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Get your complex projects right - and protect the bottom line

Published: 01 Oct 2014 Average Rating: 3.6 / 5 Print
 
This article appeared in Contracting Excellence magazine on 01 Oct 2014 view edition
 

Author: Martinne Heckscher, Lead Contract Manager, Global Business Services (GBS), IBM

Complex projects have the power to make or break. Get the basics right and you've bought yourself time to handle the complexity and risks - and protect the bottom line.

It might seem obvious – but it's far better to aim for delivery excellence than prepare to manage conflict. Although riskier, excellently executed, complex contracts enhance reputations and put goodwill firmly on the balance sheet.

Many factors contribute to complexity in contracting and delivery - first of a kind solutions, non-binding scope, new services that need to be combined or high reliance on subcontractors.  Add moving business scope, technical complications, organizational change and vague requirements to the mix, and it's no surprise that complex contracts have a greater risk of becoming troubled.

Get it right from the start

Complex contracts need to be treated in a different way, especially at the start. However, not all aspects of the project will be complex - our job is to understand which parts need special handling and which just need quality best practice implementation.

As a minimum the contract manager can:

  • Support project launch activities with focus on the project management office.
  • Set up best practice contract management – ie deliverables, documentation, change management and governance.
  • Improve contract awareness – team understanding of the contract and behaviors needed.
  • Identify the “grey zones” that need negotiation with the client.
  • Define how to manage change requests so impact is understood.
  • Improve management and set up of contract governance to avoid neglecting (or covering up of) issues, and managing client expectations.
  • Improve Quality Gates for complex projects.
  • Improve project documentation and tooling so best in class templates for project management office are available at start.

Project launch1 is an underrated process.  Taking time to coach delivery teams during start up is an opportunity to get those difficult conversations started and catch problems early.  An enhanced project launch2 should include:

  • a kick off meeting;
  • a checklist of project start-up tasks based on known best practice;
  • a plan for the necessary support for start-up activities; and
  • a check point to ensure the quality is there – with skilled sparring resources in place who can ensure consistency and implementation.

Root out uncertainty!

Contracts never read as a project plan, and that can mean vagueness on “how” to execute the commitments in the contract. Delays in deciding what to do will hit the financial health of the contract, because resources will stop until the team receives guidance.

The contract expert often sits in the challenging position of converting a customer's less-than-exact descriptions of their required solution into a blueprint for delivery.  To win the customer's heart at contract signature, you need to demonstrate a plan exists for handling uncertainty.  Any “grey zones” of uncertainty remaining in the contract must be identified and an action plan agreed with the client so project activities are specific and clear for the delivery team.

Contracting sometimes tries to deal with this uncertainty by putting in contract failure clauses: fixed price, complex governance, SLAs and penalties.  But contracts are often painfully silent on how to handle the risks and issues known at contract signature, and simply state the consequences of not achieving delivery excellence.

This approach often makes problem-solving the supplier's issue, and we all know that most problems cannot be solved by one party alone.  Contract penalties for failure will in no way make good the losses of not getting the customer's change agenda ready in time.

Have an action plan for risk

Complexity increases risk and we must be able to recommend ways to mitigate it before it develops into an issue.

A typical project manager's risk log will rate risk as low, medium or high.  With an understanding of the contract and its consequences, contract managers are in a good position to ensure the sales team properly hands over the risks to the delivery team with an action plan in place to identify and act on problems quickly.

I use the following as a coaching guide for risk.  These discussions would be part of a contract awareness session with the delivery team:

  • Tolerate (relent or accept)
  • Treat – mitigate
  • Eliminate or avoid
  • Transfer

The contract manager can ask the difficult questions that identify whether the risk is:

  • Low
  • Managable
  • Mission crippling
  • Impossible for the individual tasked to solve it

Monitor metrics closely to catch issues early

It is vital that your senior managers can see your complex contracts in the metrics that are monitored.  You cannot manage delivery excellence if you do not measure it.  Delivery excellence on a project basis means understanding the client's requirements, delivering a solution to meet those, within the timescales required and with optimal resources.

If delivery fails to meet the customer's expectations, requirement disputes will arise, positions will be taken and trust will erode.  The challenge is to catch the risk indicators before they become “nobody wins” issues.

  1. Contracts or projects gross profit against the original supplier's pricing case is a strong indicator of problems that need to be handled sooner rather than later, and should be rigorously monitored each month.
  2. Customer business case should be transparent to the supplier as well as the customer organization, so a common goal is understood across the partnership.

Leadership from both the customer and the supplier must have the ability to filter escalations and disputes through the above two filters.  When harmony can be achieved here, the resolution will be more permanent and you will have filtered out personal interests which can be extremely disruptive to the goal.

Benchmarking troubled projects is also a powerful call for continuous improvement, highlighting the need for better processes to handle project complexity. 

Metrics can include:

  • Benchmark for usage of risk contingency - for example 5% tolerance for missed time and cost targets or risk management automatically engages.
  • Benchmark the impact troubled projects are having on your company overall Set a best practice percentage ie 3-5% total revenue leakage tolerance.  Even a 1% improved or worsened cost performance across all your projects, could represent millions in lost bottom line profitability.

Other useful problem metrics are:

  • Software errors in production;
  • Missed SLAs;
  • Invoicing disputes;
  • Missed deliverables and milestones;
  • Staffing concerns; and
  • Client satisfaction and complaints

If contracts are failing, find out the reasons

If contracts are failing, be sure to ask for explanation from your delivery teams. The following root causes of inability to meet client expectations are from some IBM analysis done in 2002 which spearheaded the delivery excellence initiative internally: 

  • Poor planning/estimations
  • Unclear requirements
  • Quality violations
  • Cross geographical issues
  • Subcontractor issues
  • Change - transition and transformation issues from “as is” state
  • Skills and availability issues

The sad part is, these pointers are still relevant today, for many companies, and possibly will hold true into 2020.  The internet is awash with similar failure conclusions so complexity for any supplier or customer is a tough nut to crack.  But crack it we must, as avoiding complexity will simply erode margins in the long term and make you less relevant in the eyes of the client.

What can we do differently for the complex projects?

Companies and customers should consider investing in enhanced project launch for complex projects and take the time to set it up right.  In addition consider using program management office automated tooling3, which can offer much more than a simple documentation storage system or deliverable tracker.  It can also give transparency to the customer and supplier on progress and help operationalize the contract and its many obligations.

When it's tough use your best skills

An organization's skilled professionals must be able to explain the steps to take when it gets tough.  Do not underestimate the power of guidance, checklists4 and templates to use when facing problems.  This is how you improve the process for handling difficult tasks that the project must solve.    Invest to extract this knowledge from your talented staff and use tooling and technology to get the best practice efficiently out to future projects.

Get your best resources handling the difficult stuff and make sure they are teaching others how to handle it.  They should not be wasting their time clearing up the mess of unprofitable contracts or handling basic tasks that should have been automated years ago.

We need to be practical, and prevent problems by writing better contracts that describe delivery. Then, when there is an unforeseen problem - solve it. This quality makes your team the smartest one to do business with.

REFERENCES

  1. Project launch is generic best practice adhering to an agreed mandatory checklist of activities that should be completed on all projects within the first 45 days to ensure a good start.
  2. Enhanced project launch is the recognition that some of the activities in project launch require additional subject matter expertise to support the complete project management (PM) effort such as:
    • contract awareness and understanding the contract;
    • technical set up of essential program tools; and
    • technical workshops to understand customer requirements and ensure a match to contract deliverables, scheduling, governance report automation, establishing the financial plan and tracking etc. Hands on support is required in the first 45 days. Additional external reviews are used to ensure that projects are complete and reflect the required standard of excellence. 
  3. An IBM tool titled, IBM Program Work Center™ automates Governance and Reporting, in addition it contains best practice templates and workflows to automate processes, based on thousands of lessons learned in projects.
  4. Recommended reading from the author:
    • Crucial conversations – tools for talking when the stakes are high – Patterson, Grenny, McMillan and Switzler
    • The Checklist Manifesto – How to get things done right – Atul Gawande

About the author

Martinne Heckscher is a senior IACCM certified international contract and commercial manager (CCME) and an Associate Certified International Outsourcing Professional (IAOP). She is competent in all the major customer disciplines, contract management, international account management, program management, distribution support, third party management, buying and contract closure/in-life support.

At IBM GBS, she often leads the company in creating deep solutions that will transform the client's business. This requires a high degree of professionalism from the team deployed to understand the client's requirements and piece together a robust solution that will deliver the outcome, on time and within budget.

 
 
 

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