It Only Takes One Change Order

If you're like me you hate to give the project customer bad news. Especially if things seem to be going well on the project. If they aren't, then what's one more bit of bad news? You can probably just clump it in with the next round of bad stuff you have to show them or issues you have to bring to their attention. But if the project is running smoothly, then introducing bad news to the customer at any point can be painful...something you wish to avoid if at all possible.

Scope issues = be careful

However, when you play with scope issues then you are definitely playing with fire. Why? Because scope issues can have such far-reaching and devastating affects on our projects. And many of those affects just can't be or won't really be realized until it’s too late if we don't manage scope well. And we all now that, as project managers, it is our unfortunate responsibility to do so. Of course we have the help of our very skilled project team members and even the customer and their team. But most change orders are derived from a customer calling for a functionality that wasn’t identified during the requirements definition process so most change orders are sort of the customer's fault anyway. And, honestly, I have never, ever - not one single time - had a customer raise a flag and say, "That's a scope issue, let's create a change order!" No, most customers think everything 'close' should be included...like a gimme putt in golf. Sorry, if you let it happen that way you're the one that everyone will be calling a failure. And you'll deserve it. Don't let that happen!

One change order can make a big difference

So many things can wok against our efforts to keep the project on time and on budget. Most of the time we're overjoyed - everyone's overjoyed - if we are within 10% of our budget and timeframe targets. Now, let's say we are managing a $140,000 project that is running about 10% over budget - forecasted to come in at around $154,000. The customer wants a series of reports added and a customized screen and fields added to that accounting system you're installing. If your team's average bill rate is, say, $150 per hour and that extra work will take 130 hours of total effort, then that need is adding $19,500 to the project budget...bringing the new forecasted cost to $173,500. Before you were only forecasting to go over by a fairly acceptable 10%. Now you're looking at a project that is a forecasted to end up 24% over budget. That's not so acceptable. And it can all be avoided by identifying this extra work as a change order, getting it signed off by the customer and bringing the project's target budget up to $159,500. Now when it finishes at $173,500, you're only looking at an 8.7% overage. Even better than before the change order!

The moral of the story

So what's the moral of this story? Yes, it only takes one change order. We could see how it was only going to take one big giveaway piece of work to throw the budget off by another 14% making it a big failure financially. And then we saw how the project manager who wisely documents the needed change, creates a change order for that work and gets the change order approved by the customer actually raises the budget for the project and brings it in only 8.7% over and turns it into a success sorry. Don’t be afraid to manage scope closely and put change orders in front of the project customer for approval. You can be nice and fail, or you can be proactive, wise, and a good leader and succeed. You choose.

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