Proportional Response and Project Risk Management

In managing projects for clients, occasions arise to make decisions about what volume of resources to apportion to specific tasks.  In doing so, we must take into account:

• what seem to be the client's risks - we do not want to leave the client in a tough place
• our own risks - these have to do with uncertain future obligations, or the consequences of contractual representations or warrantees

Mid-project, events can occur which cause us to move away from the original project plan.  In this situation, to the extent that we can remain within the original scope, we attempt to do this within budget, where a budget is specified.  Some clients have expressed that in retrospect that they would have approved increases in budget in order to compensate for departing from the original scope and to speed up development.  However, it is very difficult to judge this type of situation, and ideally - we prefer to discuss what is at stake for a project at the beginning, so that we can provide more accurate estimates of the time and effort that will be required to complete the project. 

Time and Materials vs. Fixed-Price Contracts

In situations where the scope of the project is uncertain or may change, and where budget is flexible, we recommend that clients choose a time and materials contract rather than a fixed-price contract. The lure of fixing the price ahead of time is great for clients seeking to control costs, but if the contract terms will change in any material way, or if the scope is bound to change or be defined in an 'evolutionary manner', then a fixed price contract will cause one of two problems (or maybe both):

• we will have higher than expected costs, and will charge the extra costs to the additional scope or contract changes - i.e. we will offer to give the original project for the original price, or to get what is completed, now that we fully understand its costs, we will charge an additional amount
• the timeline of the project will expand far beyond the original expected timeline

Even in time and materials contracts, it is very useful to have an understanding of what is at stake in the completion of a project.  Please do not assume that it is obvious that the project is 'very important'.  We will take vastly different approaches to projects where $100,000 is at stake, compared to projects where $10,000 is at stake.  A good rule of thumb is that if you stand to gain or lose $100,000 based on a project outcome, you should provide the project manager with a budget of roughly half of that.  To go much lower will cause the project to have lower quality than your expectations, and to go much higher will starve you of the resources you need to assure yourself and your clients that the product is of sufficiently high quality to move forward.

Proportional Response to Bad News

In general, we escalate our response more if more people will be affected by the bad news.  For instance, if a server crash happens which affects 90% of our clients - this will occupy most of our attention until the situation is resolved.