Dangerous Definition: Project Scope

The first letter "S" is for "specific."  In describing project scope, I want to know as specifically as possible exactly what we are working on.  An example would be a full renovation of 450 guestrooms. That's pretty specific, so far.

“M” is for "measurable". An example of this would be that we're going to re-brand this property using a different operator’s standards.  That's measurable.

"A" is for "achievable." Is it something that we can really do? In this example, we've got 450 guestrooms, and we're going to re-brand to a new operator, but now we want to take it from a 4- to a 5-diamond property. We want to bump their AAA rating a little bit. That is achievable. We can do that, so far. 

Next is R.  It's got to be "realistic". If we have 450 rooms, converting to a new brand with a 5-diamond rating, can we do that for $200,000?  Probably not. The realistic component takes this project from the wish-list or school project category very quickly and puts it into the “real” category.  Can we do it with $8 million? That's a little closer. 450 rooms, $8 million.  Depending on the condition and infrastructure, the most recent renovation, and other factors at this property, we can likely do that.

The last letter is “T;” the project needs to be "timed." That is, it's got to have a definite start and finish so as to stop spending money and begin earning money.  It can’t just "wander along."  So to complete our example, we've got a 450-room renovation.  We’ve got a new operator. We've got a new 5-diamond rating that we're going to hit, and we've got an overall project budget of $8 million.  And we’ve got 18 months to do it.  That’s a pretty tight scope definition.

Nevertheless, I think we’ve all seen a number of projects in which it appears that the scope is SMART, but upon closer inspection, there are missing details or a sufficient amount of vagueness.  One of my favorites that I’ve seen many times is, what's the perceived scope vs. what's the actual funded scope?  These are vastly different oftentimes.  I've been at kickoff meetings where the perceived scope is we think we're getting the sun and moon and stars, and the actual funded scope is we get a telescope, and we can look at the sun and moon and stars, but we certainly aren't going to have them!  Joking aside, getting the actual funded scope defined and mutually understood by the owner and the operator and the decision makers is very, very important.  The easiest way for this to happen is with a realistic line-item budget.  Although I’m jumping a little ahead here, the key word here is “realistic.”  Those budget numbers need to be real tested numbers, not a year or two old, and from comparable markets and locations.  And quantities need to be accurate too.  We worked on a meeting space project several years ago in which the initial budget was developed using plans to develop square footage estimates.  However, not all the meeting spaces were accounted for.  It was an unusual configuration, with some spaces across a corridor and on a separate plan.  The missing costs for these accidentally unaccounted-for meeting spaces meant thousands of dollars in carpet alone. 

The next issue I run across that can destroy SMART scope is the assumptions that ensue when we say the words “all” or “full.” So we're going to do a full renovation of all 450 guest rooms. Great!  "Full" is pretty big.  Are you gutting the bathrooms?  Is it soft goods and case goods?  When you think of "all,” are suites specifically included or excluded?

Additionally, ancillary areas and connected spaces can be a little slippery.  Maybe you’re renovating a ballroom and a prefunction area, and you think that’s the complete scope.  Then the property says, "But there's this outside area that is a gigantic open seating area on a lawn, and we do events out there."  That might need to be part of the scope.  If it wasn't accounted for in the original definition of what the scope was, all of a sudden now you've got a gap between dollars and need.  It's really important to have those ancillary areas and the connected spaces considered, and sometimes they aren’t necessarily obvious if you’re only looking at a plan or if you’re not familiar with the property.

The next question is, "How big is it, really?"  It's not just square footage; it's also room count.  Things like that.  What's that room count or square footage based on?  Is it a known set of drawings that the DOE has? The director of engineering has got this library, a museum in the basement of the hotel that says, "I've got everything and I know how big everything is."  That's great unless it’s a 15th generation xerox that says in blurred type something like "estimated square feet."  Verifying square footage is a whole other animal.  Verified by whom?  My preference is it's going to be done by somebody who knows how to run a tape measure.  Somebody who knows how to read a set of drawings.  And that person is almost always at the property level. It's going to be a DOE or somebody on his staff because he's responsible and knows how things work.  Honestly, I've seen situations where there have been staff members at the hotel who have been put in a position of verifying something and honestly, they're not capable. They don't have the skill set to be able to do it.  It’s not fair to them or to the project.  I think it's really important to realize the scary ramifications of this and get the right people doing the right verification.

Every now and then, a SMART scope is disregarded with volition or because of unknowns.  For example - and this is really interesting - when does it make sense to knowingly expand the scope and blow SMART?  That is, when is moving from CAPEX to ROI a good decision?  There is certainly a philosophy that says, "No way!  You can't.  The budget is the budget."  And I get that.  But what if there is an opportunity that, if you did a little something more, you would get a whole lot of something else?  A specific example of what I mean occurred on a ballroom/pre-function renovation project, and the scope was very clearly defined.  Ballroom. Prefunction.  Period.  As we began to look at the plans, we noticed that there was a defunct restaurant bar that hadn't been used in decades, and it was right behind one level of the ballrooms.  What we figured out was, if we could capture that space and expand it and change the usage of that space from basically dead space behind the ballrooms, we'd literally double the prefunction space.  We went to the owner and said, "Hey, look at what you could have!  Would this be valuable?"  They turned to the property and asked, "What could you do with double the ballroom space?"  The answer was that they would double the amount of meeting business that they could do.  By taking space that was basically unused and not generating any kind of revenue, we all of a sudden uncovered the potential for a revenue-generating space that allowed them to double their meeting business. That's a really good example of moving CAPEX to ROI.  That kind of exciting and profitable discovery is significant to me.

The unknowns that really undo SMART are change orders and extensive punchlist items. Change orders can hit a job and absolutely pound an owner, and we certainly don't like seeing that happen.  Sometimes tighter SMART scope can alleviate this, but other times it’s a collision of small mistakes or missed items or unfollowed protocol, and the checks-and-balances system just crumbles.  Extensive punch list items can hammer an owner and the schedule too, and the owner’s back can be up against the wall if the space is booked and must be available, making the punchlist remedy process very tricky.

Renovation and construction in the hospitality industry is one of the most complicated processes I know of.  SMART scope is our first best insurance against problems, and it is one thing we can control.