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The following Lessons Learned are case studies from CSG files. There is
much to be learned from our experiences- the exemplary, the mundane, and
the disastrous.
Our Workshops incorporate a Lessons Learned
segment that requires the participation of senior personnel, who share
their own lessons learned along the workshop topic. This sharing of
real life experiences resonates with workshop participants and is always
the most highly rated portion of our workshops.
The following five Lessons Learned will be regularly updated, as there
are more experiences to share than this space allows. Please
contact us if you would like notification
when these updates occur. We also welcome your suggestions and requests
for topics you would like to see covered. Please also feel free to share
your own Lessons Learned.
Lesson Learned #1. Confidentiality Obligations
Two separate offices of a management consulting firm had been retained
by different parties in a hotly contested rate proceeding before a state
Public Utilities Commission. The two clients had potentially adverse
interests to each other. Each office of the management consulting firm
recognized the potential individual conflict of interest situation if
individuals worked on both engagements. However any potential
organizational conflict of interest was not addressed or discussed with
either client.
As a result of a client concern, the management consulting firm was
requested to terminate its contract valued at approximately one million
dollars with the other client, based on ethical obligations and conflict
of interest.
CSG consultants assisted the management consulting firm in negotiating
an acceptable confidentiality agreement and conflict of interest
mitigation plan that met the requirements of both clients and preserved
the one million dollar contract.
Lesson Learned: Any consideration of conflict of
interests and confidentiality obligations should take into
account both personal and organizational conflicts of interest.
When perceived conflicts of interest may arise, it is critical
to develop mitigation strategies that address any potential
developing conflict of interest to avoid ethical problems and
potential termination of a contract.
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Lesson Learned #2. Recovery of Payment Overruns
A client was involved in an administrative proceeding with a committee
of attorneys providing the project management. A consulting firm had a
contract with this client to provide technical consulting to the
client’s attorneys. The consultant’s proposal provided an estimate of
total cost of services, based upon the consultant’s experience on
similar proceedings. A number of assumptions were incorporated into the
development of the consultant’s cost estimate, but those assumptions
were not specifically provided for or discussed with the client.
The consultant’s project manager did not regularly communicate with his
client regarding the actual and projected level of effort on various
tasks being performed. The consultant project manager failed to provide
notice as required under the contract when any specific task level of
effort was projected to exceed the estimate set forth in the contract.
The work was finally completed with the consultant having provided
approximately $250,000 or 25% of additional services in excess of any
authorized amounts.
Although the consultant established that its services were completely
responsive to all changing conditions of the client and its legal
counsel and the consultant’s services resulted in savings of tens of
millions of dollars to the client, the consultant’s failure to comply
with contract notice requirements and its failure to keep the client
regularly informed as to levels of effort on each task, resulted in the
failure of the consultant to recover most of its cost overruns.
CSG consultants were asked to assist in developing a negotiating
strategy and cost recovery plan after the cost overrun had occurred and
the work had been completed. Arbitration and mediation alternatives were
evaluated and incorporated into the negotiation plan. The negotiation
strategy focused on early resolution of the dispute between senior
management. The negotiation strategy was successful in recovering a
portion of the disputed amount.
Lesson Learned: The consultant failed to explain to
its client the underlying assumptions that formed the basis of
its cost estimate. The consultant also failed to advise its
client regarding the changing requests and project conditions
and how those changes affected its actual and projected levels
of effort. Finally the consultant failed to comply with
straightforward contract notice requirements that would allow
the client to allocate funding and establish priorities for its
remaining work. A negotiation strategy was developed that
addressed the client project management issues with his
poor management of the changing work. Because the consultant's
project manager was too busy on technical work to administer the
contract, the contract management should have been delegated to a
contract administrator.
As consultants frequently discover, clients are rarely happy to
pay surprise additional amounts at the end of project,
regardless of the excellent results provided by the
consultant.
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Lesson Learned #3. Site Safety
A construction management contract included specific limitations that
the CM had no responsibility for site safety compliance by the
construction contractors. The construction contracts also provided that
the contractors were exclusively responsible for site safety compliance.
However, CM representatives on a regular basis reviewed and confirmed
compliance with various safety requirements by the contractor. A serious
site accident occurred and the CM was sued by the injured worker.
The matter was litigated and the court held that the actions of the CM
in actually reviewing and confirming compliance by the contractor with
its safety requirements established a legal obligation upon which the
injured worker could successfully recover damages. The court held the
actions of the CM provided a legal basis for liability, even though the
actions were inconsistent with the CM’s written scope of work.
Lesson Learned: Actions by field personnel can
supersede or modify any contractual provisions with respect to
site safety or other construction phase requirements. Field
personnel should be trained to avoid actions that will be
construed as assuming partial responsibility for site safety or
other contractor obligations.
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Lesson Learned #4. Recovery of Payment
An engineering firm had contracted with a foreign company to provide
professional services without securing any payment security in the form
of letter of credit, advance payments, or other customary payment
security used in international contracting. As is customary in some
business cultures, the final invoice was not paid when due. The project
managers for the client and engineering company did not communicate well
regarding the status of the past due payment, resulting in the amount
becoming seriously past due. The past due payment matter was referred
to outside counsel for initiation of collection activities.
Outside counsel first sent a simple letter confirming the amount due and
describing the additional attorneys fees and costs that would be
recoverable from the client if arbitration proceedings were required.
As result of the single letter, the client discovered the missing
invoice" and made prompt payment of the full amount due.
Lesson Learned: The engineering firm did not have in
place a process or check list for confirming that regular
communications were occurring with the client regarding payment
issues. The firm also did not use multiple levels of contact
with the client when payment questions arose. Finally, clear
contractual rights for prompt arbitration resolution and
recovery of attorneys fees by the prevailing party resulted in
prompt payment of the "missing" invoice.
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Lesson Learned #5. Incorporating Proposal into Contract
An engineering firm prepared a proposal as part of a competitive
negotiation on a major infrastructure project with engineering fees in
excess of $10 million. The proposal outlined an extensive quality
management program that could be implemented by the client in managing
its substantial construction effort.
During the course of contract negotiations and the performance of the
engineering contract, the client decided to not implement any of the
extensive quality management options set forth in the proposal.
However, the proposal was incorporated into the contract without any
revision or exception. During contract performance, major problems arose
on the construction contracts due to poor quality management being
performed by the construction contractors.
The dispute lead to major multi-party litigation. The client attempted
to recover all damages arising from poor contractor performance from the
engineering firm because the engineering firm had breached its
contractual obligation to provide the extensive quality management
program set forth in its proposal.
The engineering firm had no documentation of client direction or record
of negotiation indicating that the client had requested changes to the
proposed quality management program in the proposal. To compound the
problem, the client had requested that essentially all project
management and contract administration activities be performed verbally
or informally, so the engineering firm project team had few documents
confirming client directions.
The engineering firm was forced to defend litigation in excess of $35
million in claims. The firm did settle the litigation in the mid-seven
figures, due in part to the uncertainty of its actual scope of work
created by the incorporation of the proposal.
Lesson Learned: Proposals or any portion of the
proposal should not be incorporated into the final negotiating
contract, without careful review and confirmation that the
portion of the proposal being incorporated is appropriate for
contract purposes. Proposals often use marketing language that
is inappropriate for contract specification and scope of work
purposes.
An important role of a project manager is to manage client
relationships in an appropriate manner and to document client
negotiations and directions regarding changes in the scope of
work.
On technically complex and fast-moving projects, client
communication and documentation of client directions are often
sacrificed in order to perform the technical work. Lack of
documentation confirming verbal or informal directions is a
frequent basis for claims and loss of revenue.
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Contracts Design/Build Dispute Resolution
