A Project Manager’s Perspective on the Cost Impacts of the “Sequester”

By Dennis D. McDonald, Ph.D.

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 understood? Or are we just “kicking the can down the road” again?

Related reading:

Copyright (c) 2013 by Dennis D. McDonald, Ph.D. Dennis is a Washington DC area consultant specializing in collaborative project management and new technology adoption. His clients have included the US Department of Veterans Affairs, the US Environmental Protection Agency, Jive Software, the National Library of Medicine, the National Academy of Engineering, Social Media Today and Oracle, and the World Bank Group. His experience includes government contract research, software and database product development, system integration and consolidation, and IT strategy consulting. Contact Dennis via email at ddmcd@yahoo.com or by phone at 703-402-7382. This has been republished from Dennis D. McDonald’s Web Site.

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Henry Brown

Believe, in this case, that the political issues are entirely wrapped around the cost issue, and to resolve them one must engage in some level of political talk with the politicians

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RAFAEL A. GOMEZ

I feel like the cure is worse than the disease and we are about to get a load of the medicine, when a vaccine would’ve suffice.

Good points, great questions.

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