A Project Manager’s Perspective on the Cost Impacts of the “Sequester”
Click or tap above image to download a .pdf of this article.One of the realities of managing projects is that, the longer a project takes to complete, the more it usually costs. Because of this, the project manager usually estimates the impact of schedule changes on project costs so the money doesn’t run out before the project is finished. The smart project manager also incorporates a “change control” process so that the costs and risks associated with changing requirements and schedule can be effectively managed.
I thought about this when I received this email yesterday from a friend who works for the Federal government:
Friday, May 24 is a designated furlough day for [agency] employees. I will return to the office on Tuesday, May 28.
My friend’s agency is thinking about the direct cost savings made possible by reducing direct labor costs by a day a week. But what happens to ongoing projects that get delayed? Will they end up just taking more time to complete? For each day out cut from the workweek, won’t the project being worked on just get longer by one day?
Or, will schedule-induced cost increases eat up a significant portion of the furlough-associated savings hoped for by the sequester’s supporters because of downstream ripple effects of missing work days?
In some cases, based on my own project management experience, cutting a day out of the work week of key staff and managers might significantly increase total project costs. The reason has to do with the “ripple effects” that occur when a project managers and staff members are kept from making key decisions or from performing critical project activities that impact other people and other project tasks.
Here are some possible examples:
- Failure to convene an important meeting or conference call due to the forced absence of key stakeholder results not just in a day’s delay but in a 2-week delay due to availability and travel schedules.
- Contractors are involved in the project and their costs — and what they charge the government — are driven by schedule or level of effort.
- Forced absence of a key player in a key task role delays completion of a “critical path” task with a resulting downstream ripple effect that impacts and delays other project tasks.
- In order to meet an externally imposed milestone less qualified staff members have to be assigned to perform a task that cannot be delayed. Later on, work has to be re-done when quality measures are not met.
I’m not arguing about the wisdom or merits of the “sequester” as a way of controlling and reducing Federal government costs. That’s partly a political question. I am suggesting that failing to understand the impacts on total costs at the project level of the sequester leaves us vulnerable. Are these cost impacts undrstood? Or are we just “kicking the can down the road” again?
Copyright © 2013 by Dennis D. McDonald, Ph.D.
Update
on 2013-05-28 20:47 by Dennis D. McDonald
John M. Kamensky, Senior Fellow and Associate Partner, IBM Center for The Business of Government, sent me this link after seeing the above article: Fast Government: Accelerating Service Quality While Reducing Cost and Time. From the summary:
This report is a follow-on to a 2012 book edited by Mr. Prow, Governing to Win: Enhancing National Competitiveness Through New Policy and Operating Approaches, in which he introduced the concept of fast government as a key to increasing the mission value of government organizations. Through fast government, public-sector leaders make time a key performance metric in government efficiency and effectiveness initiatives—time saved by streamlining operations, improving the quality of government services, and reducing barriers to citizen engagement.
