Executive Summary
The case study explains one of Zinthro’s projects, the ShopCart, where a calculation error could cost Sharika Charlton her job and company. Charlton is one of the executive members whose career growth has been outlined. She portrays exemplary leadership skills that land her in different opportunities despite the challenges faced by various workers. The company is working for a government client where the company is given a contract to maintain all hardware and software implemented for the client, including; equipment repair or replacement, fixing software glitches and anything else needed to keep the solution running. Both internal and external providers work on the plan.
Like any other company, Zinthro divides its work, where one division focuses on hardware maintenance while the other is responsible for software issues. Different external stakeholders were on board to help provide support for specific aspects of the solution. The case study shows how coordinating with the clients in a certain project is the greatest builder for success. Charton and Villgas, a contactor on the client’s side, work together to solve problems with good and clear communication lines easily. A tiger team from one of the divisions comprising an executive management group works on seeking, bidding, and closing government contracts, landing the company different contracts. The team is supervised by Marchenko, who respects the members. The complex ShopCart contract is earned after a few weeks of the tiger team’s work on developing a high-level technical solution. The team also had to come up with the aggregated cost of the project, which meant they had to overwork to make it on time which was quite a challenge.
The company was awarded the fixed-price contract for the ShopCart project. The project began on January 2, 2019, with a technical staff of thirty project team members that increased to fifty-five by June 2019. With the complexity from a contracting perspective, a second program manager came on board to help Anderson manage the overall operations, which brought Charlton on Board. Charlton reviewed documents with lots of collected data to become familiar with the data of the project, where she figured several technical and business issues, low staff planning, stretched resources from the request from the client’s changes on staffing (subcontract withdrawal), concerns on the proposed solutions, contract modifications which brought in new contractual documents that added up on the already heavy workload for Charlton. All these challenges came from miscalculation errors, poor budgeting, and poor data compilation after sourcing. After revising the project cost, Charlton came up with a budget of $75 million, which was more than double the original cost estimate of $32 million. A project estimated for a $ 13 million profit would be a $30 million loss if the mistakes were not rectified. The financial challenge being the major crisis, Charlton had to bring up the issues to the team to protect her career and colleagues despite the possibility of a significant backlash.
Immediate Issues
As a project manager, you can better prepare your team for success by anticipating potential obstacles. Knowing the risks involved in a project helps you set achievable goals and keep your team on track. This segment outlines the immediate issues visible from the case study. One of the immediate issues is needing more skilled team members (Simushi et al., 2020). Project teams’ success is directly proportional to the quantity and quality of their available labour force, just as a chain is only as strong as its weakest link. Right from. At the start of the project implementation, there is a low count on the staff, which is later in the case study considered a “bare-bones model.” This has led to the changes of bringing another project management on board who, after reviewing the whole project, highlights that the project needs more staff members.
The second issue is stretched resources which is visible in several instances in the case study. The need for more available resources is a source of resource risk. Time, knowledge, money, and equipment are all examples of resources. A project manager’s duties include securing the necessary materials and informing the team of their progress. Charlton receives a call from Zhang, the maintenance team leader who, after looking at the proposal, finds out that there need to be more resources to cater for all the implementations. After Charlton reviewed the proposed budget and costs of the materials and staff needed, she discovered that the project needs more than double the estimated amount.
There are also adjustments to how things work. Risks associated with day-to-day operations include unanticipated shifts in team positions, new management, or different procedures that must be learned and implemented. In this case, judging from the complexity of the project implementation, the company had to add a second operations manager to help oversee the whole project. The government client also makes some operations change requests that lead to Charlton receiving more contractual documents that add to the heavy workload. Distractions, altered processes, and pushed-back schedules are all possible results of such occurrences.
Another area for improvement in managing a project is a deadline that is so tight that it compromises quality. Any competent project manager knows the team’s strengths and weaknesses and uses this information to negotiate a workable schedule by setting deadlines and assigning tasks in order of importance. In agile project management, stakeholders collaborate to determine the sprint’s velocity and the work rate. This is accomplished while the project is still in the planning stages. This prevents uncontrolled growth of the project’s scope (scope creep) during implementation and allows for more or less flexible schedules. In the case study, the very first mistake was a shallow timeline that led to many errors in budgeting.
Lastly, scope creep is also an issue in the case. Any project will inevitably experience some degree of scope creep. While there may be some advantages, the drawbacks usually outweigh them. In 2017, 52% of teams reported experiencing scope creep, which is expected to rise in the future. One of the main issues managers and the project team face is dealing with clients that need clarification on what they want and have broad criteria. In the case study even when the project is progressing, the government client still requests to make operational changes.
Root problems
Fixed-price contract projects carry a higher degree of uncertainty than other projects. For instance, the agreed-upon price for such a project is usually not subject to modifications depending on the seller’s subsequent expenditures incurred in carrying out the work. If the proposal is bid appropriately, the work is managed well, and adjustments are processed as contract updates, the rewards for managing a fixed-price project can be substantial. Significantly, in a fixed-price contract project, the client pays a predetermined amount for certain services. The service provider will only pay extra if it takes more time or money than expected to complete the work scope and produce the deliverables. The provider risks spending more money than expected to finish the project. If the service provider starts working after the agreed-upon project goals and deliverables have been completed and accepted, you may violate the terms of the agreement.
Secondly, enough time is required to complete the Budget. In a disorganized setting, where multiple budget drafts may be necessary, the budgeting process can last long. Time spent is reduced when an organized budgeting process is in place, workers are used to it, and budgeting software is employed. If company conditions are volatile, the budget model must be updated frequently, which can add significant extra labour. In this case, budgeting is the root cause of most immediate cases. According to the review from Charlton, it was done in haste to the point of miscalculation and unpriced resources there after the follow-up. The budget hikes double the set prices.
Decision Criteria
The criterion for making a call should be quantifiable and relevant to the issue at hand. One should be able to compare items based on seemingly intangible qualities. For instance, the “user-pleasant” quality is not a measurable attribute of the typical software created for a government client. According to the client’s business needs, one can either compile a list of the features that make the application user-friendly (Dixit, 2020) or test out the different options and score them according to how “user-friendly” they are. Case studies typically use criteria such as project cost, ease of modification/scalability/flexibility, and staff adequacy as decision-making tools. The case study shows the project’s complexity; it needs additional staff to keep it running. The cost is also considered, seen from the budgeting mistakes and miscalculation errors. The ease of modification is seen from the client requesting more operational cases, which is nearly impossible. The employees, however, are very few; therefore, more is needed for the project completion.
Alternatives
Identifying the project’s main outcome areas, also known as essential success elements in project management, is one approach project managers can use to rein in projects over budget. These are the “big-picture” tasks that must be accomplished on schedule and with good quality for the project to succeed (Arbuckle et al., 2021). Project managers might reshuffle priorities like pieces on a chessboard to make up for hiccups in the plan. This alternative has several benefits, including boosting communication, reducing risks, and promoting cost certainty. The pros include; the consumption of a lot of time, complexity and room for disagreement.
The second option is to inform customers and stakeholders about the budget overrun and the team’s plan for addressing it. This approach can lead to earlier risk detection, increased communication, and fewer misunderstandings. However, its effectiveness depends on the willingness of the project lead to enhance their skills and may require time and resources that could delay project completion (Arbuckle et al., 2021). Additionally, customers may be hesitant about new ideas despite the benefits of a fixed contract. Informing customers and stakeholders about a budget overrun and the team’s plan to address it has several benefits (Dixit, 2020). It allows for early detection of risks, increases communication and collaboration, prevents misunderstandings, and builds trust. However, there are also potential drawbacks, such as delayed project completion, resistance to change, negative impact on reputation, and loss of confidence. It’s important to weigh the pros and cons carefully and communicate the situation transparently and proactively.
An economical price adjustment can be proposed in a fixed-price contract to adjust the contract price based on specified contingencies such as changes in material or labour costs. This provides cost certainty and reduces the risk of budget overruns for both parties. However, it can be complex and require detailed calculations, increasing the administrative burden and contract finalization time (Simushi et al., 2020). Additionally, disputes and project delays may occur if the formula for calculating the adjustment needs to be clarified or there is a disagreement on how it should be applied. Furthermore, the clause may not cover unforeseen costs, limiting its effectiveness in providing complete cost certainty.
Recommendations
Proposing an economical price adjustment (EPA) can be the best solution because it allows adjustments to the contract price based on changes in economic conditions. In other words, an EPA clause can help to mitigate the risks associated with unforeseen events, such as inflation or changes in the cost of labour or materials, which can cause project costs to exceed the original estimate (Tate, 2019). With an EPA clause, the contractor may be able to absorb the cost overruns, which can be detrimental to their bottom line. In such cases, the contractor may be forced to cut corners or compromise on quality to keep costs under control, which can ultimately affect the project’s success. In contrast, an EPA clause allows adjustments to be made to the contract price in response to changes in economic conditions, helping to ensure that both the contractor and the client are protected from the risks associated with cost overruns (Cavalieri et al., 2019). This can lead to a more successful project outcome, as the contractor can maintain the necessary resources and quality standards without compromising the project’s objectives.
Implementation
To mitigate project overruns and their negative impact on budgets, consider implementing economic price adjustment (EPA) contract clauses. To do so, define the EPA clause with a legal expert and specify its formula and triggers. Determine the trigger based on events that increase project costs, and design the adjustment formula to compensate contractors fairly (Cavalieri et al., 2019). Define the baseline from which adjustments will be made and monitor the EPA clause’s effectiveness by tracking triggers and calculating adjustments. If adjustments are made frequently, consider re-negotiating the contract to ensure its financial viability. Implementing an EPA clause can ensure fair compensation for contractors and mitigate project risks.
References
Arbuckle, E. J., Binsted, M., Davies, E. G., Chiappori, D. V., Bergeron, C., Siddiqui, M. S., … & Macaluso, N. (2021). Insights for Canadian electricity generation planning from an integrated assessment model: Should we be more cautious about hydropower cost overruns? Energy Policy, 150, 112138. https://doi.org/10.1016/j.enpol.2021.112138
Cavalieri, M., Cristaudo, R., & Guccio, C. (2019). Tales on the dark side of the transport infrastructure provision: a systematic literature review of the determinants of cost overruns. Transport reviews, 39(6), 774-794. https://doi.org/10.1080/01441647.2019.1636895
Dixit, V. (2022). Risk assessment of different sourcing contract scenarios in project procurement. International Journal of Construction Management, 22(8), 1537-1549. https://doi.org/10.1080/15623599.2020.1728610
Simushi, S., & Wium, J. (2020). Time and cost overruns on large projects: Understanding the root cause. Journal of Construction in Developing Countries, 25(1), 129-146. https://doi.org/10.21315/jcdc2020.25.1.7
Taye, G. (2019). Simulation Modeling of Cost Overrun in Construction Project in Ethiopia. International Journal of Recent Technology and Engineering, 8(4), 12685-12691. DOI:10.35940/ijrte.D9121.118419
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