FEATURED PAPER
By Glen B. Alleman and Thomas J. Coonce
USA
Abstract
Delivering programs with less capability than promised, while exceeding the cost and planned durations, distorts decision making, contributes to increasing cost growth to other programs, undermines the Federal government’s credibility with taxpayers and contributes to the public’s negative support for these programs.
Many reasons have been hypothesized and documented for cost and schedule growth. The authors review some of these reasons, and propose that government and contractors use the historical variability of the past programs to establish cost and schedule estimates at the outset and periodically update these estimates with up-to-date risks, to increase the probability of program success. For this to happen, the authors recommend changes to estimating, acquisition and contracting processes.
Introduction
Publically-funded programs have consistently delivered less than originally planned capabilities and cost more than planned and are late. Because public funds are limited, new programs cannot be started, or worse, they are started and then must be stretched out to fund the overruns of programs that are being developed. In short, the entire portfolio of programs is affected when most of the programs require more funds and take longer than planned. Funding authorizers become skeptical of new proposals because the estimates are not deemed credible. Decisions of choice are distorted since the estimates are in error, or worse, decision-makers know the numbers are biased low and make best guesses which result in poor choices. Furthermore, excessive growth in public programs damages the credibility of the estimating community and contributes to the public’s negative support for these programs.
This paper discusses the never-ending problem of cost and schedule growth in publically funded programs and offers some recommendations to improve performance within the current Department of Defense (DOD) acquisition environment. This paper highlights the magnitude of cost and schedule growth within the DOD and the National Aeronautics and Space Administration (NASA) and summarizes some of the known and hypothesized reasons for growth. The paper also summarizes some of the initiatives that have been put in place to address estimating issues but suggests more can be done to improve them, effectively communicate them, and set these estimates high enough to reflect the historical experience so as to minimize or eliminate growth in future programs.
The authors recommend specific changes to the way initial estimates are created and agreed to. In particular, this paper discusses the value of developing activity-based estimates adjusted to account for issues that have occurred on past similar programs.
The authors propose that programs be budgeted at the 70 percent probability of meeting both cost and schedule targets – Joint Confidence Level. [1]They show how this can be done, including active input from the contracting community, and how contract management can be improved through the use of risk registers and periodic probability statements about Estimates At Completion (EAC) and Estimated Completion Dates (ECD). They also enumerate the implementation challenges, and how they can be overcome.
Cost and Schedule Growth – A Persistent Problem Through the Decades
“In 1982, an unnamed witness at a House Armed Services Committee stated, ‘enough material has been written on the subject of cost growth during the last ten years to fill a Minuteman silo. Unfortunately, cost growth is still with us. In a decade since that testimony enough additional information on cost growth has been written to fill a second minuteman silo.” [2]
Table 1 summarizes cost growth associated with NASA and DOD research programs. [3] Although this information is somewhat dated, the growth trend has not been materially reduced since the time this study was completed. Figure 1.0 below illustrates the cost and schedule growth of 30 NASA missions that were developed in the 2007 – 2009 time frame. [4]
Table 1.0. Cost Growth Experience, 2004 NASA Study showing increasing growth over the decades in spite of all efforts to control this growth through improved insight and management processes.
More…
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How to cite this paper: Alleman, G. B. and Coonce, T. J. (2024). A Cure for Unanticipated Cost and Schedule Growth, PM World Journal, Vol. XIII, Issue IV, April. Available online at https://pmworldlibrary.net/wp-content/uploads/2024/04/pmwj140-Apr2024-Alleman-Coonce-Cure-for-Cost-and-Schedule-Growth.pdf
About the Authors
Glen B. Alleman
Niwot Ridge, LLC
USA
Glen B. Alleman leads the Program Planning and Controls practice for Niwot Ridge, LLC. In this position, Glen brings his 30+ years’ experience in program management, systems engineering, software development, and general management to bear on problems of performance-based program management. Mr. Alleman’s experience ranges from real time process control systems to product development management and Program Management in a variety of firms including Logicon, TRW, CH2M Hill, SM&A, and several consulting firms before joining Niwot Ridge, LLC. Mr. Alleman’s teaching experience includes university level courses in mathematics, physics, and computer science. Glen can be contacted at galleman@niwotridge.com
Thomas J. Coonce
USA
Thomas J. Coonce is an Adjunct Research Staff Member with the Institute for Defense Analyses (IDA) where he researches Essential Views of the Integrated Program Management Report data to provide government stakeholders with a) insightful program status and b) indicators of problem areas. Prior to joining IDA, Mr. Coonce led NASA’s Cost Analysis Division where he shaped cost and schedule estimating policies and sponsored cost research work. Mr. Coonce also served within the Office of the Secretary of Defense’s (OSD) Cost Analysis Improvement Group (CAIG) where he developed independent estimates of MDAP programs. While at the OSD CAIG, Mr. Coonce also led an effort to re-engineer the Contractor and Software Resources Data Reporting System and to make the data available to users. Prior to joining the OSD CAIG, Mr. Coonce served as a cost estimator for several consulting firms and the U.S. Government Accountability Office.
[1] The Joint Confidence Level connects Schedule, Cost, Risk, and Uncertainty in a single assessment of the probability of program success, http://www.nasa.gov/pdf/724371main_76646-Risk_Analysis_Brochure-Final6.pdf
[2]Cost Growth in DOD Major Programs: A Historical Perspective, Col. Harry Calcutt, April 1993, http://www.dtic.mil/dtic/tr/fulltext/u2/a276950.pdf
[3] Unpublished 2004 NASA study performed by Drs Joseph Hamaker and Mathew Schaffer.
[4] Unpublished 2009 NASA study
