March 22, 2006	Volume 6, Issue 12
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Dubious Dealings

by Rick Brenner

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."

She 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 interestAndrew 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.  Top    Next Issue

Is your organization running at peak performance? If not, sometimes the design of its job descriptions could be the culprit? For some novel ideas for elevating performance in your organization, check out my tips book 52 Tips for Leaders of Project-Oriented Organizations.

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More articles on Ethics at Work:

Your Wisdom Box

When we make a difficult decision, we sometimes know we've made the wrong choice, even before the consequences become obvious. At other times, we can be absolutely certain that we've done right, even in the face of inadequate information. When we have these feelings, we're in touch with our inner wisdom. It's a powerful resource.

Some Truths About Lies: Part I

However ethical you might be, you can't control the ethics of others. Can you tell when someone knowingly tries to mislead you? Here's Part I of a catalog of techniques misleaders use.

Currying Favor

The behavior of the office kiss-up drives many people bats. It's more than annoying, though — it does real harm to the organization. What is the behavior?

Extrasensory Deception: Part I

Negotiation skills are increasingly essential in problem-solving workplaces. When incentives are strong, or pressure is high, deception is tempting. Here are some of the deceptions popular among negotiators.

Personnel-Sensitive Risks: Part I

Some risks and the plans for managing them are personnel-sensitive in the sense that disclosure can harm the enterprise or its people. Since most risk management plans are available to a broad internal audience, personnel-sensitive risks cannot be managed in the customary way. Why not?

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

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The Race to the South Pole: Ten Lessons for Project Managers

On 14 December 1911, four men led by Roald Amundsen reached the South Pole. Thirty-five days later, Robert F. Scott and four others followed. Amundsen had won the race to the pole. Amundsen's party returned to base on 26 January 1912. Scott's party perished. As historical drama, why this happened is interesting enough, but to project managers, the story is fascinating. Lessons abound. Read more about this program. Here's an upcoming date for this program:

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On 14 December 1911, four men led by Roald Amundsen reached the South Pole. Thirty-five days later, Robert F. Scott and four others followed. Amundsen had won the race to the pole. Amundsen's party returned to base on 26 January 1912. Scott's party perished. As historical drama, why this happened is interesting enough. Lessons abound. Among the more important lessons are those that demonstrate the power of the agile approach to project management and product development. Read more about this program. Here's an upcoming date for this program:

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The Politics of Meetings for People Who Hate Politics

There's a lot more to running an effective meeting than having the right room, the right equipment, and the right people. With meetings, the whole really is more than the sum of its parts. How the parts interact with each other and with external elements is as important as the parts themselves. And those interactions are the essence of politics for meetings. This program explores techniques for leading meetings that are based on understanding political interactions, and using that knowledge effectively to meet organizational goals. Read more about this program. Here's an upcoming date for this program:

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