Fixed price projects always present a risk to the party providing the services. What if you estimated poorly? What if your deliverables need to be re-done in order to pass the client requirements? But with that risk comes opportunity – what if your team comes in 20% under budget – your profit margin increases. Fixed price is more risk/reward than traditional time-and-materials based projects. One risk that organizations often do not pay close enough attention to when planning these types of projects is this: What if the client has delays that are out of our control? Your cost to continually staff this project would increase, no? Your margin would suffer due to something you do not directly control or maybe not even have input to. Here are some ways to protect your project against cost overruns due to client-owned delays.
Firm Contract Language
Fixed price contracts should always have as black-and-white wording in them as possible so as to ensure that there is as little ambiguity as possible when it comes to the execution of your project. Clearly spelled out dates that indicate how long the scope of services are to run for is a key component to your contract. Language around assumptions that the client is responsible for any cost increases as a result of delays caused by them is also something that is often overlooked but yet so easy to include in a fixed price contract.
Document, Document, Document
This is PM 101 for a lot of you readers but it still astounds me how often meetings are held where there are no minutes noted or sent out to attendees where key discussions are had and then later recalled by memory by each party, each with a different spin on the nature of the conversation. In order to defend your project in a fixed price model (or any model for that matter) it’s crucial that any meetings and decisions are documented promptly and accurately and then sent out to all relevant stakeholders as soon as possible. When the time comes for a dispute over who is going to pay the costs of a schedule overrun, having these documented notes is vital to satisfying the rules defined in your contract.
Cooperative Risk Mitigation
While you need to ensure that you are contractually protected and that you are doing everything you can to meet the specifics noted in that contract, one simple way to potentially avoid these situations altogether is to work with your client collaboratively to prevent delays from happening on your project. If you feel your client is slow to get testing, let them know about it and offer some guidance to help get them moving faster. Notify your client in your status reports of the risk(s) you see developing and offer some mitigation strategies that can help. Preventing the problem requires a fraction of the effort than trying to solve it once it happens.
Delays in projects happen, it’s a fact of life. How you protect your budget when the delays are not your team’s fault is key. These tips alone won’t stop delays from happening but they can help in keeping your project budget intact when dealing with client-borne delays.