A dodgy specification combined with a fixed price is every project managers worst nightmare, yet despite us all being in agreement on this there is still often a huge gapm between a projects needs and the assigned budget/resource.
Risk is the issue with this type of project, and more importantly who the risk lies with. In fixed price it is the supplier, and in T&M it is the customer, but whoever is responsible for the risk the most common risk is that of running over, and someone must take the hit on any lost time, funds or resource.
Theoretically the supplier should shoulder the risk in a fixed price project, as it is they who have set the price and timescales, and they who get the profit if the project comes in under budget. If it comes under they make more profit, if it goes over they are covered by the contingency that they probably added, so unless the project comes in really late everyone’s happy , and even if it does come in really late then surely it’s the suppliers fault so they should take the hit. Or is it their fault?
In most cases it is unlikely that the supplier has had compete say over the cost and timescales as it is a very naive customer who doesn’t negotiate the estimates they are given. And of course suppliers are aware of this, and know that if they don’t come to an agreement with the client there are plenty of competitors willing to. This leads to them accepting fixed price projects scoped with very little margin for movement, which is definitely a risk.
Even when the deficit is entirely the fault of the supplier, they still need to stay in business and running unprofitable projects is not the way to do it! So to overcome this supplier’s will often scale back the project and under deliver, then hit back with the dreaded “change request”- and once you’re into this territory, then no one wins!
Even in cases where the over run is entirely down to the supplier, they obviously still need to turn a profit in order to stay in business. So to overcome this problem need to stay in business and running unprofitable projects is not the way to do it! So to overcome this suppliers may decide to scale back the project and change the requirements, often leading to the much feared “change request” conversation- an area no one wants to get in to.
A possible resolution is to go back to the initial requirements of the project, rather than the cost and how they will be achieved. From here the gap can be ascertained and the client can see earlier the difference between what they want and what they will get.
A good Project Manager can reduce the stress in the project by revealing the gap to a customer as early on in the process as possible, so the battle can be reached and resolved sooner allowing the project to continue more efficiently. This can be achieved by allowing the customer to see small sections of the work as they are completed.
We call this procedure “Minding the Gap” and it can save hours of time and stress in the long run. It can be further enhanced by implementing project management software, as this can alert a project manager sooner rather than later to any issues or bugs which may affect the project.
Learn more about bug tracking. Stop by Countersoft’s site where you can find out all about project management software and what it can do for you.
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