Scope changes are inevitable in any project, but they can also be a source of conflict between the parties involved in a contract. How can you manage scope changes effectively and avoid disputes, delays, and cost overruns? In this article, you will learn some best practices for preventing conflicts arising from scope changes in contract management.
The first step to prevent conflicts is to define the scope of the project clearly and accurately in the contract. This means specifying the deliverables, requirements, assumptions, exclusions, and milestones of the project, as well as the roles and responsibilities of each party. A clear scope statement can help avoid ambiguity, confusion, and miscommunication, and provide a baseline for measuring performance and progress.
Defining scope clearly in contract management is crucial as it establishes the boundaries and expectations of a project. Unclear scope can lead to conflicts when parties interpret the scope differently. Clear scope minimizes such ambiguity and fosters effective collaboration.
The scope of any contract needs to obviously be clearly defined from the beginning and also be defined clearly in writing to all parties in order to know what is expected from each and every one. Any changes in the scope needs to be discussed, decided upon, agreed upon contractually and then clearly communicated to all parties to understand not only the change in the scope of the contract but the reason for the change in the scope of the contract. Broad consultation may be required and if so this needs to be done to clearly define any changes in writing. All the parties must understand the changes and buy in to successfully attain success with the change in scope. All parties need to be on the same page and amenable to constructiveness.
In my professional experience, it is imperative to establish a crystal-clear scope of work at the project's outset. Simultaneously, addressing how ambiguous zones will be managed, particularly in the context of packaged projects, is equally critical. Take, for instance, a Power Project where execution is distributed across multiple contract packages assigned to different contractors. Invariably, certain areas will remain ambiguous and may not fall within the contractual framework. In such scenarios, a robust mechanism must be in place to resolve these uncertainties. Additionally, it is crucial to explicitly outline the responsibility for providing and owning soil & geographical data, a common source of disputes in such contracts.
Prevent conflicts stemming from scope changes in Contract Management by establishing clear and detailed scope definitions initially. Foster open communication to address potential changes promptly. Implement a change management process, requiring formal approval for alterations. Maintain thorough documentation of agreed-upon scope and changes. Regularly review and update contracts as needed. Cultivate a collaborative relationship with stakeholders, ensuring alignment on expectations. By emphasizing clarity, communication, and a structured change management process, conflicts arising from scope changes can be minimized or proactively addressed in the realm of Contract Management.
What also helps is outlining assumptions that back a contractual modality to set context and intent. Changes in regulatory and commercial environments in the course of a contract duration become easily interpreted through that context
The second step is to establish a change control process that outlines how scope changes will be identified, requested, evaluated, approved, and implemented. A change control process can help ensure that scope changes are justified, documented, and communicated, and that they align with the objectives and expectations of the project. A change control process can also help avoid scope creep, which is the gradual expansion of the project scope without proper authorization or adjustment of resources, time, and budget.
Having the change process well defined in the contract is mandatory, it helps avoiding the majority of conflicting discussions by simply knowing since the beginning what needs to be done in case of a change, who implements it, who pays for it and how much, who approves it. In larger projects, with multiple contractors, where changes can become blurry in terms of generator and owner, create a practice of having progress review sessions with all parties involved to make sure potential changes are identified early on and mitigating actions are being considered.
Todo o processo deverá estar desenhado da forma mais objetiva e detalhada possível. Assim, será mais fácil conduzir o processo ainda que ocorram mudan?as durante sua e execu??o.
The third step is to negotiate scope changes fairly and respectfully with the other party. This means being open, honest, and collaborative, and avoiding blaming, accusing, or threatening. It also means being flexible, realistic, and creative, and seeking win-win solutions that benefit both parties. Negotiating scope changes fairly can help maintain trust, rapport, and goodwill, and prevent escalation of conflicts.
In my professional experience, it is crucial to engage in open discussions regarding the scope of changes. As an initial step, we should internally establish a consensus on the changes that need to be incorporated into the scope, clearly distinguishing between mandatory and desirable elements. Through transparent discussions involving all contractual parties, consensus on the scope of changes should be reached and subsequently documented in the contractual agreement. This not only builds up transparency in the partnership but also builds trust, rapport and goodwill which is very important for the delivery of services successfully under any contract.
Todas as partes envolvidas devem participar do projeto e juntas desenhar o escopo, objetivamente. Buscando que o projeto atenda a necessidade das partes envolvidas.
Negotiating win-win means creating a mutual incentive. Are Contractor's profit margin vs Client's budget always mutually exclusive objectives? ??
The fourth step is to document scope changes properly and update the contract accordingly. This means recording the details, rationale, impact, and approval of each scope change, and modifying the contract terms and conditions to reflect the changes. Documenting scope changes properly can help ensure clarity, transparency, and accountability, and provide evidence in case of disputes or claims.
Time to properly think about and document change is often a luxury not afforded to the change manager. "Just repair the hole now. Stuff is falling in it." vs "Repair the 1m dia 6m deep hole with 300mm layers of water resistant material sourced from quarry A and transported to site via route B, compacted using machine C. Prepare the hole for filling using technique D." Which of the above scope changes sounds most pragmatic, simpler, cheaper and more cost effective?
The fifth step is to monitor and communicate scope changes regularly and proactively with the other party. This means tracking the status, progress, and performance of the project against the original and revised scope, and reporting any issues, risks, or opportunities that arise. It also means keeping the other party informed, involved, and engaged, and soliciting their feedback and input. Monitoring and communicating scope changes regularly can help ensure alignment, collaboration, and satisfaction, and prevent surprises or misunderstandings.
To enhance the effective monitoring of scope changes, leveraging technology becomes essential. Utilizing Contract Management tools proves instrumental in issuing amendments for every alteration to the contract scope. Moreover, before the issuance of any amendment, it is crucial for both parties to engage in thorough discussions to address and settle the financial implications associated with the scope change. This proactive approach ensures clarity and consensus on any cost adjustments. Additionally, discussions regarding any required time extensions or reductions should be an integral part of the amendment process, providing a comprehensive and transparent framework for managing changes within the contractual scope.
Communicating potential change early requires the trust that the informed party will not manipulate their position to maximise their return from the change when it occurs. Sadly such manipulation is commonplace.
The sixth step is to learn from scope changes continuously and improve your contract management skills. This means reviewing and analyzing the causes, effects, and outcomes of each scope change, and identifying the lessons learned, best practices, and areas for improvement. It also means applying the learning to future projects and contracts, and sharing the knowledge with your team and organization. Learning from scope changes continuously can help enhance your contract management capabilities, and prevent repetition of mistakes or problems.
Whilst scope documents, change control and associated documents, etc are all key items that almost certainly will crop up during a project lifecycle, I would like to highlight something that is not a tangible project deliverable. The importance of developing a healthy relationship between clients and contractors. I have played on both sides of the fence. Start off as soon as possible and whilst I'm not suggesting you become best buddies, it pays to be able to enjoy working together whilst being able to hold those 'awkward' conversations. With this approach, openness, fairness and trust can be established so that you are better placed to enter any contractual amendments, whilst remaining compliant with your scope,
Usually contracts are built with clauses for such situations ( like quantity variation ceilings, price variation clause, unit rates application) which are usually overrun in large turnkey projects. However the best approach in an unprecedented scope change is to enter into a separate addendum contract for the additional agreed upon scope. Such contracts can be having crossfall clauses wrt to main contact.