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Project Decision Analysis Context: Situation Description

by Bill Girling

A. Background

In early 1992, the Department of Personnel and Training (DPT), and the Department of Accounts (DOA), administrative agencies of the Commonwealth of Virginia, were confronted with the replacement of their aging personnel and payroll systems. These automated systems were executed on two different system platforms, IBM and Unisys, and were used to provide payroll, human resource, and benefits services to over 100,000 state employees and their dependents. The first phase of the Personnel Management Information System (PMIS) was installed in 1978 and was expanded to provide employee benefits services. The Commonwealth's Integrated Payroll and Personnel System (CIPPS) was installed in the early 80's and despite its name, was limited to providing payroll services for approximately 60% of the employees supported by PMIS. Despite their apparent differences in age and architecture, both systems were of the same technology generation, which after 20 years was quickly moving toward obsolescence. Typically, the replacement of very expensive infrastructure services garnered little support from the legislature or the current administration. However, due to the leadership of several key administrative officials, and with the indirect support of the Auditor of Public Accounts, $6.2 million in funding was provided for the acquisition of a new integrated system that could replace all the existing systems.

A defining characteristic of the Commonwealth of Virginia is that governors are not allowed to succeed themselves in office. Ultimately, this practice creates inconsistency in the level of support for efforts that cross gubernatorial terms of administration. This newly funded, integrated human resource information system, would cross two and possibly three administrations. Because of the potential for wavering support and the reasons that follow, this effort was characterized as being a "very high risk" project:

• The system would be jointly developed and administered by different state agencies. DPT was assigned project leadership responsibility and DOA was given control of the funding.
• Unknown financial commitments were created.
• No comparable effort by another state government had been conducted. The "right" steps were not defined.
• Long lead times required commitment to technology not fully developed or stabilized.
• The new technology required skills not currently held by the state workforce.
• The current agency management did not have experience in managing large scale, multi-agency, high technology projects.

In order to mitigate these risks, the project steering committee decided to frame the "request for proposals" so that only consultants qualified as "system integrators" could respond. System integrators would provide, with the exception of system hardware and the communications infrastructure, all services and software necessary to replace the existing systems. With this approach the consultants would share the risk of selecting the appropriate technology, controlling cost, and delivering an acceptable product in a timely fashion. Although there were a limited number of firms with "system integrator" credentials for a project of this size and scope, the project steering committee considered this to be the only viable approach. This decision was reinforced because of a similar effort being conducted in the states of Kansas and Minnesota. During the time the Commonwealth of Virginia was undergoing a change of administration and preparing its "system requirements", Kansas, with 60,000 employees, was close to implementing its own version of the project. The "system integrator" approach was used by Kansas and an extrapolation of its cost as well as those experienced by Minnesota were very much in the range for which officials with the Commonwealth of Virginia had planned.

B. Project Scope

So what happened? The Commonwealth's project plans did not contain alternatives in case the only viable "system integrator" produced a bid 300% over the "expected" project budget and 550% over the current funding. When this "unexpected event" actually occurred, several major decisions faced key officials:

• Do you kill the project? Costly "Year 2000" and "aging" infrastructure problems were starting to surface.
• Is it possible to restructure and reissue the proposal? A consulting firm with international credentials has proposed the only "viable" approach, which is out of the Commonwealth's price range. Within 30 days of receiving bids on the project, another state agency exploded into the news and was placed under investigation for mismanaging a highly visible multi-million dollar information system project.
• If the "request for proposals" is re-issued, what are likely scenarios, and the optimal solution?

The project has a number of highly volatile elements; political considerations, costs, technology requirements and capabilities, employee, and consultant issues. All of these elements have to be managed within the constraints of time (limited ability to maintain old and new system simultaneously) and funding.

A quantitative analysis is expected to provide insight into the relevant risk associated with the assumptions made and the strategies that are being executed.

C. Objectives

The project steering committee must decide whether or not to restructure its project approach. Should the Commonwealth will serve as its own "system integrator"? Many decisions must be executed and contracts valued at almost $5 million have to be signed. This is a prelude to an expected total expenditure exceeding $12 million. A function of moving the project forward is to advise key legislative financial committees of the anticipated need for over $6 million in future funding. Although this is not a formal tactic for securing project funding, significant reservations expressed by committee members influences many of the decisions about the project structure, execution, and viability.

The objectives of this analysis are to address the questions:

• Should the project proceed or stop?
• What are the key elements which influence the outcome?
• What are the key uncertain events and their degree of impact on the decision?
• With the decision to proceed or stop, how sensitive is it to changes emanating from the key events?
  
  

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