How to deal with unreliable subcontractor?

Question

There is a software project which, in big part, was delivered by a subcontractor. It is already in production but there are many bugs submitted by the customer. Bugs are redirected to the subcontractor as, according to formal agreements, they should fix them. The problem is they don't.

A bit more of background:

• SLA between the vendor and the client covers not only this project but others as well.
• SLA between the subcontractor and the vendor is rather loose and doesn't include forfeits for not keeping deadlines.
• The vendor, for whatever reasons, is late with payments for the subcontractor and no one from the project team has any control over it.
• The client loses their patience as the number of overdue bugs grows over time.

What should PM do with the subcontractor in such situation?

Answer 1

You cannot fix this on project level. This is a management issue.

Get the managers from vendor and subcontractor together to negotiate a payment plan vs results. If that proves impossible, terminate the contract and start an alternative route, like fixing yourself.

Before you start fixing yourself however, make sure you have an official and formal copy taken by some independent official third party (maybe a bailiff, I don't know the correct terminology/function?). This might proove very useful if things turn nasty (like a lawsuit).

Answer 2

Look for alternative development resources.

In the short term, you're probably stuck with the vendor you have and the subcontractor you have, and your best bet is to be very proactive in following up on their progress and deadlines.

While you continue to push them, start looking for other development resources and begin transferring whatever pieces of the project you can. Possibly the primary vendor can help you if you insist on them moving to someone else, but given the slow payment problem you mention, I'd recommend looking at other vendors as well. Clearly the current situation is bad, and in my experience it isn't apt to get better over time. Find someone else and transition away from the problem subcontractor (and possibly vendor).

Answer 3

I would say that subcontractor not fixing the bugs is not "the problem" but a symptom... of what? So what is the real problem?

As a PM I would look for that problem as simply trying to push a subcontractor harder will probably fail. Is this subcontractor new to the vendor and simply turned out unreliable or is there some deeper conflict involved?

On the other hand if the problem stays unresolved too long I would opt for arranging a team using my own people to fix the bugs/address client request while maybe trying to work on the subcontractor. It introduces the additional cost to the project, but it's a matter of lower loss due to the SLA with the client (if it will cost me less to pay for the additional work than to pay for failing SLA and also for aggravating the relationship with a client.

Answer 4

DECIDE

*D*efine the problem: The sub is no longer fulfilling its obligations. Why? There is no longer a "win" in it for them and/or there is a bigger win somewhere else. They are focusing their limited resources there. The vendor (not sure what the PM's relationship is with the vendor but I am assuming (s)he works for the vendor) is making payments but untimely.

*E*valuate what "fixed" looks like: Although in production, the bugs need removed. You need a sub that is incented to work and you need a capability that makes timely payments for completed work.

*C*onsider alternatives: Everyone is replaceable. Rarely are we stuck in one solution. Identify alternatives and investigate the benefits, costs, and risks of each.

*I*dentify the best alternative: Based on your analysis, choose and go forth.

*D*evelop the plan and go do: If you are staying with the original sub, get them to the table and find the win-win. Find out why the vendor is untimely with its payments and facilitate a solution where you can. If another alternative is chosen, go for it.

*E*valuate: Measure the improvement, fix your errors in your thinking and plan, fine tune your performance.

Answer 5

I finally manage to post an answer but in the meantime you received many answers. Some of my points was described already, but maybe you will find something new and worthy :)

First of all, you are responsible for your part of the SLA. If means you should buffer all the problems and stop the domino effect, shielding the client from it. If you can't get the subcontractor make work done, then only way left is to find internal or external team to overtake the job.

Describe the situation to the subcontractor as well as client's impatience. He may do his work and have your active support with talks with the vendor or he may choose not to cooperate and tighten "the spiral". If I understand properly, first case brings him big chances of being payed (late) while the latter means he will only get additional problems.

Sweeten your relation with the client. Try referring to overall cooperation within the whole SLA or even offer something in exchange for extending the deadlines (additional support or extended period of of it). That way, you will buy some time to solve the problem.

Tighten the screw. Your original agreement with subcontractor may not include forfeits for delays but it doesn't mean you can not introduce deadlines. There are usually many informal aspects and "buttons" one can push. Put on the table as much as you believe is needed: subcontractor's reputation, your support/opposition, future engagements with this subcontractor (at least you have recommendation/criticism ability), agreement re-negotiations or formal actions that can be taken. Start it gently, not all guns blazing, and fluctuate slowly to the carrot&stick situation if needed.

Answer 6

The PM has to do something with payments to the subcontractor. The SLA is already broken by the vendor, why would the subcontractor fulfill its obligations?

Answer 7

I would reduce the ongong payments to the subcontractor. If you stop them completely they are likely to cut their losses and run, if there is some incentive there you have more hope.

Make it clear that if they provide the level of support required by the client then you are happy to pay them the full amount.

In the background, if you have someone internal and have the source code, start having them review the system and fix minor issues. Let this stream of fixes grow over time until you have a solid understanding of the solution. This is an investment that will be paid off long term with the continuing SLA.

If you don't have the source code then your in more trouble. I would work on getting it put into escrow at a minimum ... you need that or the Vendor is completely exposed.

Answer 8

Only one answer, from my experience (and I had quiet a lot problems with subcontractors and providers, believe me...): get rid of him, as soon as possible, because things will only get worse.

If the subcontractor is not reliable, it means your business is not important enough to him, and there is not much you can do about it. So the sooner you will dump him, the sooner you will stop to feel the pain...

I understand it's not always possible to get rid of a subcontractor immediatly, so in the meantime, always plan while expecting the worst from this subcontractor. And begin to look for a replacement.

About your bug correction problem, look at your contract: is a allotted time defined for the correction of each reported bug? Try to get a statement from the provider about this, and set a planning up in which you will define when each bug should be corrected. Transmit as soon as possible to the person in charge, with copy to hierarchy in-house and in the subcontractor company.

Complain if it's not done in due time. Escalate if needed, both in your company and in the subcontractor company.

Answer 9

I would suggest two steps. -

1. Call them every day asking for updates on all the bugs submitted and projected 'fix' dates. Keep calling every day until they get tired of hearing from you and do something about it.

2. Inform them that you have lost confidence in their work, and that in the long-term, as the contracts end you will not be re-negotiating, and in the sort-term you will be looking both for another subcontractor to take over the bug-fixing responsibilities, and for a way to early-terminate the contracts.

Number 2 will have one of two effects - it will either cause them to pay more attention to #1, which will help eliminate your problem, or they will care even less about #1, which means you're on the right track to terminate as soon as possible and find a new sub-c.

Answer 10

This is a very tricky situation these days, majorly in the product based organization. I believe it is always better to plan a task in such a manner that one sub contractor and one permanent employee are involved in the development of it.

If the total dependency of the module is given to the sub contractor, then definitely there is a chance of liquidity in his manner.

So, from next time onwards involve 2 people in an assignment and one must be a permanent employee.

Now coming to the current scenario, it is better you try negotiating with you vendor. If the discussion won't fructify then you can go for a better vendor and this time make sure you have properly signed SLA which will accomodate all these extreme scenarios.