As I’ve written in a previous post, change management  per se is relatively simple. It typically involves a written request as the first step; followed by detailed proposals in response about the impact on cost, timelines and services levels (usually referred to as an ‘impact assessment’); periods for review and refinement by both parties; and finally, documented authorisation.

Some contracts differentiate between certain types of change. Commonly these will be along the lines of operational change, contract change and fast-track change.

Operational change will cover changes in the supplier’s operational procedures, provided this doesn’t affect the price.

Contract change will be any change to the agreement itself.

Fast-track change is used for convenience for changes which are low value and low risk.

Many other categories are possible of course.

Operational change is worthy of note because suppliers generally expect flexibility over how they deliver their services, free of micro-management by the customer (who is essentially (so suppliers argue) buying results). Suppliers’ business models rely on the use of shared facilities and standardised processes to achieve economies of scale. Operational change is an important mechanism for maintaining efficiency. Customers of course want to know that changes won’t affect service levels or cost without their prior agreement.

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The most contentious aspect of change control during contract negotiations is usually the matter of who pays for administering it.

Some customers take the view that the supplier should provide this as part of its service (i.e. within its bid price). In reality, the number of change requests and their complexity is unpredictable and so it’s difficult for suppliers to quantify the time and resource they’ll need to make available. Most suppliers therefore look to manage their exposure through agreed limits. For example:

1. 1.The parties might agree on the number and frequency of change requests which the supplier will process before it can levy additional charges (e.g. 20 per month).
   

2. 2.Alternatively the supplier might agree to provide a specific level of resource (e.g. two full-time staff within its project management office) who’ll be responsible for change administration. Once that resource has been used up (i.e. the two staff members can’t process all change requests received without missing contract deadlines for doing so), further resource must be purchased. This has the advantage of flexibility because there will be some elasticity in the number of requests the PMO team can process (up to a point they can simply work harder, for the same cost to the customer). At the point at which they’re at full capacity, additional charges are triggered, which leads us to option 3.
   

3. 3.Option 3 is a hybrid approach which involves dedicated resource (as in option 2) but with a governance arrangement whereby the parties agree to try to smooth out peaks in demand (e.g. by temporarily extending contract deadlines for production of impact assessments) to help ensure the process remains manageable by the dedicated team at no extra cost. It might be agreed that if extensions of time have been required (say) three months running then the parties will agree on a price for additional resource to cover the extra volume of requests going forward.
   

The difficulty for the customer in paying ‘extra’ for change management is that until an impact assessment has been prepared and a price offered, there’s no way of knowing whether a particular change will ever see the light of day. If not, then the customer will be paying for nugatory effort.

Some customers also feel that an impact assessment is intrinsically little more that a quote for further work. It may be difficult in the face of executive scrutiny to justify paying for this.

Customers also worry about ‘nickel and dime-ing’ where the supplier delivers to the strict letter of the contract and raises change requests for anything which is out of scope, however trivial. One way to deal with this is to impose a de minimis threshold below which costs must be absorbed by the supplier.

Suppliers of course take the view that “you only value what you pay for”. Where there’s no cost to the customer in raising requests, the supplier may find itself bombarded with trifling or fanciful changes which never develop into paid work but still divert resources from front-line services and other important priorities. Suppliers also argue that preparing estimates and impact assessments is not a trivial exercise and time spent should in fairness be chargeable.

One way to manage these risks is to institute governance procedures requiring that change requests clear internal hurdles before they can be formally submitted. In this way, the governance process acts as a filter and only those requests which are properly authorised reach the point at which an impact assessment is triggered.