Mind The Gap

Unreliable spec coupled with a fixed priced project is the ultimate Project Manager’s nightmare. But even though we know this, there is still often a deficit between the needs of the project and the budget assigned to it.

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.

When a project is fixed price, theoretically it should be the supplier who is willing to shoulder the risk (and any related cost), as it is they who have set the deadline and all associated milestones. If a fixed price project comes in late then the cost is covered by the contingency that they added into their pricing, and if it comes in early then it means they get more profit. So everyone is satisfied, unless the project is completed so late that it takes the profit and contingency along with it, but then that’s the suppliers fault- right?

Wrong. In nearly all cases it is likely that the suppliers initial estimate was negotiated down in terms of cost, or up in terms of spec. They know what they can do for waht price, but most customers will negotiate and if the supplier doesn’t agree then plenty others will so they are forced to come to an arrangement-often a fixed price project planned with very little margin for error, which is most certainly a risk.
Even in cases where an overrun is completely the fault of the supplier, they still need to make a profit, and running at a loss is not a way to do this. So when this occurs a supplier may scale back the project, underdeliver or ‘cut corners’. Then the dread ‘change request’ excuse rears its ugly head, and we’re in territory no one wants to be in!

One potentially effective way out of the problem is to assess what the initial needs were, rather than how they are to be fulfilled or what the cost implication is. Then we can ascertain the difference between what the customer wants and what they are going to get.

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 “Minding the Gap” and it takes a skilled project manager to employ this alone. By implementing strong project management software they can give themselves a helping hand, as bugs, issues and milestones are flagged automatically allowing them to be responsive and efficient

Want to find out more about project management software, then visit Countersoft’s site to see howagile project management can help you in your projects.