Budget Padding is a Dangerous Game

Written in response to Anthony Guerra’s enewsletter memo from 4/1

Sounds like you’re a new father. Congratulations! Your rough morning also probably explains the “reckless” advice concerning precautions for clinical implementation projects. I’m referring to your suggestion about building fat into every budget and timeline. In most organizations, 10 to 15% constitutes a reasonable buffer and anything more than that may raise questions about the competence of the project team’s estimating abilities. Worse, it may even lead stakeholders to question the integrity of the project team—that they overstated their estimates to look good.

The budget and schedule are two of the triple constraints in project management. Stated more articulately, the first constraint dictates the project budget. It’s developed from funds earmarked for the project. The second constraint dictates the project schedule. It’s developed from milestones and deadlines for achieving specific objectives. The third constraint is scope and it’s contained in the project’s Statement of Work. It’s developed from the analysis of work that needs to be done in order to achieve said objectives.

Framed in the present context, the cost constraint comes from funding earmarked from another organization’s budget (like HITECH). The time constraint comes from milestones (such as the capabilities defined in the HIMSS EMR Adoption Model). And the scope constraint comes from a careful study of the gaps between the hospital’s current capabilities and the ones mandated by HITECH. The work that must be performed in order to plug those gaps is summarized in the project’s Statement of Work.

Once the Budget, Schedule, and Statement of Work are assembled, the hard work begins. The project team must lead the effort to strike a balance between the three that the stakeholders can agree on and commit to. Given the tight schedule and pioneering nature of HITECH’s objectives, the team will be hard-pressed to arrive at a realistic (do-able) plan.

Difficult though it may be, the plan must contain buffers. Tight schedules imply doing the right things right the first time. Pioneering nature implies that many hospitals will have to learn as they go. The team will face numerous risks—some of them unknown or easy to overlook. For these reasons, the team must be prudent but aggressive. This approach will pay off when the plans are vetted by management. “Yes, these estimates seem high but we made these assumptions. These assumptions had to be made because…”

Project planning is as much an art as it is a science. While there are formulas, there are also negotiation and persuasion. The project manager relies on his subject matter experts for many cost and time estimates but in the end, he must be able to defend them as his own. While 10 to 15% is not etched in stone, staying within that range is a project management best practice.

Keep up the good work. I read your articles regularly and you do dispense a lot of good advice.

Alex Pronove, MBA, PMP

Project Manager

Written in response to Anthony Guerra’s enewsletter memo from 4/1

Dear HIT Professional,

Have you ever felt there were strange forces trying to test your mettle? Well, I sure did this morning. After a sleepless night tending to my teething 9-month-old son, I managed to stumble out of the house in a coffee-fueled haze and head to work. Just around the corner from my office, I sat at a red light thinking about the many tasks that lay ahead. When the light turned green, the cars ahead of me didn’t move right away so, naturally, neither did I. Unfortunately, the person behind me was not so patient. Crash. Thus, the first few hours of my day were blown out of the water and all my appointments had to settle into new time slots.

As you embark on massive clinical implementation projects with 1,000 moving parts, dozens of constituencies and many vendor/partners with their own issues and objectives, know there will be countless accidents along the way. What to do about this? First off, build fat into every budget and timeline, prepare for disaster because it will visit on multiple occasions. When I hear of projects that are “extremely ambitious” I feel sorry not only for the CIO but his or her staff. Stretching resources — both financial and human — to the breaking point never works out well. It’s always better to err on the side of caution when creating strategic plans (and extreme caution when they involve CPOE). — Anthony Guerra