F a l l 2 0 1 6 V o l u m e X

Contrac t Management & S cope Changes

Most professional services agreements or contracts outline the key terms and conditions applicable to the execution of the work. Legal clauses in any contract are in place to protect the parties, provide clarity, describe a process in the event of a dispute; and to protect parties’ intellectual properties and outline confidentiality and liabilities

associated with the work being undertaken. All contracts also detail the commercial aspect of the work. The commercial terms may include the project budget or value of the total project, quality of deliverables and the measurements associated with such deliverables, schedule, deliverables and scope of work as well as detailing how to address any scope changes.

Many consulting companies enter into contractual agreements with good intentions; however, lack of a well-prepared and properly structured contract leaves some consulting companies vulnerable when disputes arise. A single document that binds the parties to the project, is the agreement between the two parties (Figure 1). Unfortunately there is not enough emphasis put on the preparation of a contract that protects the consulting company, the lack of which may result in lengthy and costly litigations and millions of dollars of write-offs in the professional consulting sector every day.

Wishing you a wonderful holiday season and a happy New Year! From all of us at F&M Management Ltd.

Managing a Project

BudgetSchedule

QualityDeliverables

Professional+Services+Agreement! !

! Page!1!of!6!!

Professional!Services!Agreement.docx! Initials:!Consultant:!!____________! !

Revision!0! Client:!!! ___________! !

Ref+Number:!yyAAxxxx!Date:!dd!Month!yyyy!!This! Services! Agreement! (this+ “Agreement”)! by! and! between!Click+here+to+enter+client’s+name! (“Client”),!having!an!office!at!Click! here! to! enter! location! and! Consultant+ Limited!(“Consultant”),!having!an!office!at!Click!here!to!enter!location,!is!made!effective!as!of!Click!here!to!enter!date.!In! consideration! of! the! mutual! covenants! and! conditions!contained! herein,! Client! and! Consultant! (the+ “Parties”)! do!hereby!mutually!agree!as!follows:!

Article+1: Services+

Consultant! agrees! to! perform! services! in! the! nature! of!preliminary! engineering,! project! design,! technical! services! and!other! services! (the+ “Services”)! in! connection! with! Client’s!project!(the+“Project”),!all!as!described!in!the!Scope!of!the!Work!contained!in!Exhibit+“1"+attached!hereto.!!Client!shall!promptly!provide!Consultant!with!all!information!and!data,! including! relevant! budgetary! information,! as! well! as,! all!reviews! and! approvals! required! by! Consultant! to! complete! the!Services.!Consultant!shall!be!entitled!to!rely!on!the!accuracy!and!completeness!of!all! information!and!data!provided!by!Client!or!other!consultants!or!contractors!engaged!by!Client.!Client! shall! arrange!and!make!provision! for! Consultant’s! timely!entry!and!ready!access!to!the!Project!as!required!by!Consultant!to!perform!the!Services.!

Article+2: Compensation+

Client!shall!pay!Consultant! for! the!Services! in! the!amounts!and!the!manner!set!forth!in!Exhibit+“2”!without!delay,!deduction!or!setLoff.! All! amounts! not! paid! within! thirty! (30)! days! from! the!date!of!invoice!shall!accrue!interest!at!the!rate!equivalent!to!the!prime! interest! rate! then! quoted! by! Royal! Bank! of! Canada! plus!one!and!one!half!percent!(1.5%)!per!annum,!calculated!daily!and!compounded!monthly,!until!paid.!Client! shall! reimburse! Consultant! for! all! reasonable,! preLapproved! third! party! costs! incurred! to! carry! out! the! Services,!including!accounting!and!insurance!services.!

Article+3: Estimates+

If! the! Services! require! Consultant! to! perform! estimates,!including! Consultant’s! estimates! of! probable! costs! of! the!Services,! staffing! requirements,! scheduling,! completion! date!and/or!construction!costs!or!requirements,!such!estimates!shall!be!based!on!Consultant’s! experience! and! information! available!to! Consultant! at! the! time! such! estimates! are! made.! Client!acknowledges!that!assumptions!must!be!made!to!prepare!such!estimates!and!Consultant!shall!not!be! liable!for!the!accuracy!of!such!estimates.!

Article+4: Adjustments+

Consultant! shall! be! entitled! to! an! adjustment! to! the! schedule,!completion! date,! price! and/or! maximum! cost! for! the! Services!upon!the!occurrence!of!any!of!the!following:!(1)!the!addition!to,!modification!of! or! deletion! from! the! Services! by!Client;! (2)! the!discovery!of!any! subsurface,! climatic!or!other! conditions!which!

differ!from!those!shown!in!or!reasonably!inferable!from!the!data!and! information! provided! by! Client! to! Consultant! prior! to! the!commencement!of!the!Services;!(3)!a!modification!of!applicable!law!which!increases!the!cost!of!or!time!required!for!performing!the!Services;!(4)!delay!or!suspension!of,!or!interference!with,!the!Services!by!Client!or!by!any! third!party! involved! in! the!Project;!(5)! Client’s!modification! to! or! delay! in! providing! to! Consultant!design! criteria,! decisions! or! other! information! needed! by!Consultant;! (6)! a! change! in! the! Services! to! address!environmental! and/or! safety! concerns! (as! referenced! in!Article!8)!or!(7)!any!increase!in!Consultant’s!costs,!or!the!time!required!for! completion! of! the! Services! due! to! any! cause! beyond!Consultant’s! reasonable! control.! Consultant! shall! promptly!communicate! all! changes! to! the! Services! to! Client! in! writing.!Adjustments! to! the! performance! schedule! and/or! completion!date! shall! be! for! such! reasonable! time(s)! as! Consultant! may!recommend! after! consultation! with! Client.! Adjustments! to! the!price!and/or!maximum!cost!for!the!Services!shall!be!determined!in!accordance!with!the!fee!schedule!contained!in!Exhibit!2.!

Article+5: Standard+of+Practice+

Services! performed! by! Consultant! shall! be! conducted! in! a!manner! consistent! with! that! level! of! care! and! skill! ordinarily!exercised! by! members! of! the! engineering! profession! currently!practicing!in!the!same!locality!under!similar!conditions.!No!other!representation,! warranty! or! guarantee,! express! or! implied,! is!made!or! intended! in! this!Agreement,!or! in!any! report,!opinion,!document!or!otherwise.!!Consultant!shall!provide!qualified!and,!where!required,!suitably!licensed!personnel!to!perform!the!Services.!!

Article+6: Independent+Consultant+

Consultant! shall! serve! as! an! independent! consultant! to! Client!and! shall! have! control! over! and! be! responsible! for! the!means!and!methods!for!completing!the!Services.!In! rendering! the! Services,! Consultant! may! at! any! time! engage!subLconsultant(s)!as!deemed!necessary!and!subject! to!approval!by!Client,!to!carry!out!the!Services.!

Defects+in+the+Services+

Client! shall! itself! and! shall! instruct! its! other! contractors! to!promptly!notify!Consultant! in!writing!of!any!observed!defect!or!deficiency! in! the! Services! or! any! nonLconformity! with! the!requirements! of! this! Agreement! and! allow! Consultant! a!reasonable!period!of!time!to!remedy!such!defects,!deficiency!or!nonLconformity.!+

Article+7: Environmental+and+Safety+

Client! shall! have! title! to,! ownership! of,! legal! responsibility! for!and! liability! for! any! hazardous! or! toxic! substance! (including,!without! limitation,!asbestos)!present!at! the!Project!worksite(s),!and! not! introduced! by! Consultant! during! provision! of! the!Services.!Client!shall!be!responsible!for!the!Project’s!compliance!with!applicable!safety!and!environmental!laws,!rules,!regulations!and!ordinances.!If!Consultant!determines!a!change!in!the!Services!is!required!to!address!environmental!and/or!safety!concerns,!Consultant!shall!

Continued...

Figure 1

TheStrategicAdvisor cont.

One of the most important parts of any agreement is Deliverables and Scope of Work and how the two parties deal with scope changes. Millions of dollars may have to be written off or significant disputes may occur when the project’s initial objectives are not met due to scope changes. In order to avoid scope changes, you need to plan the project properly, set up a precise and realistic budget, and schedule and clear deliverables to all stockholders. If you are drafting a Request for Proposal (RFP) on behalf of your client to award a contract to different contractors, you must make sure:

• The deliverables and scope of the project are clearly defined.• The stakeholders are given adequate information to prepare their

proposal. • The schedule and budgets are realistic and achievable. • The RFP includes a sample of what the stakeholders may be

asked to sign in the event of them being considered to do the work.

• The process is fair and confidential.• That you provide as much technical and/or general information

to ensure the contractors do not make too many assumptions in preparing their bid which may require them to ask for scope changes during the course of the project (Figure 2).

• The contract has all relevant clauses to deal with conflict resolution, intellectual property protection and the jurisdiction under which the contract is executed and potentially litigated.

Lack of clear Scope of Work, or inadequate information in the RFP for the contractors to bid the work properly will only lead to proposals loaded with “assumptions”, “subject to conditions” and qualified bids which will most likely lead to scope changes, extra costs, delays in project delivery and ultimately a project that fails to meet its original objectives.

Some of the most notable projects that failed to meet their original objectives due to scope changes and poor project planning and execution are listed below.

Notable world projects with large cost overruns:

• Suez Canal - cost 20 times as much as initially estimated• Concord’s Supersonic Aeroplane - cost 12 times the estimate• The Chunnel Tunnel - had a construction cost overrun of 80%• Boston’s “Big Dig” Tunnel - was 275% ($11 billion) over budget• Denver Airport - the $5 billion cost of constructing the airport

was almost 200% over budget and passenger traffic in the first year was half of what was originally forecast

• Sydney Opera House - The initial cost was $7 million with a plan to open by January 1963. The building opened ten years late at a cost of $102 million.

Canadian projects with large cost overruns:

• Montreal Olympic Stadium - cost 100% more than estimated• Rogers Centre (Skydome) - started operation with $165 million

debt that ballooned to $400 million• BC Ferries “Fast Cat” Project - over budget by more than $200

million and ultimately being scrapped

Faramarz Bogzaran, CMC, EPManaging Partner

Contrac t M anagement & Scope Changes (cont inued)

Figure 2

M&A NewsQ3-2016

AECOM (Los Angeles, CA) acquired the remaining 50% equity interest in FT Services Limited (Calgary, Canada).WSP | Parsons Brinckerhoff (Montreal, Canada) acquired Mouchel Consulting (Woking, UK) from Kier Group (Sandy, UK). Global provider of nondestructive testing, inspection, and related services, Acuren (Edmonton, Canada) acquired Eclipse Scientific (Waterloo, Canada). Multi-disciplinary engineering firm, McIntosh Perry Consulting Engineers (Ottawa, Canada) merged with CCI Group (Concord, Canada). Global design leader, Stantec (Edmonton, Canada) acquired Edwards & Zuck (New York, NY), a provider of mechanical, electrical, and plumbing design services across diverse market sectors.Mechanical engineering firm, J.M. Bean & Co. (Vancouver, Canada) joined Integral Group (Oakland, CA), Integral Group is a global network of engineering services. SNC-Lavalin (Montreal, Canada) sold its Real Estate Facilities Management business in Canada to Brookfield Global Integrated Solutions (Markham, Canada).WSP | Parsons Brinckerhoff (Montreal, Canada) acquired Diseno Integraly Tecnologia Aplicada S.A. de C.V. (DITEC) (Mexico City, Mexico) and the industrial water consultancy business of Schlumberger (Paris, France).

Seemingly simple tasks are often the hardest and take the most thought. Defining the scope of your project may seem easy

until you are staring at a blank page. You know what must be done, but how do you effectively document the scope? As we discussed in previous articles, communication is the most

important aspect of project management. Effectively communicating the scope of your project (or task within a project) is one of the keys for success. The budget, schedule, contract, and many other important aspects on the project rely on an effective scope definition. An ill-defined scope will cause problems throughout the project.

The starting point for every project, no matter how small, should be a Project Scope Statement. Starting with the headings below helps you focus to get important content onto that blank page. The Scope Statement should provide, at a minimum, the following information:

Justification: A brief statement regarding the need for your project. Clearly understanding the need for the project will help the team make effective decisions during project execution.

Deliverables: Simply a list of the products, services, and/or results your project will produce. This is also referred to as the project’s objectives. While seemingly obvious, there have been many multi-million-dollar project failures because of poorly defined deliverables.

Acceptance: Define the project’s deliverables “acceptance criteria”. These criteria are the conditions that must be met before project deliverables are accepted. If a stakeholder is relying on a project deliverable they need to be involved in defining the acceptance criteria.

Exclusions: Ensure that your document defines what the project will not accomplish or produce. Focus on assumptions that a client and stakeholder might make about the project’s deliverables. Clearly defining these exclusions and carrying them into the contract will give the project team solid justification for change orders when the client or stakeholder “changes the goal posts”.

Constraints: List the restrictions that limit what you can achieve, how and when you can achieve it, and how much achieving it can cost.

Assumptions: List any outstanding assumptions that were not covered in the material above. More importantly, state how you will address uncertain information as you conceive, plan, and perform your project.

A smaller project’s Scope Statement could be covered in just a paragraph or two. There are many additional items that can be included in a Scope Statement, but I find the six items above to be key for any project.

With your project’s Scope Statement in hand, you can now flush out additional details. Again, these details should be clearly stated and recorded. Depending on the nature of the project, you may tack on these additional details after the Scope Statement or include them in

Defining Your Projec t ’s Scopemore formal project documentation (Project Proposal, Statement of Requirements, or a Project Management Plan). Additional details should include:

• Description of the Project Team• List of Project Stakeholders• Project Background Information• Detailed Scope of Work: Project Work Breakdown Structure• Work Breakdown Structure Dictionary (basically scope

statement for each project task)• Quality Assurance and Quality Control• Project Costing/Budget• Project Schedule• Overview of Project Closeout

Because a project’s scope is directly tied to schedules, budgets, and quality objectives, these all must be considered when defining the project’s scope. The project manager must ensure that the above scope description is accurately reflected in the project’s engagement contract.

Clearly documenting a project’s scope seems easy and trivial, which is probably why is it often overlooked. It could be as simple as missing a small building in a Phase 1 Environmental Site Assessment because the scope was poorly defined. This simple building could have been used for chemical storage and thus this ill-defined scope would have a major impact on the project deliverables.

Faramarz mentioned the 5 billion dollar Denver Airport boondoggle. It is a case study in project management failure from beginning to end. One of the major contributions to the cost overruns and delay was the baggage handling system. The project management team had assumed that individual airlines would make their own baggage handling arrangements. This assumption was NOT adequately documented NOR conveyed to the airlines. Some airlines, like United, just assumed that they would be responsible and made their own arrangements. Others, like Continental, did not. This assumption alone cost the airport 500 million dollars and was one of the major reasons for the delay in opening the airport. All this because the project team assumed the scope was obvious to all and didn’t bother to document it.

Accurately documenting your project’s scope is the most valuable use of a project manager’s time and effort. Ensure that you give yourself enough time to complete this task and check that the scope is accurately reflected in the project’s schedule, budget, and contract documents.

Communication of these scoping documents to the project stakeholder and project management team will set you on the proper path to delivering a successful project.

Leroy Banack, M.Sc., EPSenior Partner

TheStrategicAdvisor cont.

TheStrategicAdvisor cont.

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emphasis on the following disciplines:

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3 Tips for Job Advert isements

Did you know job seekers spend approximately 49 seconds on a job advertisement when searching for an opportunity? With this very short amount of time to capture attention, it’s essential that your

job postings are clear, concise, informative and relevant. Most often, job postings are extremely text-heavy, include irrelevant information and many are not particularly eye-catching or creative. Well-defined job advertisements can significantly decrease your cost-to-hire by attracting

candidates with the precise experience and capabilities you are looking for.

Before posting your next opportunity, here are 3 tips you may want to take into consideration to update your job advertisements:

1. Place the relevant information at the top of the posting. Most job advertisements open with their company’s history paragraph at the top. Instead, use the top portion of your posting to highlight the opportunity itself and engage your audience.

2. Explain the opportunity clearly. Explain the opportunity clearly for a potential candidate. Interview the incumbent who performed the job best and find out why that person made a difference. By finding out their experience and why they excelled, you will be better able to describe the position clearly.

3. Remove vague and confusing requirements. Instead of the common bullet point, “proficient with Microsoft Office”, include an informative and literal description of the requirement such as, “ability to generate graphic and interactive PowerPoint presentations for quarterly executive team meetings and monthly client meetings”.

Lauren Semancik, CPHR

F&M Tip

F&M News• F&M sponsored the RemTech Conference in Banff, Alberta in October

2016.

• Faramarz Bogzaran, Managing Partner, received his Certified Management Consultant (CMC) designation from the Canadian Association of Certified Management Consultants.

• F&M entered its sixth year in business in August 2016, with over 50 corporate advisory services completed.