Honesty Is the Best Policy

The dejected Squall Line team leaders sat quietly, glancing alternately at their manager, their notes, and the project plans taped to the walls of the conference room. They had been through it several times. The task list was thorough, assumptions were documented and reasonable, and the estimates were credible. They couldn't find any more fat in the budget to trim.

Donna, the project manager, finally broke the silence. "I understand what you're telling me, but I don't know what to tell Acme."

Landing Acme Software as a customer six months ago had been a major coup. The Acme suits who coordinated the deal were not experts in the technology, but they were smart, well financed, and recognized Squall Line as a leader in its technical niche. The steady funding stream for the prototype had been a real boost for Squall, allowing the small company to focus on building good software. The business relationship with Acme also boosted Squall's image as a big league player.

Early in prototype development, Acme recognized that the Squall team could deliver. Acme had been a good partner, open to suggestions and engaging in minimal second-guessing along the way. The prototype had been delivered on time with nearly all of the target functionality. Costs had grown about 25 percent during the effort, but that had been identified early in the project, and Acme had agreed to both the revised budget and reduced feature list. The Acme team was pleased when it saw the prototype and wanted Squall to begin developing the product immediately.

But the celebration was short lived. When the Squall team outlined the product development projects costs, Acme said they were too high. When Squall suggested reducing functionality to fit the budget, Acme's position hardened. Acme insisted that Squall find a way to build the product with the full feature set, on time, and within Acme's budget. The Squall team was stuck. It could not find a way to further reduce costs without pushing risk to unacceptable levels, compromising quality, or losing money on the deal.

"I think they're lowballing us to see what we'll say," Adrian offered. "We need to push back. They won't find anyone who can do it for less."

"They might find someone willing to say they can do it for less to get the business," Sue countered. "We took pretty slim profit margins to do this deal in the first place. Someone else might be willing to do the same to take it away from us."

"But think of the learning curve," Bill said. "Anyone else taking over would first have to wrap his head around the definition, architecture, and design-not to mention the time he would need to ramp up a team. It would take a lot of time and resources just to get to where we are now."

They sat in silence for a moment.

"I'm worried that if we push back, we could break the deal," Marybeth said. "Everyone has invested a lot to get this far, and I don't want to damage our relationship with Acme."

Bill walked to the whiteboard and cleared a space. "As I see it, we have two problems," he said. "We don't know how to successfully do the project within the specified constraints, and we want to avoid damaging the relationship with the customer."

"There's a third problem," Sue said. "We don't want to take the work if we don't think we can be successful. We need to ensure it is profitable and that we preserve our reputation for quality work."

The team agreed, and Bill put Sue's point on