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INNOVATION AND PROGRAM MANAGEMENT IN AEROSPACE AND DEFENSE INDUSTRY

MARIA V ROMANOVA, PHD (The State University of Management, Moscow, Russia The George Washington University, Washington, DC, USA) Continuously changing market situations force companies to constantly reassess their business processes, their organization, and technology, especially with the aim to increase flexibility for project and program management. Companies are attempting to coordinate activities with partners and customers to respond quickly to changes in the market and keep operating costs low. The business environment is constantly changing and a faster response to issues makes the difference between success and failure. The Aerospace and Defense (A&D) program can provide complete management or contracting services for an active program of about 1000 contracts at once. It causes to have the knowledge and tools to react to the changing market and business conditions to respond appropriately. The challenge is to sift through the sea of information and identify the key information components. Russian A&D leading companies: KNAAPO, IAPO, UMPO and world leader company Boeing participated in developing ‘A&D solution’ and forms to adapt project management ideas to the Defense Industry. The concept is based on integrating their experience and specific models and features with the A&D business. Created solution is not rigid, but has the ability to be adaptable to specific requirements and future changes. There are four main areas to consider: 1. Multi Project Planning • Support Project grouping and planning by group • Provide excess/residual analysis and permanent cost transfers 2. Program Management • Establish and maintain project data • Establish and maintain WBS, cost accounts or Contract Charge Numbers (CCNs), and Work Packages (WPs) • Provide cost collection at the intersection of the lowest WBS elements and OBS • Integrate Earned Value Management with Manufacturing and Distribution to establish work packages 3. Contract / Project Costing • Support actual costing for material and labor transactions • Provide consistent and unbiased costing methods • Provide accumulation and allocation of direct and indirect costs • Provide cost corrections and adjustment transactions 4. Configuration Management - Unit Effectiveness • Provide unit/version effectiveness control of BOMs and routings • Provide the BOM validation reporting or comparison Contract / Program Structure Contract management consists of the definition, scheduling and control of a contract at the highest level, along with the control of the performance parameters describing the overall situation of the entire company. The conceptual A&D solution concerning program management solution offers the additional features needed to define and schedule projects. In the following sections, analysis will be provided the structure of an A&D program and contract running within A&D solution. That structure is composed of a multidimensional hierarchy of entities that, from the program level down to the activities within a work package, split the program up to lower level parts and cost elements. Program & Work Breakdown Structure (WBS)

The presence of Projects below a Contract doesn’t mean that the physical execution of the contract is controlled through projects only. etc. the elements of the CWBS are only summary points where the costs collected at lower level (Cost Accounts) are summarized. Unit effectiveness depends on the program code. Projects To support the breakdown of a large.The Program has two different purposes: 1. A project can only be in one group and all projects must be assigned to a group. a contract is treated exactly like a project. . The CWBS is formed by CWBS elements. If a Contract is recorded as a “Main Project”. The following diagram visualizes relationships between these components within scope of a contract: Program Project Group Contract Data Contract Contract/ Project Project Type Contract Work Breakdown Structure (CWBS) The CWBS is the Contract Work Breakdown Structure for a specific contract. If a contract is recorded as a “Single Project” no “Subprojects” will be attached to it. and closed. In the Earned Value Method contracts. like planned. Project Groups are cross-referenced with the “project data” table where the contracts will be maintained. the contract itself can still have its own CWBS. actual costs. since the Program Work Breakdown Structure can be stored in the system as either the WBS of an archived or closed project or as an estimate structure. since the unit effectiveness relies on the program code. since only the combination of Program/Item/Unit uniquely identifies a part. The CWBS elements and the hierarchical relationships can be maintained with available functionality within the Project. in order to provide the planning engine with the required information to perform the netting of orders within a project group. The input of the program must be mandatory. complex contract into more manageable projects the use of the main projects and sub projects functionality in A&D solution is required. 2. The group definition rules: There may be one or more projects in a group. in order to achieve enterprise wide planning. no specific new features is required. actual. from a logistical point of view. Part of the function of a Program is to be the repository of standard WBSs (Work Breakdown Structures) that can be copied (partially or totally) to create the CWBS (Contract Work Breakdown Structure) for an underlying contract or contracts. For this purpose. planned orders. Thus. Project Group and Project Type Every project is linked to a project group. Project types must be defined in a standard way. a project (expression used within A&D to designate the “child” of a contract) will be recorded as “Subproject”. Whether or not a contract consists of projects. The project groups are only used for netting and transfer purposes within the A&D solution manufacturing planning engines (PGC-GRP and MRP). CCNs. The main differences between them arise in areas like invoicing and the monitoring of actuals. all the projects would have the same group identifier.

Statement of Work (SOW) & Contract Line Item Numbers (CLINs) The Statement of Work (SOW) is the description of a product or the services to be delivered under a contract. CWBS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 A Contract and the Projects below it can use the same CWBS nodes. “Extension” can be used to store CLIN data. In the example of project B the actual costs can be merged at the level of element 3. An example is shown below displaying two project CWBS’s belonging to one contract (the contract whose CWBS has been shown in the previous figure). A “Child” Element cannot be linked several times to one “Parent” Element (in other words. new checks must be introduced to limit the flexibility currently allowed in the setup of the element structure. It is primarily used as a common base to report to the Government cost and schedule performance and to determine the amounts due for billing and funding purposes. 1 Project A Project B 1 2 3 4 5 31 11 32 8 9 10 311 312 321 322 In the example of project A the actual costs can either be merged with the costs of the main Contract as well as kept separated. The limitations to be built in are: A “Child” element can be linked to one “Parent” element only (in other words. Elements and Relationships as well as different ones. the “frequency” of the relationship between a “Child” and a “Parent” should not be used) The CWBS elements can be identified with alphanumeric codes.Some changes are needed to conform the available Element structure in to the A&D’s CWBS concept. and the existing functionality for invoicing them will be kept available. The Contract Line Item Number (CLIN) is the number used to identify a specific Contract Deliverable Item. The labeling of actual cost transactions will be based upon a mapping of the CLIN codes to elements of the CWBS or to Cost Accounts. . the same element code cannot recur several times in the element’s structure).

If a CCN is not mapped to a CLIN. Even though the CCN can be identified by its position in the RAM there must be an independent code assigned to it. or to build a specific OBS for the contract. It can change from contract to contract. Contract 1 Project B 1 2 3 3 4 5 6 7 31 15 32 8 9 10 11 12 13 14 311 312 321 322 B C D E F N O P R A G H L Q S T I M CLIN 100 CLIN 110 CLIN 120 CLIN 130 CLIN 160 CLIN 140 CLIN 150 Organizational Breakdown Structure (OBS) The OBS is the hierarchical structure that breaks the company into smaller subsets. The OBS defines the responsibilities involved in the realization of a contract at different levels in the company. It will be possible to link elements of the OBS structure with employees from the employee list. This architecture gives the flexibility to mold the OBS upon rapidly changing organizations. . the costs incurred under that CCN can only be invoiced at the project level. and it will automatically update the blow down on the lower levels of the CWBS the CLIN code. because it is virtually possible to have as many different OBSs as Projects. The OBS is not a single static structure used throughout all contracts. Due to the possibility of using the same OBS in several projects. such as team oriented organizations. and on the way those responsibilities are distributed within the company. much as an organizational chart does and can be related to a contract. • The Transfer Indicator. When a new Contract is defined it must be possible to copy a standard OBS. the structure may also be called COBS. rather than OBS. an OBS from another contract. the A&D solution also provides support for the classic concept of company-wide static OBS. depending on the type of cost some can be also collected at Work Package level (CCNs are often called Cost Accounts). Other relevant data that must be stored by CCN are: • The Cost Account Managers (CAM) Name. The CCN is the highest level at which costs can be collected.RAM).It’s possible to map free the CWBS to CLINs at whatever level needed. depending on the specific responsibilities that must be defined to accomplish the scope of the contract. Contract Charge Numbers (CCNs) The CCNs are identified at the intersection of the CWBS elements and the OBS elements (the matrix created by CWBS and OBS is called the Responsibility Assignment Matrix . The OBS is formed by OBS elements. Notice that. Contract specific Organizational Breakdown Structure.

etc. Enhancement in the sessions meant to maintain. A check for duplicate links within a project. a function should check the CCN status in order to verify whether the action is allowed or not. WP and PP are be maintained in BP as “activities”. Every time an action (transaction) is performed (booked) in the system. Work Packages (WPs). when the whole contract is copied into a new contract the CCNs should then be copied as well. 2. the WP (explained in the next sections). A check to ensure that the selected CCN is valid (it must be directly under a CWBS elements in the CWBS/CCN structure). for a grater detail. display or print the CWBS/CCN structure will enable the user to distinguish between CCNs and CWBS elements. 3. The types of costs that can be collected on the CCN ‘On hold’ Indicator (yes/no). These WPs and/or PPs represent the actual way in which smaller units of work will be performed within the organization. When defining the relationship of CCN (child) to CWBS element (parent) the same rules should apply as those described for CWBS elements (one child can only have one parent. then checks are performed to make sure that the WP is active and that it does belong to the right CCN. then costing links between ranges of units in the BOM and the project will be established at WP level (Purchase orders and shopfloor orders will be pegged to WP and CCN). The ability to link an OBS element to an existing CCN. . the CCN is broken down into WPs (the tasks to be performed in the short and mid term) which is normally less than six months. • It is not “On Hold” • If the costs must be collected at WP level. The link CCN and OBS elements requires: 1.). and PPs (the tasks to be performed in the long term) six months and into the future. Certain transactions can be performed only if the CCN status is set accordingly. • The Start and the Finish dates • Is it open for booking of the type of costs that the action (event) involves. These status are meant to control the costing aspect of the CCN. On the other hand. • Actual Costs cannot be posted to PPs • If cost collection is performed at WP level. The following information must be taken into account when verifying the status: • Does the code refer to a CCN or to a CWBS Element. The difference between WP and PP is marked by the status of the activity. that will affect a CCN (especially if it generates costs that will be posted to the CCN). Planning Packages (Pps) and Milestones. The relationships CCN-CWBS will be maintained in the same table where CWBS relationships are maintained. budgeting and control purposes.• • The Start and End dates (that define when it is allowed to collect costs in the CCN). Description of WPs and PPs For planning. The level at which actual costs are posted can either be the CCN or. Parameters at project level determine whether the costs must be collected at WP level or simply by CCN. Depending on the value of this field a check will be performed to ensure that the sessions used to map actual costs to WP are filled properly.

Control Codes (intermediate level) and Cost Types (top level) will be kept unmodified. A12 & A2) OBS Nodes (A & A1) Contract Charge Numbers (CCN’s) Work Package 11 12 Organization Breakdown Structure A2 111 112 Planning Package A2111 A2112 A212 A A12 A12111 A12112 A1212 A1 A11 A11111 A11112 A1112 CCN Schedule Responsibility Assignement Matrix The WPs are maintained in “Activities” in BP. The CCN is not meant to be a key for the identification of the WP. some modifications are required to record the hierarchical relationships that bind/link WP (or PPs) to CCNs. It is possible to develop a multi level CBS whose lowest elements are mapped to Control Codes or Cost Objects. An example of drill-down in the project cost history may be the following: Project Activity Element (CCN) Extension Cost Type Cost Component Control Code Cost Object All costs are stored along the five cost types listed below: . which are stored for every cost transaction. However. This way it is possible to report budgets. costs and estimates accordingly to various structures. Milestones will be used to define the due date for master scheduled items in the element budget. 112 & 12) CWBS Nodes(1 & 11) OBS Elements (A11. Element. Control Code and Cost Component. The key elements are Project. Cost Break Downs The cost history break down in A&D solution is structured along several key elements. Cost Breakdown Structure (CBS) and Cost Elements (CE) In BP the existing hierarchical structure consisting of Cost objects (lowest level). Cost Type.Contract Work Breakdown Structure 1 CWBS Elements (111. Extension. Activity.

The amount of information to manage big contracts is immense. Cambridge. 2001. 2000. Strategic planning for project management using a project management maturity model. Innovation management in UK and German manufacturing companies. a similar code is stored which is called the Cost Object Code.cost object) and in a relational cost grouping (cost component . every Cost Object Code is included in a hierarchical structure (cost type control code . Christiansen J. equipment and sundry cost transactions. The challenge of A&D enterprises will be to provide Dynamic Enterprise Solutions to deliver the right information to the right person at the right time and at the lowest cost. .A. Competitive innovation management techniques to improve innovation performance. 2. 5. As depicted in the scheme above.J.J. Through the use of the two structures it is possible to drill down into the actual (and budgeted) costs of a project in a dimension complementary to the WBS and OBS. References 1.g. 3. Enterprise computing via contracts is in its early stages that allow companies the flexibility to adapt to changing market conditions. Lambin J. New York: John Wiley. In labor. Project management in practice. Conclusion The A&D solution brings several new dimensions to the traditional concept of project management. New York: St. London: Anglo-German Foundation for the Study of Industrial Society. 2000.cost object). Schwalbe K... This allows tracking of every cost transaction within the cost history. Kerzner H. 6. Wiley. Mantel S. Market-Driven Management: Strategic and Operational Marketing. 4. 1999. New York: J. monthly). 2000. Ma: Course Technology. The A&D provides the methodology and application functionality to effectively apply project management to integrate with specific features of defense industry and achieve a true business advantage. in order to meet the need for time phased actual costs for Earned Value reporting. Thomson Learning. subcontracted tasks. Pfeiffer R. 2001. Information technology project management. Martin's Press.• • • • • Material Costs Labor Costs Subcontracted Labor Costs Equipment Costs (Rented and Owned) Other Costs In the case of material. the Item Code is stored in every transaction recorded in the cost history. All the transactions are stored in the cost history tables within user definable periods (e. Goffin K.