Monday, March 24, 2014

Change Management

There are many views of change management. In my thinking change management needs to be a closed loop process that documents all requested changes, irrespective of the source, documenting the ultimate disposition of those requested changes.

Changes include:
• Any request for substitution of required materials, changes of equipment, or personnel specified to perform the work.
• Requests by either party to change anything that is required by the contract.
• Requests or orders by the buyer to change the scope of the contract.
• Third party initiated change requests such as engineer or architect initiated changes.
• Potential changes contemplated by the contract.
• Instructions made during performance of the work by authorized parties.

To have an effective change management process all parties need to establish a single focal point
that will be responsible for managing the change process so requests are acted upon in a timely and all information about the potential change is documented. Documentation of requested and agreed changes is required to deal with potential claims for additional costs or extensions of time.

Documentation would normally by a log that includes:
• The party making the request.
• The date of request.
• The reason for the request
• The scope of the requested change or the specific section or document that is being requested to be changed.
• The expected impact of the potential change such as cost (will it be an increase or decrease), and any impact to schedule (will it reduce or extend the schedule).
• The urgency of the request including specific dates response is needed by, and the impact there will be if response if not provided by that date.
• Notes on status of the request, follow-ups, actions required etc,
• The disposition of the request
• Date of disposition.
• If agreed, I would also document the specific amendment, change or variation number that reflects the agreed change being made part of the agreement.

Each request should be assigned a specific change request number for management and tracking of the changes. Change requests may be closed and new request numbers assigned when the scope of the change request needs to be broken down to multiple changes. If you have regularly scheduled meetings such as progress meetings, part of the agenda for that meeting should be a review of all open change requests, and their status. The failure to act on a change request in a timely manner may result in claims from the requesting party.

In reviewing a request for a change a number of factors should be considered. The very first thing to consider is what does the contract say?
1. Is this a change that already has a procedure within the contract already established?
2. Is the request submitted following that procedure?
3. Will the contract need to be amended to implement the change if agreed?
Once you have reviewed how it fits within the structure of the contract, the change needs to be evaluated for its potential impact.
If you are a supplier you would review a buyer requested change from several perspectives. What is the cost of the requested change? What, if anything, will be the impact to the schedule? Will the change create any additional risks to the work that might require a change the terms of the contract?

From a buyer’s perspective the first question you should be asking is whether it is acceptable to the business. Is it acceptable financially? Is any schedule impact acceptable? Is it acceptable from a risk perspective? Is the proposed change acceptable from an operational perspective? When you consider the change from a financial perspective you would look not just at the price but any life cycle cost impact of the proposed change.

Once you have agreement from the business that the proposed change will be acceptable for the business, it is the contract manager’s responsibility to ensure that the value you get from the change (increased value, equal value, or diminished value) is consistent with the pricing and other impact required for the change. Let me give you an example of what I mean.

You are having an addition built on an existing facility. Your existing facility has Carrier air conditioning rooftop units. Your specification of the addition specifies the use of Carrier rooftop units. The supplier has made a request to substitute the Trane Air Conditioning units. As part of determining whether the substitution is providing you with equal value you would check:
a) the price of the Carrier Unit versus the Trane unit to see if there was a difference in cost.
b) The operating costs (energy consumption) of both units.
c) Service or maintenance requirements of both units.
d) Cost of service and spare parts for future service of both.
e) Added cost of needing to maintain spare parts inventories for both types of equipment.
As their price included providing the Carrier units to agree upon the substitution, the life cycle cost needs to be equal for the value to be equal. If the value is more, and there is no increase in cost you would probably agree upon the change. If the value is less, before agreeing to the change I would want a concession from the contractor so the value will be equal. Those concessions could take the form of a longer warranty period, a credit for the diminished value or whatever you consider to make it value equivalent.

No comments:

Post a Comment