Project Management IV Research Paper

BBA 3626, Project Management Overview 1

Course Learning Outcomes for Unit IV Upon completion of this unit, students should be able to:

4. Determine the budget requirements for a project to include earned value.

Reading Assignment Chapter 9: Budgeting Projects, pp. 244-263 Chapter 14: Determining Project Progress and Results, pp. 400-405

Unit Lesson This unit summary is going to stress the importance of project cost as a driver for project success. Many scholars and practitioners agree on the importance of managing project cost, but cost overruns continue to plague projects of all types. An article written by Gharaibeh (2013) stated that “a major driver to project success is the ability to manage the project cost effectively” (p. 1063). Cost overruns continue to plague projects of many different industries to include telecommunications, information technology, and manufacturing, just to name a few. The power utility industry has gained considerable attention during the last several years due to their significance to the public and the “urgent need to upgrade the transmission grid across several Canadian provinces to cope with the huge expansion in residential and industrial infrastructure” (Gharaibeh, 2013, p. 1063). A study was conducted using the Delphi method to determine the problems and challenges that were faced by the project teams in controlling the costs of power transmission projects. Two different transmission projects were evaluated in this Canadian study. High employee turnover was considered a number one problem for one of the projects in the Canadian study. Furthermore, it had too many restrictions imposed on it from a heavily regulated industry, which the project team had no control over. The other of the two projects had problems with the interpretation of the scope of work by the contractor along with managing project cost for engineering and procurement. Each project had different problems in the rankings but the number one problem, as stated, was the employee turnover rate, which was an important problem in managing the project cost (Gharaibeh, 2013). Both teams concurred that the two most important lessons learned in managing project cost were: The project objectives, scope, and client requirements continually changed which led to reengineering designs, and additional costs were incurred because of high employee turnover. High employee turnover equates to lower productivity in the project which led to additional costs (Gharaibeh, 2013). Cost control is a complex problem when taking into consideration so many internal and external factors. The internal and external factors consisted of governmental control, project execution strategy, human behavior, organizational culture, and processes. The project team and all its stakeholders need to be actively involved and collaborate at the project level to achieve success. The project team needs to improve its learning skills on how to deal with the problems on all levels (Gharaibeh, 2013). The Department of Defense (DoD) is constantly challenged with good project management techniques, especially cost overruns, schedule, and performance. DoD has been searching for the perfect model for good project management, but has not found this perfection yet. More DoD projects fail rather than succeed especially when it comes to cost, schedule, and performance. According to the Government Accountability Office (GAO), at least half of the major defense acquisition programs have not met their cost goals, and 80% have increasing costs (GAO, 2011). According to the 2013 GAO report, “federal IT projects run over budget, are behind schedule, or fail to deliver promised functionality” (p.3). Oversight is believed to be the problem that needs to be addressed with these IT

UNIT IV STUDY GUIDE

Budgeting Projects

BBA 3626, Project Management Overview 2

UNIT x STUDY GUIDE

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programs and is critical. There are many IT programs that are on the oversight list and some that are not. Most of these projects are behind on schedule and over the initial budgeted costs. Many projects were mentioned in the 2013 GAO report for being canceled due to cost overruns and not adhering to the schedule. For instance, the Air Force’s Expeditionary Combat Support System was canceled in 2012 after spending over a billion dollars. Multiple milestones were missed for this project, and the program failed to achieve deployment within five years of obligating funds. Not following best practices, not developing cost estimates, and not having a reliable schedule led to the demise of this program (GAO, 2013). The first failed project to note, was listed in the 2013 GAO report was the Secure Border Initiative Network program which obligated more than a million dollars and was canceled in 2011 because it did not meet cost- effectiveness and viability standards. A third failed project mentioned in this report was the National Polar- orbiting Operational Satellite System which was canceled in 2010 after being estimated to be more than a billion dollars over the initial budget if this program was to continue. Another problem with this program was because it was being managed by three different agencies (GAO, 2013). Next, another failed project worth mentioning was the Veteran’s Administration (VA’s) Health Information Systems and Technology Architecture – Foundations Modernization project. Going over budget, missing schedule milestones, and failing to deliver intended capabilities led to this project being canceled. Finally, there was the FBI’s Virtual Case File project, which was canceled in 2005 after spending over $170 million and investing three years of time. This project’s “projected costs grew from $380 million to $537 million” and was canceled (GAO, 2013, p. 29). This program also did not meet schedule timelines and the “pilot testing showed that completion of this project was infeasible and cost prohibitive” (GAO, 2013, p. 29). There are too many DoD failed projects to list since the list is long and compelling. GAO reports are created annually and anyone can find these public reports on the Internet which lists project failures. One thing all these projects have in common is cost overruns, not meeting schedule requirements, and not delivering the capabilities promised. Government oversight is critical, but the projects continue to fail. Costs and budgets are difficult to create and follow for DoD projects due to strict legal guidelines that must be followed. As one can see, budgeting is important and most difficult for DoD IT projects and other projects as well.

References Cantwell, P. R., Sarkani, S., & Mazzuchi, T. A. (2013). Dynamic consequences of cost, schedule, and

performance within DoD project management. Defense Acquisition Research Journal: A Publication of the Defense Acquisition University, 20(1), 89-106.

Gharaibeh, H. (2013). Managing the cost of power transmission projects: Lessons learned. Journal of

Construction Engineering & Management, 139(8), 1063-1067. Kloppenborg, T. J. (2015). Contemporary project management (3rd ed.). Stamford, CT: Cengage Learning. U.S. Government Accountability Office. (2011). Defense acquisitions: Assessments of selected weapon

programs (Report No. GAO-11-233SP). Washington, DC: Author. U.S. Government Accountability Office. (2013). Information technology: OMB and agencies need to more

effectively implement major initiatives to save billions of dollars. (Report No. OMB-13-796T). Washington, DC: Author.