The Power of Cost Models in Project Analysis and Decision-Making

In my journey through the intricate world of project management, I've often found myself turning to the art of mathematical models. These models, particularly the simple yet profound spreadsheet ones, have become an essential part of my problem-solving process. From decoding complex challenges to understanding project schedules, these models have guided me in making informed decisions. While I don't advocate for using Excel exclusively for schedule management, I've always relied on cost models for project analysis, especially when dealing with intricate scenarios.

Having spent a considerable portion of my career in the realm of mathematical models, I've come to regard them as an extension of my thought process. Even though I've moved beyond the realm of highly customized systems within the aerospace and defense industry, where detailed cost models were the norm, I've never relinquished the habit of constructing these models for my own benefit.

In a recent project, I found myself facing a dilemma. The client, a significant commercial entity, was eager to initiate a complex phase of the project just before a prolonged change freeze period. Given the intricate technical challenges encountered earlier in the project, predicting potential delays was a task laced with uncertainty.

Though the overall project was on track, constant adjustments to specific phases were imperative during the initial stages. The lessons learned from these adaptations were gradually shaping into a dependable process. The close proximity of the schedule to the change freeze date, coupled with the project's unpredictable nature, was cause for concern.

In response, we engaged with the client's senior team to address the risk. The question of potential overrun costs loomed over our discussion. To provide tangible answers to the "what if" scenarios raised by the client, I turned to a simple Excel cost model that had been developed for the project. This model was our guiding light for evaluating various outcomes:

• What if we dive headfirst?

• What if we execute strategy X now and hold off on Y?

• Can we circumvent certain costs by pursuing this action and suspending that service?

While I had anticipated some of these scenarios and prepared the cost model accordingly, the beauty lay in its real-time adaptability. The existence of this spreadsheet allowed me to delve into these "what if" analyses on the spot during our discussion.

Reflecting on this experience, I would advise project leaders to inquire whether their teams possess a cost model. Regularly reviewing and updating it can offer invaluable insights. The time invested in creating and maintaining such a model is an investment that pays dividends in informed decision-making and efficient project execution. In a world of dynamic variables, having a cost model at your disposal is akin to possessing a compass that guides you through the ever-evolving landscape of project management.

-James