The Value of Standardisation

Mark Infanti, Sr. Product Marketing Manager

Deltek Inc.(www.deltek.co.uk/cobra)

Summary

Are you spending more to run projects than you should and not doing a very good job?

I sincerely hope I am wrong, but can you afford not to find out? If you are using a standard CPM scheduling tool (such as Primavera P3+, Microsoft Project or Deltek Open Plan) and doing cost management with a spreadsheet, I contend you are spending too much and doing too little.

The United States Department of Transport (DOT) runs one of the most sophisticated systems in the world, yet they could not manage their programmes in a way that satisfied the US Office of Management and Budget (OMB). As a result, they were not getting all the funding they requested as there was no confidence that they could manage it. They were using CPM scheduling tools and Excel spreadsheets.

Three years ago things started to change. What they accomplished was amazing. The reduction in overhead costs of managing their programmes is between $2 million and $20 million less over the life of every programme. The quality of the project management has reduced the amount of time spent reporting programme status to government oversight officials. They now stand at the top of the OMB programme efficiency reports.

The major contributor to their success is standardisation on process and tools. They have spent the time building a standard approach with standard tools using standard reports so that everyone knows what needs to be done and how to do it. Now if they want to take a person from one programme to another, they do not need to be trained on another process or how to use another tool.

The basics of project management

We all know that the Project Management Institute (PMI) says project management is initiate, plan, execute, monitor and close. But how well we do the first 2 steps is critical to the success of any project. What standardisation does is expand on these basics to define what ‘initiate’ means, what ‘plan’ means and make sure that they are done using the best practices and a common data base.

What standardisation brings to project management

Standardisation defines the steps of initiate, plan, authorise, execute, monitor, and control. This doesn’t sound much different except for the authorise function. But that exception is major.

Authorisation is key part of controlling a project. It is tied to the scope of work, planned budget and schedule as well as responsible manager. Does your project management approach with Excel spreadsheets do this? How important is it?

As a case in point, let me tell you about what the US Marines, Command, Control, Communications and Computers (C4) group did. This group oversees information technology for the US Marines Corp. They instituted a standardised system and saved $500,000 over two years while significantly increasing the quality of their products and their efficiency. If you read the article in CIO magazine, it explains that this savings was due to better control of changes. That was accomplished by following the process of defining the scope of work, planning that scope of work and authorising only that scope of work. It stopped large numbers of field changes, working on the wrong thing and formalised the change control process. They had been trying to mange this with spreadsheets. It is difficult to manage authorisation in a spreadsheet.

Authorisation also brings the ability of discrete measurement of project work. With authorisation of only the work that is defined and scheduled to start, work accomplishment is much easier. This is where a standard cost management tool starts to become essential. How important is the accurate measurement of work?

According to Office of Government Commerce (OGC, an office of HM Treasury) in a document called Achieving Excellence in Construction, it says;

Performance measurement - Measuring the performance of construction projects is essential for ensuring that planned improvements in quality, cost and time are achieved. It helps clients to compare achieved performance with that of similar projects, identify potential for doing things better and assess how suppliers compare with other potential suppliers. Clients also need to measure their own performance and benchmark with other clients to identify areas for improvement.

To do what the OGC suggests is essential, requires standardisation of work elements, proper authorisation and a common data base for comparison.

Standardisation

Standardisation is the cornerstone to cost effectiveness. standardisation of processes, forms, reports and tools, reduces training and reporting costs while improving the communication between parties. Standardisation of the work breakdown structure (WBS) provides the capability to “compare achieved performance with that of similar projects, identify potential for doing things better and assess how suppliers compare with other potential suppliers” as the OGC suggests. It also increases the cost forecasting efficiency for current and future programmes.

Standardisation of tools

I have mentioned this before in this paper, but now it is time to explore this more completely. If every project uses Microsoft Excel to do their cost management, you might consider that standardised tools. I contend that you cannot enforce any standardisation, so it is a standard tool that is used differently in every programme.

Data Validity

Let’s take that a bit further. If I use formulas in the spreadsheets to create the information and I have to enter data in multiple cells and if I pass that spreadsheet to others for review and they change anything, I now have a problem with data integrity. If everything comes from one data base that is updated only by authorised users, that data is always consistent, current and always correct.

What happens when you need to estimate a change? How long does it take you to compare the costs of one bid to another? How long does it take to enter new labour rates, overhead rates of fee rates to calculate the real cost of that proposed change?

If you are using spreadsheets, it takes hours or days. If you are using a standard cost management tool it takes minutes. With a single data base, rate tables integrated to the financial system reflecting escalation, you simply move work in time and have it automatically re-priced accurately and consistently and have the answer in minutes instead of days

Data Forecasting

Is your spreadsheet data accurate enough to incorporate cost efficiencies to date and use that for forecasting costs at completion accurately and consistently? With a cost management tool it is easy to use current efficiency metrics to create high, low and most likely estimates of funding requirements at any point in the life of a programme.

Required time to update

How much time does it take to update the Excel spreadsheet? Studies we have done with customers before and after using a dedicated cost management tool look like this for an average size programme. Large programmes can easily take 2 to 4 times as long.

Time for MS Excel updates

• Time to enter the monthly plan changes and performance data – 8 hours
• Time to get the actual cost data from finance and format it to use – 4 hours
• Time to run reports, validate the data, rerun the reports – 8 hours
• Preparation for monthly programme review meeting – 4 hours
• TOTAL time – 24 hours

Time for a dedicated cost management tool update

• Collect performance data – 2 hours
• Actual costs extract and load batch file done unattended
• Reports creation – .25 hour
• Preparation for monthly programme review meeting – .25 hour
• TOTAL time – 2.5 hours

This means that using Excel takes an average of 21.5 hours more per month per programme than using a dedicated cost management tool. If labour is an average of £50/hour through overhead, the Excel user costs an additional £1,075 per month/programme or £12,900 per year/programme in excess of the dedicated cost management tool user.

The other part of this analysis is the emergency customer/executive ad-hoc report or special analysis report that takes the Excel user 8 to 12 hours to produce and the cost management tool user ½ hour to produce.

For all of this additional labour cost there is no standardisation, no common database, no work authorisation forms, no change control forms and none of the ‘what-if’ capability that a cost management tool would have.

Conclusion

Any group that is responsible for managing the cost of a major programme should have that capability to organise, plan, authorise, monitor and control the schedule and cost of that programme. If they are responsible for multiple programmes, they should have a standardised capability. This standardisation promotes cost efficiencies that go far beyond any one programme.

This efficiency of standardisation extends to the people that have to do the work. With standardisation they can have a career path, be trained (certified) for each leg of that path. In today’s world of not enough trained resources, this approach provides for growing the talent needed. It also helps in maintaining the workforce that you have and reducing the cost of finding and hiring talented people.

If that standardisation includes a cost management tool (such as Deltek Cobra) the costs go down again and it provides all the additional benefits of standardisation.