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Managing Project Scope: An Owner’s Manual in Four Steps

Keeping a project under control—whether end-to-end HRO or other programs—is no small task. Scope definition and budgetary control are key to avoiding unexpected problems.

by Susan Rosenbleeth

As an HR executive, you must balance your internal budget constraints against the need for special projects designed to satisfy corporate business goals, control the rising costs of benefits, or assess the impact of the perennial changes brought about by regulation and legislation. The last problem you need is an unexpected provider invoice that will blow your budget in the last quarter of the fiscal year.

The providers presenting that invoice have their own pressures. They certainly don’t want to damage the trust they have worked so hard to build. They do want you to feel positive about the work they have performed and to provide good references and opportunities for additional assignments. However, they also need to be paid a fair price for the work they have done, or they won’t be in business to have the opportunity to do it again.

Some might feel that controlling budgets is the consultant’s or provider’s problem. Agreed. It is their obligation, and the firms you want as a partner spend significant time, resources, and energy developing competitive bids, drafting project plans, monitoring and managing projects, and developing invoices. However, HR executives “own” these projects and have an obvious stake in their success.

This article outlines steps executives can take to manage project scope, avoid unexpected cost increases, and increase their level of satisfaction with the outcome. The planning process these steps describe is an essential element to setting and controlling your consulting/special project budgets. Although planning is essential in either recurring or special project work, this article focuses on planning for special projects, which present unique issues.

Four Critical Steps

Consider these when undertaking a project:
• Define the project’s scope;
• Understand the assumptions behind the budget;
• Outline the terms of payment; and
• Monitor the budget.
Let’s look at each one closely.

• Define the Project’s Scope. This phase of project planning has many aliases, including defining the deliverables, scope, objectives, and outcomes. In essence, you are defining the project’s goals and how you’ll meet them. Although the provider you ultimately choose to assist with the project will have significant input, you are wise to define the key objectives and outcomes before issuing a request for proposal (RFP). That way, you are much more likely to be satisfied with the outcome of this defining phase and be in a better position to choose an approach matching your vision. There are two approaches to defining project scope that generally do not work well for the effective management of special projects:

•Setting the budget and letting the provider define the project within that sole parameter; or

•Issuing a request for proposal that is designed to solicit ideas rather than a firm proposal.

You might ask, “Is there an easier way to control the budget than to tell the provider the project must cost so much and no more?” I can assure you that when you take that approach, the provider will make every effort to manage scope to that cost. As a result, you may achieve the desired outcome. If not, you will eventually be asking the provider to do more and discussing scope creep. You might think, “That’s OK, too. I can still keep the project and the budget from getting out of hand that way.” Yes, possibly you can, but if you initially plan holistically, you probably will get a better deliverable at an overall lower cost.

To avoid the trap of letting any provider define the project solely according to budget constraints, feel free to talk openly to your competing providers about your preferred budget range and objectives. Solicit their ideas about the validity of your budget and project scope. Be receptive to their possible alternatives and the prospect of gaining a realistic understanding of the budget required for the outcomes you envision.

A “blue sky” RFP can come from a client, unsure about a project’s scope or unable to easily reconcile competing internal interests advocating the project. In such cases, a client issues an RFP and awaits the range of approaches and the associated costs that the responding consultants recommend. While you might get some good ideas, you probably will not get proposals that match your objectives or are easily comparable to each other in terms of deliverables or costs.

If unsure about the project’s appropriate scope, consider issuing an initial request for information (RFI) or holding preliminary interviews with prospective providers. An RFI is a shorter RFP that outlines your initial objectives and timeframe and asks providers to indicate their interest, capabilities, and a high-level project plan and budget. You can use their responses to refine your approach and structure a more formal RFP that details the project scope and requests a formal fee proposal. While this two-step process is more time-consuming and appropriate only for larger projects, it can help you structure a more complete and targeted RFP, which will generate proposals that more closely support your objectives and have the same characteristics.

• Understand the Assumptions. When scoping any project, I, like any provider, must make assumptions about the number of specific activities and level of work necessary to complete the project. Read the assumptions carefully. The providers are not trying to trip you up with the small print; they are trying to point out what will drive costs and potential additional costs related to the project. Be aware of these cost drivers and be honest about the two biggest drivers: your data and your decision-making culture.

Most providers do not regard data scrubbing as a true value-added service, but they are also painfully aware that the advice or calculations they are providing are only as good as the underlying data. If you know that the internal data needed to support the project are deficient or must be gathered from multiple sources, determine in advance with your provider how to handle this. If the deficiencies cannot be addressed internally or by making certain assumptions, obtain an estimate of the additional effort that will be necessary and the corresponding cost.

The second biggest driver is often the number of meetings and revisions included in the project scope. If your culture requires more than the minimum number of meetings outlined in the proposal to reach a satisfactory decision, ask the provider for an estimated cost for each additional meeting. If you think the assumptions being made about the number of drafts or levels of internal review that will be needed before a deliverable can be finalized are unrealistic, address that up front.

Beware of “Can you do just one more thing?” requests. While it is your provider’s responsibility to point out that complying with the request will take an extra week of work, tight deadlines and the desire to please may delay that conversation. Then at billing time you may feel that the provider is “nickel and diming” you, while your provider is thinking about all that extra effort. Work with your provider to establish parameters around acceptable levels of ad-hoc, out-of-scope activity and how you will work together to identify requests that are beyond these parameters.

Assumptions about the project timeline deserve careful review. For instance, if a project must be completed quickly, recognize that the provider may make assumptions about the added costs of bringing in additional and more experienced resources. On the other hand, projects without concrete deadlines easily can be delayed as other projects take priority or the scope changes. In this case, you should ask the provider if the delay will affect the project’s budget.

• Outline Payment Terms. After you have scoped the project, issued the RFP, reviewed all the proposals, and selected a preferred provider, the time spent negotiating the payment terms may seem like a nuisance when everyone is excited to get started on the “real work.” However, payment terms are important, both in determining the true cost of the project when the contract may span multiple years and in dealing with possible scope changes. Explore the provider’s flexibility with regard to performance standards and fees at risk. If one of the objectives of the project is to produce savings, ask the provider if he or she is willing to base a portion of the fees on the savings achieved. Many providers are flexible enough to build budget safeguards into the contract.

• Monitor the Budget. Years ago, I worked in a practice where one of the senior partners hand delivered the bills to his clients each month. That approach, difficult to imagine in today’s electronic workplace, represented the ideal communication about deliverables, costs, and budgets. It was open, timely, and complete. It facilitated a necessary and regular dialogue about how project status affected costs and about where the project stood in relation to the fees budgeted.

That type of open, timely, and complete dialogue is obviously still possible. For instance, if you have paid one-half of the project fees but you estimate that only one-quarter of the work is complete, ask about the status of the work compared with the fees that have been invoiced. It is better to find out as early as possible if data clean-up or another out-of-scope item has been greater than expected so that you can take steps to either adjust the budget or change the deliverables on other parts of the project.

Conclusion

Providers do not like having to ask for out-of-scope budget adjustments any more than you like to pay them. However, projects often grow in scope as they proceed or unexpected issues arise. The keys to managing down out-of-scope fees include:
• Understanding and clearly communicating the project objectives;
• Carefully evaluating the assumptions and deliverables outlined in the proposed project plan;
• Being on the look-out for the factors that can drive out-of-scope fees; and
• Monitoring the budget and project progress openly and regularly.

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