Water suppliers regularly look to develop projects that are dependent on third party vendors. A good example of this is the deployment of Advanced Metering Infrastructure. In these cases, utility managers often look to reduce complexity and improve accountability by choosing a single provider as the primary point of contact for the project. The idea behind this approach is that a prime contractor will be responsible for delivering the entire project, and will outsource or subcontract whatever elements of the project are not within that vendor’s area of domain expertise.
This approach redistributes the risk of project delivery and the cost of managing multiple vendors to the prime contractor and away from utility managers. Given that water utility managers aren’t necessarily experts in complex project risk management, this strategy often makes sense. In fact, a phrase has emerged in the industry over the past few years to describe this approach: One Throat to Choke.
The problem with this phrase is that it connotes antagonism. What utilities really desire when initiating a large project is to see that specific objectives are met on time, and at a reasonable cost. It is worth considering if starting a project with an inherently antagonistic intent is the best approach to accomplishing the goal of improved accountability.
Perhaps it is better to think about finding a partner who you can collaborate with throughout the course of the project to meet mutually beneficial goals. Not “One Throat to Choke,” but perhaps “One Hand to Shake.”
“‘One Throat to Choke’ connotes antagonism. ‘One Hand to Shake’ elicits cooperation.”
Water utility managers should ultimately work to define clear success criteria for a project and then identify the best providers to deliver those articulated outcomes within an established budget. Regardless of whether you want to take more or less responsibility for project management, the ultimate success of a project hinges on clearly articulated objectives.
Benefits
Of course there are benefits to taking the approach of establishing a primary vendor relationship to take responsibility for delivery of all aspects of a project. The most obvious of these benefits is a single-point of contact.
By putting a single vendor in charge of all aspects of project delivery, utility staff have a clear understanding of who they need to coordinate with. This improves communication, reduces the likelihood of frustration, and reduces the amount of effort on the part of the utility to manage the project. This is a very appealing benefit and may make sense for water utilities that are resource constrained, have multiple projects occurring simultaneously, or lack explicit project management experience in house.
Another key benefit of selecting a prime contractor is that it can simplify the process of identifying a qualified vendor. By creating a detailed requirements document that outlines all aspects of the deliverables along with the expected measurable project outcomes, utility managers will reduce the number of qualified applicants and will thus save time when evaluating bid responses. This can help accelerate vendor selection and contracting and lead to a faster project kick-off.
Disadvantages
There are, of course, downsides to a prime vendor approach. The first is that, while offloading project risk and management responsibility to a single provider may result in less work for utility staff, it is inevitably going to be more expensive than directly managing multiple vendors. Many water suppliers are resource constrained and simply cannot afford the extra expense of pushing more responsibility and cost to a prime contractor.
Also, selecting a primary vendor to assemble the project elements cedes some amount of control in selecting the best point solutions and may result in a less optimally designed final deliverable. Since vendors have their favorite subs (who are known to be reliable, but also affordable) it will be difficult to evaluate or propose best-in-class sub-solutions which can have an impact on quality control.
Getting Help
Some utilities have recognized that there are many benefits to selecting best-in-class components to deliver the most cost-effective and highest quality project, but lack the in-house experience and resources to reliably manage a complex project. This has given rise to a class of consulting firms to the water industry that specialize in project definition, bid creation, vendor selection, and project or change management to ensure that the objectives defined by the water utility are delivered upon project completion.
Of course getting this experienced advice comes at a cost, and taking a consulting approach can result in pushing project costs beyond the available budget. This leaves water managers in a challenging position of having to make quality decisions with limited data in a resource constrained environment.
The Vendor Interaction Hinge
Ultimately the challenge of complex project management hinges on the interaction points between various components or providers of the project elements. Sometimes these interactions are smooth, particularly if the participating vendors have experience working with each other and have aligned incentives. Unfortunately, even if vendors are familiar with each other, when incentives are not aligned, conflicts inevitably arise. The main expression of this conflict is when vendor A is asked to perform some work to make elements provided by vendor B work well. This extra work creates added costs for vendor A which are often not contemplated when the initial project is scoped.
“The complexity of project management hinges on the interaction points between vendors.”
There are really only two viable solutions to this conflict. The first is to try to anticipate all the interactions that will be required between the differing vendors and scope the effort for each party and compensate the appropriately. This, in practice, proves to be very difficult as it is nearly impossible to anticipate all the possible integration points between technologies or human resources.
The second approach is to reduce or eliminate the number of interaction points between various systems and vendors by selecting providers that offer comprehensive, integrated solutions. Depending on the requirements of a particular project, this may be challenging as integrated solutions are hard to find and may come at a premium cost. However, by reducing vendor interaction points and shifting costs from project management (with many unknowns) to pre-integrated solutions where much of the heavy integration lifting has already been done, projects risks can be mitigated and often within the same range of total cost.
“Selecting providers of integrated solutions can reduce project complexity.”
Ultimately, utility managers are faced with a series of challenging decisions when undertaking large capital projects. There will always be tradeoffs involved as it is impossible to concurrently optimize for cost, quality, and control. But by thinking carefully about the intended outcomes, understanding the various project inputs, and clearly defining responsibilities for each element of the project, chances improve that projects will be brought in on time and within budget.
