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Navigating the Challenges of Managing a Master Vendor Construction Contract
Arjen van Berkum |
December 7, 2023 |

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Managing a master vendor construction contract can indeed be more challenging than managing a regular supplier contract due to several factors. I have had the honor of managing a very large when working at ING and I truly believe it can be a blessing but also quite difficult. Especially if you decide to use master vendorship as a means of managing a specific category or even use it to source an ecosystem.

Challenges in Managing a Multifaceted Master Vendor Construction Contract

Firstly, a master vendor construction typically involves multiple parties, such as subcontractors, suppliers, and various stakeholders. Coordinating and managing all these parties and ensuring effective communication can be complex. There is next to all the different interests also the stress of hidden margin and costs. Trust in your master vendor is paramount.

Planning, Compliance, and Coordination

Secondly, a master vendor contract often involves a higher level of complexity and intricacy compared to a regular supplier contract. Working together requires detailed planning, adherence to specific regulations, compliance with legal requirements, and coordination of various activities. There might be additional legal or regulatory requirements and other compliance measures, which contribute to the complexity of managing the contract. In the end you don’t want to get stuck because your master vendor is not back to back with its sub contractors. Especially if the master vendor also is a deliverer of goods or services under the contract themselves.

These deals can be more unpredictable and dynamic in nature compared to regular supplier contracts. The involvement of multiple stakeholders, changes in project scope, unforeseen challenges, and the need for continuous monitoring and adjustment make it more challenging at various stages of the execution.

Additionally, these contracts usually have a longer duration and involve higher financial stakes. The increased risk and potential impact of delays, cost overruns, and quality issues necessitate a more rigorous management approach.

Unveiling the Challenges: The ‘Black Box’ Dilemma in Master Vendor Contracts.

Lastly, a master vendor construction contract can become a “black box” due to the complexity of tasks and interdependencies involved. The interconnected nature of activities, subcontracting relationships, and the reliance on specialized expertise can make it more difficult to track and understand the progress and performance of each party. This makes it crucial for the contract manager to establish effective communication channels, implement proper documentation processes, conduct regular evaluations, and provide necessary oversight to ensure transparency and accountability.

Conclusion

The real question is do you really need master vendorship especially when we look at the new type of regulations and are they not an added layer of cost? Or is it defacto outsourcing of contract management activities? And for those working under public tenders, using master vendorship (like a software broker) as a means of circumventing the rules of engagement set by law is something that will be a big discussion in the future.

Author: Arjen van Berkum

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