Table of Contents
Question
A third-party supplier demands payment for the services provided for a project. The agreement was that payment would be made after the organization receives payment from the client. The third-party supplier lacks the capital to meet their payroll and has informed the project manager that if they do not receive payment quickly, they will withdraw team members from the project. What should the project manager do?
A. Explain the third-party supplier situation to the client and request payment.
B. Inform the client that the project must be delayed until payment is received.
C. Reassign resources from other projects to pay the third-party supplier.
D. Process a bank loan to pay the payroll of the third-party supplier.
Answer
A. Explain the third-party supplier situation to the client and request payment.
Explanation
In this situation, the most appropriate action for the project manager to take would be:
A. Explain the third-party supplier situation to the client and request payment.
The project manager should proactively communicate with the client and explain the predicament faced by the third-party supplier. By informing the client about the supplier’s financial situation and the potential withdrawal of team members from the project, the project manager can seek assistance in expediting payment from the client.
Option B. Informing the client that the project must be delayed until payment is received may not be the best approach, as it could create negative consequences such as delays, dissatisfaction, or breach of contract. It is better to first communicate the situation and explore potential solutions with the client.
Option C. Reassigning resources from other projects to pay the third-party supplier is not an ideal solution. Taking resources away from other projects could negatively impact those projects and potentially create additional problems. It is important to resolve the issue without disrupting other ongoing projects.
Option D. Processing a bank loan to pay the payroll of the third-party supplier is not a viable option for the project manager. Taking a bank loan on behalf of the third-party supplier could create financial risks and potential liabilities for the project and the organization. It is not the project manager’s responsibility to secure loans on behalf of suppliers.
Therefore, the best course of action is for the project manager to have an open and honest conversation with the client, explaining the situation faced by the third-party supplier and requesting prompt payment to avoid the withdrawal of team members from the project.
Reference
- Taking supplier collaboration to the next level | McKinsey
- Risks And Vulnerabilities When Using Third-Party Vendors (forbes.com)
- Indemnification Clauses in Commercial Contracts | Thomson Reuters
- How To Manage Several Third-Party Vendors On One Project (forbes.com)
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