This is the second part in our series on successful program management in an era of sequestration. Read the first, ‘Project Management and Your Talent Management Strategy.’
These days, project cost is a major factor. In fact, it’s often the standout factor for winning a contract or getting follow-on work. It’s a delicate balancing act between being competitive, and being profitable, however.
Project Cost in the Real World
Figuring out how much a project will cost can be a tricky business. Project cost can fluctuate based on desired quality level, completion timelines, employee skill levels, necessary employee training, changing requirements, and the list could go on and on.
It seems like all the project management rules were made in an overly simplistic vacuum where employees don’t quit mid-project, require raises, or need to invest in new skills. But this is the real world…where real things happen like sequestration and smaller defense budgets – in addition to all the normal forecasting variables. Estimating all those variables so management can be happy with the profit while still keeping the client and internal team happy is more than a balancing act – it’s a tight rope.
What Does LPTA mean?
Right now, the government is currently trending towards lowest price technically acceptable (LPTA) contracts. Unfortunately, this type of criteria makes project cost the most important factor to winning a contract, which means that reputation, exceeding expectations, or innovative solutions are not the primary selling point.
This makes project management especially challenging for the PM because any slip in scope or schedule can devour whatever profit margin initially existed. With razor thin profit margins, it can be hard to keep employees happy during the project lifecycle, so it’s the PM’s job to promote a good working environment and find other retention strategies to make up for the lack of raises and financial incentives. Whether LPTA contracts are a good idea or not, chances are, until the “technically acceptable” becomes unacceptable, this type of contract could be around for a while.
Game Over or Work Harder?
It may seem impossible, but all is not lost. Don’t throw in the towel. The defense department needs great project managers who are agile enough to deliver optimum results within the required budgets. So what can you do to better manage project costs?
Be a Realist
It’s important to be realistic about what your agency can and cannot fund throughout the entire project lifecycle. Shifting budgets or LPTA contracts can be frustrating for contractors. Understandably, most contractors want to deliver an innovative product or to provide the best and the brightest employees for contract support. However, if your client can’t afford a service or feature, you cannot provide it for free. Keep communications open with the client so you can quickly recognize when schedules or requirements need to be adjusted to meet funding demands.
Hit the Ground Running
Not every program manager gets to be involved with the proposal process, but no matter when you got involved with the project, the time to begin working on cost estimates was yesterday. Seriously. Roll up your sleeves right away and figure out costs. The sooner you have a realistic picture, the better off you will be. The only way to get an accurate cost picture is to sit down with the end user and gather requirements – but make sure the appropriate team members are present for requirements gathering. Once the requirements are gathered, understand what’s different between the requirements and the contract and work with the contract officer to adjust as-needed.
Don’t Coast to the Finish Line
It’s important how you start the race, but it’s really important how you finish the race. At the last minute, it all comes down the details, and it’s easy to not plan for all the finishing touches. Your client will remember the final project days the most. Do you want to be remembered for finishing strong or for going over budget right at the very end for many unforeseen costs? End well.
Everything Is Connected
The schedule and the budget are connected, so link costs to the schedule. Time is money. Don’t cross your fingers each month hoping that the numbers will line up. For sure, no one wants to work for the micro-manger, but it’s not impossible to find the balance between being overbearing and being watchful. Watch the budget and the schedule like a hawk.
It is vital to keep all of the project management drivers, like scope, schedule, and quality in check. The PM’s job is to keep everyone on the same page, talking the same language, working towards the same goal. It is not an easy job – especially when faced with a tight budget – but it is not impossible.