How Effective Project Risk Management Improves Quality
Guest Post by John Ayers (first posted on CERM ® RISK INSIGHTS – reposted here with permission)
What is quality? In a manufacturing or heavy industry, it is to minimize the defects and errors. Today it emphasizes customer satisfaction as well. It means quality is achieved if in the end the customer or user can effectively use the product. High quality is important to project success. Poor quality has a cost. Some examples are:
– Not meeting customers’ expectations
– Cost of corrective actions are high
– Team morale may suffer
Way too often, quality takes a back seat to project budget and schedule problems. It seems that once a project is over budget and behind schedule, management wants to delete tests and inspections to mitigate these problems. This is a problem. The Hubble Telescope story illustrates the problem.
HUBBLE TELESCOPE FAULTY MIRROR
The Hubble Telescope was launched into space in 1990. When it went operational, the images were fuzzy confirming the mirror shape was incorrect.
The mirror of the telescope was polished using a custom built and a very sophisticated cutting-edge polishing machine. NASA was concerned with this risky process and contracted with another company to make another mirror using a different more standard polishing process. The idea was to use the two mirrors to double-check each other’s work which if implemented would have caught the error. This was a unique process to ensure the quality of the mirror.
The project was significantly over budget and schedule. To mitigate these problems, NASA halted work on the back-up mirror. As a result, the telescope that launched included a flawed mirror which was not detected. The Hubble Telescope was fixed in space in 1993 and cost tens of millions of dollars.
Quality was compromised by management decisions driven by over budget and behind schedules problems. The likelihood is the flaw would have been identified if the seconded mirror was not halted. This situation happens much too often on projects.
HOW CAN EFFECTIVE PROJECT RISK MANAGEMENT IMPROVE QUALITY?
The four known risks to a project are discussed below. Effective project risk management can control the known risks. If so, then management will not have a reason to compromise quality due to budget and schedule problems.
Studies show that most projects fail due to known risks. If you manage the known risks, then the project success probability is increased significantly.
There are four known risks. These are:
- Cost (budget)
The contract statement of work (SOW) defines the project scope. The challenge to the project manager is to perform to the scope of the contract but not more and not less. Sometimes the scope is not fully defined or mis-understood creating a serious risk situation which may not be known until late in project. The project manager is responsible to ensure that the scope is clear to the project team, so everyone is on the same page.
The request for proposal (RFP) specifies the project schedule or period of performance. The challenge to the proposal team is to generate a plan that includes a schedule that meets the RFP requirement. The schedule must have margin built into it. Contractors can control their own schedule by adding resources or working two shifts. However, contractors do not have any control over their subcontractors. Subcontractors are a major source of project risk to the schedule.
The project’s cost risk begins with the proposal response time frame, often 60 days. The short time puts a lot of pressure on the proposal team to collect, review, and approve costs. Typically, a bottom-up cost estimate and a top-down estimate are compared to confirm they are in alignment within a specified tolerance. This is the in-house cost estimate. Subcontractor pricing is more of a challenge because they have 3-4 weeks to prepare their proposal to ensure it gets into the company’s proposal. This is the biggest risk for establishing the budget. The other major risk is executing the project to the budget and avoiding serious issues.
The quality risk works a little different than the other risks. For example, if a project is running late and over cost, the project manager may deliver the product on time but with less testing and inspection. In other words, with compromised quality.
Compromising quality due to budget and schedule issues is a problem that happens too often. Poor (or compromised quality) has cost consequences in terms of: impact to customer’s expectations and satisfaction; corrective action high costs; and poor team morale. It is unacceptable. How to address problem?
Effective project risk management is required to manage the known risks on a project. If successful, the budget and schedule ought to be under control. This means, there is no reason for management to compromise quality to mitigate budget and schedule issues. It is easy to state this hypothesis but more difficult to implement it. Knowledge and skill set for project risk management is key to success.
Currently John is an author, writer and consultant. He authored a book entitled ‘Project Risk Management. He has written numerous risk papers and articles. He writes a risk column for CERM.
John earned a BS in Mechanical Engineering and MS in Engineering Management from Northeastern University. He has extensive experience with commercial and DOD companies. He is a member of PMI (Project Management Institute). John has managed numerous large high technical development programs worth in excessive of $100M. He has extensive subcontract management experience domestically and foreign. John has held a number of positions over his career including: Director of Programs; Director of Operations; Program Manager; Project Engineer; Engineering Manager; and Design Engineer. He has experience with: design; manufacturing; test; integration; subcontract management; contracts; project management; risk management; and quality control. John is a certified six sigma specialist, and certified to level 2 EVM (earned value management).https://projectriskmanagement.info/
If you want to be a successful project manager, you may want to review the framework and cornerstones in my book. The book is innovative and includes unique knowledge, explanations and examples of the four cornerstones of project risk management. It explains how the four cornerstones are integrated together to effectively manage the known and unknown risks on your project.