By Linky van der Merwe
It was a multi-year development project, IT focussed and 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.
How a project in trouble was turned into a success story
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 an 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 which was fundamentally lacking in trust.
Turnaround and Impact
It was, in retrospect, a bad decision to fix the price of the project. When the project 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 put even more pressure on the project team resulting in decisions to augment and rotate resources on the project.
Simon had initially been brought in to help out with the business analysis but, after the protracted difficulties in overall delivery, took over the management of the project. This had a negative impact on the project budget, but it was believed that Simon could 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.
All about relationships
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.
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 and they have now put a Risk Analysis framework in place for all stages of the project lifecycle. This process is now institutionalised and, if risks are identified up-front, the team now adjusts 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.
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 contracting process.
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 PM’s or BA’s have had some experience in the field – consider contracting on phase by phase basis or use an Agile approach, not SDLC with fixed price.
Lastly, client relationships can be the turn-around. Focus on improvement of dialogue. Clients need to work with you as a partner to ensure successful delivery.
Simon Murison is a Project and Programme Manager with over 14 years’ experience in the Consulting industry. He has worked extensively with clients in the Retail and Financial Services sectors.
Simon can be contacted on +27 (0)83 6299 or via e-mail at email@example.com