How Do You Handle Scope Creep in Contract Management?
A good contract is well-defined and specific to both parties’ needs. Unfortunately, many contracts start out this way but keep expanding during the process to cover more and less-closely related elements. This type of scope creep can slow down the contract management process, make contracts more difficult to negotiate and enforce, and waste valuable time and resources. None of these outcomes are ideal – so how do you handle scope creep in your contracts?
- Scope creep occurs when a contract’s parameters expand beyond the initial intent
- Scope creep can affect timelines and focus, waste time and resources, and damage important relationships
- To minimize scope creep, better define the contract’s scope at the start, let all parties know when it’s okay to make changes and when it’s not, and use pre-approved contract terms and language
- Using contract management software will also help to reduce scope creep
What is Scope Creep?
Techopedia defines scope creep as what happens when the original goals of a project expand while in progress. In terms of contract management, scope creep happens when the contract’s parameters are expanded beyond what was originally agreed on.
Scope creep includes unexpected and often unapproved changes to the terms, clauses, and deliverables in the contract. These changes can come from either party, often from departments outside the ones that originally conceived and negotiated the contract. “Let’s just add or change this one thing” is the phrase you often hear, and then the creep begins.
Unfortunately, scope creep is not unusual. The Project Management Institute (PMI) reports that 52% of all projects experience some degree of scope creep, typically caused by a poorly defined initial scope, lax contract management, or a lack of agreement on what the contract is meant to accomplish.
How Does Scope Creep Affect Your Business?
At a minimum, scope creep can cause your contract management process to take longer than anticipated. At worst, scope creep can cause a contract not to be executed at all.
Here are five of the most common negative consequences of contract-related scope creep.
Scope creep can considerably lengthen the time it takes to create, negotiate, and execute a contract. As more parties throw in more terms, it requires a lot of extra work, including:
- Additional rewrites
- Negotiating new terms
- Analyzing how the new terms affect the existing terms
- Scrutinizing the compliance and legality of the new terms
All of this adds time to the contract process, which could affect previously agreed-upon deadlines and deliverables.
Affects Contract Focus
The best contracts are those focused on a single or limited number of deliverables. As scope creep finds its way into a contract, those deliverables get expanded. This can result in a contract with too broad a focus that affects too many areas of your business.
Results in Failed Contracts
Excessive scope creep can result in contracts not being executed at all. Too many changes can cause one or both parties to walk away in frustration or window of opportunity to close.
Wastes Time and Resources
Scope creep is wasteful. Instead of quickly negotiating and executing a simple contract, you end up spending extra time and effort that negatively affects your bottom line.
Harms Customer and Vendor Relationships
When you think you have a contract finalized but someone wants additional changes, it can damage your relationship with the other party. No one wants to deal with a vendor or customer that demands unreasonable or last-minute changes.
How Do You Handle Scope Creep?
What can you do to avoid or minimize the effects of scope creep in contract management? There are many things you can do to prevent scope creep, and here are five of the most important ones.
1. Clearly Define the Contract’s Scope
One good way to minimize scope creep is to clearly set out the contract’s scope from the very beginning. You can do this with a detailed statement of work (SOW) that defines the goals of the contract, what’s to be included and what isn’t, which departments have interest and input, what deliverables are needed, and what your timeline is. Make sure all parties are aware of and buy into the scope statement.
2. Embrace Change – Up to a Point
Some changes to your initial contract are inevitable, so you need to retain some degree of flexibility – up to a point. Make it clear to all parties involved, especially people in your organization, when their input is welcomed and when it needs to stop. Know when it’s okay to say no – typically when the incremental effort exceeds the incremental value of the change.
3. Determine When Changes End and a New Contract Starts
It’s not uncommon for some parties involved to request fairly large changes to the scope of a contract. When this happens, you need to determine whether it’s best to revise the current contract in process or initiate a whole new contract to either replace or supplement the current contract. This should be defined upfront, so you’ll know how to handle excessive requests.
4. Use Pre-Approved Terms and Language
Another way to ward off scope creep is to try not to reinvent the wheel. Start each new contract with a pre-designed template and use only pre-approved terms and language in the contract. This will reduce the number of disagreements you may run into regarding the contract’s scope. It will also help you get the contract approved faster internally since it’s based on your paper and legal team’s approved language
5. Use a Contract Management System
Finally, one of the most effective ways to reduce scope creep is to use contract management software (CMS), such as that from Contract Logix. A contract management solution helps to guide contract creation, ease negotiations, and better manage the entire contract process throughout the pre-award and post-award stages. By keeping things moving and on track, scope creep can be successfully minimized.
Let Contract Logix Help You Fight Scope Creep in Your Contract Management
When you want to reduce scope creep and create a more efficient contract process, turn to Contract Logix. We offer state-of-the-art contract management software that can help you better manage your contract workflow and keep your contracts on track. Contact us today to learn more about these and other benefits of our CMS platform.
Contact Contract Logix today to learn more about using CMS to fight scope creep in contracts.