Author: Yogi Schulz
“Federal government gives Andersen Consulting the boot from $ 44.5 million contract” was the opening sentence on a page 1 story in Computing Canada. The Department of Public Works and Government Services suggests that Andersen did not meet a major project milestone. Andersen feels the government kept expanding the functionality it wanted out of the system as the project went along.
In a strikingly similar situation, Transport Canada accuses Hughes Aircraft of Canada Ltd. of being late and over budget on an air traffic control system. Hughes counters that the government changed its requirements and that Hughes simply could not do what the government wanted for the money provided.
In the Andersen case, four months of intensive negotiations resulted in a contract cancellation. For Hughes, months of sparring resulted in Hughes continuing as the contractor with additional compensation and a scope reduction.
What’s going on here? Are we really willing to believe that some of the leading IT consulting companies on the face of the earth messed up big time? Perhaps. However, familiar contracting dynamics are also at work here. Let’s examine the factors and how we can address them. For project managers and government bureaucrats, these dynamics are career-threatening. For taxpayers, the same dynamics are expensive.
Andersen contracted to implement an ambitious client-server system to administer pay and benefits. Hughes contracted to replace much of Canada’s creaky air traffic control system. For the consultants, ambitious government programs produce large and potentially lucrative contracts. These ideas are just the thing to meet ambitious growth and profitability targets. For the government bureaucrats, ambitious programs mean important career-enhancing visibility.
These dynamics conspire to create an environment devoid of restraint and caution. As a taxpayer, I wonder about the degree of reasonableness that went into the process of scoping these projects.
Eager Acceptance of Technical Risk
I suspect both Andersen and Hughes fell into the usual traps in their internal risk assessment. We delude ourselves with words like: “How complicated can this get?” “We’re the client-server experts.” “We wrote the book on air traffic control systems.” “We did well on the last project for the U. S. military.”
These dynamics produce inadequate risk perception for the consultant and play into the hands of the government client. Government bureaucrats are unequaled experts at pushing as much risk as possible to the consultant.
As taxpayers, we may believe we are getting the best possible deal. All too often however, we get to pay for a second project to clean up the mess of the first.
Ambitious project sponsors market project benefits aggressively within the government. This marketing casts expectations about scope, cost and schedule into concrete before the tender documents are even issued.
Similarly, the IT consultants are aggressively marketing skills and experience to prospective government clients. They feel growth pressure internally and competitive pressure from their peers.
These dynamics set both parties up for a potential fall.
These two government contracts were clearly marred by scope creep. Both consultants appear to have paid insufficient attention to this problem.
The dynamics of scope creep tend to place the government and the consultant in an adversarial position. This creates a h3 incentive for the consultant to postpone addressing a difficult situation that ultimately turns on the consultant as a financial Waterloo.
It may be tempting for us taxpayers to say: “If these projects are really this complicated and risky, why don’t we just not do any of them?” Sticking our collective heads into the sand won’t help because we need many of these systems to support needed government services. So what should we do? There is a better way.
Let’s start by issuing small fixed price contracts to a few credible consultants who pass some kind of pre-qualification process. Each consultant agrees to produce a detailed approach to the project, perform a risk assessment and to develop a prototype of the final system. Notice how the initial round does not produce or implement an actual system.
The government would then use these deliverables to create a budget, a schedule and a tender document. This document will then become a more realistic basis for delivering a system that doesn’t cause taxpayers to feel robbed once again. This approach will avoid a career-terminating outcome for the government bureaucrat and a financial Waterloo for the consultant and the taxpayer.