In my experience, project managers view Time and Materials Budgets in two separate ways: 1) the customer is responsible for containing the budget through scope, 2) the project manager assists the customer in maintaining both the labor and expense budgets. Individuals are very passionate on either side of these schools of thought. How many times have we heard, "It's time and materials, let the customer tell us what they want." or "It's time and materials, we will reassess budget after the requirements are complete." Each of these statements assumes a non-agile model which is a separate discussion, but in my opinion is something the PM should reconsider.
In the first school, PMs proceed through the requirements processes and allow the customer to define the requirements without regard to cost containment. In most instances, the end user community of the customer shoots for the stars and asks for more than they really need. In some cases, they know the scope will be reduced and in others see how far they can push the vendor. This leads to a situation whereby the available project budget has been exceeded, customer expectations are high, and the PM has to reduce the scope of the project to maintain a budget somewhere near the original because the end users do not have a mechanism to understand the cost of their requests. An additional problem with this approach is an implicit assumption that the customer can afford any set of scope or that the customer is responsible for containing the aspirations of their end user community. I find this to be true in only a small number of cases. Taking this position can put the customer PM in an awkward position.
Given the customer technical resources must work with their end users over many years, they implicitly look to the vendor PM to maintain the scope within the budget as the requirements unfold. This affords them the opportunity to be the arbitrator of any disputes and keeps them in a good long term position with their end users as they are perceived as looking out for the best interests of their users. This school of thought also entails the vendor PM to identify and maintain a tally of the extra work the customer is asking for that is producing upward pressure on the budget. By keeping the top end number in front of the end users, the customer PM can maintain a more appropriate arbitrator position while still maintaining the high level budget figure. This also puts the responsibility for cost containment on the vendor PM as they will need to dynamically maintain a running budget figure while keeping a viable solution in place. Typically this includes updating the customer PM on the cost of the emerging scope through a series of estimates.
In the end, responsibility for budget control is shared between both PMs on the project. For vendor PMs who take the lead in containment with the customer, they will have a better positioned customer PM and a better relationship.
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