Mind The Gap
Tuesday, 09 March 2010 08:04 | 
Written by Jessica O'Neal |
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.
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!
Assessing what the initial needs were/are rather than focusing on how to go about achieving them or what it will cost, is one way out of this scenario. By taking this view you are able to assess the gap between what is required and what can actually be done.
This gap can be reduced or at least handled early on in a project if a Project Manager makes sure the customer can see what they will actually get as soon as possible. By showing a customer small sections of work as they are completed, the deficit between what they want and what they will get is addresses more quickly and therefore overcome in a more timely fashion.
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.
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!
Assessing what the initial needs were/are rather than focusing on how to go about achieving them or what it will cost, is one way out of this scenario. By taking this view you are able to assess the gap between what is required and what can actually be done.
This gap can be reduced or at least handled early on in a project if a Project Manager makes sure the customer can see what they will actually get as soon as possible. By showing a customer small sections of work as they are completed, the deficit between what they want and what they will get is addresses more quickly and therefore overcome in a more timely fashion.
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.
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