During summer 2007, the United States dove into a recession that, for a number of years, has persisted. Take a look at the news channels and the reasons for a weak economy will be clear. Here we are days away from a government default on our National debt payments, and our lawmakers are faced with the reality – we must cut spending. Because only about 19% of the Annual Federal Budget is comprised of discretionary spending, the only way to make the sizable cuts needed is to start hacking away at the entitlement spending, and other mandatory spending such as the Defense Budget.
I currently work in Defense Acquisition, and have been hearing a lot about “Will-Cost” and “Should-Cost” initiatives. What does this mean to us, the Monkeys in the Middle, and how do we do our small part to get our country on the right track again, fiscally speaking? Essentially, program managers within the Department of Defense (DoD) will be asked to compare the “Will Cost” budget for their programs to “Should-Cost” benchmarks. These benchmarks will come from historical costs of other similar programs, detailed “bottom-up” cost estimating, etc. Even though “best-value” has been a phrase tossed around in the government for decades, and I actually believe most of the professionals I work with do their best to adhere to “best-value” principles, this new focus on “Should-Cost” is going to bring more scrutiny, necessarily so.
Some of the areas we can all focus on to help:
- Find low value cost drivers and eliminate them where ever possible
- Ensure we are delivering needed war-fighting capabilities, without unnecessary bells and whistles. Too much is not always better.
- Be judicial when it comes to “bottom-up” cost estimating, do what makes sense for the size of the program.
- Define specific, measurable cost-saving opportunities/initiatives the Program Manager can use as potential savings against the “Will-Cost” estimate.
- Aggressively seek out the best contracting strategy for your program to manage current and future costs.
- If applicable, use competitive contracting and keep the goal to contracting at the “Should-Cost” price.
In this new era, the performance of Program Managers within DoD will be evaluated partly based on these initiatives. What are some other ways project teams can help with this initiative? I would be interested in hearing some outside ideas. Does anyone in the corporate Project Management world use this type of comparison as a benchmark for costs?
Photo attributed to: http://en.wikipedia.org/wiki/File:U.S._Federal_Spending_-_FY_2007.png