The specific project I am managing as the project manager is a building construction project. The project involves an overall contractor who is contracted to complete all the electrical works. Because the company does not have adequate human resources to complete this project, the company contracts an electrical subcontracting firm to offset the staffing issues for the company.
There are advantages and disadvantages of hiring an electrical subcontractor compared to having own workers. As stated by Hekkala, Heiskanen & Rossi (2015), one of the pros is that contracting an electrical subcontractor offers flexibility to the parent firm. For instance, there could be times when the project is seasonal, thus an electrical contractor will be hired by demand and supply. Another benefit is cost reduction. While the cost of labor is greater, the main project manager will not require to pay unemployment taxes and social security taxes (Smith, 2012). This will make contracting out an electrical subcontractor for the main contractor cheaper than hiring their employees. However, there are cons to outsourcing the electrical services from the subcontractor. First, the main contractor will not have control of the electrical works. Once the main contractor hires a subcontractor to fix the electrical work, they will have relinquished their control of that part of the project to another company, thus, they will have less control over whether the project will be completed perfectly or in the scheduled time.
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Overall, there are pros and cons to outsourcing a project. One of the benefits is that the project manager can concentrate on other project aspects. Sine other individuals will be dealing with the installation of electricity, the project manager may spend more time on further completing the project. Besides, outsourcing reduces overall costs (Hekkala, Heiskanen & Rossi, 2015). By contracting a professional company. The project manager can utilize their knowledge, skills, and connections to minimize the overall project costs. Also, outsourcing allows for more flexibility, because the project manager can access their resources, and this will help to create a more extensive infrastructure.
Conversely, outsourcing may bring about several drawbacks. Outsourcing comes with unexpected costs. Initially, the financial savings and enhanced efficiency can look great, but the problem is that there is the potential for hidden costs when some part of the project is left to a third party (Jordan, 2017). Besides, quality may suffer once a third party is outsourced. If the subcontractor hired does not have enough experience to accomplish the project, the quality of the final product may reduce (Smith, 2012). There is also the issue of possible setbacks, such as when the third party creates unrealistic timelines to complete the project, resulting in delayed delivery of the project and poor quality. Other drawbacks to outsourcing involve not having control over the project and conflicts triggered by the absence of trust or coordination in the project.
To reduce the negative impacts of outsourcing, the project manager may run a trial period with the outsourcing firm to ensure the project goals are achieved and to test if the firm can complete the work successfully. Also, a non-disclosure agreement may be signed to keep the company's sensitive information confidential (Smith, 2012). Also, to address the issue of poor quality of the final product, the project manager can have a pool of subcontractors from which to choose the best one.
There are various outsourcing considerations which the project manager should make. First, cost efficiency should be considered while outsourcing. The objective should be to minimize costs and streamline production, although there must be a balance between quality and quantity which outsourcing offers. Another consideration is the ability to meet deadlines. The subcontractor should be able to meet the project's deadlines. According to Jordan (2017), the outsourced firm should be able to work under minimal supervision. Moreover, a service level agreement (SLA) should be signed to make sure the outsourced company understands the project expectations. Additionally, timelessness is crucial in outsourcing because the outsourced firm needs to meet specific deadlines (McIvor, 2018). Finally, the project manager should ensure that the outsourced firm has the right resources and technology for handling business needs.
References
Hekkala, R., Heiskanen, A., & Rossi, M. (2015, February). The Role of Social Capital as Antecedent in Clan Formation in Information Systems Outsourcing Project. In Global Sourcing Workshop 2015 (pp. 83-99). Springer, Cham.
Jordan, A. (2017). Project Management in Outsourcing.
McIvor, R. (2018, July). Integrating process improvement into business process outsourcing: a capability approach. In Academy of Management Proceedings (Vol. 2018, No. 1, p. 15953). Briarcliff Manor, NY 10510: Academy of Management.
Smith, A. (2012). The Pros and Cons of Outsourcing.
