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1. "And the contractors have no incentive to push back: The cost-plus
contract puts all the risk on the CAA. The agency and the contractors have
different goals and objectives.” - Examine the impact of the contracts on
the project outcomes?
Cost plus fixed fee contract is used when both the owner and the contractor are in
agreement that the contractor would get a fee in addition to the project expenses.
Under CPFF one does not know what the actual costs are going to be. So estimation
of cost is done initially. Finally, the fee is calculated as a percentage of the
estimated cost.
In the cost plus fixed fee contract, the profit or the fee is fixed at the beginning of
the contract. In this case, it was the cost of labor, materials, and overheads. The
incentive for the contractors here is to complete the task assigned to them as
quickly and as cheaply as possible because they would earn more profit on the
actual cost.
In the case, CPFF contract allowed the contractor (Hollenbeck-Eskina) to cut corners
as they were more focused to complete the prototype as soon as possible. The
contractor was using computer simulations instead of ground testing. On doing so
they skipped the iterative development process where the prototype could be
tested after its completion. The company was also cutting cost on the iteration
process and could not identify the weaknesses in the prototype. Additionally, the
prototypes were not even equipped with the instruments that would provide the
desired test data.

Triple constraint





REACH was designed to replace the batteries.” Sticking purely to the parallel development strategy of the project phases R&D. However. What. were some of the key project management mistakes in the running of REACH? The first phase of the REACH project met the deadline and within the budget. The lack of knowledge and leadership skills for such a complex project which were demonstrated by David Macdonagle the head of CAA and the program manager Samantha Van Sant. as one of the reasons behind the system failure that REACH experienced in space station was that the same problem was neglected when it came during one of their on-ground testings and there was no electronic data management system that would allow both the parties to access current data for analysis. and even though there were facts that showed not a single test in four years had gone flawlessly. testing. It was rushing “a decade’s worth of work in six years. the contractors were not incentivized to give their best and produce an effective and efficient REACH. and quality control which is a violation in the aerospace circle and the project phases should be done sequentially. 2. even after that they went ahead with the REACH project. in your opinion.We can see from the above figure that the contractor wanted to complete the prototype spending minimum amount of time thereby reducing the cost. all risk was taken by the CAA. prototyping. The quality was compromised because the project’s schedule was too compressed. In this type of contract. as they were more focused on the completion of the REACH in the stipulated time to keep the project in the budgeted cost. as the original contract between Canadian Aeronautics Administration (CAA) and contractors reflects the desire of CAA to have the job done at the earliest possible time. its scope was also increased to service for repair. To cut down on cost and time. leading to poor quality of REACH. 2 . production. since a cost-plus-fixed fee contract was being implemented between the CAA and the contractors. Additionally. contractors used computer simulations instead of thorough and rigorous ground testing which was indeed a recipe for disaster in such complex project. CPFF had a negative impact on the project as the current prototype also failed and the astronaut had to spacewalk to complete the task that was to be done by REACH. there are key project management mistakes in the running of REACH as follows:      Although the project was able to meet the deadline but the problem faced by them was of quality. Additionally. Contractors prioritized the speed and cost and compromised the objective and overall quality of the project so that they got most out of the contract. In this project. however. this contract did not provide any incentive to the contractors to complete the project quickly. emphasizing more on speed than quality.

no matter how brilliant. operational functional uncertainties may arise due to unaccounted political events. from outsourced contractor etc. Hence a project operation and execution from the beginning to end involves a number of risks and uncertainties. For example. In addition to this. Critique the statement. 4. A project also spans over a duration and hence different parties and different people. The quality risk can be due to low cost. risks during transportation. a supplier from another location could be arranged for the work to be carried out. This means that its defects could be identified at early stages • It is a recipe for a successful product 3 . Financial risk matters can arise from investors or sponsors. human resource risk. human resource risk might arise also. A major uncertainty that might arise could be the client’s request for a modification or addition in their proposals that might affect the earlier work progress and so on. Contrast the iterative process with the conventional project management approach. Unexpected economic and market conditions in a supplier’s country such as currency uncertainties. Highlights the merits and de-merits of the "Iterative development process"." A project involves various phases with different functional groups interlinked to obtain an outcome or result. unfavorable weather conditions and much more. machinery used etc. risks involving availability and much more can be related to supply risk. resignation etc. supply risk and quality risk. develop and test additional features Iterative provides more flexibility for changes The product can be improved step by step at each stage. new weaknesses could be identified The company could design. Financial risk is the risk related to the cash flows in the projects. market demand. and supply might result in further negotiations with the supplier thereby causing delay to the project.3. It is only possible for the members of the project team to have a contingency plan to mitigate the effects that occur during risks. Thus. if materials cannot be delivered via air freight due to unfavorable weather conditions from a supplier. it is definitely impossible for human beings to foresee all the risks and uncertainties involved in the project. Risk related to the supply of materials can be numerous. A project may come across Financial resource risk. "Human beings. The risk of supplier’s business being shutdown. Advantages: • • • • With each iteration. cannot foresee all the issues that might arise in a complex project. Similarly. Any personnel involved in the project might be facing issues such as health.

On the other had iterative process is not time bound as the organization may go through several iterations for a successful product leading to delays Conventional project management has fixed cost as opposed to iterative process where the cost is flexible Conventional project management is risky as compared to the iterative process as the product is sent to the customer without any testing Conventional project management has a low quality as it does not give the contractor any incentive to rework on the product 4 .Disadvantages: • • • An iterative development process would take lot of time It would cost more Unaware of the completion time of the product Iterative process is different from the conventional project management approach in the following ways: • • • • Conventional project management approach is time bound.