Let's suppose that a client asks for a change or some additional functionality, but doesn't accept/agree that it is a change request (and that, as consequence, the schedule, the cost must be revised)? What do we do?
It becomes a contract dispute. As the PM, you would escalate the dispute based on however your company defined its escalation process. Most likely, you would raise it internally through your contracts and legal departments. The folks there would assess the merits of your argument as compared to the contract language and the risk of litigation. From there, it is out of your hands until your superiors tell you what to do next. As a PM, the answer is no until you are told otherwise.
In my experience, sellers acquiesce and proceed with the work despite its impacts. My industry is in the government space so I think that is common here. However, in construction, that is less likely to happen.
If your operating model involves detailed scope and change management then ultimately that comes down to negotiation. As in any negotiation, you can win some things and lose others. If you think you are giving away too much then the final decision is usually a matter of account management rather than project management because whoever makes the commercial decisions will at some point have to decide how much holding onto the contract and the customer is worth to your business.
In the case of software development, attempting to fix detailed scope too early is something that sinks many projects into a mire of contract negotiation and ill will. It's usually better for all concerned to steer clear of the change versus fix debate. Use a model (fixed budget or T&M or gated delivery milestones) that allows you to deliver the best solution at the best price without agonising over whether something represents a change or not.
Inform and Advise Your Company's Leadership
As others have said, this is largely a contractual issue. From a project management perspective, your responsibility ends at referring the issue to senior management and/or your contracting or legal departments.
As for what happens next, there are generally five possible outcomes:
- The service provider and the client collaborate on the request to avoid unacceptable changes to scope, cost, or schedule for either party. This often involves out-of-the-box thinking and compromise. Collaboration is almost always a better option than contract (re-)negotiation.
- The client accedes to the change request, whether under the terms of the contract or out of practicality.
- The service provider (i.e. your company) eats the cost of the unfunded changes for reasons that seem good and wise to your senior leadership.
- One party or the other terminates the contract (per any applicable terms of the contract), or simply walks away.
- Lawyers get involved, and the contract dispute ends up in court or arbitration.
In all cases, a project manager's job is primarily to articulate to their own senior leadership why they think the request is out of scope, or how it will negatively impact schedule or cost. Unless you are one of the company's lawyers, an authorized signer of the contract, or an officer of the company, you have no business inserting yourself directly into a contract dispute. Your job is to inform and advise leadership when a project's controls fail, or when the parameters of a project are out of acceptable tolerance.