vendor management framework? - Today, a growing number of organizations have supplier/vendor management frameworks in place to help project teams leverage relationships with such entities. The framework available may be owned by a PMO or Procurement Group, and it can range from providing lists of “preferred or prequalified parties” and information about specific organizations for specific types of work, to offering project teams a comprehensive guide on how best to develop a successful relationship with suppliers and vendors on your project. In some organizations, the Procurement group will also be a project resource, responsible for performing the procurement tasks for the project.

Do you have a project strategy for working with each supplier and vendor? - This is perhaps the most important question to ask. What do we mean by a project strategy for suppliers and vendors? The following points are just some of the considerations you may want to keep in mind (note that we are not going into the details of Procurement Group activities here, which may include assessing the financial health of the third party, workload split etc):

• When do you need them to come on board, and how will you select them (e.g., through a tendering process)?
• Do you have a standard “on boarding process” for suppliers and vendors for the project?
• Do you have a standard review and selection criteria (e.g., some industries use terminology such as Requests for Proposal), Risk review and other procedures in place to objectively review each returned proposal? This is important if you are using a tendering process.
• How critical is their work to the success of the project? Are all or some of their activities on your critical path?
• Does the organization regularly work with the supplier/vendor you intend to use, or is this the first time? If they have worked with the company before, what can be learned from others in the organization who have had a contact relationship with them?
• What kind of contractual relationship will exist (including any incentives)?
• How will you engender openness and trust in the working relationship or partnership?
• Will you be assessing their performance as to completing an activity, and will it be compared to other suppliers (e.g., for defects measurement, productivity or other measures)?
• How will you ensure that the relationship is based on a clear understanding of what success means?
• What risks exist that, if they occur and become issues, may result in an acrimonious situation, and how can you spot the warning signs or “triggers” early enough to prevent their occurrence?
• What will you do if things go wrong? Do you have a back-up/mitigation plan?
• Are performance standards (e.g., Service Level Agreements are common in IT) expected from the supplier if it is for an ongoing service? Agree to them early, including penalties for missed targets, and ensure that they are mutually accepted and contractually binding.