Importance of Outsourcing Procurement projects

Cost flexibility, as it is easier to increase or decrease the cost, according to the needs. When time-and-materials type of contract is being used (and it seems to be the most commonly used type for this kind of engagements), then the cost level matches the real effort. With this type of contract the buyer (organization) usually pays for the seller’s (project manager’s) hours spent on delivering services, and not for any particular deliverables. Fewer hours means lower cost, and more hours means higher cost. Very unlike the situation with the employed project manager, when costs are being generated even if there‘s not enough work for a full-time project manager. This is particularly important in volatile times, when demand can go up or down very quickly, and consequently organizations are generally more cautious in employing new people.

Higher level of objectivity. An outside person is less likely to fall under the influence of office politics and may bring an independent and more objective view of what is better for the organization. The lack of those blind spots, that each organization inevitably possesses, enables decisions that bring more value to the organization.

More authoritative position of an outside expert. A specialist from outside is sometimes viewed as a kind of a know-it-all superman (sometimes not justifiably ;-)), so in such cases people within organization can be more inclined to agree with a
course of action suggested by an outside expert than with one suggested by their colleague from within the organization. With time this bias tends to fade away as the more realistic view sets in.

Experiences are brought from outside and they benefit the organization. External experts usually work simultaneously on other projects not related to this organization and they bring these experiences with them. This is not about intellectual capital being
stolen, of course. It is about learning from other areas and applying these lessons within our organization.

Possibility to negotiate with more providers. Competition is a good thing. When there are more providers to choose from, they try harder, and they work on improving their practice. Organizations can benefit from this by applying sound procurement procedures. This applies to project management outsourcing as well.

Exposure to newer methodologies being used by an outside specialist. External specialists tend to invest more into project management research, new technologies and methodologies. Organizations benefit from this without the need to invest as much themselves.

Generally lower cost levels. Employment costs of project managers are generally not in the lower categories. And it seems that they are on the rise even when economy is going down, due to demand on the job market which continues to rise. If an organization needs a project manager who would not work full-time, the decision to outsource is probably a no-brainer (cost-wise) as in these cases the outsourced cost levels are much lower. However, if organization needs a full time project manager, in some cases it may be more effective and economical to hire a full-time project administrator (generally a lower-cost role that takes care of the more administrative parts of managing the project) and to outsource the part-time project manager role.

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