Flexibility and insight when it comes to statements of work and workscope changes—and the dreaded “scope-creep!”—is necessary when crafting a properly governed and collaborative Vested Outsourcing agreement.
This was brought home to me recently by Jack Everett, president – CEO at Triad Logistics Partners, LLC, who related the story of how he became known as the Scope Nazi, a riff on the Soup Nazi of fame.
Jack was prompted to tell his story after listening to my recent WERCVideo interview on the value of good governance in a 3PL relationship – one that follows Vested principles of managing the business, not the supplier or service provider, with insight, not oversight.
“I was reminded of one of my past experiences with project scope documents from my days in 3PL operations,” Jack wrote in an email. He was directly involved in the development of a project statement of work at a service parts distribution center for a major aircraft manufacturer.
“Having been involved in other new business start-ups, I had experienced the nightmare of managing ‘scope-creep’ in a new distribution center operating paradigm.”
Rather than suffer the consequences of out-of-control cost overruns, Jack adopted an aggressive process of issuing “Change Orders” anytime there was an unplanned out-of-scope element added to the solution.
“For a while during the early days of the start-up, every weekly project status update meeting included at least one request from me for a change order to cover the cost of some unanticipated solution element or service that had been added to the scope during the prior week.”
A senior leader in the client’s management team, Jack continued—apparently annoyed by the frequent change order requests—“spoke out in an expression of frustration,” saying he was going to start referring to Jack as the Scope Nazi.
The reality is that there will always be workscope changes. That’s why we need an insightful flexible governance framework and flexible pricing structures that embrace scope changes when they happen without the buyer or seller getting frustrated.
Going into the relationship with this attitude prevents frustrations.
It is much easier to have a transparent relationship with smaller statements of work and a great change management and pricing model to allow for flexibility. This is a hallmark of a Vested agreement: everyone stays happier that way!
The key is to manage the business, not the supplier. This is done by devoting more pages to managing the business and governance arrangement than wrestling with a 500-page statement of work (which I have seen!). Typically I see outsource contracts change in content when companies realize there will always be scope-creep and that it’s simply unfair not to have pricing that can address this.
Jack says that my views on managing change in outsourcing agreements are spot-on: “In my career, I have yet to see a distribution or transportation project that has a static scope of work. Service providers and their clients should expect a dynamic scope when they enter into a relationship and establish a mutually agreeable process for managing and pricing the change. Pouring through a 500-page statement of work every time there is a new solution element introduced is a deterrent to a business partnership of trust.”
Even the most comprehensive SOW cannot anticipate the realities and external factors that impact a given business relationship. That’s why governing and managing the business with flexibility and insight from the start will avoid the need for a Scope Nazi.