How to Improve SOW Change Management

In a related article, we discussed the importance of taking steps towards improving the statement of work of any contract to improve your contract management process. It showed that the more detailed the SOW, the lower the probability that a project will run over budget or timeline.

However, there are still situations in which a change may be necessary for the benefit of all parties. This is why the SOW also needs to include the agreed-upon process for a change order and variation order form. In this article, we will explore the field of change management relative to SOWs.

Editor’s Note: To learn more, download our whitepaper on contract management best practices.

A Closer Look into Change Management

The IACCM provides a great definition of change management, which is “change management is based on a voluntary agreement over whether or not a change can be agreed between the parties”.  The process of whether changes to the scope of a project are formally introduced and approved shouldn’t be seen as a complete breakdown of the contract. Instead, it should be viewed as an inevitable and necessary event toward streamlining a business relationship.

Within change management, there is also claim management, which has some similarities but also several differences. Unlike change management, claim management is a legal process that is triggered by the refusal of one party to implement certain changes, and that is based on contractual stipulations.

Objectives for Successful Change Management

From the definitions of change management and claim management, managers should realize that there are several necessary steps to improve these processes. The IACCM suggests the following objectives of successful change management and claim management:

  1. Establish a culture that creates a non-hostile and transparent process for managing changes and claims
  2. Establish clear ownerships, accountability and responsibility for change and claim management
  3. Design processes and activities that align with business, organizational and project management processes
  4. Establish a single focal point for change and claim management
  5. Establish a closed loop between change and claim management processes and the development of products, services, process, and contract quality to reduce — while not necessarily eliminating — the sources of change and claim management events

Using these 5 objectives as guidelines, an organization can improve how it manages changes to any contract or SOW.

Sample Change Management Process

Just like it is important to have contract templates in your contract management software, you also need to have a sample template for change procedures. Christian Sandbeck and René Franz Henschel developed a useful template based on the body of knowledge from the IACCM, the Information Technology Infrastructure Library, and the Universities and Colleges Information Systems Association:

  1. Record all details for the request for change (e.g.person making request, reason, timeline, etc.)
  2. Establish whether or not the request for change is within the existing contractual framework
  3. Evaluate the urgency and required contractual changes along with their financial, contractual and operational impact
  4. Make decisions to authorize or reject the change through established approvers
  5. Coordinate the implementation of change or information that change is not accepted as well as the different steps that must be taken from the different internal and external parties
  6. Review and close:
    • Have changes been made according to the agreement (or rejected)?
    • Have goals been reached?
    • Are all parties satisfied?
    • Were there any surprising effects?
    • Was there a cost overrun or delay?
    • What was the cause for the change request?
    • Were the contract terms sufficient?
    • Did product or service quality exist? How about process or communication quality?
    • Is there room for improvement in the change process (process, contract, communication etc.)?
    • Can change be recorded as completed, or do we need new change( or maybe a claim management process)?

It’s important to note that the last step is the most critical in the change management chain. This step provides essential takeaways for improving the business relationship, suggesting the course of action in other similar events, and measuring the overall impact of the change.

Takeaway

Change management is a necessary part of contract management and should not be viewed as an isolated event. Not only should change management be part of your contract management lifecycle, but it should also be a source of learning to improve the overall contract lifecycle.