It has been occurring to me lately that there is a fundamental mismatch between how some astronomy projects select and manage external vendors and their expectations of these external vendors’ performance. In our case, we require competition and fixed price contracts. Our typical instrument contract bidder, a university lab or department, is often not used to fixed price contracts. To inappropriately stereotype, academia likes to be awarded grants and submit reports on the work accomplished after the fact. That’s not what our contracts are. Universities are not used to, and therefore do not generally have the infrastructure for, fixed price, fixed schedule, competitive bid contracts. They have not usually developed the considerable expertise needed to fully cost a new project and identify and manage its risks. The end result is that they often deliver late and and over-budget, if at all.
An alternative to academia. we could pursue our contracts in the commercial world. Except for one, they don’t usually respond to our requests for proposals, and two, they generally cost more. Their more properly calculated and risked cost is what generally prices them out of the competition and prompts them not to waste their time bidding. Again, to inappropriately stereotype, the commercial world has learned how to cost and scope a project to ultimately complete a risky project to a fixed deadline and cost. While their bids end up more expensive, the price more accurately reflects the risks involved in a fixed price bid for what is ultimately, after all, a one-off product. Those that know how to properly cost an uncertain project, whether in academia or outside, will inevitably come up with a higher price and a later delivery that those that do not. So we are simply fooling ourselves if we expect a complete, on-time, on-budget delivery after selecting the low bid from an ill-prepared institution.
So, we have a couple choices. We can pay the higher price requested by those that really know how to cost a risky project or we can adjust our approach and our expectations and work with less-prepared institutions. The latter, though, means acknowledging early on that the bid cost and schedule will not likely last the whole project. If our selected vendors do not have the tools for full project management, we need to work more closely with them throughout the project, both training them and working as embedded project managers. This effort will have real costs in terms of both resources and schedule. By using our contingincies (see some of my thoughts on the use of contingency in the middle of this earlier post) properly, for example,we can begin to generate a culture of cost and schedule containment from the early stages of the project. At the beginning of a project, when the first hurdle is found, most people want to throw time and money at it since at that point, these reserves are well-stocked and it seems too early in the project to de-scope. Yet, if schedule and cost are to be maintained, de-scoping early is often the most appropriate response. One way to soften the blow is to leave hooks for the de-scoped capability to be added again later, if reserves allow. In some instances, however, that simply won’t be possible and a given capability will simply have to be eliminated in order for the project to stay on track. Making these kinds of decisions early will help the project develop a plan-oriented culture. If, on the other hand, there is more time and money than there is functional contingency, then we need to realize the initial optimistic delivery dates and costs are not likely to actually correspond to the final delivery dates and costs. We therefore need to set our expectations, and those of our community, accordingly, by adding in the schedule and cost contingencies necessary to assure the required functional specifications are met. If time and schedule reserves are not very plentiful, then we must prepare our stakeholders for an ultimately de-scoped end-product.
If we really do need something on a fixed price and schedule, then we need to consider paying more to the people who know how to deliver in those circumstances. It will look like it costs more to do so, but in the end, it may actually cost less and is certainly more likely to result in a useful delivered product than would a lesser contract awarded to a less realistic vendor.
(I realize there are commercial companies who don’t understand risk and universities that do, but my point here is to understand the vendor and adjust your stakeholders’ expectations and project management approach, accordingly. We may not always be able to choose with whom we work, but we can choose how we work with them.)
Scot has managed both projects with both commercial and university vendors. He’s seen similar mistakes made by each type (not reading the contract is a common one), but has also learned to adjust his style dependent on the vendor’s experience and approach.
