Bag's Rants

Government project's. A recipe for disaster?

Seems like whenever you look at any significant Government Project there are massive and expensive failures predicted or actually happening. Read an article on the latest MoD overspends here.

You would think from this that it was a fault of the project management community and managers in those areas rather than the people that request the project. In some cases that is true but when you compare public projects and private projects it seems that the failure rates are not as bad as you would think. Public sector projects do fail more often but not to the level that is implied by the media. Read this report.

I've worked a significant portion of my life on government projects, mainly MoD, and I am currently working on the multi billion pound NHS project.

In general, significant projects are bid for by third party suppliers and evaluated by a central body. This means that the same people putting in successful projects in the private sector are failing to put in projects in the public sector. How can that be?

Well. In my opinion, it is down to two things. Funding requirements and Management. Touching on each.

Funding requirements. This to do with the Public Sectors requirement to fund entire projects up front. We have to define requirements and funding for procurement, implementation, support and removal years in advance. Sometimes 25 years or more for major projects. Major changes take place in these timescales and necessitate significant changes to the scope of work. This also causes them to be overambitious with a project to allow for changes, often predicted, and make it all encompassing.

Management. Politics enters into this area. It is not unknown for someone to make statements in the House of Commons which results in much work within Government systems to make the statement true. Senior figures see things developing outside in the commercial marketplace and say I want some of these shiny new black ones rather than the old beige ones. Unfortunately, these requirements are usually defined in paper under contractual agreements with the third parties and, again, not easy to fix except at great cost. They also like setting up lots of progress meetings to discuss progress and summon all the key people to report to them.

Over the lifetime of projects there can be, and are, many technology changes and assumptions made can be changed radically by general progress. In some cases disappearing completely perhaps to be replaced with new requirements. These requirements are defined in paper under contractual agreements with the third parties. Who have also made contractual commitments based on them. There can be many changes made to the user requirement itself over the lifetime of the project as people become more aware of their expected use and see other tools. In some cases it is not easy to make changes to the systems without major rework at great cost. Technology leaps can change things significantly. In reality they are trying to plan ten to fifteen years in advance based on today's requirements. Who could have predicted the change in mobile phones, PDAs and communications over twenty five years ago. Projects are releasing kit now that has been obsolete in the commercial world for years.

In fact many bidders have low bids because they are anticipating changes which do not have to be subject to cost oversight and can make a reasonable profit. The vendor has the cards at that point and can literally charge what they want. Plus the customer then fiddles with the requirements all the way through the project in some cases adding in completely new functionality and changing the scope entirely. All subject to change notes and increased costs. Look at Nimrod as a prime example and this is just the refit not the original project which had doubled in cost many years ago and was used as a justification for moving from the old costplus model to full project specifications with quotes up front. Costplus was where a supplier would get his costs repaid plus an addition agreed percentage as pure profit which gave them little or no risk. Nimrod was the one that seemed to derail that gravy train although it was not the only project that had significant overruns.

In the commercial sector no projects have the scope involved in public sector projects. Small projects which introduce gradual changes take place and can be stopped at any time. Technology changes over the time of small projects are insignificantt and can be ignored. Managers still fiddle but have to find funding out of this years budgets. So there is usually no long term impact. In short the project is broken down into small chunks which can be managed easily. Public sector ones do not. Thus the overruns instead of being a few medium sized sums are huge sums. 10% of £1Bn, £10M, sounds a lot worse than 15% of £100K, £15K., and you can hide £15k easily enough.

I always use the example that the sooner you know of a change the cheaper it is. Take the following simple example.
I want to paint several large rooms blue.
I can change the colour before I order the paint and it is effectively at no extra cost.
If I change it after I have ordered the paint there is usually a restocking fee of about 20%. Plus I've got more trips.
If I change it after I have started work I cannot return some of the paint so there is the cost of the paint I have used, the restocking fee for what I return plus the cost of the new paint. Plus I have some rework to do, labour cost, and yet more trips.
If I change it when I am finished. I have to buy a complete new batch and start again.
Make the changes as soon as you can. The sooner the better.

What happens in government type work is;
I get three people in for a quote and get three different quotes.
Procurement goes for the cheapest and places an order with supplier A. Looks like he is below cost with his paint. Sucker. They will only make a small amount of profit on this.
Just after I place the order it is then decided they want it red. I call the supplier. It is a change. And guess what? He had a deal on the blue he can't get on the red so it will cost me an extra 10%. It is now the highest quote but I'm stuck with the guy because I've already placed an order so I agree with the new price. Not such a sucker after all. Profit margin now up to normal.
I then get a visit from senior management. The new thought is lime green. I contact the supplier. They have already ordered the red paint. The restocking fee is 20% plus there is a delay on that colour but good news it is the same price as the red. That delay will also cost me because the supplier has fewer resources available for the new date estimated for delivery of the paint but can get contractors in at an added cost. Which I agree to pay as otherwise it will take longer to do with more disruption to the business otherwise.
They come in as arranged and start to paint. When the colour is up really, really senior management drop in to see it. They don't like the colour, so what else can we do? We investigate and decide on red but by the time we have done this the work is finished. Contract completed. Supplier waiting to be paid. Cost overruns of 50% and we don't have what we want. Management says it is unacceptable to have this colour. I get the blame and am shunned by all those in the offices who feel queasy.
Three months later a decision is made to redo our other offices. They want these ones red. I then go out for bids for this new requirement. The bids come in, Supplier A now quotes cheaper red and wins the contract again. B4$^4&ds.

This is based on a true situation although not with paints. Honest.

posted by Bag @ 12:58 pm