Proportional Response and Project Risk Management

In managing projects for clients, we must decide how to apportion resources among a set of specific tasks. In doing so, we must take into account:

• what seem to be the client's risks - we do not want to leave the client in a tough place
• our own risks - these have to do with uncertain future obligations, or the consequences of contractual representations or warrantees

Events can occur mid-project which cause us to move away from the original project plan. When such situations occur, we attempt to remain within the original scope of the plan and to remain within the budget, if a budget is specified. Some clients have expressed that in retrospect that they would have approved increases in budget in order to compensate for departing from the original scope and to speed up development. However, it is very difficult to judge this type of situation, and ideally we prefer to discuss what is at stake for a project at the beginning, so that we can provide more accurate estimates of the time and effort that will be required to complete the project.

Time and Materials vs. Fixed-Price Contracts

In situations where the scope of the project is uncertain or may change, and where budget is flexible, we recommend that clients choose a time and materials contract rather than a fixed-price contract. The lure of fixing the price ahead of time is great for clients seeking to control costs, but if the contract terms change in any material way, or if the scope is bound to change or be defined in an 'evolutionary manner', then a fixed price contract can cause one or both of the following problems:

• we will have higher than expected costs and will offer the original project for the original price, or the project as it was actually completed with a wider scope at a higher price
  
• the timeline of the project will expand far beyond the original expected timeline

Even in time and materials contracts, it is very useful to have an understanding of what is at stake in the completion of a project. Please do not assume that it is obvious that the project is 'very important'. We will take vastly different approaches to projects where $100,000 is at stake, compared to projects where $10,000 is at stake. A good rule of thumb is that if you stand to gain or lose $100,000 based on a project outcome, you should provide the project manager with a budget of roughly half of that. To go much lower will cause the project to have lower quality than your expectations, and to go much higher will starve you of the resources you will need to assure yourself and your clients that the product is of sufficiently high quality to move forward.

Proportional Response to Bad News

In general, we escalate our response to a problem based on the number of people it affects. For instance, if a server crash happens which affects 90% of our clients, we will devote most of our resources to fixing the problem until the situation is resolved.