How to manage work of subcontractors properly?

How to manage your work of the subcontractors properly?

In my early days as professional I was working in a IT consulting company and spend quite a lot of time with customers, project managers and consultants. This experience gave me a great understanding that the project terms must be agreed and signed off before the project starts.

I try as much as I can work exclusively with fixed contracts where a contractor commits on deliverables and delivery time, so they actually carry the whole risk on the contract in terms of money paid, but if your project is complex and there are a few contractors or one with major responsibility, you need to manage them closely because if they fail, your project will stress a time slip which can be hardly damaging for the whole success.

From a project-management perspective, some types of contracts are better than others. I will not review the ones which are not good, they are widely available and ultra-loved by a contractors. There is only one type of the contract which give you a better control over the quality, time and cost — one of them is a fixed contract where you have deliverables described by what, when and with quality metrics described by requirements. It might be based on a cost per stage without looking into sub-contractor cost as well as cost-plus contract, such as cost-plus-fixed-fee and cost-plus-incentive-fee.

The way these contracts work is that a contractor is paid for the work done, it might be a fixed fee without entering into details of their direct and indirect costs — like estimating all the expenses and negotiating an additional payment to allow for a profit. The contractor’s fee can fluctuate depending on the results of their work and hitting targets faster can lead acash bonus. Be careful with this as it might make subcontractor to over estimate stages in a run to get additional cash from you. I would suggest you complete negotiations and agree on the fixed terms and then introduce this bonus, ifyou feel it is necessary and give your project a priority in their scope of work. I mean there must be a concrete reason for introducing it.

In my company I work with lots of different partners and subcontractors, including having a deeply integrated, complex project where part of the tasks is done by our own team and part of the tasks is subcontracted. Sometimes I meet with "a tribes-situation" where people from one team start treating members of another team like they are not belonging to their cycle and this is very damaging. Lots of misunderstanding and uncontrolled conflicts taking its beginning from such thinking.