Risk management

Risk management
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Managing risk is an essential aspect of project management. Overall risks of using a consultant should be considered as early as possible in the procurement process to maximise the opportunity for adopting mitigation strategies, if required. In the case of complex projects, it is worth seeking professional advice, or consulting older publications such as Purchasing Australia (1997), AGS 1997a, and AGS 1997b. Although some aspects of these publications are now outdated (for example the procurement framework and policy) they still offer a range of practical advice.

As well as the risk of hiring a consultant, the project itself will involve risk. Good consultants will automatically assess the risks associated with a project, either as part of their proposal or once the contract has been signed. Clients should always ask for a risk assessment and the consultant’s proposed method of dealing with risks. In the case of large or complex projects, it is a good idea to ask the consultant to produce a Project Charter or Plan, to ensure that both sides have an agreed understanding of both the content of the project, as well as who bears likely risks and implements appropriate mitigation strategies.

Not all risk is borne by the client. When considering how to bid for a project, a consultant will typically take into account a wide range of issues, including dependence on the client for the provision of data, the clarity of purpose demonstrated by the client (and hence risk of goalposts changing during the project), the continued availability of key staff (consultant’s and client’s), conflict of interest with other clients, the client’s ‘culture’ (and hence the willingness to accept unconventional or ‘creative’ results), the realism of the client’s estimate of the time required to complete the project, political factors beyond the consultant’s control, profit levels, and whether the client will pay on time.

Both client and consultant risks are relevant to the success or failure of a project. As the client, you should endeavour to be aware of all of them.

Table 1 — Establishing the Need for a Consultant: Risks and Mitigation

Type of risk	Likely consequence	Mitigation strategy
Overlook or breach key provisions of CEIs, CPGs or FMARs	Decision to engage consultant is not defensible Possible legal action, media interest, or probing by Senate Committees	Read key documents, particularly CEIs for your agency Check with contracts officer or legal adviser
Insufficient funding	Purchase or availability of services delayed Premature termination of contract Reduced quality of output	Ensure funds available at outset Allow for contingencies and risk in contract Provide for about 10 to 15 per cent expenditure contingency Check that there are no follow-on costs after completion of the consultancy
Unrealistic timeframe for completion of task by consultant	Delivery schedule not met Lower quality product delivered Bad reputation among consultants (and possibly higher quotes for next tender)	Plan ahead Where timeframe is unavoidable, select high quality consultant with large resource base
Realistic solution not feasible	Unnecessary expenditure On the other hand, external confirmation of the absence of a solution may be an advantage Finalisation of the project may be difficult	Perform detailed needs analysis before decision to hire a consultant If it seems likely that a solution may not be found, provide in the contract for flexibility to terminate the contract
Misinterpretation of needs, or inability to use results	Unnecessary expenditure Failure to implement optimal policy outputs	Specify clear deliverables Check ‘needs analysis’ with stakeholders Carry out a ‘dry run’ using dummy results to check how they will be used in practice (eg., for policy advice, statistical testing) Perform a ‘gap analysis’ to compare expected outputs of consultancy against what is needed for policy advice, etc.

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