464 Chapter 12 Outsourcing: Manag ing !
nterorgan izational Relations
Buxton Hall
Chad Cromwell, head of uni versity housing, gazed up at the tower at Buxton Hall
and smiled as he walked toward the landmark building. Buxton Hall was built in
1927 as a residential complex for over 350 students at Pacifica State University.
At the time, Buxton was the tallest building on campus, and its tower had a
panoramic view of the athletic fields and coastal range. Buxton quickly became
a focal point at Pacifica State. Students perched on the tower dominated the cam-
pus during the annual spring water fight with their huge slingshots and catapults.
The first intranet on the Pacific coast was created at Buxton that linked students'
computers and allowed them to share printers. Around the 1970s, some student
artists began the tradition of painting their room doors. Whether a Rolling Stones
logo or Bugs Bunny on a skateboard, these colorful doors were an artistic legacy
that caught the attention of students and faculty.
Buxton Hall served as a residence hall for the university for many years, but time
was not kind to the stately building. Leaks destroyed plaster in the interior. Wiring and
plumbing became outdated and so dangerous that the building was deemed unsafe.
Buxton Hall's doors were closed to students and windows boarded up at the end of the
1996 spring quarter. For 10 years Buxton sat silent and over time became a symbol
of the general decline of Pacifica State. Now thanks to state bonds and generous
contributions, Buxton Hall was about to be reopened after a $20 million renovation.
18 MONTHS AGO
Chad and key representatives from university facilities were engaged in the second
of a two-day partnering workshop. Also in attendance were managers from Crawford
Construction, the chief contractor for the Buxton renovation project, as well as several
key subcontractors and architects from the firm of Legacy West. During the first day a
consultant ran them through a series of team-building and communication exercises that
accentuated the importance of open communication, principle negotiation, and win/
win thinking. The second day began with the "project from hell" exercise, with each
group describing the worst project they had ever worked on. Chad was surprised that
the Crawford and Legacy West descriptions were very similar to his own. For example,
each group talked about how frustrating it was when changes were made without proper
consultation or costs were hidden until it was too late to do anything about them.
This was followed by a discussion of the best project they had ever worked on. The con-
sultant then asked the groups which of the two they wanted the Buxton project to be.
A genuine sense of common purpose emerged, and everyone became actively engaged
in spelling out in specific terms how they wanted to work together. The session
concluded with all of the participants signing a partnering charter, followed by a picnic
and a friendly softball game.
12 MONTHS AGO
Chad was on his way, with Nick Bolas, to meet Dat Nguyen, the Crawford project
manager, on the third floor at Buxton tower. Dat had contacted him to discuss a prob-
lem with the tile work in one of the communal bathrooms. Dat's people had completed
the work, but Nick, who was a Pacifica facilities manager, refused to sign off on it,
Chapter 12 Outsourcing: Mana gin g lntero1ganizatio11al Relations 465
•
claiming that it was not up to spec. After a 24-hour impasse, the Crawford foreman
exercised the escalation clause in the partnering agreement and passed the issue up
to management's level to be resolved. Dat and Chad inspected the work. While both
agreed that the job could have been prettier, it did meet specification, and Chad told
Nick to sign off on it.
Chad met Dat again later in the day at the weekly Buxton status report meeting.
The meeting kicked off with a brief review of what had been accomplished during
the past week. Discussion centered on the removal of elm trees . Alternati ve strategies
for dealing with the city inspector, who had a reputation of being a stickler for details,
were considered. The proj ect was two weeks behind schedule, which was an
important issue, since it was imperative that the building be ready for students to move
in at the 2008 fall term. The project was also on a very tight budget, and the manage-
ment reserves had to be carefully administered. Renovation of existing buildings was
always a bit of a gamble, since you never knew what you would find once you began
tearing down walls. Fortunately, only small amounts of asbestos were found , but rot
was much more severe than anticipated.
The meeting included a partnering assessment. The results of an online survey
filled out by all the principals were distributed. The results revealed a dip in the ratings
between the Crawford foremen and university officials regarding timely collaboration
and effective problem solving. One of Chad's people said that the primary source of
frustration was Crawford foremen failin g to respond to e-mail and telephone
messages. Dat asked for the names of his people and said he would talk to each
of them. The Crawford foremen complained that the university officials were being
too nit-picky. "We don't have the time or money to do A+ work on everything,"
argued a foreman. Chad told Dat and his people that he would talk to the facilities
workers and ask them to focu s on what was really important.
6 MONTHS AGO
The project status report meeting started on time. Crawford had been able to make
up for lost time, and it now looked like the building would open on time. Chad was
glad to see that the partnering assessment had been positive and steady over the
past month. The big issue was the surge in costs consuming all but $50,000 of
management reserves. With six months to go, everyone knew that this would not cover
all the change orders needed to have the building ready. After all, there was already
$24,000 worth of change orders pending.
Chad looked across the table and saw nothing but grim faces. Then one of the
Crawford foremen proposed postponing treating all of the exterior walls: "Instead of
cleaning and preserving the entire brick building, let' s only do the front entrance and
the north and south walls that the public sees. We can just refurbish the interior court
walls as well as the west side. This would be adequate for at least eight years, in which
time money should be available to complete the job."
At first Chad didn't like this idea, but eventually he realized that this was the only
way they could have the building ready for the students. Friendly arguments broke
out ~ver which exterior segments needed the full treatment and which ones didn't.
The whole team ended up touring the outside of the building, identifying what kind of
work needed to be done. In the end, only 70 percent of the exterior brick walls were
reconditioned according to plan, with a savings of over $250,000. While this boost to
the reserve would still make things tight, everyone felt that they now had a fighting
chance to complete the proj ect on time.
466 Chapter 12 Outsourcing: Managing l nterorganizationa/ Relations
TODAY
As Chad mingled, with a glass of champagne, no one talked about the walls that still
needed to be refu rbished-tonight was a night to celebrate. All of the major partici-
pants and their spouses were at the party, and the uni versity was hosting a five-course
meal at the top of the tower. During the toasts, jokes were exchanged and stories told
about the ghosts in the west wing and the discovery of a dead skunk in the south
basement. Everyone talked about how proud he or she felt about bringing the grand
old building back to life. More than one person mentioned that this was much more sat-
isfying than tearing down an old relic and constructing a new building. The president
of the university concluded the festivities by thanking everyone for all the hard work
and proclaiming that Buxton would become a bright, shining icon for Pacifica State.
1. How successful was this project?
2. What best practices were evident in the case? How did they contribute to project
objectives?
• Goldrush Electronics Negotiation Exercise
OBJECTIVE
The purpose of this case is to provide you with an opportunity to practice negotiations.
PROCEDURE
STEP 1
The class is divided into four groups, each comprising the project management group
for one of four projects at Goldrush Electronics.
STEP2
Read the Goldrush Electronics background information in the following section.
Then read the instructions for the project you represent. Soon you will meet with
the management of the other projects to exchange personnel. Plan how you want to
conduct those meetings.
BACKGROUND INFORMATION
Goldrush Electronics (GE) produces a range of electronic products. GE has a strong
commitment to project management. GE operates as a projectized organization,
with each project organized as a fully dedicated team. The compensation system is
based on a 40 + 30 + 30 formula. Forty percent is based on your base salary, 30 percent
on your project performance, and 30 percent on the overall performance of the firm.
Four new product development projects have been authorized. They are code
named Alpha, Beta, Theta, and Zeta. The preliminary personnel assignments are listed
in the following table. You are assigned to represent the management of one of these
projects. The policy at GE is that once preliminary assignments are made, proj-
ect managers are free to exchange personnel as long as both parties agree to the
transaction. Personnel may be traded for one or more other personnel. Yqu will have
the opportunity to adjust your team by negotiating with other project managers.
Chapter 12 Outsourcing: Manag ing Intero rganizariona l Relations 467
Alpha Project
Software Engineer Hardware Engineer Design Engineer
Jill Cameron Mitch
John Chandra Marsha
Beta Proj ect
Software Engineer Hardware Engineer Design Engineer
Jake Casey Mike
Jennifer Craig Maria
Theta Project
Software Engineer Hardware Engineer Design Engineer
Jack Chuck Monika
Johan Cheryl Mark
Zeta Project
Software Engineer Hardware Engineer Design Engineer
Jeff Carlos Max
Juwoo Chad Maile
STEP 3
Meet and negotiate with the other proj ect managers.
STEP4
Individual project scores are totaled and posted.
STEP 5
Discussion questions
1. What was your initial strategy before starting the actual negotiations? How did you
view the other groups?
2. Did your initial strategy change once negotiations began? If so, how and why?
3. What could top management at GE have done to make it easier to reach agreement
with the other groups?
Appendix 12.1
Contract Management
LEARNING OBJECTIVES
After reading this appendix you should be able to:
LO A12-1 Describe the procurement management process.
LO A12-2 Describe the differences between fixed-price and cost-plus contracts and thei r adyantages and
disadvantages.
