This story is from Simon Murison who took over a troubled multi-year development project in the energy management and information domain of the retail sector.
The client wanted a system to help them monitor and understand their energy usage.
There were two main areas of difficulty that Simon confronted when he took on the project.
Firstly, his company was unfamiliar with energy management and that made them very reliant on the client for guidance. Over time, the project team realised that the solution specification and development required in-depth knowledge of the topic and that generic systems development skills simply weren’t enough.
A second complication was that interaction with the client stakeholders was difficult and often highly confrontational.
Simon found that the client did not have a comprehensive picture of what they wanted and that the resultant scope definition was broad and subject to interpretation.
This had resulted in a number of conflict situations and a relationship that was fundamentally lacking in trust.
Fixed Price Contract
In retrospect, it was a bad decision to fix the price of the project, because when it ran into problems, the contract put them under pressure from a delivery and timeline perspective.
The client was unwilling to renegotiate on cost so it was ultimately the quality and timing of delivery that suffered. This puts even more pressure on the project team resulting in decisions to augment and rotate resources on the project.
When Simon took over he had to restore credibility and trust with the client. If the project had failed it would have had a very negative impact on a number of other client projects and future work. The project team ultimately managed to address the issues with the work that had been done to date and, as a result of the earlier decisions and improved delivery success, Simon and his senior management were able to revitalise and refresh the client relationship.
Restore Relationship by Renegotiation and Improving Trust
They communicated that the project was running at a significant loss for the service provider, and that this was unsustainable. Once that understanding was reached, the client was more open to change and they were able to renegotiate the contact terms – a Time and Materials based pricing was adopted and the project operated more profitably going forward.
The effect of this was a better relationship, improved trust with the client, a more profitable project and a project team that was under considerably less pressure. The decisions made to turn around a trouble-some project proved effective. Through an open dialogue with client representatives, they could negotiate a way forward that worked for all parties.
Considerations on Projects to Develop a New, Unfamiliar System
Based on the lessons learned from this troubled project, here are some key considerations.
1. Do Risk analysis and have a risk margin on contracts
The initial decision to contract on a fixed price basis was as a result of ineffective risk management prior to signing. A proper risk analysis was needed before deciding on a pricing approach. Put a Risk Analysis Framework in place for all stages of the project lifecycle and institutionalise the process. If risks are identified up-front, the team needs to adjust proposals and contracts to include the time, resources and/or costs needed to address them.
Profit margins can be negotiated down with the client; but risk margin cannot. You should never reduce the risk margin unless the risks themselves are transferred, mitigated or eliminated completely.
2. Document assumptions
It’s important to document the assumptions made during contracting as they are often an articulation of the risks that may end up detrimentally impacting the project. If possible, a project manager should be brought in prior or during the contracting process.
3. Select Agile approach if development requires specialist expertise
As far as software development is concerned, don’t fix the price unless you know the topic. If it’s a new area for you – if none of your project managers or business analysts have had some experience in the field – consider contracting on a phase by phase basis or use an Agile approach, not SDLC with fixed price.
4. Relationship is about partnership and trust
Problematic client relationships can be turned around. Focus on improvement of dialogue. Clients need to work with you as a partner to ensure successful delivery.
About the project manager
Simon Murison is a Project and Programme Manager with over 15 years' experience in the Consulting industry. He has worked extensively with clients in the Retail and Financial Services sectors.
Simon can be contacted via e-mail at firstname.lastname@example.org