Where to Draw the Line
Scope creep is creepy. It is subtle and can sneak up on your project like an undetected cancer that eats away your profits. It can also ruin your customer’s experience with your company if it’s not handled well. A classic example is a home builder who does not tell their client of the added costs of their client’s requested changes until the very end of the project. The builder assumes the client intrinsically knows their requests will cost more and the client assumes, since the builder didn’t say anything when they requested the change, that it was within the original quote. In the end, both are likely to walk away angry. Effectively managing scope creep can lead not only to financial health for your organization but higher levels of respect and trust from your customers too. The antibody for scope creep is available and it is within your grasp.
Let’s first take a look at what causes scope creep. Big projects can be wonderful to have. They provide a steady backlog of work and they offer you plenty of opportunity to bring great solutions to the table for your customer. Practically every company I know wants big projects. The problem is that big projects are more complex in scope and span a longer period of time which opens the door for many customer- driven changes to creep in along the way. Ultimately, those changes will make for a better product, but they also can require additional cost and time to implement. Herein lies the dilemma. Where do you draw the line between when you as the supplier absorb the extra time and costs for the changes and when you ask your customer to reimburse you? Firms that fail to draw this line effectively (or at all) usually miss in one or more of these areas:
- Recognizing when a change in scope is requested
- Understanding and tracking costs to the project’s budget
- Communicating scope changes to the customer
For each of these three failure modes, there are three corresponding skills you and your company should have to effectively manage scope creep.
Provide a thorough quote at the beginning of the project
Creating a robust quote for a large project is not easy but it is critical as it clearly sets the project expectations for both you and your customer. It is, in essence, the project contract between you and your customer. It will be the basis upon which all scope changes to your project will be compared. Scope defines the cost, timing, and requirements of your project. Regardless of the type of quote (whether fixed price or time and material), you will want to be detailed. Whenever possible, get help on your quote from the key people that will actually be doing the work and from someone who has experience quoting this type of project. They best know how long tasks will take and what risks are involved. In the body of your quote, define the boundaries of your scope well.
Give an overview defining the scope of what you will do, what your responsibilities are, and what you will deliver upon completion. Include a detailed section of assumptions further defining the scope. At least one of your assumptions should state what types of changes you can absorb and what types need to be quoted and approved before they are implemented.
Once your project is awarded, review the quote with your project team so they know the boundaries of their responsibilities. Although some scope changes may be small and considered normal development iterations on a project, the main benefit of a detailed quote is that it allows you and your team to recognize when a customer-directed scope change is significant enough to request reimbursement.
Establish a robust budget-tracking system for all your projects
Knowing where you are relative to your quoted budget at any point along a project is not only good discipline in project management, but it gives you key information for negotiating when scope changes occur. A good budget-tracking system accounts for both the time and material spent on your project. There is a variety of software available that you can use for budget tracking. QuickbooksTM is a very good small business accounting software that tracks budgets well. Creating a simple spreadsheet to track time and material can work also.
Establish a change-management system within your firm
A good change-management system will help you manage and communicate scope changes proactively with your customer. The biggest mistake project managers make is not alerting the customer of scope changes when they are first recognized. Too often project managers are sheepish to go tell their customer that a requested change will cost more money, take more time, or affect features. They procrastinate. They’re afraid the customer will get angry. On the contrary, your customer will appreciate you more if you alert them early of the impact their requested change is going to make on the project. Your change-management system does not need to be complicated. It can be a one-page form that includes the following:
- A description of the change and who requested it – the ‘what’ and ‘who’
- The reason for the change – the ‘why’
- The cost and timing impact and who is responsible to pay – the ‘how much’
- A customer signature line for approval
Waiting until the end of a large project to tell your customer they owe you more money or that you will be late is bad for everyone. Don’t let yourself fall into that cancerous situation. Large projects are hard work and can create some tense moments, but treat them with careful discipline and keep your customer well informed along the way. This is the ideal prescription for a healthy, long-term relationship.
Written By: Jeff Disher, Founder & President | Jeff is a 26 year veteran of new product development. He has held roles in program management, product design, manufacturing, quality and training & development. He has a BS from Hope College and an MS in Mechanical Engineering from the University of Michigan. He also is a certified Professional Engineer in the State of Michigan. Jeff and his family enjoy many outdoor activities.