The company that you choose to help you in your endeavors is nothing less then a full partner on that project. From all the companies in the world, you chose them because you need them, and they in turn need you just as much. Simply put, if this partner is not committed to the effort, they shouldn't be your partner in the first place. The real question is how to identify when partners are starting to head down a path that will most likely not serve your interest. Fortunately, there are some dead giveaways:
Ambiguous contract: If the vendor insists on the use of their contract/SOW AND that contract/SOW has more loop holes then a slice of Swiss cheese, you may want to think twice about them.
Can't answer your questions: If you ask questions that never seem to get answered, they may be purposefully skirting the question for a specific reason.
Communication issues: When talking to your vendor you can't understand them or have a hard time getting hold of them when you need them.
Time doesn't add up: If the work or the product they are charging you doesn't seem feasible for the work performed, then take a close look at their time-tracking practices.
Always on the up-sale: If your vendor is constantly trying to get you to invest in new technologies but hasn't produced results in past projects, you may want to reconsider purchasing at that moment.
Lowest bid regardless of scope: Most RFPs are not perfect and are revised throughout the process. If a vendor consistently has the lowest bid, and you just can't figure out how they can price that low, then you should watch out. Pricing, especially, can be a dead give-away in terms of identifying a vendor for low competency. There are hidden dangers associated with the lowest bid. More often than not, the lowest bid doesn't have the competency to do the project - they just want the job. So low bidding can be a sign that somebody is a potential bad partner.
To get around the low bidder issue, you can always perform an "Olympic" RFP, where you toss out the highest and lowest bidders and focus on the median quotes instead. This approach lets you focus on candidates that are similar to each other and within your pre-set pricing bounds. Hey, if you really like an extreme candidate, you can still go back and spend some time on them after you finish the research on the bulk of the other candidates.
It's no secret that the key to successful projects is effective communication. So no wonder so many problems arise when you have a lack of communication. If no one knows that there is a problem, then no one can fix it, simple as that. Expectations should never be a corporate secret, and your partner needs to know what you want out of their work. Most importantly, you need to know what your partner expects from you. Many times people forget that hiring a third-party company isn't the end-all answer to the problem.
If you and partner never communicate about your project issues and risk, then you will never be fully in sync to each other. The key to communication is to keep your lines open, and let your vendor know you are accessible. A simple way to improve your communication is to send your vendors a weekly "what's happening" e-mail that gives them an overview of what's happening in your team, your department and your company. It doesn't have to be too detailed and it's not a press release. Instead, it's a friendly update that may go over vendor invoice status, possible projects, and quick questions that need to be answered.
All too often, we run into a vendor that has two out of three of the undesirable qualities we've discussed, yet we still figure everything will eventually work itself out. This just isn't so. Once a partner starts heading down the wrong path, all kinds of additional negative behavior will surely follow suit. When you peel everything back, you have to be sure that your IT partner has the knowledge or talent to do the job. This competence factor contributes greatly to the amount of trust that you will develop with the vendor. If they don't have the necessary skills, you can be sure that they will endeavor to take all kinds of shortcuts to compensate for a lack of competence.
It's not enough to trust or like someone; you have to trust the competency of the entire organization. Trust is important. So how do you build trust? Simple, get to know your vendor before you hire them. It's a relationship and, as in any relationship, there is a courting period. Have them come into your office to get familiar with your environment. Hire them on "mini" projects to test them out. Have team-building events with them like lunch, brainstorming sessions, and sporting events (Bonus: most times, they'll pay).
So what are the signs of a bad vendor? I've listed the top signs to look for to see if a current or proposed vendor is turning into a liability. Please feel free to add your own signs in the comments.