Treating Project Management as a Commodity Damages Project Delivery

I have seen a recent trend whereby project management is being treated as a commodity, often as a way of driving down price. This is, in my opinion, a retrograde step and it is damaging project delivery.

If anyone has seen the Apprentice TV programme in the UK, there is a task to be done in each episode and, at the beginning, a project manager is chosen. This seems to imply that anyone can be a project manager; they can’t.

Not everyone can be a great marketer, salesperson, or business analyst, and not everyone can be an effective project manager. Having been delivering projects and programmes for many years, I have seen my fair share of good and, in some cases, disastrous project managers.

Why Procurement Tries to Productise Services

One of the drivers of this productisation of project managers is the rise in importance and power of procurement departments. They are tasked with getting better value from their suppliers which usually entails driving down costs. It is hard to negotiate with a supplier if each supplier is providing a different level of service.

If you can commoditise the service then Procurement can play one supplier off another and pick the cheapest supplier. This practice is prevalent in the private sector but is also widespread in the public sector where they are almost obliged to select the cheapest supplier so as not to waste taxpayer’s money.

I’ve had direct experience of this when speaking to a procurement person at one of our large clients. He maintained that all project mangers were basically the same so he would pick the cheapest price.

I can see why it is in the interests of the procurement department to commoditise a service to reduce price as they can demonstrate to senior management that they have saved £x million on these contracts. But, is this really the case? A saving on a contract is only valid if the supplier has delivered. If the project is delayed, the cost of this delay could far outweigh the saving on the supplier’s price.

My contention is that, all too often, the supplier who has the lowest price or wins the bidding process provides ineffective project managers who cause a myriad of problems including: project delays, cost over-runs and unexpected project outcomes.

These ‘hidden costs’ usually far outweigh the saving of a few pounds on a project manager’s day rate. I do wonder if procurement are assessed not just on what they save on a project management contract but also whether the supplier has also delivered the outcome that the business wants.

I suspect that many procurement departments are not assessed on the outcome but just the price. It is in the organisation’s interest to select the supplier who has the best value which is not necessarily the one that provides the lowest price.

Project Managers are not Commodities

I may be biased but my view is that project managers are very valuable resources. I agree that some projects are not critical and, if there is an overrun, there maybe a cost implication but little other impact. However, there are countless other examples of projects that an organisation needs to deliver successfully in order to compete more effectively in their market.

Delays to these types of project can have a serious impact on an organization and may even translate to an adverse share price movement. Other projects, if badly managed, could cause brand damage. For example, when Terminal 5 opened at Heathrow, there were massive problems to the baggage system; the bad publicity and customer dissatisfaction caused significant brand damage.

Why Organisations Must look for Value not Price

To quote Oscar Wilde, “A cynic is a man who knows the price of everything, and the value of nothing”.

Organisations need to focus on the value of project management, not just its price. A poor project manager may save you £50 or £100 a day from a lower-cost supplier, but if the project is badly managed then the total cost of this poor project management could run into millions and could result in brand damage for projects that go horribly wrong. It may help if all procurement departments are measured not just on cost savings but also delivery.

Summary

Project Management is not a commodity and passing a Prince2 exam does not make someone an effective project manager (a subject for my next blog).

Select your project management partner on value offered or a cheap project management partner could cost you a lot more than you bargained for!