7 Steps to Handling a Contract Management Crisis
Perhaps you’ve been there before.
- You have determined that you’re about 3 weeks behind schedule with only 10 weeks left to go on the project.
- You also find that you’re over budget and realize that this is because you have done extra work without client authorization.
- Your principal decides that you should ask for a change order from the client.
- Your client is furious about the change order request but agrees to it, only if you commit to finishing work two weeks ahead of schedule.
- This all means that you’re now 6 weeks behind the original schedule.
What do you now? Here are 7 steps to managing this and similar contract management crises.
1. Don’t React Immediately
Facing the situation outlined above, most contract managers launch into action and commit to unrealistic terms that further complicate the situation. It’s key that you take a step back and regroup with your team. You need the input of your team and principal on this scenario because your project’s delay will have repercussions on the availability of team members to projects other than yours. Make sure to have the full picture of your department’s timeline and budget before making any additional commitments with the client.
2. Define the Problem
It’s easy to focus on the scary fact that you would be 6 weeks behind the original schedule, but that’s just a symptom. You need to define the problem or problems that lead to this crisis. A review of your original contract lifecycle in your contract management system should provide you clues about what is causing the delays. It’s important that you identify the issues that lead to the crisis and determine if they were generated by the client or by your company. For example, if the mutually agreed allotted time for client review is just 3 days and the client constantly takes a whole week, your team will never be able to finish the project two weeks ahead of schedule. Those two weeks would be consumed entirely by two client reviews.
3. Don’t Assess Blame
However, don’t spend energies on pointing fingers. Nothing good will come out of a discussion that focuses on finding a scapegoat. Robert Anthony put it best, “When you blame others, you give up your power to change”. Instead all of your focus must be put to…
4. Identify All the Alternatives
When the issue is that the project is behind schedule, here is a list of potential alternatives:
- Subcontract part or all for the work;
- Review the scope statement;
- Review the quality of delivered work;
- Stop work, if necessary;
- Hire temporary staff (e.g. project, administrative, or temporary);
- Bring in senior staff from other projects; and
- Evaluate the critical path of the project from a CPM perspective.
On the other hand, when the issue is that the project is over budget, you should consider to:
- Subcontract part or all for the work;
- Request a change order;
- Consider using or leveraging past project work;
- Define absolute minimum requirements for deliverables;
- Standardize deliverables and minimize client reviews; and
- Shorten the schedule.
Keep in mind that three alternatives that are never acceptable are:
- To use unrecorded time
- To charge to company overhead
- To charge another project.
5. Select the Alternative That Your Team Agrees On
This is why you didn’t react immediately on step 1 and you didn’t pass the buck on step 2. By not pointing fingers and getting as much buy-in as possible, you are more likely to arrive to a solution that most people on both parties will be happy with. Make the process as inclusive as possible or risk disgruntled employers or dissatisfied clients. Either scenario is harmful to maintaining a sustainable operation. You can’t make everybody happy, but it’s much better than making anybody happy.
6. Document the Process
Don’t let the process go to waste by trying to cut corners through poor documentation. In times of crises, every single agreement needs to be in writing, otherwise it may become a potential argument down the road. Make sure to keep track of emails, files, document versions, and sign-offs on your contract management system. To facilitate the scanning of printed documents, look for a system with enhanced dDocument scanning features, such as accurate OCR.
7. Assess through a Post-Mortem
Often, companies oversee this final step. This increases the chances of running into the same problems in the future. It’s a good idea to customize your contract lifecycle to include a post-mortem review towards the end of a major milestone. By doing this, your team maintains project awareness, identifies corrective actions, and becomes more skilled at identify future scope growth.