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Managing Contract Changes

April 20, 2010

I wrote recently about the growing importance of change management .  I was highlighting the need for properly defined change procedures that assist in maintaining alignment between the contracting parties and therefore play a key role in building cooperation and trust.

The frequency and speed of change (up by more than 30% in the last 5 years, according to recent IACCM research) has made it increasingly important for organizations to define the way it will be managed. Failure to do this almost inevitably results in disputes and means that opportunities for increased value or innovation will be lost.

Last week, a message board posting by an IACCM member shed a different light on this problem. Essentially, this professional was asking ‘How do you get internal and external management to engage in the change control process?’ Even though she works at one of the companies that is acknowledged for the excellence of its post-award contract management, she finds it extremely difficult to gain management attention or have them follow the established change procedures. That lack of discipline means that key conversations either do not occur or are not recorded, changes happen informally and when things go wrong … fingers point everywhere except at the true cause.

To see whether this was more than an isolated incident, I spoke with a few senior professionals in industries where efffective change management is critical to cost and performance – for example, aerospace, engineering and outsourcing. It became clear that the experience of the original author was far from unique. In the words of one very senior commercial executive: “The lower level contracting professionals  follow process whereas seniors circumvent the process because they get paid to make really big decisions.  In my career, (I found that these) very big decisions were very rarely written down.  In my view, the level of risk rises in direct proportion to the level of seniority making the decision.”

Of course, one would expect that senior management is involved in the riskier decisions. But the point here is that senior management may often be the source of risk because it considers itself above trivial things like process and business discipline. Good change management is without question a source of better relationships and higher profits; but often, it seems, executives may be the ones who are the enemies of properly managed contract change.

Is that true in your organization?

One Comment
  1. B.R.Srikanth permalink

    I think this case could be for specific instances like getting paid on cost plus basis – NASA or Defence contracting with Lockheed for example;
    However, in normal Contracts big decisions need to be documented and processes followed – atleast in the oil and gas industry

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