FEDERAL SECTOR REPORT
October 2006

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Operational Analysis Reviews

13 Tips for Successful Reviews

Enterprise-Wide Consolidated Review?

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Keep up with the latest information about IT Capital Programming, Strategic Planning, CPIC, and the OMB 300

OPERATIONAL ANALYSIS REVIEWS

Operational Analysis Reviews are an important tool for the strategic management of IT systems, alignment with Enterprise Architecture (EA), and successful execution of the Capital Planning and Investment Control (CPIC) process. This article will explain operational analysis and offer you tips for how to make better use of these reviews.

These reviews are important to you even if your IT investments are now in the planning or acquisition phases: Your budgets, plans, and performance indicators will become the baseline against which your systems’ efficiency and effectiveness will be judged over the long term. This is particularly true with the emphasis of Federal oversight agencies on IT management, cost and schedule control, and business results.

Lifecycle Costs

New projects and investments have a tendency to attract most of the attention in Federal IT portfolio management, but most of the money is actually spent on existing IT assets, which are in the “Operations and Maintenance” or “Management-In-Use” phase of the system lifecycle. The new edition of the Office of Management and Budget (OMB) Capital Programming Guide points out that this is generally the longest phase of the lifecycle, and ownership costs can consume more than 80 percent of the total lifecycle costs.

The impact of lifecycle costs is intuitively obvious and a fact of personal life:  Take the cost of a modestly-priced automobile, such as a $17,000 Chevrolet Cobalt with four doors and an automatic transmission. Over five years, http://www.edmunds.com/ estimates the true cost of ownership at approximately $37,100 in the Washington metropolitan area—of which only 32 percent is for acquisition cost ($12,118 depreciation).  Insurance alone (known as “risk management” in IT) is projected at more than $8,000.

A similar pattern is present in Federal IT, where acquisition costs of new systems are just the tip of the iceberg. Many other expenses are involved in the lifecycle including some which have not always been tracked historically—like energy consumption and cost of facilities.

Operational Analysis Reviews

Operational Analysis Reviews compare the performance of an IT asset or system to an established baseline.  The review measures ongoing performance of Management-In-Use investments against established cost, schedule, and performance goals. It should also include a review of related enterprise management issues such as risk, information security, harmonization with the EA transition strategy, and any updates to the agency’s strategic plans/objectives.

Note that the review is conducted against a baseline, which should be consistent with your system planning and OMB Exhibit 300 documents. You will find that the new format of the OMB 300 (beginning Budget Year 2008) will provide a very useful summary of budget, acquisition plans, performance indicators, cost/schedule variance, risk, security, and EA. We recommend that you conduct your Operational Analysis Review every October, after the prior fiscal year has ended—when you have an updated OMB 300 but before OMB “passback” which occurs about Thanksgiving time. This will give you an opportunity to tweak your final budget submission before becoming incorporated into the President’s proposed budget.

We recommend that an Operational Analysis Review should be conducted annually for each major IT investment. In addition to comparing quantitative factors (such as cost, schedule, and performance metrics), the review should also wrestle with the less structured—but highly important—factors, such as customer satisfaction, options for system consolidation, and the impact of technology innovation.

Sample Template

The P2C2 Group has a sample template that it has developed as a starting point for use with some of its agency clients and CPIC workshops. You can access it here.  As a caveat, please note that we always adapt this template to the organizational culture and processes of the client agency. We do not recommend that you use it without adaptation. 

13 Tips for Successful Operational Analysis Reviews

The P2C2 Group assists agencies with a thorough approach to performance analysis and measurement. Following are our recommendations based on years of successful experience.

1.  Read the New Capital Programming Guide. OMB has modified the requirements for Management-In-Use reviews.

 

2.  Define Your Performance Measurement Methodology in Advance.  You need to develop a performance measurement methodology before a capital investment is initially funded. This should include definition of measurement indicators, mapping to strategic goals and objectives (and the OMB 300), data collection and record-keeping procedures, and methods for analysis. These might be incorporated in your Project Management Plan or, better yet, there could be an agency-wide methodology with relevant templates.

 

3.  Document Your Baseline.  The best time to establish a baseline is before the acquisition phase—so that you have appropriate comparison points to analyze the process and outcome results of the project. The baseline should include performance, cost, and schedule measures. These should be consistent with what you report in your OMB 300s and OMB 53.

 

4.  Keep Your Records Up-to-Date.  The only way to have accurate performance data is to keep records on an ongoing basis. Much of the data should be maintained on at least a quarterly basis—and can be integrated with your other status reporting requirements.

 

5.  Consider Business as Well as Technology Issues.  The primary purpose of technology is to improve business performance in the most cost-efficient manner practicable. Since government operations and enables program mission will change over time, it is important to analyze how well the investment is aligned with the changed (current and future) requirements.

 

6.  Refine Your Exhibit 300. Reviews will yield updated information about the performance of your investment, and you will need to update your OMB budget documents accordingly.

 

7.  Develop a Review Plan. You can avoid haphazard or incomplete reviews by developing a written plan. This should include a scope statement, a schedule with milestones, assignment of responsibilities, and identification of the information and people who will provide needed information.

 

8.  Involve Your Stakeholders in Reviews.  Stakeholders often have outstanding observations and suggestions during the review process. We recommend group meetings whenever practical, because face-to-face dialogs will often address important topics not considered when developing questionnaires or other structured data collection formats.

 

9.  Be Open Minded about Change.  All options should be considered—modifying the system, outsourcing it, replacing it, merging it with other systems, and decommissioning it. Just because the investment was considered a good idea five or ten years ago doesn’t mean that it must perpetuate itself as is. True, stakeholders and IT support personnel can become emotional about change, but that’s when you make use of your communication and change management plans

 

10.  Document Gaps.  The Operational Analysis Review may identify strategic or tactical gaps. Strategic gaps include mismatches with the agency’s strategic goals, performance plan, and EA. Tactical gaps may involve changes to address risk, security, technological, or integration issues.

 

11.  Be Open Minded about Change.  All options should be considered—modifying the system, outsourcing it, replacing it, merging it with other systems, and decommissioning it. Just because the investment was considered a good idea five or ten years ago doesn’t mean that it must perpetuate itself as is. True, stakeholders and IT support personnel can become emotional about change, but that’s when you make use of your communication and change management plans.

 

12.  Take Action.  The payoff for conducting a review is to take action—make decisions that improve the effectiveness and cost efficiency of IT in support of the agency mission. A Plan of Action & Milestone (POAM) table may be appropriate with actions, milestones, assigned responsibility, and scheduled completion dates. In some cases, action will cost little or nothing (or maybe even save money!). In other cases, there may be a decision to revise the investment’s scope, schedule, or costs in the next available budget cycle.

 

13.  Take Advantage of Lessons Learned.  The entire agency can benefit from the lessons learned by a thorough review, and the findings can improve future planning, acquisitions, and Management-In-Use. Ideally there will be a common repository maintained by the agency’s Office of the Chief Information Officer or Project Management Office where all can benefit.

Enterprise-Wide Consolidated Review?

Consider conducting a consolidated, enterprise-wide Operational Analysis Review of all steady state assets included in your Exhibit 53 (that is, both major and minor investments). Many systems are interrelated, and a unified review can better answer questions such as:

• The overall cost and performance of all Management-in-Use investments
• Trends in variances of cost and performance
• Overall alignment with agency strategy and performance objectives
• Opportunities for consolidation
• Relative performance of various contractors and suppliers
• Potential for business process streamlining
• Progress in pursuing the agency’s target EA
• Enterprise-wide policy issues.

 A consolidated approach can also save time, both for IT professionals and all stakeholders. It can also ensure that there is uniform compliance with CPIC requirements for Operational Analysis Reviews.

SERVICES

The P2C2 Group helps agencies transform IT compliance activities into results that leverage mission and programs in measurable ways. This includes IT strategic planning, EA, CPIC, EVMS, FISMA, and analyzing performance. Our firm specializes in capital programming, which integrates the planning, acquisition, project management, and operational control of capital assets. Our consulting services assist agencies in improving asset management, mission results, and compliance with regulatory requirements.

 Professionals in the P2C2 Group's consulting practice are highly experienced, have proven performance records in multiple agencies of the United States government, and are dedicated to implementing best practices.

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I finally was able to take two weeks in September to prepare for and pass the Project Management Professional (PMP) exam, and I enjoyed taking several courses—including one where I was the only student involved in the Federal marketplace. It was really interesting hearing the project/portfolio management issues in such sectors as pharmaceuticals, construction, financial services. Each has a different culture, guidelines and constraints. However, the bottom line is pretty much the same: manage according to the scope, keep on top of costs and schedules, manage stakeholder expectations, get approvals for change, and document lessons learned.

Elena and I took a few days to enjoy Colorado. We met a serious bull elk in Rocky Mountain National Park, but most of our time was on trails with smaller creatures, such as chipmunks. Three female elk did prance across the road in Estes Park, possibly headed to the nearby Safeway for alternative fruits and vegetables. Denver was fun, and we discovered a “cash cow” that was totally unrelated to the Federal budget. Our Colorado vacation postcard is attached.

Best wishes,

Jim Kendrick, PMP, CMC

Certified Management Consultant

P2C2 Group, Inc.

4101 Denfeld Avenue

Kensington, MD 20895

kendrick@p2c2group.com

301-942-7985

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