Project Controls, Part 4- Changes of Scope, Controlling External Providers, Troubled Projects
Changes of Scope
A request for a change of scope (or contract modification) can be initiated by either the customer or the provider. For internal projects, this takes the form of an updated project charter. Here is a list of potential issues.
- Decision to provide out of scope work for free.
Providing minor additional work for free can be an excellent way to exceed customer expectations, resulting in future contracts or at least a very nice letter of appreciation (don’t be bashful about requesting such a letter).
- Addressing unforeseen conditions often requires a contract modification.
- Trades leading to zero cost modifications.
Discuss the possibility of reducing scope or the expected quality in another deliverable, or the customer’s employees contributing some time (if appropriate).
- Request modifications gracefully.
Even if you as the provider have no fault at all, diplomacy is very important at this time. The customer’s project manager may be under a great deal of stress at this point.
- Bases for modifications (original statement of work and proposal, project plan, e-mails, status reports).
Review these documents before requesting a modification. Any of them might provide ideas to support your case of why a modification is appropriate. Did you make any assumptions or exclusions in your proposal?
- Modifications are just like new contracts.
Not only must modifications be signed by persons with the proper authority prior to beginning the modified work, but your project management plan and other relevant documents must be revised to reflect the new terms and conditions.
Controlling External Providers
These actions are performed by the customer project manager.
- Review, accept, disapprove work in progress.
All deliverables should be inspected, either by the customer or 3rd party reviewer.
- Progress payments and partial withholding, if necessary.
Payments are based on level of effort for contracts that are time and materials or cost plus. Payments are based on percent complete for contracts that are firm fixed price (also known as lump sum). Pay all undisputed portions. Some contracts specify partial withholding until final acceptance of all deliverables.
- Stay ahead of your contractors and their subcontractors.
Enforce all provisions of the contract and detailed plans to the letter (unless unforeseen conditions are identified). Review work in progress. Frequently compare progress against the intended schedule and rate of expenditures (and require the contractor to do the same in status reports). Advise your co-workers not to provide guidance to the contractor without your prior permission, and ensure any such guidance is in writing.
If required communications and status reports are not arriving on schedule, remind and/or warn the contractor there will be consequences for non-compliance.
Stop short of telling providers how to produce the project’s deliverables. Your opportunity for input was during the planning phases, usually prior to signing contracts and/or other documents accepting their plans. If you feel strongly that work is being performed incorrectly, consider stopping those portions of the work until agreement is reached. Be aware, delays and cost increases might occur.
Use partial withholding where appropriate. Review incoming invoices immediately, and if they do not arrive in a format that can be interpreted easily, reject the portions in question and give the sender an opportunity to re-submit.
- Manage change (formerly unknown conditions, cost overruns, delays).
Do not blame your contractors for formerly unknown conditions or issues over which they had no control or means to predict. If cost overruns occur during a firm fixed price contract, they will have to show increased scope with prior authorization, or very extenuating circumstances to be given additional funds. For time and materials and cost plus agreements, you are likely obligated to pay, so the earlier advice related to staying ahead of your contractors is especially important.
- Minimize the cost impact of change orders.
Perform all of the activities presented above. Another tactic applies to firm fixed price contracts. When requests for quotation are first issued, ask for lump sum bids for specified quantities, but also require the bidders to supply unit costs for overages related to any of the products or services that could have overages applied: (1) it helps with selecting the provider, and (2) you don’t want to be held hostage to high unit costs if quantities increase.
- Obtain final project deliverables.
Besides the visible products and services, remember to collect warranties of materials and workmanship; operation and maintenance manuals; and have any promised training provided.
This list is mostly self-explanatory, but it is important to involve the other senior members of the project team.
- Re-examine upcoming tasks for cost or schedule savings.
- Consider obtaining more resources or authorizing overtime.
- Have stakeholders agree to a reduced scope of services.
Does the entire project consist of must-have items? Can portions of the scope be completed later or not at all?
- Identify and use additional technical experts.
Maybe your team does not consist of the most qualified individuals.
- Subcontract or outsource portions of the work.
Maybe your company does not possess the most appropriate individuals or equipment to create the current set of deliverables.
- Ask the customer’s employees to complete part of the work.
This is certainly one of the customer’s options. Remind them if the situation seems appropriate.
Next Article in This Series: The next article discusses project closeout and organizational structures as they relate to projects.
Category: Business Growth & Strategy