CIOs labor over contracting crisis

After several high-visibility systems project failures, CIOs are grappling to find out why large IT contracts so often go awry. In a broad-ranging series of interviews, GCN State & Local probes the reasons why contracting has reached its current crisis stage, presents guidelines for avoiding IT project failures and describes how progressive IT organizations around the country are preventing failures and reinforcing success.

A contracting crisis looms over state and local government. And it is large. The Standish Group, a consulting firm in West Yarmouth, Mass., estimates that last year only 24 percent of government IT projects succeeded in meeting budget, schedule and functionality goals. Half of all projects failed partially and 26 percent failed completely. By contrast, in the commercial sector, 40 percent of projects succeeded in meeting all three goals, 44 percent failed partially and 16 percent failed completely.Based on estimates from Standish and research firms that contend state and local government computer expenditures range from $30 billion to $45 billion annually, the number of total contract failures costs governments from $7.8 billion to $11.7 billion each year.Karen Larkowski, executive vice president for the Standish Group, said her company has been tracking government IT for seven years. 'We have seen a little bit of improvement over that time, but not a lot. We see smaller projects today than there were seven years ago, and our research shows smaller projects have a greater chance of success than larger projects.'Ultimately, citizens bear the often severe consequences of IT project failures. Failures can'and do'jeopardize the delivery of basic services such as public safety, health care, corrections and child protection.Also at risk is the glittering goal of electronic government. The Organization for Economic Cooperation and Development, a policy study group, points out in a recent study, 'Unless governments learn to manage the risks connected with large public IT projects, these e-dreams will turn into global nightmares. Governments must get the fundamentals of IT right if they want to harvest the huge potential of going online.'Officials interviewed by GCN/State & Local cited failings by both government and vendors as the source of the contracting crisis. They also tended to agree that government agencies are belatedly learning lessons that major corporations have been taught by their equally costly if less public project failures.Thanks to new project management techniques, improved oversight, employee training and contract controls, several state CIOs reported that project failures are decreasing. But they agreed that the political cost of bungled projects remains high.New Jersey CIO Wendy Rayner cited three reasons for the contracting crisis: imprecise project specifications, excessively large projects and poor program management.'You have to be very clear in your expectations of the vendor when you prepare a contract,' Rayner said. 'Also, if the scope of the work is too large, it becomes too big to manage,' she said. 'In New Jersey we are putting many people through project management courses.' Rayner said CIOs must accurately forecast the maintenance and other lifecycle costs of aging systems. 'You have to be clear on the funding up front,' she said. 'If you're not, you can fall flat on your face when the powers that be cut funding.'To avoid risky projects, Rayner's office conducts cost-benefit-risk analyses of projects before starting them. At the early stage of evaluating projects and designing bid documents, Rayner recommends hiring consultants who will not bid on the project and so will be neutral in their recommendations.She also stressed the benefit of building patterns of success by reducing projects to smaller modules of work for project teams.Rayner said that low-level systems professionals are often reluctant to inform senior managers about emerging project problems.'They think they can fix it. That leads to a reluctance to share it upstairs, but eventually it becomes an issue they can't hide from management,' Rayner said.Texas CIO Carolyn Purcell said expertly designed bid documents are also important. 'It starts with the buying end. ' Trouble can start if you don't specify a good request for offer.' Doing so will help state officials avoid an adverserial relationship with their vendors, she said.A major factor leading to project failures, according to Purcell, is scope creep, or requirements creep. 'It works against both the agency and the vendor when the specification is not complete and the contract is poorly written,' she said.Purcell agreed with Rayner that sometimes problems remain hidden at lower levels for too long. 'There can be an unwitting conspiracy of silence,' she said. 'Nobody wants to take the bad news upstairs. Every time it goes up the chain it gets moderated.'Contractors can cause problems on a project, Purcell said, but ultimately the responsibility for a project's success is with the government agency. 'You can't contract out the responsibility for the project,' she said.Vendors, however, often set up situations that doom a project to failure, said Lester Nakamura, administrator of the Information and Communication Services Division of Hawaii's Accounting and General Services Department.'The initial group they send to work on a project is very good,' he said. 'They are the 'A' team. They are articulate and competent. However, when the consultant feels comfortable that a project is moving ahead, they go to their 'B' team. Then we run into problems.'Nakamura said that in one project involving software from Oracle Corp., inexperienced 'B' team consultant employees asked state project monitors 'how to do things in Oracle.'Nakamura agreed that program management skill is another field in which state government agencies need help. 'In our state we should have better project manager training,' he said.Like other senior state IT managers, Nakamura said large, long-term projects are more likely to fail. 'Some say a project should not last longer than 18 months,' he said. Maine CIO Harry Lamphear emphasized the importance of senior management support to the success of projects. 'If you don't have at least one senior management person attending the monthly project meetings, the project can lose focus, can lose steam and can get off-track.'Lamphear agreed with Nakamura that contractors do at times replace their most-skilled employees as projects mature. During a project, 'if I am doing my job right, I am calling the high-level person in the [vendor] company and saying, 'You are pulling your high-level resources, and that is not acceptable,' ' Lamphear said. 'If you start losing key people, the first warning sign is that you miss deliverables.'Kentucky CIO Aldona Valicenti, president of the National Association of State CIOs, observed that 'in most cases it is not the technology that has failed, but it's usually project management that has failed.'Valicenti pointed to shifting project requirements as a key cause of contract failures. 'You will continuously have people saying they want more," she said. "Managing a project means you have to manage expectations.' Some new requirements can be added to a project, but the project manager must deny others, she said.Valicenti said there is a critical shortage of program managers in state government and senior officials increasingly are looking to training and certification courses for their employees to take to become project managers. 'Many times states turn over the project management to a contractor, and then they are surprised at what they get in the end,' Valicenti said. 'I say shame on us in that situation.'However, as more managers realize the importance of program management, states' performances will improve, Valicenti said.'I think project management is one of those critical disciplines that states have to master,' Valicenti said. 'I think that state leadership is much more savvy than it was in the past.'

The Standish Group consulting firm estimates that in 2000, only 28 percent of government IT projects succeeded in achieving their budget, schedule and functionality goals.

New project management techniques stem the tide of costly contract failures

After several high-visibility systems project failures, CIOs are grappling to find out why large IT contracts so often go awry. In a broad-ranging series of interviews, GCN State & Local probes the reasons why contracting has reached its current crisis stage, presents guidelines for avoiding IT project failures and describes how progressive IT organizations around the country are preventing failures and reinforcing success.













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