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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

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Content

• Have we learned or is it relearning?

• Costs go up anywhere in the life cycle

• What are the effects of schedule delays?

• Highly desirable missions have big cost risks

• Implementation cost drivers

• What would help ?

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What We Have Learned (1)

Cost and Schedule growth results from several factors, among the most notable are:

• Incomplete understanding of the driving mission/system requirements, including the impact of time-critical mission activities

• Unsubstantiated/unvalidated assumptions, particularly heritage

• Lack of early identification of key risks – e.g. new technology, new designs and risk retirement/mitigation

options/impacts

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What We Have Learned (2)Cost and Schedule growth results from several factors, among the

most notable are:

• Unsubstantiated optimism of the capabilities of the project team and/or its contractors/partners

• Optimistic baseline implementation plan

• Inadequate number of experienced, skilled workforce in key disciplines

• Lack of early in-depth penetration of technical issues via peer reviews

• Insufficient reserves to cover risks at inception

• Launch vehicle delays

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Pre-Phase A& Proposals

Phase A

Phase B

Phase C

Phase D

Authorization Commitment

MCR/Downselect

PDR

Phase E

SIRCDR SRR/MDR/ Selection

Optimistic assumptions

Preliminary estimates remembered by sponsors as commitments

Incomplete requirements

Requirements creep without funding creep

Increased knowledge and detail in cost estimates

Contractors bids exceed assumptions

Test failuresLV Delays

Increased understanding of technical difficulty

Schedule delays anytime are major cost drivers

L

Scope doesn’t match resources

Costs Go Up Anywhere in the Lifecycle

New technical problems discovered (S/C, LV, etc)

Management inexperience with projects of similar complexity

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This is a copy of an original Werner Gruhl chart from April 19, 1988

Cost Increases are Not New !!

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Costs Go Up With Schedule Delays Example

FY 1 FY 2 FY 5FY 4FY 3 FY 7FY 6 FY 8 Δ Cost, % / mo

0.6

Baseline Plan

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Δ L, mo

5

Δ Cost, %

3

11

0 0

1.3

1.419

15

0

(this is based on a real project that had 4 significant delays from the baseline plan)

15 1.117

PDRB C/D E

L

C/D EL

PDRB C/D E

L

C/D E

EL

TO

TA

L P

roje

ct C

ost

, $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

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Generic Causes: Costs Went Up From Delays (1)

• Additional work due to funding delays, including continuing resolutions

• Unplanned work using bridge funding between phases

• Inflation

• Vendor cost increases that exceed planned inflation rates

• Increased reserves to maintain required levels for design margins

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Generic Causes: Costs Went Up From Delays (2)

• Cost shifts into years with increased rates

• Effort to diagnose/fix/retest for failures

• Double shifts to meet schedule pressure

• Launch vehicle cost increases with lifecycle delays

• Launch vehicle readiness slips

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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

Risk Imbalances Lead to Cost Increases

Desirable Characteristics Cost Risks

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

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Implementation Problems Are Big Cost DriversPhase

CPhase

D

Commitment

PDR SIRCDR

(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

L

Partner performance shortfalls

Launch vehicle readiness slips

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What Would Help: At the Start

• Adequate early definition and freeze of requirements– Level 1 and Minimum Mission approved at KDP-A

• Agreement on meaningful descope options

• Balanced requirements/scope, resources and risk

• Predictable time phasing and receipt of money– Development funding profile from NASA that is realistically front-loaded

• Right leadership, project team and partners

• Maximum use of inherited hardware and software– Ensured applicability of heritage items for this application and environment

• Limited new technology

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What Would Help: Formulation

• Adequate resources to get smart– Design maturity adequate for realistic cost plan and reserves

• Penetrating independent reviews– Peer reviews to penetrate technical issues– Detailed reviews to validate inheritance

• Resistance to requirements creep• Retirement of known risks early

– Realistic demonstration of new technology/engineering

• Sufficient margins and reserves in plan – Known risks included in baseline– Unknown-unknowns included in reserves

• Completed system architecture/interfaces/trades and requirements complete through level-4 before PDR

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What Would Help: Implementation

• Finalized design before beginning fabrication and ordering parts

• Build and test engineering models before CDR• Following proven institutional processes• Resistance to changing requirements/design • Finding and fixing problems early

– Testing early and constantly– Responding to late problems is more costly

• Awareness of changes in contractor/partner capability • Managing margins and reserves

– Timely decisions to cover liens– Realistic tracking of remaining margins and reserves

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What Would Help: The Soft Stuff

• Constant communications with all stakeholders– Understanding motivation and priorities– No surprises to anyone

• Everyone is a valued partner– Engineering, S&MA, science, contractors,………

• Sensitivity to changes (e.g. capabilities and priorities)• Encouraging differing opinions

– Healthy tension, checks and balances

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• Decisions/problems that can increase cost occur in any phase of a project lifecycle

• Schedule slips are a major cost driver

• Cost lessons have tended to be re-learned, not learned– Reasons for cost increases tend to be common across projects

– Responsibility of everyone on projects and review boards is to:

• Be aware of lessons about reasons for cost increases

• Be paranoid about making sure they don’t occur on this project !

Summary