Estimating and Managing Time and Material Projects

We all need to have a more rigorous outlook when managing T&M projects. Even though, by definition, T&M projects pay hourly for the work completed, we owe it to our clients to manage the project to the best of our abilities and keep them informed of progress.

T&M projects are paid on an hourly basis for all work provided, consulting services or work towards a specific deliverable. T&M projects can be straight T&M (all work billed hourly) or T&M – Not to Exceed (all work billed hourly up to an agreed maximum total value, retained risk). In either case, expectations are set with the client that the work is completed in the estimated time

It is our job as project managers to manage those expectations, and to keep the client informed of progress and the remaining effort required to complete the work. Due to a variety of circumstances, we may deviate from the original estimates. By effectively communicating the deviation, it allows the client to reset their expectations, locate new budget needs, reduce project scope, or implement change requests. Keeping the client informed in this manner we continue to maintain our professional and trusted reputation of leading our clients to success.

This article provides direction and recommendations on how to maximize success with T&M projects.

Opportunity Stage

1. Estimates
   Success begins with a good estimate, which should include a solid understanding of the project objectives, the quality of the requirements (completeness, complexity), the estimator’s capabilities (experience with the client, the domain, the technology), and the capabilities of the team. We also need a clearly defined project scope from the client within established parameters (i.e. product functions, a schedule with tasks and deliverables, overall budget). The more detailed the scope definition, the fewer problems we will likely encounter throughout in the project’s lifespan. The scope statement can define ‘building a barn’ or it can define ‘building a 50 square foot barn, 20 feet high with a 10% sloped roof, two hinged doors . . .’. We must be precise when defining scope on all projects, not just Fixed Price projects.
   
   
2. Assumptions
   It is important to articulate the estimating assumptions used when preparing the proposal, SOW, Project Management Plan, etc. These form the baseline of the project. It is impossible to know how the project is trending in real time without having a baseline to measure against. Without a baseline we use gross estimates (such as hours in the phase) and most often do not understand how off track the project is until we reach the end of that phase. With a baseline we have inter-phase metrics (e.g. number of interviews, hours of testing support, etc.) that we can use to measure against. These assumptions need to be reflected in the project schedule used to manage the project.
   
   
3. Deliverables-Based Schedule
   We need to develop a detailed deliverables-based project schedule, with tasks, estimates, dependencies, and resources for each deliverable in the Work Breakdown Structure (WBS). Plan tasks to a sufficient level of detail – no more than one- or two-week duration each. Major and interim milestones should be included as appropriate. Include all tasks for all aspects of the project including key client tasks – deliverable acceptance, UAT, training, change management, etc. Level resources to 80% utilization to allow for non-plan related tasks, such as unplanned meetings, etc.

Project Initiation

1. Project Management
   There are three active components to a PM’s responsibility; Administer, Manage, and Lead:
• Administer is the collection of project information and the updating of the artifacts;
• Manage is the review and assessment of the information and resultant changes, and the go forward actions and strategy;
• Lead is the toughest and most underserviced component. This is where the PM acts as the catalyst to help form a disparate group of people into a team focused on a common goal.


2. Kick-off
   In this meeting we review the contractual obligations of the project. Everyone should be clear on what we have said we would deliver, how we are going to deliver, as well as everyone’s role and responsibility on the project. The best way to accomplish this is to review the SOW (or whatever commitment document you use), and work together to develop or review the Roles and Responsibilities matrix.
   
   It is also important to discuss project processes with the team in the kick-off. How is the project going to be run, what is the process for collecting updates, managing risks, etc.? One of the key messages I used to share with my team is how to respond when someone approached them and asked them “do this little thing for me”. No exceptions “Please go to Steve and talk with him about getting it added to the project”. This is just as important on a T&M project as it is on a Fixed Price project.
   

Project Execution

1. Reporting Status
   Project status reports, no less frequent than twice a month (aligned with time reporting), must include Estimate to Complete (ETC) information. This includes calculated hours to complete, not just the estimate hours minus hours spent. It should also include text describing activities that have taken longer, or additional activities performed in the period (e.g. “Eight client interviews were required versus the five that were estimated”). Even if there has not been a material increase to the effort hours or ETC, we need to document all the changes, large and small, from the agreed baseline assumptions. Firstly, this allows us to advise in real time as effort creeps up. Secondly, when it comes time to make a change, we have a documented and communicated timeline of the project evolution. No surprises. The status report should be discussed with the client, not just emailed to them. In-person is best, but a remote call is acceptable. This does not have to be a long meeting, usually 15 minutes is enough to highlight variances and exceptions on this period’s status report.
   
   
2. Communication
   We should ensure when we develop the project governance that we have a direct voice to the decision makers, and not be filtered through other people. It is best to have both the PM and Account Manager attending the Steering Committee meeting. If, for whatever reason, this is not possible, then arrange a brief one-on-one with the project sponsor (even if this is a 15 minute ‘variations and exceptions’ meeting). If our status is filtered through one or more people, we cannot be sure what is being communicated and emphasized.
   
   There is no such thing as over communicating. Keep stakeholders up to date with project plans, progress, and variances, and exceptions. Bring issues to the client’s attention for discussion as soon as they occur to avoid confrontation and pain later. Have a solid Stakeholder Management Plan that makes stakeholders aware of the project to bring them into line with adoption.
   
   
3. Documentation
   All decisions need to be documented. It is a good practice to have a decision log to capture project decisions. The format and medium are not as important as the fact that the decision is captured in writing. If it is not written down, it never happened. As an example, you happen to be walking down the hallway with the business sponsor and you both agree that a new group of stakeholders should be interviewed. When you are back at your desk, send the sponsor an email saying something like, “Nice chatting with you today. Just to confirm, per our conversation, we will hold xx interviews with stakeholder Group X as part of the Y Phase of the project. Can you please respond to this email and confirm I have captured this change accurately? Thanks”. This assumes that the person you were speaking with has the authority to make this change, otherwise, you would not have agreed to it. This email exchange now is added to your project book of record (digital or hard copy) and the change is communicated to the team.

A final word
What doing the above accomplishes is better managed, more successful projects, supported by informed stakeholders, and more efficient contract management.

The techniques presented here should help the project team successfully deliver on client expectations, as well as keep everyone involved engaged and invested in success. This makes for a healthy project team and happy client.

This post originally appeared on LinkedIn.

*This was originally written by Sierra Systems Group Inc., which has become NTT DATA Services as of December 17, 2018.