By Kelly Conway, Sr. Project Manager -
The Slippery Slope
As project managers, we know that all projects encounter change during their lifecycle. We also know that we need to do a better job at documenting and communicating changes, but we are hoping to get by with the least amount of work while juggling other priorities. Documenting and communicating change does take effort, but when change management is acknowledged from the beginning of the project and proper controls put into place to handle changes, these bumps in the road are expected rather than feared.
One measure of good project management is how well change is managed during the project and early awareness of who benefits from deliberate change management.
A project change is simply a difference in requirements from what has been previously agreed to and documented, that affects scope, schedule, quality, and/or budget. Change Management is the process for managing change to your benefit. Understandably, clients view change differently than their contractors. It is important to understand where you are in the hierarchy of the contractual relationship and define your goals for Change Management. The ultimate client, with fixed resources and funding, may view changes negatively, while contractors may view change as a potential revenue stream. Your goals for Change Management drive the resources that will be needed for this effort.
When clients and contractors partner early in the project planning stages on an agreed approach for change management, a structure is created for communications and an endorsed method for efficiently processing changes. This agreed approach may be in the form of a Change Management Plan or in a less formal documented agreement of how change will be handled during the project. Everyone wins when change is acknowledged as a normal part of monitoring and controlling and a healthy method is established for discussing change in a non-confrontational manner.
The Project Management Institute explains that: “Change is inevitable and accelerating. Organizations that manage it effectively will pull ahead of their competition. Change initiatives are time consuming and costly, but by approaching change management with a disciplined approach, organizations can survive and thrive.”
This article primarily addresses Change Management from the contractor’s perspective, with an emphasis on government contracting which is an invaluable read for clients and subcontractors alike. The following topics are explored in more detail in the below sections:
- What constitutes a change
- Communications and timeliness
- Documentation of events/timeline
- Types of change packages
- Gathering cost elements
- Client communications and presentation
- Change resources
What Constitutes a Change?
Project changes happen for many reasons. The project scope is so often found to be unclear. Risks are not fully researched in advance of project start. Sponsors change requirements. Differing site conditions happen. Interpretation plays a key role in how requirements are understood prior to additional vital information becoming available that further explains the facts. Unknowns abound. Assumptions and clarifications make every attempt but fall short of qualifying conditions that may affect the baseline. Changes can come from any direction and any source and may be:
- Requested or not requested
- Documented or not documented
- Subject to interpretation
- Controversial (keep emotions in check)
- Managed by the PM or at the PMO level (if one exists)
- Governed by a set of rules (contract, change management plans, change control board)
- A risk for both clients and contractors
It is important to recognize and/or anticipate a condition or causal factor that will drive a change, then take the next step to provide notification. Even if you don’t see it coming, notification after awareness is the first essential step.
Communication and Timeliness
The PM has ultimate responsibility for change management. Once the PM is aware of a changed condition, it is his/her responsibility to provide notification in a timely manner. Most contracts have language that require timely notification. For large, complex projects with many moving parts, it may be prudent to assign responsibility to a change team or create a Change Control Board to keep up with the notification and documentation requirements associated with logging, tracking, and processing changes. The PM’s role with respect to initial communication of changes includes:
- Understanding the contract/technical specification requirements and the cost basis for the scope of work
- Knowing the rationale for the baseline schedule
- Notifying in writing as soon as you believe a change exists
- Providing a high-level summary of the event and potential impact to the scope, schedule or budget
- Keeping a log of changes and progress
- Maintaining a centralized storage repository for change documents
- Making status changes at regular project meetings
Documentation of the Timeline
Plan for the end at the beginning. Change Management requires an investigative mindset. What would an attorney want to see to document the facts of a particular change should it go to litigation? Talk to those involved in the change. Set up a project email address to be copied on all project correspondence that can be searched for a given change topic. Collect the timeline artifacts to support your change package:
- Develop a timeline of pertinent events
- Research formal and informal communications
- Phone calls
- Daily logs
- Design changes
- Configuration changes
- Define start and end dates for delays in work progress
- Identify both internal and external influences
The timeline is invaluable in determining exactly when a change occurred, what causal factors were involved, and the impacts that resulted from the change.
Types of Change Packages
The type of change dictates the level of detail associated with the documentation provided to justify the change. The terms listed below are common in government contracting, however commercial contractors may set up their own language to describe the types or levels of change expected (by size or impact). Changes can be defined by category, such as dollar value, whether the change has schedule or contractual impacts, or if there are design or configuration changes.
- Field Changes – changes usually initiated by field installation or construction teams (could be subcontracted or direct labor) and approved by the teams managing the work in the field. There is usually a low threshold (dollar value) associated with the approval authority for these changes.
- Engineering Change Notices (ECN) – issued by the client or design authority, communicating a design change in the form of a request for proposal.
- Engineering Change Proposals (ECP) – the response to an ECN providing qualifying scope, cost, schedule, and level of effort to accomplish the change. A contractor can also decline to perform the work requested under an ECN.
- Requests for Equitable Adjustment – documentation provided to a client requesting compensation for changes that were not requested by the client, but instead may be due to a change in requirements caused by environmental or other external factors.
- Claims – changes that have not been agreed to by the parties involved (client and contractor or contractor and subcontractor) and require further mediation or legal involvement to bring to closure.
Gathering Cost Elements
Costs must be presented in an easy to follow narrative (basis of estimate) and include a spreadsheet that organizes costs and the associated adders (General and Administrative, Overhead, and Profit). These costs can include any or all of the following categories for both actual costs and estimated to complete costs:
- Direct labor hours and rates by year
- Subcontracted costs
- Other direct costs
- Schedule delay/time impact
Presentation of the Change Package
The change package should be organized for the benefit of the reader/reviewer. It must use terminology that the receiving entity is familiar with and is common for the industry. There are basic elements to every change package, with specific backup information provided to strengthen the justification for each cost element. Labor costs should include reports for the particular time period from corporate accounting systems and/or timesheets as backup. Materials costs should include vendor quotes or invoices. Subcontractor costs should have a signed and dated subcontract proposal or invoice if costs are actuals. The package should clearly spell out why the change occurred and what action is being requested from the receiving party (additional funding, contract change, schedule extension, etc.).
The package may include any or all of the following elements:
- Cover letter
- Cost spreadsheet
- Certification of cost (if applicable)
- Basis of estimate by task
- Backup documentation
- Labor reports from accounting system
- Subcontractor proposal
For government contracts, the change packages may be under document control if configuration data is being communicated (such as design change information). These packages will require the use of a document control system, transmittal sheets, and special handling with respect to transmission. Be sure to consider special handling requirements as defined by contract for security or configuration management.
On large contracts with sizable change orders, the negotiation of changes may span lengthy durations. The negotiation of the change itself may cause a delay and additional costs. As the PM representing the entity requesting the change:
- Request status of the change with client frequently, both verbally and in writing.
- Address client fact finding questions promptly and in writing.
- Initiate discussions to explain rationale or technical points.
- Consider a regularly scheduled change meeting or Change Control Board dedicated just to the topic of changes.
It isn’t over until it is over, at least to the satisfaction of the parties involved in the change(s). After many heated discussions and what seems like (or is) months of your life in negotiations, many changes do get approved. Those changes with better documented packages will surely help to avert multiple rounds of questions by the reviewers. Having said that, approval will trigger prime contract and/or subcontract actions to implement the change. Be sure to archive all the appropriate documentation concerning the change as appropriate for the contract and get the wheels turning for the administrative and technical implementation of the change.
Rejection doesn’t mean it is over. It just means that you will likely get more help possibly in the form of legal staff to continue the fight. When a claim is filed, there will be new resources that will want to see your documentation. When the new resources call, you will be glad that your files are complete.
The Change Management team is an interesting mix of management, technical and administrative resources. Having a technically savvy and legally trained resource on your change team provides a leg up in the war of words that sometimes entails. Decision-makers need to be a part of the change team to set direction and shake loose important information from the wider project team. Skilled technical resources are important to discovering artifacts and telling a compelling story. Administrative and technical editing staff will make short work of the organization of large and complex document packages with multiple formats and file types. The wider matrixed team, which includes prime contract and subcontract administrators, government pricing reviewers, subject matter experts, program managers and field staff, all contribute to the information that is included in change documentation.
A Final Note
Recognize that project change, when managed well, benefits both clients and contractors. It can diffuse emotion and open the dialogue to resolution. It can be right-sized depending on size and complexity. Change Management is a disciplined culture worth incorporating into your next project.
Kelly Conway is a senior project manager with Management Solutions, LLC with more than 30 years of program, project, and portfolio management experience and success managing both commercial and government projects, as a contractor and directly for the Department of Energy and the Tennessee Valley Authority.