Franklin Electronics Won An 18-Month Project With Spokane

Franklin Electronics won an 18-month project with Spokane Industries in October 2003

Franklin Electronics in October 2003 secured an 18-month labor-intensive product development contract from Spokane Industries, structured as a cost-reimbursable agreement with a target cost of $2.66 million and a fixed fee of 6.75% of the target. This contract marked Franklin's first experience with formal project management, including the implementation of a newly developed project management methodology. Historically, Franklin had completed similar contracts for Spokane Industries, all fixed-price and without formal project management requirements or earned value reporting.

The contract’s key stipulations mandated the use of formal project management processes, including earned value management (EVM), with monthly status reports and two technical interchange meetings scheduled at six and twelve months. The first EVM report was due after two months, with subsequent reports monthly. Spokane Industries believed that they could rely solely on earned value status reports to replace monthly interchange meetings, trusting the EVM system’s capacity to provide sufficient project insight. Unbeknownst to Franklin, Spokane never previously indicated that EVM might become a contractual requirement for future projects.

To prepare, Franklin engaged a consultant for a four-hour seminar on earned value management, attended by the project manager, the cost accounting team, and two line managers. The cost accounting team was resistant to adopting EVM techniques but acquiesced to remain competitive for the Spokane bid. During the planning phase, a work breakdown structure (WBS) was developed comprising 45 work packages, with only four scheduled within the first four months.

In terms of progress, Franklin designed a straightforward status report, providing financial data at the end of months two and three. At the close of the third month, the report indicated significant variances, with the project experiencing cost overruns and schedule slippages across multiple work packages. The data showed that for Work Package D, the most problematic, the cost variance (CV) was -$10K at month three, with a schedule variance (SV) of -$26K, highlighting severe performance issues.

A week later, the project manager was summoned to an urgent meeting with Spokane’s vice president for engineering, who presented alarming performance metrics. The vice president expressed frustration over an escalating cost variance of 78%, increasing from $14K to $25K, and a schedule variance worsening by 45%, from $31K to $45K. He projected these trends could result in a 500% cost overrun and a project delay exceeding one year, urging the project to be reined in or canceled to prevent further losses. He threatened to terminate the contract if Franklin failed to demonstrate a credible corrective plan to control costs and schedule deviations.

This scenario underscores the critical challenges of applying earned value management in a high-complexity, labor-intensive project context. The deficiencies in initial planning, the resistance to adopting EVM, and the escalating variances highlight the importance of proactive project control and stakeholder communication. Effective project management would necessitate identifying root causes of performance issues, adjusting resource allocations, reevaluating project scope, and establishing rigorous control measures to realign performance with the agreed upon baselines.

Paper For Above instruction

Effective project management is crucial in complex, labor-intensive projects to ensure timely delivery within budget. The case of Franklin Electronics’ 2003 contract with Spokane Industries exemplifies the challenges and importance of integrating formal project management methodologies, such as earned value management (EVM), in monitoring and controlling project performance. The scenario demonstrates how deficiencies in project planning, stakeholder communication, and performance tracking can result in significant variances, threatening project success and organizational reputation.

Initially, Franklin's decision to adopt EVM was driven by the contractual requirement and a desire to improve project oversight. The shift from traditional fixed-price contracts to a cost-reimbursable, management-driven project represented a strategic move toward more rigorous control over project costs and schedule adherence. A key aspect of this transition was training the project team and the cost accounting department in EVM techniques, which had historically been unfamiliar to Franklin. Resistance from the accounting team highlighted the organizational challenges associated with implementing new project control tools, emphasizing the need for change management and leadership support in such initiatives.

The development of the work breakdown structure (WBS) and initial planning laid a foundation for tracking progress. However, the performance data collected at the end of months two and three revealed substantial deviations from planned cost and schedule baselines. The negative values in cost variance (CV) and schedule variance (SV) indicated that the project was significantly behind schedule and over budget. The case of Work Package D, with a CV of -$10K and an SV of -$26K at month three, illustrates the severity of the project's issues. These variances often stem from underestimating task complexity, resource constraints, or unforeseen technical difficulties, which require timely intervention.

The escalation of variances prompted immediate concern from Spokane's vice president, highlighting the importance of transparent and effective communication with stakeholders. The vice president’s alarmist projection of a 500% cost overrun and a delay exceeding one year underscored the need for corrective action. Such situations demand rigorous root cause analysis, re-evaluation of project scope, and resource reallocation to address deficiencies. Management must implement targeted corrective actions, such as reallocating resources, adjusting schedules, or redefining scope, to realign project performance with initial baselines.

Critical success factors in managing such projects include strong leadership commitment, comprehensive risk management, and stakeholder engagement. Leadership must foster an organizational culture open to change and continual improvement, particularly when adopting new tools like EVM. Incorporating risk mitigation strategies, such as contingency planning and proactive monitoring, can help anticipate issues before they evolve into crises. Furthermore, maintaining transparent communication channels with stakeholders ensures alignment and facilitates timely decision-making.

In conclusion, Franklin Electronics’ experience with the Spokane Industries contract underscores the significance of rigorous project management practices in high-performance projects. The integration of EVM and disciplined project controls can provide early warning signs of performance issues, offering opportunities for corrective action. Effective stakeholder communication, comprehensive planning, and organizational commitment are vital to overcoming the inherent uncertainties of complex projects, thereby increasing the likelihood of achieving project objectives within scope, time, and budget constraints.

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