April 15th, 2021
Panic sets in一you’re reviewing a project budget and realizing there is far too little money allotted for the work left. Sadly, this is a common occurrence. At least 85 percent of every project is over budget to some degree. Although this may not be as detrimental for small projects, overruns are detrimental on an enterprise scale.
Projects in industries such as oil and gas, power utilities, and transportation infrastructure often require enormous capital, risking the loss of millions, sometimes billions of dollars. In fact, the top 15 cost blowouts of the last decade for oil and gas projects amounted to a cumulative $80 billion, diluting returns to 12 percent on average.
As scary as this sounds, there are ways to set up your next project for success. While you can’t control every aspect of a project, defining a reasonable project scope is one of the best ways to help ensure it doesn’t run off the rails.
In this piece, we’ll review what project scope is, why it’s critical to success, and discuss the best way to manage it.
What Is Project Scope?
Project scope is an aspect of project planning that delineates all of a project’s tasks and deliverables, deadlines, and costs. By clearly defining all of these elements—elements that are often directly tied to measures of project’s success—project scope helps ensure that a project doesn’t end up including items that stakeholders don’t agree to, i.e., items that push the project beyond the agreed-upon scope.
For instance, say an oil refinery has scheduled a three-week turnaround to do routine maintenance on their equipment. Stakeholders have agreed on the staff, time, and equipment necessary for just maintenance. However, once the crew starts inspecting things, they find that several pieces need major repairs or replacing. The unexpected tasks not only add expenses to the project, but they may require more crew members. These things are beyond the project’s original scope.
But it’s not as if the scope is set in stone. Stakeholders can all agree to revise the scope to account for needed changes—the goal is simply to prevent unnecessary, costly changes and make sure everyone’s on the same page. The best way to do that is to create a clear project scope statement.
What Is a Project Scope Statement?
A project scope statement, also called a scope of work (SOW), documents key details of a project’s constraints. Typically, it begins by explaining the project’s purpose and expected outcome. It also distributes work among certain departments, lays out project boundaries like budgets and timelines, and establishes the standards and criteria a project must meet in order to be considered complete.
Throughout the duration of the project, managers can refer to the project scope statement to keep team members on task and to decide whether or not to incorporate change requests.
Benefits of Having a Project Scope
Constructing a project scope statement may seem tedious, but there are several major benefits to developing one. Here are just a few of those advantages:
- Alignment – Before a project kicks off, key stakeholders should specify which requirements are must-have vs merely nice-to-have. This collaboration guarantees that no one overlooks important steps or resources and that everyone is on the same page from the start. All stakeholders should agree on major aspects of the project like timeline and milestones, budget, staffing resources, and quality standards.
- Provides a project outline – A clear project scope acts as a roadmap for managers to draft up and assign specific tasks, oversee budget, and schedule work appropriately. In addition, since major milestones should already be plotted out, team members know what’s coming next and can more easily rally around common objectives.
- Helps prevent scope creep – Perhaps most importantly, project scope keeps everyone on task and on budget, precluding complex projects from extending beyond the original vision一a phenomenon known as scope creep. Scope creep has a whole array of sources: new client requests, pricey vendor contracts, issues found in testing, etc. Scope creep is an issue that’s common to projects of any scale, but it can quickly and drastically impact large-scale projects.
How To Define Project Scope and Write a Scope of Work
So, how do you write a scope of work? Before you put pen to paper, as it were, you need to gather feedback from all major parties who’ll work on or benefit from the project, from construction and engineering to accounting and legal. They’ll have insight into major requirements, resource availability, and timeline feasibility. You can also look back at the SOWs for previous, similar projects—the more, the better—and compare the SOWs with how the projects actually performed. Together, insight you gather from stakeholders and past projects can help you shape a realistic scope
Once you have that information, you can start drafting your SOW. Here are the main sections your project scope statement should include:
- Introduction – The introduction presents the purpose of the project and gives a clear, concise synopsis of the work it entails. It’s useful for other team members, executives, or clients who may be onboarded to the project after it’s started.
- Scope – The scope section should explicitly state which requirements a project covers and who’s responsible for carrying out the related tasks. The scope normally contains a high-level overview of deliverables, essential testing that must occur, and any other work post-go live. This section becomes an especially important reference if a stakeholder perceives discrepancies between what he or she expected and what was delivered.
- Milestones and deliverables – This section should list all planned deliverables such as reports, analyses, services, etc., and it should clearly list project milestones and their due dates. For large projects, this list may be quite long, but it should be exhaustive to limit the number of surprises throughout the project lifecycle.
- Criteria for project acceptance – Next should be the acceptance criteria (and the metrics) you’ll use to define a project’s success. For a new highway bridge project, for example, one of those criteria might be passing a final inspection from the state’s department of transportation. Whatever the acceptance criteria might be, all stakeholders should agree to them, since they’ll be used to validate whether or not the project should get final approval and sign-off.
- Exclusions – It’s also a good idea to add which tasks your project won’t include to your SOW. Exclusions can include just about anything: creating 3D renderings (vs 2D blueprints) of that highway bypass your company is building; roof repairs not related to solar installation for the large-scale rooftop solar farm project you’re managing, etc. Whatever they might be, exclusions should dispel any potential misconceptions regarding scope during the project.
- Constraints – No project goes 100% according to plan, so constraints are an important piece of context to include in the SOW. Examples of constraints could be reliance on outsourced vendors, or uncontrollable delays in procurement of raw materials, like what the construction industry is dealing with as a result of the COVID-19 pandemic. When these things occur, they hamper team members’ ability to get things done on time or to the level of quality desired. Mentioning constraints in the SOW is insurance for cases in which something happens outside of the project manager’s control.
What’s the Best Way to Manage Project Scope for Capital Projects?
Unfortunately, going over budget and running past deadlines are all too common for large projects. Without guardrails in place, it’s easy to bend to extra client demands, let deadlines slide, or accidentally create misalignment among project stakeholders. But for large-scale projects, these allowances compound quickly and result in enormous costs.
Clearly, a straightforward project scope can dramatically tamp down on these issues. And though the components of a project’s scope seem straightforward enough, developing and managing those components is a complex process all of its own that requires the right project management tools.
Of course, there are many project management solutions to choose from, but it’s important to use one that is well-suited to large-scale projects. After all, the bigger the project, the higher the stakes.
EcoSys’ Enterprise Project Performance Software unites all aspects of capital project management, from planning, to budgeting and forecasting, to risk and change management—everything you need to quickly and easily create a project scope and more, all in one platform.
Learn more about how EcoSys can help you tackle your project scope process today.