Even the Odds in your Consulting Contract– Tips for the Client

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For the most part I write this blog to assist consultants to achieve the highest standards and best results possible in their profession. However I also feel great empathy for clients who accidentally engage a predatory consulting firm and even some empathy for those who do it knowingly. First of all, the predator does this all the time, breakfast, lunch and dinner every day. The client may only occasionally engage consulting firms and has yet to hone the necessary survival instincts to not be a main course dinner. Many of these feasts have unhappy endings.

“inadequate planning, ineffective design, and poor communication with users had produced a high-cost, incomplete system that did not meet the needs …” (go ahead and search for the text on BING.com (if you wish)

“signed a $180 million contract …was followed by a $32 million contract… cost eventually rose to $284 million. Employees experienced problems with the system and considered it cumbersome. At one point, it was down for 16 days.”

“made their money and left … the taxpayers o­n the hook for their outdated system. …expensive, inflexible, out of date  and cannot be modified to support future operations”. Somebody sold the government a pig in the poke, and left laughing all the way to the bank. That somebody was ..”

The stories continue to appear unabated.

The number one reason for overruns is lack of clarity in requirements, either technical or functional. This followed in close second by breakdowns in communication which drive issues with politics, collaboration and adoption. Coming in third and perhaps the most surprising is consultant resource availability, productivity and skill, the very reasons the client hired the firm in the first place.

So how do you even the odds?

Requirements.

requirements

There are 7 solid tests of requirements. They are:

  • Stability – degree to which the requirements are changing and the possible effect changing requirements and external interfaces will have on the quality, functionality, schedule, design, integration, and testing of the product being built.
  • Completeness – Missing or incompletely specified requirements, requirements that are not specified adequately to develop acceptance criteria, or inadvertently omitted requirements.
  • Clarity – ambiguously or imprecisely written requirements
  • Validity – requirements that do not reflect client’s intentions for the product, misunderstandings of the written requirements, unwritten client expectations or requirements
  • Feasibility – difficulty of implementing a single technical or operational requirement, or of simultaneously meeting conflicting requirements. Also included is the ability to determine an adequate qualification method for demonstration that the system satisfies the requirement.
  • Precedent – any capabilities that have not been successfully implemented in any existing systems or are beyond the experience of program personnel
  • Scale – technical and management challenges including scheduling and response requirements, complexity of system integration, component dependencies  and impact due to changes in requirements.

You even the odds by being realistic about the current state and treating stable, complete, clear, valid, feasible requirements under a statement of work that isolates as many of these components from ones that are not. In most projects more than 60% of the requirements will fit this category and then there are the… other ones.

Sorry folks but you can’t fix price contract variable requirements. That’s just a fact. You can however limit your exposure to a runaway, with strong change control procedures and perhaps most importantly productivity warranties.  The biggest and oldest game in town for predatory consultants is to deep dive into the never-ending requirements analysis pool.  Timebox activities, set aside budget for change control  and keep control of the process. Offer incentives for timely completion and incentives for NON-USE of the change control budget. As an example, the consulting firm and the client work on elaborating requirements for a specific area. It was timeboxed at 50 person-months effort. 25 person-months was set-aside for change control and a cash-bonus of 50% of the pool was set-aside for hours not used.

Assume $25,000 / month / person. Initial requirements cost is  $1.25 Million.  $625K has been set-aside for change control.

Let’s assume the consulting firm is running at 30% Gross Margin.  The profit on $625K  would be $187.5K if they maxed out the change control.  The bonus for not using the change control budget would be $312.5K. You will complete it faster for $312.5K less  by setting up the contract correctly on the areas with weaker requirements where you can even the odds.

 

Communications

megaphone-girl

Communicate it all, communicate it now and communicate it to everyone including every member of the consulting firm. It is the only way to even the odds. Good PM’s know to keep communications logs but that is not what I am talking about. It is not just the contractual to and fro that needs to be communicated and logged. It’s everything!  Every change gets a CR no matter how small, every change gets its day in court (Configuration Control Board) and every resource on the team gets a copy of the change log on a daily basis with a note that says…. it is your personal responsibility to reply-all if any of these changes effects your workstream and it is not noted on the CR with an appropriate budget modification.

Yes, the amount of time spent each day (it could be 10%) on communication will seem high, but the consequences on not doing it are far beyond the 10% investment to do it. If you hide something from the team, expect to pay dearly for it.

 

Resource Productivity

lazy

Not all productivity lapses are as obvious as setting up a hammock on the office front lawn. There are actually 6 common dimensions to this potential problem.

  • doing a lot of work that isn’t useful
  • doing the work slowly
  • doing the work with insufficient skill to be proficient or to turn out a quality deliverable
  • not doing the work at all
  • managing other people that don’t work either

               or my personal favourite

  • being conference room furniture (CRF)

I was working with a large systems integrator with a 3 letter moniker and we had scheduled a requirements review meeting for a functional area. 22 people from the integrator attended. (all billing)

  • 4 domain analysts
  • 8 business analysts
  • 4 application analysts
  • 2 functional analysts
  • 2 project managers
  • 1 architect (application)
  • 1 Program manager

The only thing missing was the partridge in a pear tree. So I started the meeting like this. “Ok if everyone could introduce themselves and state your role on the project and your role in this meeting and your deliverables from it …”

Panic ensued…none of them knew why they were there. Personally I like the smallest team possible with the highest calibre people and pay them well. I know people don’t use the term “conference room furniture” on their CV, but some of them really should. Clients need to be able to recognize furniture when they see it and not pay for it.

How do you even the odds.

#1 – Build a detailed and granular*  plan   and base it on accepted standards like the 16hr/FP metric (see my blog Art of Estimating a New Project) * (granular means no higher than 8 hours per resource. If you plan an 800 hour task it is NOT controllable.)

#2 – Fire any PM immediately that suggests a duration based plan can manage a project.

#3 – Time gets entered daily against  the plan with a minimum of 2 numbers:

  • todays effort against the task
  • time remaining to complete the task (ETC)

#4 – No one gets paid a dime if it was not logged in the master plan

#5 – Hire a full time Project Coordinator that tracks individual productivity against plan and

#6 – have a “3 strikes and you’re out” clause written into your contract with the firm or at a minimum “3 strikes and we don’t pay again until the productivity comes into range”.

Be tough, be fair but above all be vigilant. The  #4 reason reason for runaway project costs is lack of adult supervision.

 

Even the Odds…

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One Response to Even the Odds in your Consulting Contract– Tips for the Client

  1. Pingback: Infinite Shades of Grey – A year later and a little greyer | Infinite Shades of Grey

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