BASELINE MANAGEMENT PART I: THE CONTRACT BASELINE
In the last article, we discussed the importance of Baseline Management and Change Control in Earned Value Management on programs and projects. We also listed the key elements of Baseline Management and Change Control. Because this is so critical to achieving strong performance, the upcoming articles will go a little deeper into these key elements to identify critical issues that impact performance in each element and important actions the Program or Project Manager can take to avoid and address the issues. The first of these key elements to discuss is the Contract Baseline as it is the primary baseline affecting all the others.
In the coming years, there is going to continue to be downward pressure on cost and we are going to see more competitive and fixed price procurements, especially in the aerospace and defense programs, resulting in contractors having to absorb more of the risk. The dilemma, of course, will be that the overarching win strategies in companies’ proposals will be built upon delivering “best value” or “high affordability” products and services. This will translate to providing more capability faster at the lowest possible price to win the contract. Unfortunately, the proposal will not always equal the negotiated contract that governs execution of the program and the detailed planning required to execute will either not have occurred or will have to change. For this reason, it is imperative that the contract baseline or “slate” for the program, especially the statement of work, specifications, key assumptions, terms and conditions is well documented and specified in as much detail as humanly possible. We’ll discuss in a later article the detailed planning that is required following contract award, but once a contract is definitized and baselined, it will be vital that any change in contract scope, at any time, for any reason be captured and all impacts to the program identified so that adjustments (e.g. budget, schedule) can be made accordingly. Otherwise, cost and schedule performance, product or service capability and quality, as well as long-term affordability will suffer.
To avoid these pitfalls, there are at least six actions that Proposal, Program and Project Managers can take. These actions will minimize volatility in the contract once execution begins; provide a means to deal with change when it does occur; and result in a much higher degree of program success.
- Strong contractor relationship with the customer
- Nothing is more important than a strong relationship with the customer (and users) if different from the procuring customer. The customer needs to be involved in the planning and execution of the program and have an equivalent understanding as the contractor on where the highest degree of change will come from. Communication is imperative, and the contractor AND customer must be aware of every potential change that arises. This strong relationship will go a long way to minimizing change that impacts the program performance.
- A detailed, well documented Program Plan or Program Execution Plan
- Once the contract is definitized, the contractor should generate, with customer involvement, a detailed program plan that translates the contract into executable terms and delineates specifically what efforts will be performed; what deliverables will be provided and when; and how (policies and processes) the contractor will execute the program. A well written program plan solidifies the “slate” for detailed program planning. In the case of a product or system development, a detailed System Engineering Management Plan is also critical in establishing the technical approach for managing the program.
- An agile and rapid change management and authorization process
- When change must occur, there needs to be a process in place for change that provides for implementation in a timely manner in the contractor’s and customer’s organizations. This will allow change to be reviewed and approved; contract adjustments made; and rapid implementation of the change. We’ll discuss the Change Control Process in more depth in a later article.
- Change recognition at the working level of the program
- In the contractor and customer organizations, the people working the program must be trained to know the scope of their share of the work and have a vehicle (e.g. data base entry form) to report changes that may impact their ability to deliver quality work within the allotted time and budget to the management team. Then they need to get a rapid response from management in the form of direction from the appropriate level of authority. The agility in the program needs to exist so change management forums such as Change Control Board can occur as quickly as the priority of a decision dictates.
- Adequate Management Reserve and Contingency Funding
- With a strong Risk Management process in place, many of the smaller or “reasonable” changes can be foreseen. The appropriate levels of management reserve and contingency funds, along with well documented procedures for authorization and allocation will enable rapid approval and funding of these changes.
- Detailed cost and schedule EVM planning, with an Integrated Baseline Review Intra Management Solutions would like to wish you all a warm, safe and merry Holiday Season, and a prosperous and happy New Year!
- These key actions, if implemented, will dramatically reduce the volatility in the Contract Baseline and the impact of change whenever it occurs. As a result, Earned Value Management will be a highly effective technique for measuring and controlling program performance for the contractor and customer as well.
- Detailed and thorough EVM cost and schedule planning should occur immediately, as these will be the primary tools for managing execution. At the appropriate time and as early as possible, an Integrated Baseline Review should be held where the contractor and customer agree that there is adequate time and budget (with margin according to risk) to execute the contract.