Cost Overruns, Schedule Slips: The Norm, Not the Exception.

Author:Johnson, John C.

Numerous past government projects, such as infrastructure, federal buildings, hospitals, satellite programs and weapon systems, have suffered under cost overruns and schedule slips that resulted in billions of dollars of unplanned expenditures.

This trend, which reaches back decades, demonstrates that cost and schedule issues are now the norm in government program performance rather than the exception.

It appears many have acknowledged and accepted this woeful circumstance and spend more time now accounting for and accommodating performance shortfalls than preventing lackluster performance. As both government and industry ramp up, best business practices must remain at the forefront.

The Defense Department depends on acquisitions to preserve a technological battlefield advantage and sustain current force structure. However, every administration struggles with contracts and how to balance development efforts with the risks of inflated budgets and schedules. Budgets that exceed planned funds and time adversely affect other essential programs by diverting funds, delaying start dates and initial operating capability, and reducing the unit quantity purchased. The result: a loss of technological advantage for U.S. forces.

In 1983, the Nunn-McCurdy amendment went into effect. This provision requires overruns greater than 25 percent to be reported to Congress; those over 50 percent warrant termination of the contract unless it is certified as essential to national security. The idea was for Congress to pressure and shame the various agencies and their programs into performing within the original contracted terms.

Yet issuing cure notices, threatening suspension, and even debarring contractors for a set period accompanied by withholding payments have had little effect--still the problem lingers.

Contractors also struggle, but on the other side of the issue. They spend months assessing government proposals to verify financial assumptions--such as estimates versus actuals, man-hours, degree of difficulty and areas of risk. Their engineering and manufacturing divisions, subcontractors and suppliers must make the same assumptions. Once a program starts, they implement a rigorous review schedule coupled with in-depth project analysis--but still the problem lingers.

The Budget Control Act of 2011, commonly referred to as "sequestration," has perhaps disproportionally affected the Defense Department compared with other government agencies. More than a...

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