The Complete Project Management Office Handbook, Second Edition (ESI International Project Management Series)

The PMO's overall responsibility for project management and business alignment is supported by this PMO function. In many project management environments, the external customer represents the business of the relevant organization. The closer that customers are likewise aligned with the project effort, the greater is the opportunity for business success. This PMO function model enables the PMO to achieve that alignment from both business and project management perspectives.

The prominent activities of the PMO's "customer relationships" function model are depicted in Figure 18.1. Each activity is described in the following subsections.

Figure 18.1: "Customer Relationships" Function Model

Manage Customer Relationships

The PMO's role in managing customer relationships is not a replacement for the several (if not many) activities accomplished within the business environment toward that end. Rather, the PMO is responsible for ensuring that the customer's business experience as a recipient of project-based product and service solutions equals or exceeds the standards for service prescribed by the relevant organization. As well, when PMO responsibility is discussed in this function, it is implied that the concepts and practices it establishes will be properly used by the project manager and members of the project team, who inherently have associated responsibility for managing customer relationships.

In the context of project management, the PMO will have to establish the capability to learn about the customer's needs, requirements, expectations, etc. and to achieve business objectives associated with each customer project. Moreover, the PMO has the added responsibility to appropriately include customers in the project effort simply as a matter of demonstrating effective project management practices.

The PMO can consider the following three activities when establishing its capability to manage customer relationships within the project management environment.

Manage Customer Project Information

The PMO should examine information requirements needed to initiate and conduct projects and project management activities for each customer. These project information elements are primarily associated with technical needs, but they may include other types of information as well. The following list describes four primary areas of customer project information that will assist not only in project delivery, but also in customer relationship management:

• Project requirements and specifications: This set of information represents the customer's perspective of what needs to be achieved by the project. Presumably, associated information items are prepared and presented by the customer as a part of the request for project assistance. In some cases, initial efforts in project management or external sales and business development activity may provide a measurable amount of assistance in preparing this information. However, in the context of this activity, the customer's view of what is to be achieved is paramount. (Note that additional information elements of project requirements and specifications are described in greater detail in Chapter 14, the PMO "planning support" function model.) A few sample information elements include:

  • Request for proposal (RFP)

  • Statement of work (SOW)

  • Business/technical needs analysis

  • Technical specifications document

  • Technical survey document

  • Technical design document

• Project definition: This set of information represents the translation of customer requirements into a description of the project effort. This information is aligned with the customer's needs but represents the perspective of the relevant organization regarding what needs to be achieved by the project. This of course is collaborated with the customer. In some cases, the project definition is contained as an element of the project business case document. (Note that additional information elements of project definition are described in greater detail in Chapter 14, the PMO "planning support" function model.) A few sample information elements include:

  • Project scope statement

  • Project objectives

  • Project deliverables and milestones

  • Project assumptions and constraints

• Customer contract: This set of information establishes the formal business relationship between the customer and the relevant organization. It sets forth the agreement between the two parties, specifies their obligations to one another, and presents the terms and conditions under which the agreement and obligations are upheld. Often, the customer contract will append or reference the project information materials mentioned in the previous two items.

• Customer management plan: This set of information is used by the project manager and the members of the project team to guide their interactions with the customer. This information is sometimes incorporated into the project communications plan, which represents the communication practices and protocols to be used on the project. This information specifies points of contact for business and technical collaboration, coordination, and decision making. In particular, it will identify the individuals and preferred interactions with any customer project manager or customer project team.

The PMO can consider these and other information elements in establishing and managing customer project information.

Manage Customer Business Information

Project information elements will not necessarily present a comprehensive depiction of the customer, but rather they will focus on customer technical needs for the project effort at hand. Therefore, the PMO will also have to acquire and manage customer business information as a means of understanding the current status of the customer relationship. This includes the following three types of customer business information:

• Customer business profile: The customer's business profile contains any relevant information the PMO deems is needed to gain an adequate understanding of the nature of the customer's business. Fundamental information elements in the customer business profile can include:

  • Customer business description (e.g., product, service, industry, etc.)

  • Customer business size (e.g., number of employees)

  • Customer business location(s) (e.g., local, regional, national, global, etc.)

  • Customer business status (e.g., sales, revenue, stock position and outlook, etc.)

  • Customer business management (e.g., executives, directors, private owners, etc.)

  • Customer business affiliations (e.g., partnerships, industry memberships, etc.)

• Customer relationship history: Information on customer relationship history examines past business dealings with the customer. Its focus is on being able to review past business with the customer, but it can also look at the customer's other dealings in the industry and in the marketplace. Fundamental information elements in the customer relationship history package can include:

  • Major business transaction history with the customer, and the outcomes

  • Project work history with the customer, and the outcomes

  • Partnership or business affiliation history with the customer, and the outcomes

  • Key customer participants in projects and business transactions

  • Sales and revenue history with the customer

  • Customer invoice payment history

  • Prominent types of products and services outsourced by customer

• Customer business approach: Information about the customer's business approach may well be included in the customer relationship history, but it is separated here to distinguish the nature of the information compiled. The primary information elements collected are based primarily on the discernment and judgment of managers in the relevant organization vs. absolute factual data. This information set helps to examine the customer and associated business opportunities from a business-interest perspective of the relevant organization. Fundamental information elements in the customer business approach package can include:

  • Management perspective on alignment of customer business objectives and interests

  • Management perspective on customer's business decisions and outcomes

  • Management perspective on impacts of customer's business values

  • Management perspective on demonstrated customer loyalty

  • Management perspective on importance of particular customer retention

These three areas of customer business information can be comprehensive or basic, per established business needs and the capacity to manage it. It is likely that most commercial organizations will already have this type of information, and the PMO's role is to facilitate its transfer and use within the project management environment. To the extent that the project knowledge management system is established, that would be a primary mechanism for introducing customer information for use by the PMO and by project managers.

Manage Customer Project Participation

The third component of establishing an effective customer relationship capability is to identify points of opportunity and necessity for customer involvement in projects and in project management. The PMO can play an instrumental role in (a) collaborating with project managers to prescribe these points and (b) developing the means to optimize customer involvement for the purposes of business interest (i.e., achievement of relevant organization business objectives and obligations), technical performance (i.e., achievement of quality technical-solution delivery), and project management interest (i.e., achievement of customer satisfaction).

In some cases, customer relationship management means introducing the customer to project manager and associated project technical leader activities. In other cases, it considers PMO, business unit, and executive involvement with the customer. The following are several areas the PMO can examine as a means of incorporating customer project participation as a basis for achieving the desired customer relationship results:

• Project management activities: The customer can participate on projects in association with a variety of activities aligned with phases of the project management life cycle:

  • Business needs collaboration

  • Technical requirements specification/statement of work

  • Project planning and technical solution development

  • Project tracking and controlling

  • Project team status reports

  • Project manager progress reviews

  • Change-management process (project scope management)

  • Project close out

• Project technical activities: The customer can be a part of the progressive development of the project deliverable(s) at appropriate junctures in the technical effort:

  • Technical solution implementation

  • Configuration management process

  • Interim test and acceptance (quality control and assurance)

  • Delivery and acceptance

• Project business activities: The customer should participate in several business-related activities associated with the project effort:

  • Contract or agreement negotiation

  • Contract modification process

  • Executive and senior management collaboration

  • Project business reports

  • Invoice receipt and payment

The nature and extent of customer involvement will also consider the particular type of project work, industry and marketplace influences, and associated norms for customer involvement under these conditions.

Completion of this customer relationship activity description warrants a side note. The particular prescription for PMO consideration of customer information and involvement presented above has a distinct commercial tone to it. However, the PMO can also examine these concepts relative to noncommercial project efforts, and specifically internally conducted projects. The PMO should ensure that internal customers and end-users receive equal value from a professional project management capability within the relevant organization as do customers and end-users in the external marketplace.

Manage Customer Contracts

A major shift in the project manager's role is emerging in association with the implementation of concepts and practices in modern project management. The responsibility for customer contract management is one of the more prevalent considerations of project manager role expansion. This is consistent with one definition of a contract, i.e., a relationship between a buyer and a seller. Therefore, the project manager would be appropriately positioned to be the contract manager relative to the established customer relationship. A second definition of a contract — an agreement about rights and responsibilities — leads to the consideration of contract administration. The individual who administers the contract can be a member of the project team, a business unit support person, or a PMO that assists the project manager in managing and achieving contractual obligations. However, the project manager could also administer the contract on smaller projects.

It is sometimes said that while every contract is not a project, every project is a contract. Therefore, lest we forget, there will be a need for a contract on every project, including internal projects. Often, such contracts are referred to as internal memoranda of agreement or simply agreements. While internal agreements may not have significant legal implications, they nevertheless have obligations that a professional project management organization should properly manage and fulfill.

Then comes the consideration of what the PMO can do to oversee and support customer contract management within the project management environment. Fundamentally, if it exists under project manager influence, the PMO should ensure that complete and comprehensive contract management and contract administration practices are being used. If this function has not yet made its way to the project management environment, the PMO should (a) ensure that complete and comprehensive contract management and contract administration practices are being used relative to the projects within its purview and (b) facilitate the introduction of appropriate contract management responsibilities to individuals within the project management environment.

This PMO function model prescribes a three-prong approach to achieving customer contract management within the project management environment. Each is described in the following subsections.

Produce and Manage Customer Proposals

The PMO should establish a viable process for preparing and managing the customer proposal. This represents the business offering of the relevant organization. In many cases, sales or business development managers perform this activity, and the PMO can provide support to the business development effort to ensure that an adequate business and technical solution will be presented to the customer. The activities of this effort, developed in collaboration with business unitbusiness unit responsibilities, should be incorporated into the initiation phase of the project management methodology.

The following four subsections describe the primary elements of customer proposal preparation and management that warrant attention and intervention of the PMO and project management environment.

Opportunity Qualification

Opportunity qualification is inherently a function of the expertise that will be applied to the anticipated project effort. Therefore, the intended project manager and technical experts should be involved in determining the customer's needs and in defining the project. Even when proposal responsibility resides within the project management environment, someone should be designated to attend to the business perspectives of the proposal offering. Usually the PMO can represent business interests, or it can collaborate with internal business-development professionals.

Opportunity qualification includes the following general activities:

• Identify the customer by conducting a customer business information review

• Identify the opportunity by conducting a customer project information review

• Develop the project business case, in part to determine:

  Is there business interest to do this project?

  Is there technical capability to do this project?

  Is there a reason to do this project?

• Assess business risk and opportunity

When an opportunity has been qualified and the business case approved, the next step in the proposal process can be addressed.

Proposal Preparation

The PMO should prescribe the components and general content for a proposal that is prepared within the project management environment as a business offer for conducting a customer project. It can examine the variety of formats that are prevalent in its industry or customer marketplace to establish its recommended approach to proposal development.

In the absence of any industry affiliation that provides a standard proposal format, the PMO can consider introducing a proposal preparation process that includes the following proposal components:

• Technical solution: This proposal component presents the technical approach that the project manager will use to achieve project objectives and fulfill customer deliverables. It normally includes a WBS and project task schedule, a description of each task, and the project resources that will be assigned to perform each task. It represents the relevant organization's response to the customer's RFP or statement of work and shows how those and other customer requirements and specifications will be fulfilled.

• Business solution: This proposal component presents the business pricing offered for the accomplishment of the technical solution. For smaller project efforts, the business solution component may be combined with the technical solution component. This component is often separated to allow the customer to review the technical solution independent of the cost to be incurred. This component contains such elements as the list of contract terms and conditions, assumptions and constraints, costs associated with each project deliverable, and the proposed customer payment schedule.

• Management solution: This proposal component is generally needed primarily on larger project proposals. It represents the organization and structure to be used to manage the project effort, and it usually demonstrates the scope of resource control afforded the project manager for each important customer project. It allows the customer to identify the different project management and technical team leaders and to gain confidence and comfort that project management and technical leadership is appropriately aligned to ensure project success.

Again, a proposal is still preferred, even for internal project work. This allows the project manager and the internal customer to establish a common understanding and agreement of what is to be accomplished by the project effort. Usually, an internal project proposal will focus only on the technical solution component, unless there is an interdepartmental cost-transfer requirement that the internal customer must consider. In turn, this proposal can easily become the project agreement or "contract" under which the project is conducted.

Proposal content can be as elaborate or as simple as is needed by the customer and warranted by the technical nature and complexity of work proposed. The PMO should consider development of proposal content guidance that addresses the variety of customers and needs encountered.

Proposal Submittal

The proposal submittal activities presented here are fundamental, but the PMO should establish the detailed process and responsibilities associated with presenting the project proposal to the customer for review and consideration.

The following are a few of the primary activities to be accomplished as a part of proposal submittal:

• Proposal presubmittal meetings: Prior to the proposal being finalized and presented to the customer, there could be opportunities to meet with the customer to clarify requirements and specifications. The PMO and project manager should participate in such meetings.

• Proposal presentation: The proposal is presented to the customer in a written document or in an oral presentation, or both.

• Proposal clarification: The PMO and project manager stand by during the customer's proposal review period to answer questions or to clarify points of technical, business, or management being offered. This could include participating in postsubmittal meetings with the customer.

• Proposal management: The project manager monitors specific proposals, and the PMO monitors all proposals currently offered and in the hands of customers for review and acceptance. Most proposals should include at least an overview schedule and an offer closing date. These two information elements are important because they represent the readiness of the relevant organization to initiate and conduct the project effort as offered. The PMO's proposal-monitoring activities ensure that readiness. This activity can also prompt follow-up contact with the customer as the proposal closing date approaches to determine current interest and to extend the proposal closing date, if necessary.

• Proposal modification: The project manager and PMO meet with the customer to address changes to the proposed technical approach to accommodate the customer's interests, but sometimes proposal modifications can result from internal decisions for proposal adjustments that are initiated by the relevant organization and coordinated with the customer. Of course, such changes could also influence the need for adjustments in the business (pricing) proposal.

In some industries and internal business environments, the proposal management process will not be as elaborate as outlined above. Rather, the process may simply require the PMO to track what proposals are pending with each specified customer and maintain readiness to begin the project upon notification of customer acceptance. This also would be the case where a business unit in the relevant organization, and not the PMO or project manager, has primary responsibility for proposal submittals and management. The PMO should then conduct its proposal management activities in collaboration with the applicable business unit.

Contract Negotiation

The need for contract negotiation usually represents customer acceptance of the technical solution but also indicates the customer's desire to achieve an adjusted price for the proposed effort. The contract negotiation process can be simple or complex, as is appropriate to the level of the proposed project effort and business importance to both the customer (buyer) and the relevant organization (seller). Some basic steps for conducting contract negotiations from the seller's perspective are presented below, and the PMO can determine the level of complexity or detail to be implemented in its project management environment:

• Plan the contract negotiation: Less-formal contract negotiations, usually one-on-one discussions with the customer, generally require less preparation, but the authorized latitude to adjust proposal offers must be known by an authorized negotiator. Conversely, more-formal and more-complex contract negotiations warrant additional preparation, usually by a small team of experienced negotiators, ideally including the project manager and the PMO. The following are a few points of consideration in planning for contract negotiations, with consideration for the fact that the customer usually has control over the negotiation agenda.

  • Form a qualified team of individuals who have experience in contract negotiations to plan and conduct the negotiations; ensure that the capability to discuss technical concepts and considerations is included in the team makeup, usually represented by the PMO, project manager, or technical leader.

  • Review any known points of customer contention and review customer project and business information. Confirm the strategic business importance of this customer and this project. Examine leeway in proposed cost, schedule, and resource utilization based on estimates presented in the customer proposal.

  • Prepare the negotiation strategy. Specify and prioritize negotiation objectives; identify fair pricing standards; examine alternatives to be encountered during negotiation (best case, most likely, worst case). Determine negotiation tactics and countertactics to be used.

  • Prepare a negotiation authorization plan that specifies the negotiation bottom-line price and other factors authorized for contract agreement.

• Conduct the negotiation: Meet with the customer to identify negotiation points and to deliberate, debate, and discuss negotiable options for the proposed project effort. This usually includes learning about the customer's negotiation objectives and sharing the resolution objectives of the relevant organization. It includes examining the customer's initial offers and presenting any counteroffers. In particular, it requires the determination and discussion of differences, as perceived by each party. Ideally, this effort results in a settlement and agreement that enables the contract and associated project effort to be conducted.

• Document the negotiated agreement: A memorandum of agreement (MOA) should be prepared and signed by both parties, which will serve to identify the changes and adjustments that will be incorporated into the final contract. The MOA should include:

  • Date of the agreement

  • Customer RFP/SOW reference and contract title

  • Identification of the negotiators

  • Adjusted project schedule

  • Adjusted financial details (e.g., contract price, type, and payment terms)

  • Discussion summary of other changes to the initial proposal or anticipated contract

In some cases, there could be multiple meetings required for negotiation of large-value contracts or complex technical project efforts. The negotiation team should remain intact to manage such an extended negotiation effort, revisiting the negotiation preparation steps prior to each contract negotiation session.

Establish Customer Contracts

The contract or agreement is the essential document that enables a project to be initiated and conducted. It confirms the customer's request for the project and represents the relevant organization's intent to achieve project deliverables and objectives. In the commercial environment, the contract or agreement further stipulates the monetary considerations of payment by the customer for the products delivered or services rendered. Therefore, it is particularly important to have a valid, executed contract if customer payments for project performance are expected.

The PMO should ensure that a contract or agreement, including internal agreements, is in place for every project under way in the relevant organization. It can do this simply by managing a list of current contracts, by maintaining and monitoring the files of all active contracts in association with performance of contract administration, or in conjunction with activities associated with the PMO "project portfolio management" function (see Chapter 17).

The PMO should establish the process by which customer proposals become official projects within the relevant organization. There are just a few key steps the PMO should consider in establishing each customer contract:

• Verify contract documents: This step represents verification that all contract documents are complete and accurate and that they reflect the results of any ensuing contract negotiations. It particularly includes a review and incorporation of project plans and technical documents that were adjusted as a result of contract negotiations.

• Obtain contract approvals (and signatures): The project manager, PMO, or business unit representative leading the negotiation team or customer contracting effort will present the contract or agreement for review, including a review by the legal department. Then, final review and an authorized signature within the relevant organization will be obtained. For internal projects, this authorization can reside within the PMO. The PMO will need to facilitate or otherwise monitor customer review and approval of the contract as well.

• Book the contract: Contract booking is the process of accepting a contract or order into the business system and the project repository. An account number is established for the project (contract), and the baselines for scope, schedule, and costs are validated in the accounting or project management information system. This process allows work orders to be issued, project work to begin, and invoices to be submitted to the customer.

• Transfer contract responsibility to the project manager: The project officially begins when the contract is passed to the project manager for execution.

The PMO should also identify, through the established organization and structure or through a basic stakeholder analysis, which other stakeholders in the business and project management environments should receive a copy of the customer contract that will guide the project effort.

Many business environments have a dedicated contract management business unit that serves as the repository for all contracts and agreements. If this is the preferred contract management solution, the PMO can collaborate with that business unit in conjunction with oversight of contracts associated with projects. Otherwise, the PMO can become the repository for customer contracts and agreements associated with project work. In either case, if the knowledge management system in the project management environment is sufficiently advanced, the contract can be placed on that system for authorized individual access and review.

Conduct Customer Contract Administration

The principal objective of contract administration is to ensure the fulfillment of the contractual obligations by all parties to the contract. Ideally, a project contract manager is assigned. However, on small projects, the project manager or a member of the project team can hold responsibility for contract administration. On the other hand, an appropriately advanced PMO can assist project managers by developing a customer contract administration capability.

A key aspect of contract administration is managing the interfaces among the players. All members of the project team must be aware of the legal implications of actions taken when administering the contract. To that end, the PMO should incorporate important contract administration activities into the project management methodology for easy reference by all project participants.

The PMO can examine the following contract administration activities for applicability within the business and project management environments. It can then develop and implement preferred processes to enable contract administration to positively influence the customer relationship. The contract administration activities presented for PMO consideration are divided into three primary areas: contract administration planning, contract performance management, and contract close out.

Contract Administration Planning

The PMO should provide guidance to ensure that contractual obligations that impact the project effort are identified and appropriately addressed during detailed project planning conducted following award of the contract. The PMO can establish a staff position to perform contract administration planning; it can assist the project manager in this activity; or it can simply provide guidance incorporated into the project management methodology for use by the project manager and project team members. The following are a few of the more prominent planning activities that can be considered for implementation within the project management environment:

• Establish a meetings schedule: The meetings schedule specified in the contract and the internal meetings schedule should be established and communicated to all stakeholders. The schedule should include preliminary meetings, such as the customer's kickoff or initial planning meetings. It is important to the customer relationship that project team members demonstrate awareness of and preparation for all customer meetings.

• Establish deliverables, reports, and reporting schedules: All contractually required external and internal (team and management) deliverables, reports, and reporting schedules should be identified and communicated so that members of the project team and other project stakeholders know the required schedules for providing project deliverables and project reports to the customer in a timely manner.

• Establish contract documentation oversight: The PMO or a specified business unit may be the primary repository for contract documentation, but the project manager, and some members of the project team, will need access to critical contract documents. As well, the project manager and project team members may also need to document ongoing interactions of the customer relationship. Documentation is essential to provide proof of performance, management of changes, justification for claims, and evidence in the unlikely event of litigation. The purpose of documentation is to record facts and reduce reliance on human memory. Efforts to maintain documentation must be thorough and consistent. These documents can be made accessible to a variety of authorized stakeholders on the knowledge management system developed for use within the project management environment. Contract documentation should include:

  • Official copy of the contract

  • Contract modifications

  • Conformed or adjusted working copies of the contract

  • External and internal correspondence

  • Invoices

  • Change orders

  • Meeting minutes

  • Project plans

  • Progress reports

  • Project diaries

  • Telephone logs

  • Photographs and videotapes

• Establish a contract communication control system: Communication is an essential part of contract administration. Compliance with contract terms and conditions requires effective communication about contract performance. The project manager must establish not only the communication procedures to ensure that project team members and all stakeholders know what to do, but also the controls to ensure that the procedures are used. In addition to developing an internal communications system, the project manager must ensure that effective communication with the customer is practiced.

• Establish procedures to solve contract issues and problems: The means for project team members to use an issues log to identify, handle, report, and track project (contract) issues and problems should be implemented.

• Establish contract-change control procedures: The PMO must ensure that acceptable change-control procedures are established for each project effort having contractual obligations and that all members of the project team know how to use it. Change-control procedures normally provide guidance to:

  • Ensure that only authorized people negotiate or agree to contract changes

  • Estimate the effect of a change on cost and schedule and gain approval for any additional expense and time before proceeding with a change

  • Notify project team members that they must promptly report any action or inaction by the customer that does not conform to the contract terms and conditions

  • Notify the customer in writing of any action or inaction that is inconsistent with the established contract terms and conditions

  • Instruct team members to document and report in writing both the actions taken to comply with authorized changes and the cost and time required to comply

  • Promptly seek compensation for increases in cost or time required to perform, and negotiate claims for such compensation from the customer in good faith

  • Document all changes in writing and ensure that both parties have signed the contract or contract change; such written documentation should be completed before work under the change begins, if practical

• Set up procedures for claim and dispute resolution: The PMO must ensure that project managers and other stakeholders responsible for achieving contract obligations are well versed in contract claim and dispute resolution procedures. Disagreements are inevitable and should be expected as a normal part of contract management. However, all contract parties must commit themselves to resolving disputes amicably. Although claims and disputes cannot be avoided, they can be resolved effectively, fairly, and without rancor and litigation. To that end, only professionally trained contract managers or legal counsel should initiate and conduct formal contract conflict and dispute resolution actions. The PMO's primary responsibility in dispute resolution is to work with each project manager to identify and attempt to resolve disputes when they are minor and showing only the earliest signs of disagreement. The project manager must seek the advice of the PMO, senior management, and legal counsel at the first indication that a customer dispute is emerging or escalating. The PMO should ensure that each project manager and project team are familiar with the range of common resolution issues and the techniques that can be used to avoid escalation of contractual conflicts and disputes. Prominent techniques include:

  • Negotiation: Similar to the negotiation conducted for award of the contract, this interaction between the involved parties seeks to compromise on issues leading to resolution of a conflict.

  • Mediation: Legal counsel is involved in this effort led by an impartial third-party participant, who facilitates a compromise on issues leading to resolution from an unbiased perspective.

  • Arbitration: The disputed issues are submitted to a disinterested third party for a final decision. This approach is usually considered to be more expedient, less expensive, and a less-formal resolution method that is often preferred over litigation.

  • Litigation: A highly formal and potentially lengthy process for resolving contractual disputes through the courts and applicable legal system. Litigation always involves lawyers.

All of these planning actions and determinations can be compiled into a contract administration plan for use by the project manager and members of the project team and for oversight by the PMO. In some cases, depending on content, elements of a contract administration plan can be shared with the customer.

Contract Performance Management

The PMO should provide guidance to ensure that the achievement of contractual obligations is a pertinent theme within the project management environment. The following steps are prescribed for PMO consideration in establishing a contract performance capability that advances the customer business relationship and the success of the project:

• Manage commitments to the customer: Ensuring that commitments made to the customer are accomplished within the approved scope of work is critical. The project manager is responsible for all such commitments. A customer commitment log can be used to document and monitor all authorized commitments to the customer.

• Monitor the contract for compliance: Contracting parties should know and understand the terms of their contracts and keep their promises to comply in good faith. To ensure that this premise is achieved, active management of contract compliance must be pursued, including compliance with the terms and conditions, contractual dates, costs, schedule, and deliverables in the contract. Often, those individuals who have negotiated or otherwise established the terms and conditions of the customer contract are not those who subsequently perform the work that achieves the contract objectives. Therefore, the project manager must ensure that all key personnel involved in managing technical performance are also advised and become familiar with contractual obligations associated with project performance. One means to accomplish this objective is to use the contract administration plan created in contract administration planning to train all members of the project team and other relevant project stakeholders, as appropriate.

• Manage customer acceptance of deliverables: Many contracts have specified acceptance procedures. However, if that is not the case on a particular project, controversies can still be avoided by using a formalized acceptance procedure. The PMO should implement the prescribed process for presentation of deliverables to the customer. The following are particularly important steps to include in the customer delivery and acceptance process:

  • Notifications to the customer

  • Acceptance meetings

  • Customer sign-off for acceptance

• Manage project cash: The PMO must ensure that management practices are established to ensure proper oversight of the cash flow and to facilitate reduction in the cash-to-cash cycle, thus improving cash flow. Ideally, the PMO is involved in early proposal preparation and any negotiations to evaluate project cash flow issues. However, it also must institute proper cash management procedures for use by the project manager in conjunction with project performance. Some considerations for the PMO include:

  • Obtain partial customer funding: If a contract is funded in phases, ensure that the customer is aware of funding requirements with sufficient time to take funding action.

  • Monitor billing and receipt of payments: Take actions to provide timely delivery of goods and services that enable early customer payments; examine ways in which the project schedule can be renegotiated to improve cash flow; remove blocks to the customer's payment approval process; track customer invoice receipt; hand-carry large-value invoices; and facilitate review meetings for incentive payments.

  • Monitor payments to subcontractors: Where possible, establish subcontractor payment schedules that match the customer's billing cycle.

  • Perform effective change management: Provide prompt attention to customer-directed changes and early identification of constructive changes, particularly those that require additional funding to be accomplished.

  • Expedite shipments: Conduct shipping on schedule; complete conversion of inventory into receivables and cash as quickly as possible; and seek authority for accelerated delivery and early payment where possible.

  • Maximize use of project equipment and residual material: Manage and dispose of project equipment and used materials promptly to avoid costs resulting from extended equipment and material retention. Transfer customer-owned property back to the customer or to follow-on and related contracts, when possible, to avoid the need for equitable adjustment of costs specified in the contract.

  • Reduce impact of liquidated and consequential damages clauses: Continuously monitor the circumstances that cause payment of liquidated or consequential damages, and eliminate these clauses or obtain incentive clauses to offset the risk of penalties.

  • Protect proprietary data: Ensure protection of all proprietary data, including those of the third parties; monitor data submissions to ensure proper markings; and use appropriate nondisclosure agreements. Proper attention and care will ensure that contingency funds for potential litigation are not needed.

  • Manage stop-work orders and termination: Attend to customer orders to stop work in a timely manner. Likewise, discontinue contractor and subcontractor work at the direction of the customer. Following the stop-work response, ensure that the customer addresses valid partial payments and cost-recovery actions. Per the conditions encountered, consider whether legal counsel is needed to respond to customer work-stop or termination actions.

Contract Close Out

Contract close out is an integral part of contract administration and represents project completion. Close out includes the last important project tasks for which the project manager is responsible, and it requires the same level of attention as tasks encountered earlier in the project management life cycle. Following are key steps in the contract close out process:

• Obtain customer acceptance sign-off: Obtain official signatures for sign-off from the customer indicating final acceptance of the products and deliverables of the project. Consider the following activities:

  • Ensure that all project deliverables have been fulfilled and accepted by the customer.

  • Resolve any performance issues or problems that develop in association with warranty or guarantee provisions of the contract being closed.

  • Resolve any remaining open questions or issues.

• Conduct contract close out actions: Contract close out is performed during the closure phase of the project management life cycle. To formally close out the contract with the customer:

  • Ensure that contract terms and conditions have been fulfilled and that any final project reports have been prepared and submitted.

  • Prepare and distribute written instructions to all project team members and project stakeholders that the contract is completed and that no further charges should be incurred for that project account.

  • Manage the disposition of the customer's property.

  • Provide notice to the responsible business unit advising that action be taken to close out any associated subcontracts that remain open.

  • Ensure that final invoices have been sent to the customer and that the customer's final payment has been received.

  • Forward formal notification of contract completion to the customer.

• Prepare the postcontract summary report — At completion of the contract, the project manager, contract manager, and project team jointly develop a postcontract summary. It should include a lessons-learned section, which describes the major positive and negative aspects of the contract. The postcontract summary provides general information, and the lessons-learned section focuses on sharing best practices with other company's project teams, warning them of potential problems, and suggesting methods to mitigate risks to ensure success. To prepare the postcontract summary report:

  • Evaluate the customer.

  • Evaluate the effectiveness of the processes and tools used.

  • Incorporate any approved improvements to processes and tools.

  • Identify lessons learned.

  • Write and archive the final report.

The completion of contract close out activities should be monitored by the PMO. In turn, contract close out leads to project close out activities, which has bearing on the utilization of resources within the project management environment and the achievement of business objectives within the relevant organization.

Manage Customer Satisfaction

The achievement of customer satisfaction is a genuine contribution to ongoing opportunities associated with the customer business relationship. However, customer satisfaction issues and information also tend to surface in the marketplace to reflect on and communicate the project management capability of the relevant organization. Therefore, the PMO has to ensure that the customer's experience with project performance conducted by the relevant organization is one that meets the customer's business needs and expectations. It can do this by establishing the means to monitor and respond to customer satisfaction issues on a nearly continuous basis.

The PMO should develop the processes and procedures needed by the project manager and project team members to gauge customer satisfaction throughout the project management life cycle and to respond to any indications of customer dissatisfaction. In turn, the PMO can play a key role in helping to discern customer satisfaction levels and in defining and implementing responses that can be used across projects within the relevant organization.

The PMO should pursue three primary activities, as prescribed in the following subsections.

Measure Customer Satisfaction

The only way to know the level of customer satisfaction achieved is to measure it — on each and every project. The PMO can be instrumental in developing measurements for use by the project manager and project team, but it can also actively participate in conducting customer satisfaction measurements and analyzing results across all projects.

Most customer satisfaction measurement actions can be performed by the project manager and can be included as an integral part of the project management methodology. However, the PMO or senior managers within the relevant organization also can perform measurement actions, sometimes independent of project performance. The following are a few examples of customer satisfaction measurements that can be conducted in association with the PMO's responsibilities for project performance:

• Business manager follow-up: The individual responsible for the customer account and associated customer business generation can maintain contact with the customer to ascertain how well the customer is responding to project performance and progression. This type of feedback can be collected across all projects and compiled by the PMO for further evaluation.

• PMO and executive follow-up: The business importance of the customer relationship will determine whether PMO and executive involvement with the customer is warranted. If so, an executive level relationship (i.e., contact and conversation) could be pursued with the customer at the executive level to obtain a senior management perspective on the progress of the project effort. The PMO can perform a similar role, as a representative of senior management within the relevant organization, in communicating with customer senior managers to ensure that project performance is meeting customer expectations.

• Informal customer contact: The project manager will likely be in continuous contact with a customer who desires such ongoing interaction. Otherwise, the contact will merely be frequent. This presents an ideal opportunity to discuss project progress and performance with customer representatives on an informal basis to obtain insight into customer perspectives and satisfaction with the project effort. These insights should be documented for subsequent examination, with recognition that they are obtained informally.

• Formal customer satisfaction surveys: The PMO and project manager can collaborate to determine the appropriate junctures in the project to conduct formal surveys of customer satisfaction. The surveys can be administered by the PMO or by the project manager, depending on the nature of the business relationship with the customer. The PMO should (a) determine which formal customer satisfaction surveys would be most valuable to the relevant organization and then (b) obtain professional assistance to develop and implement the prescribed surveys for use within the project management environment. As a side note, on-line surveys are coming of age and should be considered as a means for increasing the PMO's efficiency in the survey administration and management process. The PMO can consider accomplishing customer surveys at the following points in the project:

  • Postcontract survey: An evaluation of customer satisfaction relative to the business development and contracting processes encountered to initiate the project

  • Interim surveys: An evaluation of customer satisfaction at specific junctures in the project management life cycle, when a determination of customer satisfaction is deemed critical, e.g., transition to the next project or technical phase, introduction of a new concept or practice, subcontractor performance, etc.

  • Test and acceptance evaluation: An evaluation of customer satisfaction in association with the customer's inspection and acceptance of project deliverables

  • Evaluation of end-users: An evaluation, which could be pursued on an informal basis as well, that considers the responses and reactions of end-users in the customer's environment to the technical solution delivered by the project

  • Postproject review: An evaluation of customer satisfaction with both project performance and the associated business relationship

• Project status meetings: The project manager should include customer representatives as participants in a recurring meeting to review project status and progress. This provides the opportunity to obtain direct customer feedback, which should be documented as a part of the review of all customer satisfaction results.

• Customer feedback report: The PMO and project manager can jointly determine the applicability of using an impromptu customer satisfaction feedback form. This would be valuable when an extremely large project effort is conducted in a customer environment that spans a number of geographical locations, possibly global. This report allows customer managers and end-users throughout the customer's organization to provide feedback regarding all aspects of project performance, but likely focusing on satisfaction with project deliverables. This type of survey may be created for a specific project and specific customer effort.

The PMO should be a recipient of all customer satisfaction measurement and feedback results. It can then examine these results against the individual performance of project managers, the group performance of project teams, and the overall performance of all projects within the relevant organization. This will enable the PMO to prescribe corrective actions for individuals and for teams, where needed, but particularly to devise and implement actions for use across the project management environment to improve customer satisfaction indicators.

Conduct Customer Relationship Programs

Customer satisfaction is distinctly associated with projects that produce the desired deliverables and achieve the prescribed customer business objectives. Customer satisfaction with project performance can be determined in direct alignment with project success. However, there are other means that the PMO can use to complement project success as a primary reason for customer satisfaction and to induce customer satisfaction beyond the completion of the project effort.

The PMO should collaborate with project managers and business unit managers within the relevant organization and then lead the effort to determine what types of customer relationship programs can be developed and implemented to contribute to customer satisfaction — before, during, and after each project effort.

The following are a few examples of customer relationship programs that the PMO can consider developing and implementing within the relevant organization:

• Customer interest surveys: This is a survey of all or a portion of current and past customers to obtain their perspectives on business and technology, particularly as it pertains to the nature of project work conducted by the relevant organization. Customer comments and opinions can be used to evaluate new project management practices or to examine new technology or technical solutions. They can also be used to ascertain any emerging opportunities within the customer's industry or within the established customer base of the relevant organization.

• Customer technical and business forums: The PMO can arrange and present single or multiday programs for attendance by selected current and past customers. These forums can be used to facilitate collaboration and communication among customers using the products or services delivered by the relevant organization through project efforts.

• Customer postproject correspondence: The PMO and project managers can "keep in touch" with customers through use of general and specific correspondence. Such correspondence could be more informal and personal, or it could represent an official follow-up at some time beyond project completion to inquire about project deliverable performance, business results achieved, and the state of customer satisfaction over the passage of time.

• Customer postproject contact: Similar to correspondence, this program represents personal contact by phone or in person. It demonstrates continued interest in the customer by the project manager or PMO and uncommon business interest and commitment to the customer by the relevant organization.

• Customer newsletters: The PMO can collaborate with leaders in the technical disciplines to design and publish a relevant newsletter to communicate with current and past customers. It can highlight technical trends and innovations, particularly those introduced by the professionals within the project management environment.

These follow-on customer programs help to build the customer relationship over time and, hopefully, contribute to extending each business customer relationship beyond a single project effort. However, as these programs are considered, the PMO must also be prepared and have the capability to respond to any adverse customer feedback. Of course, the key is to ensure excellence in the delivery of project management and the technical solution for which the customer will have no lingering doubts of success or loss of satisfaction over time.

The PMO's interest in these customer relationship programs is directly tied to its responsibility for business integration. As the project management environment achieves greater capability, and as the relevant organization becomes more mature in concepts and practices of modern project management, the PMO will inherently be positioned to address business practices such as customer relationship management programs within the project management environment.

Implement Customer-Centric Improvements

Managing customer satisfaction includes addressing improvement actions that the PMO can take to increase the likelihood of customer satisfaction. Some improvement actions will be a result of inherent business sense, while others will be more subtle — a result of discovery and analysis regarding how customers perceive the efficiency and effectiveness of the project management environment.

The PMO should be privy to virtually all feedback and survey results from customer satisfaction measurements. It must compile and analyze such information, from a business perspective, to identify indicators within the project management environment that can be adjusted to improve upon general and specific customer satisfaction results. The PMO's analyses should identify improvements that can be implemented in the integration of project management, technical, and business practices to increase individual and overall customer satisfaction. This means examining the project management environment from a customer's perspective and then determining what PMO influence can be applied to engender a mutually rewarding customer business relationship.

The specific examination of the project performance from the customer's perspective makes this a customer-centric activity. It extends and expands the traditional customer business relationship into the project management environment, and it seeks customer input and feedback to better position project management capability for achievement of results and benefits from the customer's point of view.

The PMO can develop and implement improvements to achieve greater customer satisfaction associated with project performance. The following are a few improvement areas to consider:

• Customer perceptions of project manager performance:

  • Project management skill and qualifications

  • Leadership capability and experience

  • Technical capability and experience

  • Customer relationship skills

• Customer perceptions of project management practices:

  • Communication of plans and documentation

  • Inclusion of the customer in key project decisions

  • Timeliness of project reporting

  • Collaboration and resolution of issues and problems

  • Scope and change-management effectiveness

  • Project stakeholder management

  • Contract administration (including invoice management)

• Customer perceptions of technical performance:

  • Technical skill and qualifications of the project team

  • Inclusion of the customer in key technical decisions

  • Achievement of technical specifications

  • Timeliness of project deliverables

  • Quality of project deliverables

  • Effectiveness of configuration management

• Customer perceptions of business performance:

  • Skill and qualification of the business manager

  • Attention given to the customer by executives and senior managers

  • Recognition of the customer's ongoing business relationship

  • Competitive pricing in the marketplace

  • Value of products and services obtained

The PMO can examine these points and incorporate additional improvement indicators to its evaluation of customer satisfaction. It can then develop and implement improvements to its processes and practices according to the particular PMO function area guidance it has established.