What if I told you that you could become a superstar project manager and it wouldn’t be that difficult. I’ll show you how to set yourself up to be the envy of your peers and you don’t need to be Michael Phelps.
Learn ways to reduce on-the-job stress, enhance your reputation, become a top profit principal and project manager. And, wouldn’t it also be nice to be recognized for your skill at retaining loyal clients?
In my ACEC webinar I shared tips to help project managers set themselves up to become superstars that make money. Although I cover a variety of ideas in the webinar, in this post I’ll share a successful budgeting and contracting tip that you won’t find in any book. Here is an example of a win-win contract that worked for me.
What was the Client Really Asking?
My client wanted me to help them to rehabilitate their 30 million gallon per day water treatment plant. We developed a budget and a contract for the work. The client liked a collaborative approach which matched with my values.
I knew that the staff, and even the City Manager and some City Councilors would want to be informed too. My budget included meeting time with all of the stakeholders. The budget was developed with a budget for me of 20% to make sure I had enough time to spend with the stakeholders as well as manage the project.
It was a rehabilitation project with many complexities due to working with an older facility. I made sure my client understood the design budget had to be robust to allow for surprises. Since surprises along the way were certain, I knew there would be more exploration and more re-do.
To account for large unknowns, the contingency budget was set at 20%. I set up the contract as a fixed price, which provided for monthly invoices based on percent complete.
The City Manager looked it over and wanted to know the basis of the contract fee. He asked that we set it for payment using hourly rates. I explained we were comfortable taking on the risk of a fixed price and that would give him assurance over the budget. He said he was okay with that, but he wanted to make sure the basis of the budget was documented.
To address his concerns, I showed him my budget back-up, a very large spreadsheet with hours and disciplines for each sub-task. He then asked if I could attach it to the contract. After giving this some thought I labeled a printout of the budget “for information purposes only”. Then, I included it as an enclosure with the transmittal letter for the contract.
The budget was then not a formal part of the contract. But the City Manager had a copy for his file. You see, what he really wanted is a document that showed how the budget was derived, should someone ask. I thought it was smart of him to know this might become important.
Since I was successful at securing a fixed price, the project was invoiced as a percent complete, with no hourly rate back-up. I was motivated to manage every hour and minimize our cost while delivering a good product. An hourly contract would have limited my profit to profit in each hour. There would be no motivation to finish under budget.
The Art and Business Science of a Solution
This is an example of understanding how to listen to the client’s true concerns and to apply best business practices to negotiate a contract that was a win-win for everyone. The client knew their costs and I addressed their key concern about the basis of the budget. The project was finished with a 30% profit (that is over $300,000 to the bottom line), the largest project profit for the company to date.
This, and hundreds of other approaches are best practices that are not offered in standard project management training programs. It requires a business educated mind, and years of practical experience.
The Superstar Program
Learn more by viewing my on-demand ACEC webinar— Superstar Project Managers Make Money: Set Yourself Up On Day One. If achieving Superstar status excites, my profitability program for managers and executives is the surest solution. Email me at firstname.lastname@example.org for further details.
Doug Reed, Business Consultant, FosterGrowth