May 272011

So here’s a thought for you……

How much addtional scope should you allow on your project [for free] in order to mitigate risk?

Sounds like a no-brainer: “Nothing of course! All additional scope should be negotiated and paid for.” I hear you snort in reply.

I’m currently engaged in a project which involves the manufacture, supply and installation of a motor control centre [MCC] panel. my project scope is to build according to the electrical designs which are compiled by the consulting engineers on behalf of the end client, a large water purification and distribution company. Our major challenge is that the quality of the designs is, for want of a better description, apalling. If we were to build the MCC according to the issued drawings it wouldn’t work, period.

So, in order to secure at least some chance of project success, I have added a senior design engineer to my team whose predominant task it is to check and ‘red-line’ the consultant designs in order to get them into a state suitable for manufacture. This is taking a lot of time! Time not budgeted for!

You might say: “Easy. Just put in a motivation for a variation order” and indeed, it’s an avenue we are currently pursuing, although the chances of success are 50:50. So the question remains – should I or shouldn’t I. If I don’t, the project will be utter chaos, crisis management and cost overruns from start to finish. If I do, the margins will take a bit of a knock but life will be easier and in the long run cheaper and more effective.

First prize is still to get the client to pay for this value-add service. It’s in their best interests, absolutely no doubt about that. If that doesn’t happen the trick I think, is to do a financial analysis of the problem. Weight up the cost of the chaos risk against the cost of added engineering reviews. Find the tipping point and spend the money mitigating the risk.

What do you think?

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