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where can i buy robaxin “If you think that a fixed price contract is going to solve all your previously experienced project issues, think twice”

A fixed price contract appears to be the magic bullet to a number of project management issues, but that may only be superficial. At the end of the day, all of the project management routines still need to be flawlessly executed including the financial aspects, regardless what contract vehicle has been selected.

With a fixed priced contract the customer is making an attempt to transfer the financial risk to the vendor. The transfer is at a cost to the customer and wouldn’t exist, if the parties decided to sign a time and materials contract. The additional cost is a risk premium (cost contingency) that the vendor is adding to the base estimate that if done properly already has an effort contingency. It is quite common to see a risk premium in the 10 – 30% range on top of the base estimate and effort contingency together. So long story short, customers are paying a lot extra when they sign a fixed price contract. Is that worth the money; is that worth the delivery risk? Now, there are customers that want to know what the actual project cost to the vendor is and based on the outcome recoup part of that risk premium. Unfortunately that’s not how it woks, because the customer did not bear the delivery risk and also would not chip in extra dollars if the vendor would experience a cost overrun.

Alongside the risk premium (additional cost), the customer bears the risk that the vendor is not delivering the contracted scope with the expected quality (less business benefits). When a vendor is exposed to a fixed price deal, they are managing the project scope very tight. When the project scope is not well defined in the contract and therefore the level of ambiguity (see previous post ‘Ambiguity’) is relatively high, the project is set up for failure. Oftentimes the expectation gap cannot be closed without a project change request, which most customers do not account for in their budget when they have signed a fixed price contract. It is very likely that the gap is significant; therefore the vendor is raising many change requests over time. The relationship stress that manifests between the customer and the vendor, because of the conflict, can be detrimental to the overall trustworthiness of the parties, and when trust goes down, cost goes up, and speed goes down (see Stephen M.R.Covey, “The Speed of Trust”). As a result, the project slides into a downwards spiral triggering all different kind of consequences.

Managing a fixed price contract is asking for a different mindset from the parties than any other contract vehicle. Scope and schedule must be perceived as equally important for both parties. If not, the project is doomed to fail. There are cases where a vendor managed a fixed price contract as it was a time and materials contract. For quite awhile there was an abundance of resources and everything seemed possible (exaggerating here a little bit), but overtime when the project actuals came in and the scope verification check was completed, the vendor realized that the burn rate was way out of line, and that the only way out was raising change requests (extra dollars or scope reduction). At that point, frantic behavior should not be a surprise to anybody. It is possible that the vendor tells the customer that for certain deliverables they have exceeded the number of hours, and the customer has to pay extra. Or that rigorous testing is not required, because best practices and development standards have been followed consistently, and therefore the risk of failure is low. A customer would instinctively think: “But I have a fixed price contract for that deliverable, the requirements are clearly articulated in the contract, blueprint and specifications. We agreed to the delivery approach, what’s the problem?”

These are just a few examples of situations where a customer might end up with, if they make a fixed price deal. They need to be aware of the buyers risk of paying more (risk premium), for potentially less quality (business benefits), and potentially damage to a good relationship with the vendor, whom they may have been successful with before at other projects. What is then the alternative?

There is actually a few. Customers can simply go for a time and materials contract. There is nothing wrong with that if they manage it well. Or customers can decide to go for a hybrid model, where the basis of the contract is time and materials, with fixed price for specific, well-defined scope items. They can also consider performance-based contracts with time and materials as basis. If the intention is to transfer delivery risk to the vendor (which is a great idea and something a customer must consider), embedding performance-based incentives in the contract is a perfect alternative. More and more vendors are willing to demonstrate skin in the game.

The success of any contract vehicle comes down to the accuracy of the scope definition. Customers need to know WHAT they want (see my post ‘Continuity of Vision’) throughout the project lifecycle. They need to clearly articulate it to the vendor, and collaboratively document it meticulously in the contract. When customers are locked into a fixed price contract, discrepancies seem to be much harder to resolve than with any other contract vehicle. Customers must be mindful of the pros and cons of a fixed price contract when they consider it. Customers should not run into it, because they think they have frozen their financial baseline and they therefore only need to focus on scope and schedule. That’s an act of shortsightedness, which at a certain point in time will be proven to be wrong.

Bas de Baat

Program Manager Enterprise Applications, PMP©

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Making good decisions is a crucial skill at every level – Peter Drucker

What can you do when you need “that one decision” right now before you can move forward with a critical path item? You are already tracking behind schedule and a further delay can be lethal. You have exhausted all your creative planning and scheduling options. You know what the decison should be, have made the right recommendation a few times, but still don’t have an answer.

Making decisions can take more time than you anticipated. Making big decisions (impactful) takes courage and risk. These values are crucial for any leader and they are must haves for any project in order to be successful. But unfortunately there are leaders who, for a variety of reasons, default to risk aversion, procrastination, deflection and counter-productive behaviour. Now for the record, there are leaders who live up to these values, they are fabulous, very effective, epic performers and role models, but they seem to be more and more an exception than the rule.

Now back to the question: what can you do in these circumstances?

1 – Clearly articulate the impact – Make sure that you have prepared a decision document with options and a recommendation. Socialize the document with stakeholders who can be influential to the decision making process and build a coalition. Make sure that you have the impact of ‘not making a timely decision’ documented as well. You want to avoid that the decision maker can find an argument about lack of information. Decision makers typically have limited availability and you want to be respectful of their time

2 – Set the sense of urgency – Set the right tone by making the need for a ‘decision now’ explicitly clear. Explain to the decision maker what the risk, cost and missed benefits are if a decision is pending

3 – Escalate – Every project must have an agreed to escalation path before it starts. This has a number of reasons. One is to expedite decision making, and the other is to avoid people from being surprised when you actually do escalate. Don’t hesitate to escalate. As PM you are resonsible to deliver on time, on budget and as per specification. That means that you have the right to take corrective actions when you feel it is needed. When you do escalate make sure that it is transparent to the people involved. You want to keep trust levels up high

4 – Be bold – If it turns out that the last station on your escaltion path also doesn’t make a decision, be bold, creative and identify another end station. Keep going up the ladder and find that leader who can and wants to make the call. You would be surprised how effective that can be for not only the decision you need, but also for anything to come after.  You have found yourself an ally!

5 – Document and move on – If it turns out that there is no sight on a decision anytime soon, document all the steps that you have taken and what has been discussed along the way, with whom and when. There is a high probability that at a later time, the fact that a decision was not made, comes back as an issue. You want to make sure that you can speak to the facts instead of emotions. Share the document with the key stakeholders who have been involved. Once that’s done you are ready to move on with scope that you can deliver and implement

Good luck with getting that “one decision” made!

Bas de Baat
Program Manager Enterprise Applications, PMP©

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The key is not to prioritize what’s on your schedule, but to schedule your priorities – Stephen Covey

It seems that we are more and more dealing with ‘Competing Priorities’ on a daily basis then ever before, and as a result do not get the work done that we want to get done. Meaning we are facing a downwards spiral on our productivity. Is this a true fact or is it an excuse to better organize the work?

I think that both arguments are valid. It appears that in the world we are living today, much more options are available to decision makers than in  the times where technology was not a major influencer. And if you look at technology in general, we really have just started, knowing that we are in the early adopter phase of mobile solutions, big data and analytics, wearable gadgets, the internet-of-things, and robot technology. Having said all of that, there are no excuses for not doing a much better job on organizing the work. Procrastination, power and politics, are examples of drivers that work counter productive in getting things done. But the most important driver in my mind is that we are not effective enough in consistently prioritizing the work according to the goals we want to achieve. And that activity is fully in our control, compared to the other two. How can we change that?

First of all, what is a priority? According to Google a priority is defined as a thing that is regarded as more important than another. It suggests that there is some kind of ranking happening based on certain conditions.

One of the things we can do is to change our behaviour by taking a structured and pro-active approach by becoming a better planner! It has been proven that people, teams and organizations who spend a serious amount of time on planning are ultimately more effective in attracting what they want. Planning is a routine activity and starts with defining and prioritizing goals and scope. Once you have done that including proper communication to stakeholders you have made the most important step on your way to a new, future state. Planning is an iterative and repetitive process. The process itself can be more important than the outcome itself. The fact that you are consciously thinking about what you want to achieve is major. Planning is like a perpetual mobile, it never steps and if you do it well has the same rhythm.

Before you can set the right priority, you must have alignment and commitment from the stakeholders on the vision, goals and scope of work. Alignment means that everybody who is impacted, agrees with what is going to be done and why. Commitment means that everybody who is impacted, has the will power to make it happen.

There are a number of models that you can use to prioritize the work. Without going into detail, most of them are based on a combination of qualitative and quantitative argumentation. Or in other words, what are the cost and benefits to do first and that later? A pragmatic approach is to  categorize things as high, medium and low. Or the Moscow model: Must have, Should have, Could have, Won’t have. Problem is that these models can quickly become a biased and subjective approach. Something that is high for you, can be low for someone else. What it comes down to, is that in order to prioritize the work, you need agreement on what the selection criteria are. Depending on the complexity of the work, you want to make a choice between a simplistic or more comprehensive approach.

Another dynamic that tends to derail our work prioritization and therefore our productivity is information overload. If have seen organizations spinning on prioritizing work, because overtime the items were discussed, new information was brought forward. Most of the times, the new information was irrelevant and did not change the foundation for stakeholders to make decisions. A successful leader is able to make the right decision and set the right priority based on a limited set of information. What it means is that the leader is taking risk, and in some industry sectors that kind of behaviour is not stimulated.

If you look at all of the above, if you want to be effective and get things done, as an individual, team or organization, you must be aware of where you want to go and the conditions that ultimately help you or not. Make sure that you shift your mind set to one where you are capable of defining what you want and remove the conditions that are roadblocks. This requires a change that takes time. For teams and organizations it means a cultural change. External expertise may be required to make that change happen. For an individual it can become a mental and spiritual change. To make that mental change, you may want to practice the art of planning the work over and over again until it becomes a habit. To make a spiritual change, the art of meditation is very effective.

Once you have figured out what you want to achieve with the right priority, the only that is left is to stay focused and dedicated to the plan and intended outcome. Stick to the plan and keep it up to par as new situations arises, or vision, goals and scope of work changes. Make planning a routine and always try to be a step ahead of the game.

Bas de Baat
Program Manager Enterprise Applications, PMP©