Top 10 Reasons Why Fixed Bid ERP Implementations Fail

In our years of ERP experience, we’ve learned a thing our two about what it takes for a successful implementation. We have also seen what can derail the process, particularly in a fixed bid situations.

1. A shift in focus

The focus of the implementation will shift from true deliverables to tracking the project scope deviations, delays caused by unavailability of involved personnel, infrastructure issues, and other unforeseen circumstances associated with the project size and complexity.

2. Exponentially large scope

Unavoidable decisions to forego certain deliverables in order to fulfill the “perceived” project scope.  No matter how detailed the project scope, it is nearly impossible to define every minute detail associated with large ERP implementations.

3. Finger-pointing

Tension over who is responsible in the ‘current state scope’ (who, what, when and how OR “The blame game”).  If the scope and expectations are not 100% clear, it is likely to lead to a combative relationship between the implementation vendor and their customer.

4. Over-management

A false sense of security perceived from a fixed-bid.  In reality, the final costs could be higher due to increased project management costs and/or inflated bids to hedge vendor risks.

5. Lack of process ownership

Tasks and activities usually handled by the implementation vendor could be pushed into the hands of their customer.  This decreases efficiency and accuracy and ultimately adds to the length of the implementation effort.

6. Loss of budget flexibility

Although it appears there is budget stability, the reality is it makes the project extremely non-flexible as strategic modifications throughout the implementation (which are 100% guaranteed to occur) will be very expensive not only to execute, but also to track and manage.

7. Emphasis on resource management – not ROI

The ROI is reduced, as the effort spent on controls and contract/project management is significantly higher.

8. Best practices go out the window

The implementation vendor is incentivized to spend less time and not focus on a best practice implementation.  Tasks such as knowledge transfer, data cleansing, documentation, etc. move down the priority list.  Vendor incentives for the fixed bid project are misdirected.

9. Risks remain

While the customer’s goal is to transfer risks and responsibilities to the implementation vendor, the true risks for ERP implementation projects remains with the customer.  Trying to recant on internal responsibilities will only hurt the initiative.

10. Fine print galore

Fixed bid project contracts come with a long list of constraints and conditions, which make the fixed fee terms ineffective.