"keeping it simple and succeeding"
In today’s dynamic environment, with ever-shrinking budgets, changing technology, and possibly changing requirements, which can lead to schedule slips, cost overruns, and increased competition, the challenge, now more than ever before, is to:
- Deliver a winning proposal that is the best value, and then
- Execute that contract within budget.
This presentation shares a simple “Best Practice” that many successful Earned Value Management System (EVMS) programs have in common, regardless of whether the program is large or small, a weapons system, or a construction or pharmaceutical project. It will touch on some of the factors they have in common and discuss the one simple way to avoid those same problems without breaking the bank.
If I were to ask you to name a federally funded project that (truly) came in on schedule and cost, could you name just one? However, if the question was to name a project that had a cost overrun and/or finished late, I’m sure most people could name several. A Government Accountability Office study found that half of the federal highway projects it examined had cost overruns of more than 25%. (GAO, 2003, p. 6)
Large cost overruns are routine on federally funded transportation projects. A good example is the Springfield, Virginia, USA highway interchange project. Virginia officials claimed that the project would cost US$241 million, but it ended up costing US$676 million by the time it was completed in 2007. (Shear, 2002, B1) To add insult to injury, Virginia officials said that the project was finished “on time and under budget,” but the Washington Post correctly pointed out that “the final cost was nearly three times what was first projected.” (Weiss, 2007 B1) Another fine example was Boston’s “Big Dig,” where in 1985, government officials claimed that the Big Dig would cost US$2.6 billion and that it would be completed by 1998. The project’s cost came in at a whopping US$14.6 billion and wasn’t completed until 2005! (Lewis & Murphy, 2003, B1)
What contributed to these cost overruns? A GAO report concluded, “weapons programs continue to take longer, cost more, and deliver fewer capabilities than originally planned,” and it noted that “systematic problems both at the strategic and at the program level” were to blame. One problem is that project managers are frequently changed during development, which makes cost control and accountability very difficult to maintain. Another cause contributing to the cost overruns is poor management. The Inspector General of the Department of Homeland Security concluded that the TSA did virtually no planning for the effort and it ignored warnings that project costs were far exceeding those in the approved budget.
It is said that change is the one constant in life, and the reality is that people will come and go on a program; therefore, we need to make sure that regardless of who is doing the job, there are policies/procedures/work instructions in place to guide the individual, so that whatever task has to be performed, it is done in a consistent manner.
In some cases, newly assigned personnel may be unfamiliar with corporate (or business unit) management practices. On the other hand, those who have been on the program for a while may not realize that previously established processes may have changed or are no longer in place. Therefore, in the beginning of a program, both the customer and contractor should conduct a review of key management practices such as work authorization, change control, and the timely incorporation of scope/schedule/budget changes.
A review of such key practices has produced overwhelming success because it leads to a heightened level of understanding of common management processes among the program participants. It also provides a mutual understanding of contractor planning, processes, and preparedness. The cost associated with this type of review is minimal; in fact, there may be a cost savings. The processes, practices, and documents briefed during the review should already be parts of the contractor’s normal program management activities and conducting the review should not be onerous. The question that is usually asked is: Why conduct this type of review? The response is simple, do you really want to award a contract to a company that does not have a repeatable and documented way of:
- Accounting (collecting, tracking, payments, and so forth.)
- Authorizing work (scope, schedule, and budget),
- Incorporating changes external (contract modifications) and internal in a timely manner
- Managing subcontractors
- Material management (plan, order, and track)
- Identifying, quantifying, and managing risk.
There are those who believe there is no added value for conducting this type of review. So, what if there are some processes that are not in place? If specific processes or practices need to be developed in response to the requirement for a Contract Implementation Review (CIR), all parties will benefit from having done this at an early stage in the program. Because if a processes has not been documented, updated, or even in place, the program personnel responsible for executing that particular role may not be performing the effort in a consistent manner, resulting a variety of outcomes. Value is achieved via this type of review because all parties (subcontractors are included, as appropriate) gain a heightened level of insight regarding the common practices that will be applied in the management of the program.
Therefore, the value of this review,far outweighs the cost, because all parties become more knowledgeable of the processes being implemented by the program. Having the benefit of enhanced understanding, all participants will be better equipped to engage in responsible program decision-making.
Government Accountability Office (2003, May 8). Federal Aid Highways: Cost and Oversight of Major Highway and Bridge Projects: Issues and Options, GAO-03-764T, Retrieved from http://www.gao.gov/new.items/d03764t.pdf
Government Accountability Office (2008, June 3). Defense Acquisitions: Better Weapon Program Outcomes Require Discipline, Accountability, and Fundamental Changes in the Acquisition Environment, GAO-08-782Tretrieved from http://www.gao.gov/new.items/d08782t.pdf
Lewis, R., & Murphy, S.(2003) Easy Pass: Why Bechtel never paid for its Big Dig mistakes Boston Globe, .p.B1
O'Harrow Jr., R. (2006, January 5). Report Faults TSA Security Contracting, Washington Post, p. D1
Shear, M. (2002 ,November 26). Springfield Interchange Project Is Defended, Washington Post,. p B1
Weiss, E. (2007, July 19). In Mixing Bowl, Va. Sees Recipe for Success, Washington Post, p. B2
Originally published as part of Proceedings PMI Global Congress 2011 – Dallas/Ft. Worth, TX
This guide will help you drive more successful outcomes and better strategic alignment in your organization. Digital version available for free download for a limited time.