5 Strategies to Handle Scope Creep in Contract Management
Scope creep. Just the mention of these two words can make even the most experienced project managers or contract managers nervous.
Scope creep is one of the biggest challenges in contract management because it involves uncontrolled changes or continuous growth in a project’s scope. When a project is not properly defined, controlled or documented, it has a higher probability of developing a case of scope creep.
Editor’s Note: To learn more, download our whitepaper on contract management best practices.
Here are five useful contract management strategies to keep scope creep at bay.
1. Define a Scope Statement
A key step in beginning a client relationship is to clearly define a scope statement. Very often account managers are so eager to secure a client that they rush into agreeing to terms. This is particularly true in industries with low conversion rates.
Developing a scope statement isn’t a one-step process and often requires several rounds of meetings between key stakeholders. No matter how many iterations are needed to develop a scope statement, two processes are always necessary.
First, you need to keep records of all meeting resolutions and all versions of actual scope statements. Second, every key stakeholder needs to sign off on the final document, which should spell out the scope, timeline of deliverables, and list of requirements for the deliverables. By investing the time in these two processes, contract managers will lessen the chances of a project growing out of control.
2. Provide Specifics
“If you don’t know where you’re going, any road will get you there,” warned the Cheshire Cat to Alice in Lewis Carroll’s classic book.
To avoid scope creep, you must provide clients with as much detail as possible. Some guidelines to consider in building a detailed scope statement are:
- How processes will be handled
- What deadlines need to be met
- Where deliverables need to be sent
- Who is responsible for action items
- Who is the point of contact
- What the process is for change management
- What the procedure is for mediation
Write your scope statement as a FAQ document that your client can quickly use to understand what he or she has agreed to. The more specifics you provide, the less room a client has for misinterpretation. The onus is on your team to be as specific as possible.
3. Budget for Small Discrepancies
Pricing strategies vary from industry to industry. However, two practices are common across all of them.
First, you want to break down items to account for the functions of all departments. This information is for internal purposes and allows you to have tighter controls on projects. Second, you should budget between 5% to 15% in your pricing for scope creep. This is not to allow scope creep to take place, but to account for potential discrepancies in your estimates. You can customize your contract lifecycle within your contract management system to include a step that requires representatives from each department to review estimates and budget for small discrepancies.
Sometimes scope creep is created due to poor budgeting. This budgeting cushion, be it in hours or dollars, allows you to complete work on time and keep a contract sustainable. There are times when going back to the client for a change request is not worth the battle because it may hurt your chances for future projects with them.
4. Set Expectations for Change Requests
Of course, you don’t want to shut down any opportunities of future work with an existing client. After all, the probability of selling to an existing customer is 60%-70%, while that of selling to a new prospect is 5-20%.
Therefore, you should invest in having pre-approved and ready-to-use clause and template libraries in your contract management system. This gives your contract managers an initial framework to use with existing clients. Your scope statement should include specific pre-approved clauses that provide details about change requests. For example, what can be defined as change requests, what are applicable cost ranges, how are change requests processed, and how changes would affect existing timelines.
Depending on the contract, some companies may decide to include an additional fee to process a change request. Such a fee often makes the client think twice about whether it is worthwhile to “tweak” an existing project. However, some clients with deep pockets may go ahead and submit as many changes as they want.
That’s why your team always needs to have this last strategy.
5. Stipulate What is a New Project Request
Contract managers should have clear guidelines that help them determine what constitutes a new project request. If they lack those guidelines, then client relationships may suffer due to unnecessary delays and opportunity costs.
Clients talk with each other and, for better or worse, they rely on each other to find out about your company. When your team isn’t consistent in deciding what is a new project and what is not, word may get around to your existing and potential clients. To prevent this from happening, stipulate clear guidelines for your team so that they can apply them consistently across the board.
By addressing scope creep through these five strategies your team can be more confident in providing top-quality service to your clients. By defining a scope statement, providing specifics, budgeting for small discrepancies, setting expectations for change requests, and stipulating guidelines for new project requests, your contract managers will be more efficient in assessing client needs and providing solutions that deliver high standards.