Point Lookout: a free weekly publication of Chaco Canyon Consulting
Volume 6, Issue 12;   March 22, 2006: Dubious Dealings

Dubious Dealings

by

Negotiating contracts with outsourcing suppliers can present ethical dilemmas, even when we try to be as fair as possible. The negotiation itself can present conflicts of interest. What are those conflicts?

Andrew stopped outside Jane's door and knocked on the doorframe. Her back to him, studying her screen, Jane must have somehow recognized Andrew's knock. "Andrew," she said without looking up. "One sec."

A cup of coffeeShe half-stood, still holding the mouse and staring at the screen. Then she clicked, stood up straight, and turned to face him. "OK," she said. "Where to?"

"Courtyard," Andrew replied.

They walked silently to the elevator, rode it to One, crossed the lobby, went out into the brilliantly sunny courtyard, and sat down at an empty umbrella table. Jane still had her coffee mug in hand. She sipped.

"So…" she prompted him.

"This contract bothers me," Andrew began. "I'm a project manager. I don't know much about negotiating contracts. I'll probably do something dumb, but I'm not sure that's what bothers me."

Managing a project for which
you negotiated contracts
presents a conflict of interest
Andrew wasn't sure, but Jane was. She'd been there. "Right," she began. "The real problem is that project managers shouldn't be negotiating contracts. It's a conflict of interest."

Jane's insight isn't widely shared, but she does raise a critical point. Project managers who must monitor day-to-day performance of contracts they personally negotiated have a potential conflict of interest. Here are some of the ways this conflict can appear.

Vulnerability to time pressure
Especially if negotiations drag on, the organization might apply pressure to the negotiator to bring negotiations to completion. For those project managers who are also the negotiators, this pressure can lead to a temptation to yield, based on a belief that we can "close the gap" through cleverness during project execution.
When project manager and negotiator are separate people, the project manager can better represent the project's interests, insisting on what is actually required, and compelling more creative negotiation.
Hidden cost transfers
During negotiations, it's common to entice the vendor with the promise of work on future projects. But when the negotiator manages both the project at hand and the future project, this tactic amounts to a transfer of resources between the two projects. It distorts the costs of both, invalidating the metrics used to manage projects.
When the negotiator and project managers are independent, each contract is more likely to stand on its own.
Concealed contract flaws
When there are flaws in the contract that become evident only during execution, and when the negotiator has gone on to become the project manager, it is the project manager who must report defects in the contract that he or she produced. It can be tempting to find a way to avoid reporting a flaw of one's own creation.
When the negotiator and project manager are independent, contract flaws are more likely to be reported, and remedial action is possible.

Even considering whether or not we have a conflict of interest can be problematic. Since we don't want to believe we have a conflict of interest, we do. Go to top Top  Next issue: When You Aren't Supposed to Say: I  Next Issue

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Related articles

More articles on Ethics at Work:

Mark Twain in 1907When You're Scared to Tell the Truth
In the project context, we need to know that whatever we're hearing from colleagues is the truth as they see it. Yet, sometimes we shade the truth, or omit important details. Here's a list of some of the advantages of telling the truth.
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A reader wrote recently of wanting to learn "to effectively participate in office politics without compromising my integrity." It sometimes seems that those who succeed in workplace politics must know how to descend to the blackest depths, and still sleep at night. Must we abandon our integrity to participate in workplace politics?
A hot dog with mustard on a bunCounterproductive Knowledge Workplace Behavior: II
In knowledge-oriented workplaces, counterproductive work behavior takes on forms that can be rare or unseen in other workplaces. Here's Part II of a growing catalog.
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The term "full disclosure" is now a fairly common phrase, especially in news interviews and in film and fiction thrillers involving government employees or attorneys. It also has relevance in the knowledge workplace, and nuances associated with it can affect your credibility.
A performance review formAvailability and Self-Assessments
In many organizations, employees develop self-assessments as a part of the performance review process. Because of a little-known effect related to the Availability Heuristic, these self-assessments can be biased against the employee.

See also Ethics at Work and Project Management for more related articles.

Forthcoming issues of Point Lookout

A meeting in a typical conference roomComing April 3: Recapping Factioned Meetings
A factioned meeting is one in which participants identify more closely with their factions, rather than with the meeting as a whole. Agreements reached in such meetings are at risk of instability as participants maneuver for advantage after the meeting. Available here and by RSS on April 3.
Franz Halder, German general and the chief of staff of the Army High Command (OKH) in Nazi Germany from 1938 until September 1942And on April 10: Managing Dunning-Kruger Risk
A cognitive bias called the Dunning-Kruger Effect can create risk for organizational missions that require expertise beyond the range of knowledge and experience of decision-makers. They might misjudge the organization's capacity to execute the mission successfully. They might even be unaware of the risk of so misjudging. Available here and by RSS on April 10.

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