Unprofitable outsourcing project: cut scope, reprice, or stop
Who this is for: Owner, delivery lead, and finance when contract margin is negative or trending red.
When to read: Before you absorb another month of loss “to keep the client.”
What you get: Three decision paths and escalation rules.
Next step: Early margin signals, 20-minute review.
Loss rarely appears overnight — it accumulates through scope drift, rate mismatch, and delayed decisions. The goal is a named decision within one weekly cycle, not another month of hope.
Path A — Operational (delivery)
- Stop unapproved scope; reset baseline to signed SoW.
- Fix utilization mix and seniority on the account.
- Pair with bench and utilization control.
Path B — Commercial (rate and change orders)
- Reprice or cap with documented change order.
- Move unbilled scope to approved commercial status before more delivery.
- Link to scope-change workflow.
Path C — Portfolio (stop or restructure)
- Exit or pause when loss exceeds agreed threshold and client will not renegotiate.
- Protect reference value vs. cash burn — owner decision, not PM alone.
Weekly red-line signals
- Margin below internal floor two weeks in a row.
- Scope without money status growing faster than approved revenue.
- Disputed lines blocking invoice while costs continue.
What to do in 7 days
- One-page fact pack: baseline, actual burn, margin trend, top scope deltas.
- Owner picks A/B/C with deadline and client conversation owner.
- Freeze new unapproved work until commercial status is clear.
When not to wait
- No owner for commercial escalation.
- Team keeps delivering without money status on new scope.
- Finance sees loss only at quarter close.