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

Rick BrennerThe article you've been reading is an archived issue of Point Lookout, my weekly newsletter. I've been publishing it since January, 2001, free to all subscribers, over the Web, and via RSS. You can help keep it free by donating either as an individual or as an organization. You'll receive in return my sincere thanks — and the comfort of knowing that you've helped to propagate insights and perspectives that can help make our workplaces a little more human-friendly. More

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Related articles

More articles on Ethics at Work:

A wooden chestYour 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.
A nervous dogThe Power of Presuppositions
Presuppositions are powerful tools for manipulating others. To defend yourself, know how they're used, know how to detect them, and know how to respond.
A TSA Officer screening a passengerVirtual Termination with Real Respect
When we have to terminate someone who works at a remote site, sometimes there's a temptation to avoid travel — to use email, phone, fax, or something else. They're all bad ideas. Terminating people in person is not only a gesture of respect. It's good business.
The 1934 rally of the Nazi Party in GermanyInfluence and Belief Perseverance
Belief perseverance is the pattern that causes us to cling more tightly to our beliefs when contradictory information arrives. Those who understand belief perseverance can use it to manipulate others.
A meeting held in a long conference room.Multi-Expert Consensus
Some working groups consist of experts from many fields. When they must reach a decision by consensus, members have several options. Defining those options in advance can help the group reach a decision with all its relationships intact.

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

Forthcoming issues of Point Lookout

A hummingbird feeding on the nectar of a flowerComing October 12: Downscoping Under Pressure: II
We sometimes "downscope" projects to bring them back on budget and schedule when they're headed for overruns. Downscoping doesn't always work. Cognitive biases like the sunk cost effect and confirmation bias can distort decisions about how to downscope. Available here and by RSS on October 12.
An owl of undetermined speciesAnd on October 19: Bullying by Proxy: I
The form of workplace bullying perhaps most often observed involves a bully and a target. Other forms are less obvious. One of these, bullying by proxy, is especially difficult to control, because it so easily evades most anti-bullying policies. Available here and by RSS on October 19.

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