Developing the scope and estimate for an enterprise-level transformation is not a simple matter. Countless hours are spent by vendors and their clients on the mutual goal of developing a proposal that is achievable and economically feasible for all parties.
A comprehensive estimate contains many components that are essential to delivering the big objectives of the proposed business case that will transform the business. Omission of important details in the proposal are costly and could lessen the impact of the larger business case objectives.
The Areas Where You Can Easily Go Astray
One area that does not always get fair treatment during the proposal development process is a transparent and detailed staffing estimate. The timeline and costs of the contracted program estimate will quickly grow unfavorably if the staffing estimate is incorrect or mismanaged.
Two big misconceptions by enterprises in personnel planning when developing a statement of work are:
- Our proposal is a fixed fee contract and does not require a resource plan for vendor and client participation and timing of participation. We have nothing to worry about here, since the vendor is responsible for delivery of the solution.
- Our proposal is a time and materials (T&M) agreement, so the statement of work contains a list of roles and the percentage of participation for each. We will only pay for what we use.
The obvious questions with fixed fee contracts include, “What talent/roles/experience, etc., am I paying for?” and “How much money are we leaving on the table?”
Although the T&M comment may appear better than the fixed fee comment, below I will identify a few gaps demonstrating future challenges to your responsibility of controlling cost and delivering value.
UpperEdge recommends companies receive a detailed transparent staffing plan for both vendor and client resources as part of a comprehensive proposal, regardless of whether you have a fixed fee or a time and materials proposal.
A Staffing Roster is Not a Program Staffing Plan
Allow me to use a simple example to support the recommendation of a detailed transparent staffing plan for both vendor and client resources.
Vendors will often provide what I refer to as a “staffing roster” as their proposed staffing plan within the statement of work. The roster will include roles and percentages of participation and may be titled “Staffing Plan” or “Resource Plan”. My first concern is that this level of information lacks details as to specificity of participation, timing, or an estimated quantity of hours.
I will use a simple table of only three roles to demonstrate my point and assume the duration of the program is 24 months.
|Role||Percent of Participation|
In this example, you are left wondering questions like:
- What are the expected hours per week by resource or location?
- How many hours are expected for roles B & C?
- When are B & C’s participation to be provided?
- What is the quantity of B’s & C’s persons needed?
- What if this table represented 25, 50, or more than 100 roles?
The vendor could have included program phases within the staffing tables, which would provide a general idea of participation. It is not uncommon for a phase to be two-to-six months or more.
Perhaps you can “guestimate” the hours expected to be provided for all roles, but there is nothing to indicate participation timing of the identified roles.
And here is more uncertainty for your consideration. Should B & C availability, timing, or assumed hours of participation be managed as a straight-line average, timed sequenced participation, onboarded first day of the project, or would their timing be expected later? Does participation of B & C overlap?
These are good questions for the vendor if you are trying to determine onboarding of vendor resources or you are attempting to forecast the volume of work. These are important questions that will need answers if you are planning and securing internal resources.
Vendor Secret: Credible vendors possess sophisticated models to develop proposal estimates, including resource planning. Requiring vendors to provide a detailed and transparent staffing plan should not be a hard ask, especially if the vendor aspires to be your “business partner.”
Change Orders – For Adding Value or Documenting Additional Cost
Change orders occur within transformation programs. Your goal is to use change orders to add value to the program, not additional costs. However, this goal is difficult to achieve when using a high-level and vague staffing plan. Enterprises do not realize their vendor may have assigned enormous amounts of risk via your acceptance of a vague staffing plan.
Here are a few examples of the risk realized and the resulting change orders due to the challenge of managing a program with an incomplete staffing plan:
1. Program Delay
Stated Cause: Work is not completing according to plan, with the vendor stating delays in the client’s work as the root cause.
This is a common incident. However, we have seen situations where the vendor is the real cause of the program delay due to the vendor’s late onboarding of vendor resources or under participation.
The difficulty for the client to challenge the vendor’s assertions is because of the documented, but inadequate staffing plan within the statement of work. The client’s ability to question the change order is extremely challenged in a fixed fee contract. A time and materials contract does offer some opportunity to challenge, but the opportunity to challenge would be limited with comparing the vendor’s invoice data to a nondetailed staffing plan.
Risk Mitigation: Cross comparison of detailed invoice data with a detailed staffing plan raises transparency of onboarding and participation. This activity is worth the time and expense.
2. Inadequate Client Participation
Stated Cause: Client’s resources did not provide expected levels of support.
This one is like the above program delay example, but in this case the vendor will offer to help solve your problem. The vendor is aware of your limited understanding of the staffing plan. Your vendor is also aware you have a limited ability to quickly scavenge additional internal resources to fill a support gap. You have little defense without a detailed view of your participation and data that represents your actual participation.
The vendor will raise your anxiety with warnings of milestones in jeopardy without immediate approval of the change order. Do not be surprised to see the vendor offer and charge for additional vendor resources to supplement your roles and your responsibility to minimize program delay.
Risk Mitigation: Your resource data can be collected via your financial tools for tracking budgets, expensing projects and resources, including internal chargeback. Project tools like JIRA can be configured for team members to record their time on various tasks. Comparison of a detailed company participation plan to internal tracking data can reduce your exposure.
Use your internal data with status reports and other project-generated data to foresee any client participation issues. Understand that client participation estimates can be understated by as much as 20%.
3. Late Discovery of Missed Scope
Stated Cause: Needed functionality is discovered AFTER the blueprint and design phase.
There are two major contributing factors to this type of a change order:
- The customer was unsure of functionality during estimation of scope, or
- Availability of the company’s subject matter experts (SMEs) were limited during critical baseline and design phases.
There are many contributing factors to the SME’s availability issue including SMEs that are supporting daily business and technology operations and are not fully dedicated to your program.
Risk Mitigation: SME availability issues can be resolved many ways. A few tactics include program steering committee reviews and approval of the client resource plan. Leveraging their approval for resource availability can remove many conflicts and barriers. Another tactic is to work with the vendor to identify key decisions during the crucial path of the program where SME resource availability is required.
Why This Matters
UpperEdge recommends you receive a detailed transparent staffing plan for both vendor and client resources as part of a comprehensive proposal. Expected program delivered value can erode from 25% to 50% due to unplanned program cost increases and what is actually delivered.
Managing a transformation program is hard work executing the project plans and mitigating risk. You can strengthen your ability to manage the negative impact of estimation and assumption variance with:
- A comprehensive SOW that includes a transparent baseline proposal that includes a detailed vendor and client resource plan
- Active PMO management of the plan during your transformation program.