Synchroncity — What is proper schedule and cost integration?

Much has been said about the achievement of schedule and cost integration (or lack thereof) in the project management community.  Much of it consists of hand waving and magic asterisks that hide the significant reconciliation that goes on behind the scenes.  From an intellectually honest approach that does not use the topic as a means of promoting a proprietary solution is that authored by Rasdorf and Abudayyeah back in 1991 entitled, “Cost and Schedule Control Integration: Issues and Needs.”

It is worthwhile revisiting this paper, I think, because it was authored in a world not yet fully automated, and so is immune to the software tool-specific promotion that oftentimes dominates the discussion.  In their paper they outlined several approaches to breaking down cost and work in project management in order to provide control and track performance.  One of the most promising methods that they identified at the time was the unified approach that had originated in aerospace, in which a work breakdown structure (WBS) is constructed based on discrete work packages in which budget and schedule are unified at a particular level of detail to allow for full control and traceability.

The concept of the WBS and its interrelationship to the organizational breakdown structure (OBS) has become much more sophisticated over the years, but there has been a barrier that has caused this ideal to be fully achieved.  Ironically it is the introduction of technology that is the culprit.

During the first phase of digitalization that occurred in the project management industry not too long after Radsdorf and Abudayyeah published their paper, there was a boom in dot coms.  For business and organizations the practice was to find a specialty or niche and fill it with an automated solution to take over the laborious tasks of calculation previously achieved by human intervention.  (I still have both my slide rule and first scientific calculator hidden away somewhere, though I have thankfully wiped square root tables from my memory).

For those of us who worked in project and acquisition management, our lives were built around the 20th century concept of division of labor.  In PM this meant we had cost analysts, schedule analysts, risk analysts, financial analysts and specialists, systems analysts, engineers broken down by subspecialties (electrical, mechanical, systems, aviation) and sub-subspecialties (Naval engineers, aviation, electronics and avionics, specific airframes, software, etc.).  As a result, the first phase of digitization followed the pathway of the existing specialties, finding niches in which to inhabit, which provided a good steady and secure living to software companies and developers.

For project controls, much of this infrastructure remains in place.  There are entire organizations today that will construct a schedule for a project using one set of specialists and the performance management baseline (PMB) in another, and then reconciling the two, not just in the initial phase of the project, but across the entire life of the project.  From the standard of the integrated structure that brings together cost and schedule this makes no practical sense.  From a business efficiency perspective this is an unnecessary cost.

As much as it is cited by many authors and speakers, the Coopers & Lybrand with TASC, Inc. paper entitled “The DoD Regulatory Cost Premium” is impossible to find on-line.  Despite its widespread citation the study demonstrated that by the time one got down to the third “cost” driver due to regulatory requirements that the projected “savings” was a fraction of 1% of the total contract cost.  The interesting issue not faced by the study is, were the tables turned, how much would such contracts be reduced if all management controls in the company were reduced or eliminated since they contribute as elements to overhead and G&A?  More to the point here, if the processes applied by industry were optimized what would the be the cost savings involved?

A study conduct by RAND Corporation in 2006 accurately points out that a number of studies had been conducted since 1986, all of which promised significant impacts in terms of cost savings by focusing on what were perceived as drivers for unnecessary costs.  The Department of Defense and the military services in particular took the Coopers & Lybrand study very seriously because of its methodology, but achieved minimal savings against those promised.  Of course, the various studies do not clearly articulate the cost risk associated with removing the marginal cost of oversight and regulation. Given our renewed experience with lack of regulation in the mortgage and financial management sectors of the economy that brought about the worst economic and financial collapse since 1929, one my look at these various studies in a new light.

The RAND study outlines the difficulties in the methodologies and conclusions of the studies undertaken, especially the acquisition reforms initiated by DoD and the military services as a result of the Coopers & Lybrand study.  But, how, you may ask does this relate to cost and schedule integration?

The present means that industry uses in many places takes a sub-optimized approach to project management, particularly when it applies to cost and schedule integration, which really consists of physical cost and schedule reconciliation.  A system is split into two separate entities, though they are clearly one entity, constructed separately, and then adjusted using manual intervention which defeats the purpose of automation.  This may be common practice but it is not best practice.

Government policy, which has pushed compliance to the contractor, oftentimes rewards this sub-optimization and provides little incentive to change the status quo.  Software industry manufacturers who are embedded with old technologies are all too willing to promote the status quo–appropriating the term “integration” while, in reality, offering interfaces and workarounds after the fact.  Those personnel residing in line and staff positions defined by the mid-20th century approach of division of labor are all too happy to continue operating using outmoded methods and tools.  Paradoxically these are personnel in industry that would never advocate using outmoded airframes, jet engines, avionics, or ship types.

So it is time to stop rewarding sub-optimization.  The first step in doing this is through the normalization of data from these niche proprietary applications and “rewiring” them at the proper level of integration so that the systemic faults can be viewed by all stakeholders in the oversight and regulatory chain.  Nothing seems to be more effective in correcting a hidden defect than some sunshine and a fresh set of eyes.

If industry and government are truly serious about reforming acquisition and project management in order to achieve significant cost savings in the face of tight budgets and increasing commitments due to geopolitical instability, then systemic reforms from the bottom up are the means to achieve the goal; not the elimination of controls.  As John Kennedy once said in paraphrasing Chesterton, “Don’t take down a fence unless you know why it was put up.”  The key is not to undermine the strength and integrity of the WBS-based approach to project control and performance measurement (or to eliminate it), but to streamline it so that it achieves its ideal as closely as our inherently faulty tools and methods will allow.