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As a corollary to above, consultants will naturally extend a project - A consultant will happily work way on a project as much and as long as allowed. You have to really manage: watch costs, watch bills and don't allow anything to go uncorrected and unexamined for any length of time. It's not that consultants are malicious, it's just that they want to do as good a job as they can, and they make money, lots of it, on a time and materials project.

Always do fixed price projects - Except for short proof of concept and analysis projects, don't ever do anything with consultants that is not fixed bid. Make this an iron-clad rule. Also remember, you do not have to allow consulting companies to "pad" a project because it is fixed bid. You should allow them a little room (20% at most) to account for a few unexpected things, but don't let them pad more than that.

Do your own project management - Consultants are almost never great project managers. Unless you completely "farm out" a project to an outside firm, you should always use an in-house project manager. There is an inherent conflict of interest when you assign project manager duties to them.

Anyways hire best consultant for your tasks - If you need Exchange 2000 experience, then find a consultant who is an expert at that product. Don't award contract to group you've been using just because you are comfortable with them. You are going to be paying top dollar for expertise, so get top talent. If your favorite consultants have experience or knowledge, then fine, use them, otherwise, find someone who has exactly what you need.

It's difficult to manage consultants off-site - If you must manage a consultant or a consulting firm off-site, then you must manage project to death. Every detail must be checked, and communication must be flawless. Since you are not seeing them every day (or even every week), then you are increasing risk of failure greatly by allowing them to work off site.

Never, ever use consultants for maintenance tasks - The only exception would be in an emergency situation, such as your only in-house expert quit or something to that effect. Your own staff MUST be sufficient to handle day-to-day production tasks at all times. Consultants are extremely expensive, and since they are not employees they generally do not have mind-set and desire to perform more mundane, daily procedures. (Remember that outsourcing is different than hiring consultants. Outsourcing is finding a company to do a task, such as running your accounting system, for you on a routine basis. Outsourcing can be a very cost effective solution under many conditions.)

Demand detailed time-sheets from all consultants - This helps keeps them honest and allows them to communicate what they have accomplished. Review these time sheets constantly.

Do not cut your consultants any slack - Consultants are very expensive and are always expected to be experts (otherwise why did you hire them in first place?) Demand they work hard and produce constantly.

Do not hesitate to fire consultants - A consultant (and a consulting company) has absolutely no rights unless they are in a written agreement. If a consultant has a bad attitude, does not work well with others or is not getting job done, then you don't have to be and should not be a nice guy. You don't have to give them notice (unless you have a contract which says otherwise), you don't have to coddle them, and you don't have to put up with anything. They are NOT employees.

Set up benchmarks and milestones and measure performance against them - Let's say you've hired a consulting company to write a new warehouse system. They have finished analysis and produced a specification which you have approved. Now be sure you get a time line with tasks to be completed and demonstrated on specific dates. Make your consultants prove they have met those milestones completely and with quality. Correct any issues fast, and if consulting company continues to miss deadlines or produce poor products, then take strong action. If necessary, stop project and find a new consulting group. DON'T throw good money after bad just because "you've already spent a million" or whatever. You are just digging a deeper hole for your casket.

Write good contracts - Coming up with a good contract for a consultant is an art and a science in and of itself. Make sure you can terminate immediately for cause, not producing, not meeting schedules and so on.

Manage your project - Most importantly, if you are project manager, then manage your project. Control everything thoroughly, test assumptions and demand not only results, but demonstrations of results. Don't believe anything without proof and without actually seeing it (either yourself or your supervisor-level subordinates). Most importantly, demand compliance to your contracts, your standards and your specifications. And finally, demand that consultants meet their commitments without fail.