Contracting for Performance
Classic project objectives are set in terms of cost, time and performance. Bringing it in on time and to budget are risk management achievements which are internal to the project.
Performance starts before there is a project and continues after the project is complete. Managing risks to performance is a subtler aspect of project management, while within business-as-usual organisations the delivery of performance is a key issue on scales ranging from the individual to the whole business.
For many people working within project management, understanding the risks to performance is by no means straightforward. For example:
• When we talk about performance, do we mean meeting objectives and delivering a ‘fit-for-purpose’ product?
• Is performance all about quality, audits, KPIs or KRIs?
• Do we have agreed definitions for performance?
• How should we measure performance?
• Do we know what the risks to performance are?
Exploring the issues around risk to performance
The Association for Project Management Risk Specific Interest Group (SIG) held a one day event with the Institute of Risk Management (IRM) in July 2009 to explore these issues. The specific objectives for the event were:
• to explore what good practice meant in three areas: risk management, performance management and benefits realisation management;
• to explore how these three areas differed and to explore the lessons that attendees could learn from each area;
• to consider whether they should be brought together to form a single discipline or not.
The presenters for the event were:
• David Chard, Principal Consultant at OTC Optima Ltd;
• John Knott, Principal Consultant, John Knott Associates;
• Peter Campbell, Director Risk Advantage Ltd and Chair of the APM Risk SIG;
• Val Jonas, CEO of Risk Decisions Ltd, and;
• Matthew Leitch, Principal Consultant with Internal Controls Design
Andy Garlick, independent risk Consultant with The Risk Agenda and PPP Secretary for the Institute of Risk Management opened the event by posing three questions:
• How well do we deal with risk to performance?
• Is what we do worth the effort?
• Is there scope for improvement?
To illustrate the scale of the challenge – and the opportunities – facing organisations running projects, Andy said that for every 100 projects:
• 40% (40 projects) failed to deliver – these were cancelled or faced serious delivery problems;
• 40% of the rest (25 projects) failed to be accepted by business users;
• 40% of the rest (15 projects) failed to generate the expected benefits, and;
• Just 20% (20 projects) delivered the planned benefits.