Integrated Baseline Review: From Optimistic Planning to Pragmatic Management — Bridging the Gap - Acquisition Baseline Agreement

Program Manager, Sept-Oct, 2001 by Walter E. Casey Bahr

The Milestone Decision Authority (MDA) for a typical DoD developmental program uses a document called an Acquisition Baseline Agreement (ABA) to establish a contract with a program manager for cost, schedule, and performance thresholds. The ABA may bound a program; more often, however, a cost-plus contract with industry defines the program.

Frequently, the contractor-government team's productivity fails to meet the performance goals of the contract, ultimately breaching the program baseline. The breach can be the inevitable outcome of overly optimistic goals, unforeseen external influences, requirements creep, or mismanagement. Typically, it results from a combination of the four.

Until some future acquisition initiative successfully alters the acquisition process for developmental programs, I suggest we find a way to transition from optimistic planning to pragmatic management. I believe that the MDA can bridge the gap between the optimism of the ABA and the reality of the contract through the ownership and judicious use of the information resident in the Integrated Baseline Review (IBR).

Where Does Program Optimism Come From?

Any system that unites unlimited wants (user requirements) with competition for limited resources (DoD budget) yields optimism. Almost everyone in the acquisition system puts pressure on programs to deliver their product better, faster, and cheaper. From DoD's perspective, users want the best systems possible, resource sponsors want the most system they can get for the money they allocate, and budgeters want to allocate only what is necessary to execute the contract.

Contractors have their own pressure for optimism. Even when DoD awards its competitive contracts based on best value, contractors know cost will be one of the selection criteria. Understandably, contractors pare their cost submission consistent with the competitive environment. More often than not, a contractor's profit potential lies more in the production phase than in the development phase. It can make economic sense to a contractor to bid at or near cost during the development phase to secure the more lucrative production contract.

Even after the government selects a winning contractor, the system often encourages program managers and contracting officers to find areas of additional savings during contract negotiations rather than highlight potential funding shortfalls. As a result, our programs begin with requirements that challenge the existing state of the possible and execute at a funding level below the contractor's original estimate.

Not until Initial Baseline Review (IBR) do we have the hard data required to challenge the forces of optimism. It's at the IBR, after the contract has been signed and the budget obligation identified, that we could and should admit to ourselves what we bought. We might not like what we find, but without a realistic baseline, history suggests the contract specification and statement of work, not cost and schedule, will dominate program execution.

What We Bought is Effort

We have signed a contract in which a contractor has committed a pre-ordained set of resources in pursuit of contract goals. They have proposed a design solution, a management approach, and manning level. At the IBR, the contractor lays out the schedule, anticipated resources, and management reserve. Resource allocation should give rise to expected levels of productivity across all elements of the project. The contractor should be able to cite the manhours per drawing, software lines of code per day, material costs, Quality Analysis allocation, anticipated scrap or rework rate, or any other factor that contributed to the estimate. The IBR should reveal how the contractor intends to measure technical performance as the system matures.

From a management perspective, the quality of the initial assumptions matters less than an understanding of the factors behind those assumptions. The contractor should articulate a process to monitor and adjust those factors over time. The true nature of any buy-in should become apparent as well as any unrealistic schedules or levels of productivity The IBR should baseline expectations as well as disclose how the contractor intends to manage costs. It should identify the level of Work Breakdown Structure that the contractor will be collecting, cost data, the tie to the contractor's detailed schedule, and areas of responsibility for the cost account managers. The government must be comfortable that the contractor knows where the taxpayer's money is going, not just where it's been.

The IBR is Too Important to be Left to the PM

Because the IBR validates the detailed plan for contract execution, I believe it should belong to the designated MDA for the program. The MDA should lead the program office IBR team, providing independent experts experienced not only in the IBR process but also in the subject matter of the contract. If all involved are to get a true sense of program risk, the MDA needs to do everything possible to ensure a quality IBR. From the results of a quality IBR, the team should be able to assess the likelihood that a given set of resources and time can produce the desired product. In that way, an IBR can assess the level of optimism, and evaluate the reason for the optimism.