Vendor partners can be a valuable resource to your department. They can provide resources such as temporary headcount to your team and/or bring additional expertise to your team. But this comes at a cost. Usually a vendor will provide an estimate of the cost for providing the product or service, which is defined by a scope of work. However, too often when the work is being done, the cost can escalate outside the defined scope due to several reasons. This is called scope creep, and depending on the size of the contract, it can end up costing you a sizable amount of your budget.
What Causes Scope Creep?
Scope creep can be the result of any or a combination of:
- Vendor mismanagement. The vendor fails to manage its resources and assists well, and the project goes over what the vendor estimated. Let’s say the contractors the vendor hires to work on a project work too slowly, so the project takes much longer than anticipated. This can lead to cost overruns.
- Poor estimation of the scope. The vendor does a poor job of estimating the resources it needs to complete a project. One reason the vendor may do this is to keep the initial bid price low and then hit you with a scope change request as the true cost of the project unfolds. For example, if a vendor said it could support the rollout of a new training project with five contract trainers but actually needs eight trainers to do the work, the vendor may try to pass that additional cost to you.
- You changed the scope. The vendor priced the project based on your initial deliverables and specifications, but while executing the project, you or your stakeholders changed the parameters. In this case since you were the cause, the vendor is likely going to charge you for the change and additional work.
- Project changed or morphed into something different. Sometimes when you get into a project, it can develop a life of its own, and the deliverables completely change. This can lead to a scope change because what the vendor originally based its estimate on has changed. For example, if you want to develop a new sales model and associated selling skills, then after you begin the project, key stakeholders want to incorporate an account management element into the project, then this change means the scope is expanded significantly, resulting in the need for additional funds.
How to Prevent Scope Creep
The are several things you can do to prevent scope creep. Most of them require advanced work on your part, but they can result in significant savings. Below are common things you can do to prevent scope creep:
- Clearly define project deliverables, specifications, and timing. A little homework before a project can ensure you have clear project outcomes and timing, which can help to ensure that the vendor’s pricing is accurate.
- Ask the vendor partner to define what constitutes a scope change in the beginning. Before the project begins, ask the vendor to clearly outline what would constitute a scope change and why. This helps you understand whether a request by you is within or outside of scope. In addition, if you anticipate something happening during the development or execution of a project, ask the vendor ahead of time whether that will be a scope change. You can share a list of “what ifs” of common situations that could arise as a great way to gain an alignment on scope parameters.
- Manage stakeholders. On your side of the equation, make sure your stakeholders are asking for things that are within scope. For example, if a member of senior management requests something be added to a project, then inform him/her of the cost in terms of additional funding or time to fulfill the request. Finding a diplomatic way to inform a senior manager of a potential scope change as a result of his/her request is a good skill to master.
- Stay informed of vendor progress. Asking for periodic updates on a project is a good idea and during the update, request a budget review so you know whether you are within scope. As the vendor does this review, ask a lot of questions to ensure that the project is still within scope and on track to stay there. If it looks like things are heading out of scope, then either accept it or adjust to get back within scope.
- Select a good vendor. Some vendors are notorious for scope creep and will charge you for every little request. By qualifying a vendor before a project and developing an understanding of its organizational process and culture, you can avoid working with challenging vendors.
Keeping a project within scope can be tricky depending on the deliverable, the vendor you select, and your stakeholders. It all starts with clarity around the project’s outcomes and timing. The clearer you are about what you want, the more likely the vendor will manage the project to that vision. Therefore, a little homework before getting bids from vendors goes a long way toward completing a project within scope.