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Fixed Cost Projects

By November 10, 2014 No Comments

The most contemplated topic: Fixed cost projects!

Frequently, IT consultancies face the fixed scope project monster! Why do I call it a monster? Sigh! With experience and listening to the comrades out there cringe about it, I am sure most of them would agree with me.

It is no less than a celebration when the RFTs get awarded, everything goes well until there is a client who would want to potentially include previously undiscovered requirements within the scope of the project!

Let me explain. The discovery phase happens once the consultancy gets the project. At times, the client is reasonable in listing the requirements and the quoted price is close to what is required from the project. The contrast to this situation is actually the monster which I was referring to. The client wants a shark when the initial quote was for a cute jelly fish !

The biggest issue is in saying that there is scope creep in a fixed cost project when the discovery or consequent engagement with the client indicates an extraordinarily blown-up version of the initial requirement!

How do we handle this situation??

The project management triangle talks about the 3 constraints in a project: time, cost and scope. If one of the constraints change, the other two are affected and have to change. Ideally, one of the constraints is fixed and the other two are variable. But, in fixed price projects all 3 of them seem to be fixed!

So how do we handle a case when the unstoppable major scope creep occurs in the discovery or project evolutionary phase. The key is managing the mischievous scope-creep better. Here are some of the ways it could be done:
1) Increase the time – Increase the timeline of the project
2) Increase cost – Increase the number of resources and thus increase the cost
3) Reduce the Quality – Reduce the number of unwanted features and use the cost savings and time resources to build the important ones. This will involve a high level of transparency with the client and working with them to prioritize the deliverable.

If an agile methodology is used for the project , a burn up chart which tracks the progress towards project completion can be used . This gives a fair idea if the project is ahead or behind the schedule.

 

If the project scope has increased as indicated in the graph below, we have to work with the client to reprioritize and redefine the project objective to deliver a product that is in line with the changed expectations at the same time working within the scope of the project. This will result in “remaining work with increased scope” as shown in the graph below and a satisfied client who will trust us for being transparent.

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