This is a true story. The name of the
city has been changed.
Starting with lessons learned
The City of Yorktown was starting a
project to replace its financial and human resources systems. The city had a
history of technology projects that were completed late and over budget, and
the sponsor for this project was determined that this project would be
different. He and the project manager decided to start with lessons learned.
The project manager spent time
researching what other cities had done and what had worked well. As a result of
this research, there were some things she decided were important to Yorktown’s project:
(a) all departments would be involved in and committed to the preparation of
the business case; (b) the structure of the contracts with the various vendors
involved would ensure one vendor was responsible for managing all of the
vendors; (c) the vendors would be treated as business partners; and (d) the
budget would have plenty of contingencies.
Implementing the lessons
Before choosing a software package and
vendors, the business case and requirements were prepared. In every department
at Yorktown , the department heads signed off
on the cost savings and other benefits expected from the new system, including
agreement that specific budget cuts would be made to the department once the
system was implemented. The cost savings and budget cuts would be made over a
five-year period as staff retired, since there were to be no layoffs.
The Request for Proposal (RFP) was
issued with a requirement that the vendors bid together as a team, and that the
system integrator take responsibility for managing the other vendors. The proposal
was to include software and hardware recommendations.
After the applications and vendors were
selected, the business benefits were re-worked, taking into account the
specific package that had been chosen and its particular capabilities. Again,
each Yorktown department head signed off on
the business benefits, including the planned budget reductions. At the same
time, the costs were refined, based on current information about the package,
the infrastructure and the implementation fees.
The contracts with the vendors were
negotiated and included some important elements: (a) the system integrator was
to have responsibility for managing the software and hardware vendors; and (b)
the vendors were asked to put up some extra contingency dollars. The additional
dollars were not laid out in the contract itself but were negotiated at the
same time and were to be managed outside of the contract.
The project manager knew that each
vendor would already have included some unallocated budget in their own bids,
in order to ensure they were not going to lose money on this fixed-fee price. She too
had a miscellaneous category in her own project budget. However, she also
wanted all parties to provide additional assurance by sharing costs for
situations on the project where the responsibility for picking up the extra
costs could not be clearly defined. She felt this would prevent cost overruns
and also lead to the city and vendors acting as partners instead of each
protecting their own budget.
The shared contingency dollars were to
be spent on a case-by-case basis when agreed by all parties during the project.
The total of the shared miscellaneous budget was approximately one percent of
the project budget
Using the shared contingency dollars
The implementation was to take seven
months. Almost immediately, Yorktown and the vendors used nearly a quarter of
the shared reserve of funds, as additional hardware needs were identified
during the set up of the infrastructure.
During the rest of the project, several
smaller items were agreed to be paid out of the shared reserve fund. Most of
the remainder of the reserve was used for additional processors, storage, and
database licensing.
In each case, when an issue arose that
would cost more money, Yorktown and the vendors would, as expected, try to
negotiate so that another party would pay for the new item. However, when it
became apparent that some items could not be agreed upon, the parties agreed to
pay out of the shared reserve.
The outcome
The project completed on time and on
budget, and is expected to deliver the planned business benefits. Yorktown and the vendors did maintain a collegial
relationship during the entire implementation.
Conclusions
The time the project manager spent on
planning and research was time well spent. The project manager learned a lot from
her discussions with other cities. She focused on making sure the key success
factors were in place and that potential points of failure were mitigated.
She ensured commitment from the
business users by involving them in defining the system requirements and having
them take responsibility for budget reductions related to implementation of the
new systems.
The contracts were structured so that
one vendor could manage the others, reducing the conflict that can arise when
no one vendor is responsible for the outcome.
The shared reserve was an innovative
concept that allowed the project manager to honour her commitment to the sponsor and city
council to complete the project without going over budget. Just as important,
because the reserve was shared by Yorktown and
the vendors, there was more of an implied partnership between the parties. They
had a means to resolve budget issues that might otherwise cause each to dig in
their heels to protect their own budget.
According to the project manager,
who built in an extra contingency, when each party already had a contingency,
the old expression should be “Measure Twice, Cut Once – And Have Money Handy
For More Lumber!”
Copyright
2015 Debbie Gallagher
