Late designs 6

[Cuyanausul]

What would it be the latest aceptable design shedule for a project, is there any theory, some kind of regulation or standard.-
We are finishing a project already overdue, because ( as we see it, tehre have been too many changes ), and our fixed costs are running, how do we convince the client that he has ton pay for it, is there any method to show them the cost of late designs??
Thanks

 

[PSE]

Is there a work contract? That document should be the base point for any communications regarding schedule and cost. Modifications (presumably approved) from the original approved contract are hopefully represented in any ammendments along with their cost and schedule impact. In my view, the cost and effect on schedule, should have been shown in any project ammendments and signed off by both parties at the time they are approved. If you are being required to absorb the changes as part of the original project costs, you may have some delicate negotiations ahead.

Regards,

 

[Cuyanausul]

Yes we have a contract, and the negotiations are hard right now. We have to prove by numbers the extra cost, at the same time that the client is pushing hard to finish the project, costing us more extra duty hours a day. The contract doesn´t say anything about late designs.

What I am looking for is some document, a history of other large projects, this one goes for about $6,000,000.00. Any regulations from a goverment or something? that we can use as examples. Any spreadsheet on monetary impact due to changes?

 

[dik]

With each and every change to a project you can issue what we call an "Extra Service Work Order" or something of that ilk... you can even do up a template that automatically tallies the costs. Present this to the client for each change (don't nickel and dime him to death) with an explanation of the reason and any additional time required as well as the costs. If the work is issued as a Notice of Change, then enclude this as part of the description. It can be used for work as it progresses prior to tender, or work during construction.

As a caution, this may make a client more sensitive to errors and omissions if these occur.

Dik

 

[IRstuff]

Now that you've seen the dark side of this customer, you'll need to make sure that EACH and EVERY change is documented and approved by the customer before proceeding.

TTFN

 

[SylvestreW]

To be fair, if I received a notice from someone asking for more money out of the blue, I'd want to know each and every detail.

First off, the client should always be made aware of the status of a job, be it intermittently, or on scheduled intervals. Even if things are going perfectly, they should be aware (even if they don't care).

When things go wrong, they should be made aware immediately, and the economic impact should be explained once the issue is known!

As for scope creep, that requires a good manager to know when to draw the line and inform the client that additional work will cost. If not, it's incredibly unprofessional to ask for payment after.

ANYWAY,
in your case, when did those "too many changes" occur? Who requested them? Who authorized them? What benefit did it give to the client? How far out of scope were the changes?

You'll need to know all these things before you approach the client.

 

[Cuyanausul]

Every help is very valuable and apreciated.
Changes are still ocurring, the client has always requested them, the project manager has always authorized them,and of copurse the benefit is always for the client. As I see it, and as many projects are, the design wasn´t finished at the beginning, but ther was a very close time shedule for start up. Most of them are small changes but all of them take time and money. What is hard for the client to understand is that changes not only have direct costs but other indirect ones like RISK of making mistakes, ENGINEERING to acomplish changes, you name them...
Any book, stories, references????

 

[PSE]

If you have a set, non-flexible start up date and are being bombarded with changes, you will need to really work hard with the project manager. A design freeze date needs to be set that indicates the end point at which changes may be accommodated without jeopardizing the start up date (you may already have reached or passed it). Once that date is reached or surpassed, any approved change causes slippage in the end date. The other option is to add additional resources (and cost) in order to continue to accommodate the changes. This becomes less and less efficient as it always takes time to bring people up to speed when they are coming in partway onto a project.

I spent five years working at a start-up company where the product went through continual design modifications. We would get the product set up an running for one process and then would be told to add capability for another. We ended up never shipping a product that we actually received payment for. Source of the design changes, the company president. Eventually the company itself was sold. Design or feature creep can be deadly within a project if not controlled.

Regards,

 

[Cuyanausul]

We already passed the finish date, a month ago. And though it semms there will be no more changes the hard part now is to chrge for all those extra expenses and fixed costs.

 

[dik]

You should identify the issues and advise the project manager that there are legitimate supplemental costs and that he should support you in obtaining compensation. In hind sight, it is more difficult to collect for work already done... My reference to extra service charges comes from a similar terrible experience.

Dik

 

[Cuyanausul]

Yes that´s what´s hard, it´s hard to explain that this extra costs are not only direct ones, but it takes engineering , extra possible mistakes, paper work, and stressssssssssssss

 

[JRMacGregor]

You have received good advice in many of the posts above.

The indirect effect of many small changes in disrupting a project is well documented in many industries. Many large defence contractors seem to feed off delay and disruption claims against their client (the government = the taxpayer = us).

But even in the real world, this effect does exist and is often much greater than the direct cost of the change if considered in isolation.

But it is hard to prove.

One journalistic account of a major project gone wrong because of late and changed design (and other factors) is RUNNING CRITICAL, by Patrick Tyler. It is about Hyman Rickover and the US Navy design for the Los Angeles class submarines, General Dynamics Corporation and their Electric Boat shipyard where they were built. It is about many things, but delay and disruption is one of them.

If nothing else it will make you feel relieved to know that other people have gone through even greater project catastrophes than your own (although that can sometimes be hard to believe).

SYSTEMS DYNAMICS or feedback dynamics is one area whose practioners claim can provide the proof. But these consultants are expensive.

Here are some professional references which might not be of much practical use but they (and THEIR references) will indicate to you that the literature is HUGE.

Eden et al
THE ROLE OF FEEDBACK DYNAMICS IN DISRUPTION AND DELAY ON THE NATURE OF DISRUPTION AND DELAY IN MAJOR PROJECTS
Journal of the Operational Research Society (2000). 51, 291-300

Kumaraswamy
SUBSTANTIATION AND ASSESSMENT OF CLAIMS FOR EXTENSION OF TIME
International Journal of Project Management, 21 (2003) 27-38, Pergamon Press

Williams
ASSESSING EXTENSION OF TIME DELAYS ON MAJOR PROJECTS
International Journal of Project Management, 21 (2003), 19-26, Pergamon Press

Cooper
NAVAL SHIP PRODUCTION - A CLAIM SETTLED AND A FRAMEWORK BUILT
Interfaces, Vo. 10, No. 6, Dec 1980. Institute of Management Sciences, Dec 1980

 

[DRC1]

Each contract has 2 important elements - consideration (which is money) and time. If time is a contract issue, your scope of work needs to be clearly defined and the consequenses of late performance need to be defined. If the scope increases, you should imeadiately notify the client that the request will require additional time, money or both, and as soon as practical or within limits defined by the contract, you should estimate the cost of the change. Not doing this properly may invalidate your claim,no matter how fair it is, depending on your contract. If you seek costs other than direct costs, they are indirect or overhead costs. Engineeing can be a direct or indirect cost depending on how the contract is structured. Stress and engineering mistakes are not compensible. What is compensible is the portion of the overhead required to support the extra work.This is generally handled two ways. Either as in engineering, the company overhead is built into the employees charge out rate, or as is common in construction the overhead is proportioned on billings. There are several ways to do this, the most common is Eichley. Six million is a big contract and I would be getting professional leagal and accountin advise on this. If your attorneys are not completely involved, get them involved today.

Good Luck!

 

[dik]

DRC1:
What is Eichley?

Dik

 

[DRC1]

During the development of he minute man missle program, a contractor work was suspended by the government due to the need for changes in the design. When computing the cost of the suspension, Mr. Eichley, the proect manager developed a simple method of allocating home office overhead. This is the "Eichley" method.
It is used to compute the cost of a fixed pool of home office overhead costs. It is widely used in construction to compute these costs for suspension, delay, extended performance and certian extra wok claims. There are several variations as well as other methods.It has many supporters and detracters.
The concept is simple. A pool of overhead costs is defined. Typically FAR (Fed. Aquistion Register) Rules or GAP (Generally Accepted Practice - Accounting)is used to define the allowable home office overhead. Next the ratio of the final earned value of the contract is divided by the earnings of the company for the same period.Tis ratio is then multiplied by the total overhead to determine the total overhead attributal the project. This value is then divided by the total number of days of performance to get a daily rate". This daily rate is then multipied by the number of days the project was delayed to arrive at the total home office that the company would have earned but for the delay. It is not an actual amount, but a projected forcast and the value of the daily rate is heavily dependent on the company's sales volume

 

[dik]

Thank-you, sir...

Dik