Don’t Let “Scope Creep” Creep up on You!
Scope creep is defined as the continuous and gradual expansion of the scope of a project after the contract has been signed, as a result of multiple and successive owner-issued change orders. But let us take a look at this phenomenon in action with the help of an example.
An illustration of scope creep
Picture this. Joe and his wife Mary are planning to build a new house. When in the architect’s office, they explained to him their design guidelines and demands. Joe emphasizes that his budget is limited to $250,000. The architect completed the design within their guidelines and budget.
Later, Joe signed a contract with a construction company to build the house for the agreed price tag of $250,000. As the contractor broke ground, Mary decided to add a little suite for her parents who visit occasionally. Joe agreed as this idea gives him more privacy when they visit. This addition required the architect to redesign and reapply for a permit.
The contractor suggested larger windows in the living room and Joe’s office since they overlook beautiful scenery. Later, the kids (Mike: 15, Kyle: 14, and Beth: 10) badgered their dad for installing a swimming pool, and Joe bowed to their pressure.
As Mary was working with the contractor on the finishes, the contractor gave her options to upgrade. The upgrade would include flooring, kitchen cabinets and appliances, countertops, paint, plumbing, lighting fixtures, security system, and more. The contractor explained the advantages of these additions and she couldn’t say no.
Finally, the project was finished and the house turned out to be beautiful. That was the good news. The bad news though is that Joe and Mary had to shell out $384,000. Joe and Mary had signed so many change orders that they did not anticipate the cost to go so high.
Why do Scope Creeps take place?
Scope creeps take place for a number of reasons including :
Failure in accurately assessing the impact of changes on the cost and schedule,
Unrealistic expectations and decentralized decision making.
It usually results in negative consequences to the owner, often including a reduction of the project value. The term scope creep is used to reflect how these small and successive expansions of the project’s scope “creep up” without making much noise.
1. Direct and Indirect Scope Creeps
Causes of scope creep can be grouped into direct and indirect. The first group includes changes the owner made willingly due to change of mind during the construction phase, whether resulting from rethinking or getting influenced by others. The second group includes changes forced on the owner for items that should have been considered originally.
Most likely, this was caused by poor planning. In some cases, these changes are not the fault of the owner. A sudden change to codes and regulations, new developments, or market conditions may force a change in the project.
2. Scope Creep and Change Orders
There is a relationship between scope creep and change (variation) orders. Scope creep usually results in a chain of change orders, but not every change order is necessarily part of scope creep.
Besides, change orders may not always alter the project scope. Large numbers of change orders is an indicator of poor project scope definition/management. However, we need to distinguish scope creep from any results of value engineering (VE) studies. Unlike scope creep, VE-induced changes are studied and controlled so they are more logical than emotional.
There are also two important differences between VE changes and scope creep. Value engineering changes mostly result in increasing the value although it may increase the upfront cost. Scope creep changes always result in a cost increase with a decrease in value.
A value engineering study in a project is conspicuous and its results usually are grouped in a report, although it is possible for suggestions to arrive individually. On the other side, scope creep occurs gradually and inconspicuously.
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Scope Creep - Root Cause Analysis
There are many causes for scope creep, many of which are related. So we can group them in the following manner:
This is probably the number one cause, by far. Many owners skip planning as they believe it is a waste of time and money. Sometimes, they rush to execution because they are so eager to see it finished. There are several symptoms or types to this cause:
• Failing to reconcile the “wish list” with the “can list”
It is like wanting to buy a Bentley with a Toyota Corolla budget. It is nice to upgrade and add features but we must always verify - Do I really need this upgrade/addition? And can I afford it?
Actually, the comparison should be 3-dimensional: the “wish list”, the “can list”, and “need list”. If you are building a 3-story residential villa and thinking of installing an elevator. There are four likelihoods:
i. You need it and you can afford it.
ii. You need it and but can’t afford it.
iii. You don’t need it but you can afford it.
iv. You don’t need it and can’t afford it.
The decision in the first and fourth cases is easy. The second case is a financial issue that must be resolved. The third case qualifies as a classic example of scope creep for unnecessary upgrades that may not add value unless you believe this is good for the resale. That is why a cost-benefit analysis is necessary during the design phase with a focus on the value.
• Lack of clarity and depth in the original design
Designers may not do a proper job; leaving the design documents with errors, omissions, or ambiguities. The owner may not realize the issue until construction begins. By then, the contractor starts discovering these issues and issuing change orders.
• Failure to understand all project requirements
This can be the fault of the owner, the designer, or both. It can happen when you rush to execution before you do the “due diligence.” You can design a commercial building without paying attention to what future tenants may need. Later on, issues start arising and forcing changes.
• Lack of involvement of professionals and stakeholders early enough
This can be particularly important for technical issues. The owner may be the decision-maker but needs to consult with technical experts and end-users.
• The wrong type of contract
Choosing the type of contract (lump-sum, unit price, or cost-plus-fee) is extremely important to control cost and risk. A cost-plus-fee contract, if inappropriately chosen, may create a chain of problems for the owner. The choice of a contract template and delivery method is also important.
2. The “Cheap Mentality”
Some owners want to cut costs without careful consideration to the quality of the hired professional (design and construction). They may give the job to pseudo-professionals, elect to do it themselves, or go for the cheaper contractor. In most cases, they end up spending more money and getting more headaches. There is also a trend at some owners to pressure the contractor as much as possible. Owners need to realize that working with a happy and content contractor is better for everyone.
3. Unnecessary use of fast-track
Fast-tracking a project means overlapping design with construction. This method is used when time is tight and construction needs to start as soon as possible. But it comes with drawbacks such as starting the project with a scope incompletely defined. It is like starting the foundation of a building without knowing exactly what the building will look like. I recommended that fast-tracking is only used when needed, and with taking all precautions to minimize scope creep and change orders.
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4. Inefficient decision-making process:
This can happen to both individuals and organizations alike. Some of the reasons are:
• Too many stakeholders / decision-makers making or influencing the changes.
• Hesitation and inability to make decisions. Some owners overreact to events and incidents which require an opposite “correction” later.
• Owner’s lack of technical competency and instead, making impulsive decisions.
• Getting influenced by others with different opinions. This likely indicates emotional thinking (lack of emotional intelligence).
• Organization turnover. There is a high likelihood for people taking leadership positions to reverse or alter the predecessor’s decisions because of either genuine difference in opinion or sheer ego.
5. Poor communications between the owner and the designer:
Misunderstandings may arise due to different languages and cultures, overlooking the issues due to lack of time, inefficient exchange of information, ineffective communications protocol.
There might be a problem in allowing direct and unmanaged contact between either the owner and contractor’s crews and subcontractors. The same applies between the people in the owner’s organization and the contractor.
Another reason is the lack of “professional democracy”. This happens when a person in a high position in an organization makes decisions that have technical implications without consulting with technical staff. At the same time, subordinates don’t feel free to speak out to critique or correct these decisions. They take the boss’s suggestions as directives that may not be argued!
Documentation is another important item. There are many reasons for insisting on a strict documentation process. It can settle arguments like “No, that’s not what I said” or “I didn’t mean what you thought”. It can refresh the memory of people in this busy time. It establishes a reference to go to, especially when people leave their positions.
6. Poor “change control/management” policy
Changes are highly likely in any project but the challenge is in how to control and manage them. A clear and efficient process must be established and followed. It should include who initiates the change order, who approves it, length of the approval process, what documents are needed, among other items. This change management policy must help minimize both the number of changes and their impact on project objectives.
Scope creep also has to do with project length because it is directly related to uncertainty which likely leads to more changes. Market conditions and government rules and regulations may change. Natural and man-made disasters may happen. The owner’s own situation may change; to better or worse. All these can trigger changes in the project scope but managing these changes is a key factor.