Project Costs Go Up: the Question is Why? NASA Project Management Challenge Long Beach, CA Feb 9 – 10, 2011 Rod Zieger Man...
Content <ul><li>Have we learned or is it relearning? </li></ul><ul><li>Costs go up anywhere in the life cycle </li></ul><u...
What We Have Learned (1) <ul><li>Cost and Schedule growth results from several factors, among the  most notable  are: </li...
What We Have Learned (2) <ul><li>Cost and Schedule growth results from several factors, among the  most notable  are: </li...
Pre-Phase A & Proposals Phase A Phase B Phase C Phase D Authorization Commitment MCR/ Downselect PDR  Phase E SIR CDR  SRR...
Cost Increases are Not New !! This is a copy of an original Werner Gruhl chart from April 19, 1988
Costs Go Up With Schedule Delays Example FY 1 FY 2 FY 5 FY 4 FY 3 FY 7 FY 6 FY 8 Δ   Cost, % / mo 0.6 Baseline Plan 14 Δ  ...
Generic Causes:   Costs Went Up From Delays (1) <ul><li>Additional work due to funding delays, including continuing resolu...
Generic Causes:   Costs Went Up From Delays (2) <ul><li>Cost shifts into years with increased rates </li></ul><ul><li>Effo...
Risk Imbalances Lead to Cost Increases Desirable Characteristics Cost Risks Enormous Science Breakthrough Innovative Missi...
Implementation Problems Are Big Cost Drivers Phase C Phase D Commitment PDR  SIR CDR  L (more)   New driving requirements ...
What Would Help: At the Start <ul><li>Adequate early definition and freeze of requirements </li></ul><ul><ul><li>Level 1 a...
What Would Help: Formulation <ul><li>Adequate resources to get smart </li></ul><ul><ul><li>Design maturity adequate for re...
What Would Help: Implementation <ul><li>Finalized design before beginning fabrication and ordering parts  </li></ul><ul><l...
What Would Help: The Soft Stuff <ul><li>Constant communications with all stakeholders </li></ul><ul><ul><li>Understanding ...
<ul><li>Decisions/problems that can increase cost occur in any phase of a project lifecycle </li></ul><ul><li>Schedule sli...
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Zieger.alfred

  1. 1. Project Costs Go Up: the Question is Why? NASA Project Management Challenge Long Beach, CA Feb 9 – 10, 2011 Rod Zieger Manager, Project Support Office Jet Propulsion Laboratory, California Institute of Technology Used with permission
  2. 2. Content <ul><li>Have we learned or is it relearning? </li></ul><ul><li>Costs go up anywhere in the life cycle </li></ul><ul><li>What are the effects of schedule delays? </li></ul><ul><li>Highly desirable missions have big cost risks </li></ul><ul><li>Implementation cost drivers </li></ul><ul><li>What would help ? </li></ul>
  3. 3. What We Have Learned (1) <ul><li>Cost and Schedule growth results from several factors, among the most notable are: </li></ul><ul><li>Incomplete understanding of the driving mission/system requirements, including the impact of time-critical mission activities </li></ul><ul><li>Unsubstantiated/unvalidated assumptions, particularly heritage </li></ul><ul><li>Lack of early identification of key risks </li></ul><ul><ul><li>e.g. new technology, new designs and risk retirement/mitigation options/impacts </li></ul></ul>
  4. 4. What We Have Learned (2) <ul><li>Cost and Schedule growth results from several factors, among the most notable are: </li></ul><ul><li>Unsubstantiated optimism of the capabilities of the project team and/or its contractors/partners </li></ul><ul><li>Optimistic baseline implementation plan </li></ul><ul><li>Inadequate number of experienced, skilled workforce in key disciplines </li></ul><ul><li>Lack of early in-depth penetration of technical issues via peer reviews </li></ul><ul><li>Insufficient reserves to cover risks at inception </li></ul><ul><li>Launch vehicle delays </li></ul>
  5. 5. Pre-Phase A & Proposals Phase A Phase B Phase C Phase D Authorization Commitment MCR/ Downselect PDR Phase E SIR CDR SRR/MDR/ Selection Preliminary estimates remembered by sponsors as commitments L Costs Go Up Anywhere in the Lifecycle Optimistic assumptions Incomplete requirements Requirements creep without funding creep Increased knowledge and detail in cost estimates Contractors bids exceed assumptions Test failures LV Delays Increased understanding of technical difficulty Schedule delays anytime are major cost drivers Scope doesn’t match resources New technical problems discovered (S/C, LV, etc) Management inexperience with projects of similar complexity
  6. 6. Cost Increases are Not New !! This is a copy of an original Werner Gruhl chart from April 19, 1988
  7. 7. Costs Go Up With Schedule Delays Example FY 1 FY 2 FY 5 FY 4 FY 3 FY 7 FY 6 FY 8 Δ Cost, % / mo 0.6 Baseline Plan 14 Δ L, mo 5 Δ Cost, % 3 11 0 0 1.3 1.4 19 15 0 (this is based on a real project that had 4 significant delays from the baseline plan) 15 1.1 17 PDR B C/D E L C/D E L PDR B C/D E L C/D E E L TOTAL Project Cost, $M 290 280 235 205 175 L Schedule Delay Due to Funding Delay More Schedule Delay Due to Funding Delay Schedule Delay Due to Tech Problems & Contractor Capability Schedule Delay Due to Launch Vehicle
  8. 8. Generic Causes: Costs Went Up From Delays (1) <ul><li>Additional work due to funding delays, including continuing resolutions </li></ul><ul><li>Unplanned work using bridge funding between phases </li></ul><ul><li>Inflation </li></ul><ul><li>Vendor cost increases that exceed planned inflation rates </li></ul><ul><li>Increased reserves to maintain required levels for design margins </li></ul>
  9. 9. Generic Causes: Costs Went Up From Delays (2) <ul><li>Cost shifts into years with increased rates </li></ul><ul><li>Effort to diagnose/fix/retest for failures </li></ul><ul><li>Double shifts to meet schedule pressure </li></ul><ul><li>Launch vehicle cost increases with lifecycle delays </li></ul><ul><li>Launch vehicle readiness slips </li></ul>
  10. 10. Risk Imbalances Lead to Cost Increases Desirable Characteristics Cost Risks Enormous Science Breakthrough Innovative Mission Concept High Decadal Survey Ranking High NASA Strategic Priority Exciting to Public Advances State of the Art World-Class PI Advocate Risks Not Well Understood Few Acceptable Descopes Requirements Not Well Defined Inheritance Several Years Old New Mission/ System Architecture New Operating Environments Scope Mismatch to Cost & Schedule New Technology Breakthrough No Experience With This Kind of Mission
  11. 11. Implementation Problems Are Big Cost Drivers Phase C Phase D Commitment PDR SIR CDR L (more) New driving requirements mandated (fewer) Start implementation before design complete - Build to redlines, then re-build - Order wrong parts, then re-order Costs of trades open at PDR Infrastructure not available on time due to schedule slip by other projects Known threats against the budget not included in the baseline - Known threats consume reserves, inadequate reserves remain to cover new unknown-unknowns Environmental test failure requires redesign New technology not ready, requires redesign Not identifying impending schedule slips in time for efficient replan Contractor capabilities not adequate to deliver Hardware failure during I&T requires redesign Partner performance shortfalls Launch vehicle readiness slips
  12. 12. What Would Help: At the Start <ul><li>Adequate early definition and freeze of requirements </li></ul><ul><ul><li>Level 1 and Minimum Mission approved at KDP-A </li></ul></ul><ul><li>Agreement on meaningful descope options </li></ul><ul><li>Balanced requirements/scope, resources and risk </li></ul><ul><li>Predictable time phasing and receipt of money </li></ul><ul><ul><li>Development funding profile from NASA that is realistically front-loaded </li></ul></ul><ul><li>Right leadership, project team and partners </li></ul><ul><li>Maximum use of inherited hardware and software </li></ul><ul><ul><li>Ensured applicability of heritage items for this application and environment </li></ul></ul><ul><li>Limited new technology </li></ul>
  13. 13. What Would Help: Formulation <ul><li>Adequate resources to get smart </li></ul><ul><ul><li>Design maturity adequate for realistic cost plan and reserves </li></ul></ul><ul><li>Penetrating independent reviews </li></ul><ul><ul><li>Peer reviews to penetrate technical issues </li></ul></ul><ul><ul><li>Detailed reviews to validate inheritance </li></ul></ul><ul><li>Resistance to requirements creep </li></ul><ul><li>Retirement of known risks early </li></ul><ul><ul><li>Realistic demonstration of new technology/engineering </li></ul></ul><ul><li>Sufficient margins and reserves in plan </li></ul><ul><ul><li>Known risks included in baseline </li></ul></ul><ul><ul><li>Unknown-unknowns included in reserves </li></ul></ul><ul><li>Completed system architecture/interfaces/trades and requirements complete through level-4 before PDR </li></ul>
  14. 14. What Would Help: Implementation <ul><li>Finalized design before beginning fabrication and ordering parts </li></ul><ul><li>Build and test engineering models before CDR </li></ul><ul><li>Following proven institutional processes </li></ul><ul><li>Resistance to changing requirements/design </li></ul><ul><li>Finding and fixing problems early </li></ul><ul><ul><li>Testing early and constantly </li></ul></ul><ul><ul><li>Responding to late problems is more costly </li></ul></ul><ul><li>Awareness of changes in contractor/partner capability </li></ul><ul><li>Managing margins and reserves </li></ul><ul><ul><li>Timely decisions to cover liens </li></ul></ul><ul><ul><li>Realistic tracking of remaining margins and reserves </li></ul></ul>
  15. 15. What Would Help: The Soft Stuff <ul><li>Constant communications with all stakeholders </li></ul><ul><ul><li>Understanding motivation and priorities </li></ul></ul><ul><ul><li>No surprises to anyone </li></ul></ul><ul><li>Everyone is a valued partner </li></ul><ul><ul><li>Engineering, S&MA, science, contractors,……… </li></ul></ul><ul><li>Sensitivity to changes (e.g. capabilities and priorities) </li></ul><ul><li>Encouraging differing opinions </li></ul><ul><ul><li>Healthy tension, checks and balances </li></ul></ul>
  16. 16. <ul><li>Decisions/problems that can increase cost occur in any phase of a project lifecycle </li></ul><ul><li>Schedule slips are a major cost driver </li></ul><ul><li>Cost lessons have tended to be re-learned, not learned </li></ul><ul><ul><li>Reasons for cost increases tend to be common across projects </li></ul></ul><ul><ul><li>Responsibility of everyone on projects and review boards is to: </li></ul></ul><ul><ul><ul><li>Be aware of lessons about reasons for cost increases </li></ul></ul></ul><ul><ul><ul><li>Be paranoid about making sure they don’t occur on this project ! </li></ul></ul></ul>Summary

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