Managing the Contractor-Customer Relationship

Today, organizations of all sizes and types are outsourcing many of their project requirements to third-party vendors that possess the requisite resources and expertise to provide high-quality goods and services pursuant to contractual requirements. While many if not most of these contractor-customer relationships are mutually beneficial and achieve their intended outcomes, there are some important issues that must be taken into account prior to and during any such contractual arrangement. To determine these issues and their implications for the contractor-customer relationship, this paper provides a review of the relevant literature concerning the ethical issues that can arise in contracting and an analyze and discussion concerning the benefits that can arise with contracting. In addition, a description of the importance of the communication process in the contractorcustomer relationship and the risks and responsibilities in the contractorcustomer relationship is followed by a summary of the findings that emerged from the research concerning these issues in the conclusion.

Discussion concerning the ethical issues that can arise in contracting

The increase in outsourcing in recent years has introduced a number of ethical concerns, most especially the need to ensure that the third-party provider is capable of providing the requested goods or services at the agreed-upon price in a timely fashion without violating national and international labor standards or otherwise engaging in illegal conduct in the performance of the contract (Tuft 2010). In this regard, DeVelliers (2022) emphasizes that, Stories are common of exploitation of workers in developing countries and are a key reason there is still a stigma surrounding outsourcing. Companies must partner with firms that pay their employees fairly and ensure safe working conditions (para. 4). Although these types of ethical issue are fairly obvious and even intuitive, the high-profile projects that are the focus of the outsourcing initiatives are sensitive and proprietary, and it is therefore essential that our company perform the required due diligence in this area in a thorough manner prior to entering into any outsourcing contracts.

Beyond the foregoing considerations, some of the other ethical issues that can arise in contracting include ensuring the security of the information that is shared with contracting partners. While the factor may not be especially relevant for some types of organizations and projects where the goods or services that are involved are not technologically intensive, this factor may present real concerns for organizations that are outsourcing critically sensitive information that could threaten corporate or even national security if they are compromised. As DeVelliers (2022) points out, IP theft is rampant in China and other countries with low law enforcement and patent protection. Companies should work with outsourcing companies with similar regulations and laws as the US to minimize the risk (para. 8).

Certainly, these are not the only ethical issues that might arise prior to and throughout the course of a contractor-customer relationship, but they are among the most common and business practitioners must remain vigilant to ensure that any novel ethical issues are resolved immediately to avoid suboptimal outcomes in the contracting relationship. While this level of oversight and due diligence is frequently time-consuming and complex, it is also vitally important in order to ensure that organizations realize the full range of benefits that can accrue to these types of relationships as discussed further below.

Analysis and discussion concerning the benefits that can arise with contracting

Perhaps the most obvious benefits that can arise with contracting needed goods and services from a third-party vendor are the potential cost savings that can be achieved through increased efficiency as well as access to expertise that is otherwise unavailable in-house (Letica 2016). In addition, many organizations are able to improve their innovative practices by outsourcing their technological needs to companies with the requisite expertise (Aamer 2018). In this regard, Aamer reports that, The benefits organizations can gain from outsourcing include cost savings and higher levels of innovation (6048).

Developing and implementing innovative practices frequently requires sophisticated information technology (IT) support that even major corporations may lack in-house, making these needs especially appropriate for outsourcing. For instance, Dhar and Balakrishnan report that, Many large organizations are increasingly outsourcing their IT functions. Factors like lower costs, improved productivity, higher quality, higher customer satisfaction, and ability to focus on core areas are some of the benefits of outsourcing (2006, 40). Given the significance of these multiple benefits, it is not surprising that increasing numbers of organizations are opting to outsource some or even all of their IT-related project needs, and it is clear that these trends will continue to accelerate well into the foreseeable future.

Irrespective of other considerations, though, the key to achieving the full range of benefits that can arise with contracting is the careful selection of which goods or services are best suited for this purpose (Letica). This step will require a collaborative in-house effort to ensure that the full range of requirements are identified early on in order to ensure that the opportunity exists to locate suitable third-party vendors and perform the above-mentioned...

…the contracting organization will incur all or at least the lions share of these costs, especially when third-party vendors are located in other countries. In this regard, Choma cautions that, When contracting another company to execute part or all of a project, its not possible to transfer 100% of the risk. Its rarely possible to transfer fines to the contractors, or transfer costs for extensive repairs and/or delays which might occur (4).

Therefore, both contractors and customers have some fundamental responsibilities to each other, including the obvious need for transparency and honesty in their contract negotiations and administration of the contract. In addition, and as noted above, contractors and customers also have the responsibility to maintain open lines of communications so that any potential delays or other problems in performing the contract are made known as soon as possible so that alternatives or other arrangements can be made. Taken together, the foregoing risks and responsibilities make it apparent that a solid contractor-customer relationship that is characterized by open communications as well as honesty and transparency in the performance of the contract is essential for successful outcomes.

Conclusion

The findings that emerged from the research indicated that the increase in outsourcing has led to ethical concerns about performing due diligence in order to ensure that third-party vendors are in compliance with relevant labor standards and do not engage in illegal conduct. Ensuring the security of sensitive information shared with outsourcing partners is another ethical issue that may arise. Therefore, business practitioners must be vigilant in addressing these and other ethical issues that may arise in contracting relationships. The research also showed that there are a number of benefits that can be achieved through the outsourcing process, including most especially cost savings, increased innovation and productivity as well as higher quality and improved customer satisfaction. In addition, the outsourcing process also enhances the ability of organizations to focus on their core competencies in ways that can increase their profitability. Likewise, the research consistently stressed the importance of good communications throughout the outsourced project process. Poor communication processes can have a negative impact on the contracting relationship in numerous ways. Even reliable vendors may experience unexpected delays or misunderstand the requirements of a project. It is therefore crucial for both customers and contractors to maintain open communication and periodically check in for additional collaboration when needed. Finally, the contractor-customer relationship is fraught with risks and corresponding mutual responsibilities to ensure that timely performance is achieved according to the contract…