Learn how to calculate the cost of a scope change request

The project manager and project team are accountable for understanding the total impact of a scope change to a project. This article describes the elements that need your attention.

When you receive a request for a scope change, you should consider the three basic components of the change management process:

  • The client defines the business value of the change.
  • The project manager (or project team) determines the impact to the project.
  • The project manager takes both the impact and the benefit to the sponsor for resolution.

The project manager and project team are accountable for understanding the total impact to the project. Let's take a look at the most important areas you should evaluate.

Factors that affect scope change

Effort. The first place to look is whether there will be more effort required as a result of the change. Almost all scope change requests result in more effort, unless the change actually implies a reduction of features and functions.

Cost. The scope change request may require additional labor and/or non-labor costs. In many organizations, the internal employees do not have an hourly chargeback to the client so there is no additional cost (from an accounting standpoint) unless the work is done by contract resources. There may also be non-labor charges. For instance, you may have to buy additional hardware as a result of a scope change.

Duration. It is an over-generalization to say that all scope changes result in a longer project. The question to ask is whether the additional effort for the scope change is in the critical path. If it is, the project may indeed take longer. If the change is off the critical path, it may take more effort but it may not effect the overall project duration.

Focus / morale. Some scope changes result in more than additional effort, cost, and duration. They can result in the team losing focus or experiencing decreased morale. This is especially true if the changes come late in the project or if there are many, many changes that result in project drift.

Don't overlook this final factor: Deferred benefits

Your project will result in a benefit to the company. The benefit usually starts immediately after (or soon after) the solution is implemented. If a scope change request results in the project being delayed, the impact of the scope change should also include the cost of the delayed benefit.

Look at the following example. Let's say your project will result in a business benefit of $5,000 per month in increased revenue. As the project is progressing, the client makes a change request that will cost $5,000 and add one more month to the project. The change has an estimated payback value of $500 per month.

You could go to the sponsor with a change request that states that there is a $5,000 cost, a one month project delay, and an estimated benefit of $500 per month. The sponsor might reason that the change will pay for itself in 10 months.

However, the part that is missing is the deferred benefit cost associated with implementing one month late. In this case, implementing one month later than planned also costs the company $5,000 in lost revenue, making the total cost of the scope change request $10,000, and requiring 20 months to receive a payback. The sponsor may still approve the change. However, taking into account the deferred benefit associated with a project delay should be a part of the scope change impact estimate for the sponsor to evaluate.

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