How can we avoid the costs of the programme spinning out of control?

Strategic Cost Analysis (SCA) can be used to assess the probability of meeting budgets and also showing the assumptions that need to be managed in order to recover the finances. SCA can be used at any phase of a programme from the proposal stage onwards.

It works by adding a quality/confidence dimension to the estimating process so that high quality estimates, based on relevant experience, are treated differently from low quality estimates which are little more than guesses.

The output takes the form of a probability distribution diagram and a “roadmap” of risky assumptions (and opportunities) that need to be managed in order to move the curve to the left and squeeze it (i.e. reduce the potential overspend and the cost uncertainty). The assumptions are rigorously linked to the estimates that have been made so that the effects of managing a given risky assumption, or realising an opportunity, remain explicit throughout the process.

SCA is particularly useful in the early stages of a project/enterprise, when the desired target budget is subject to great uncertainty, to quantify the magnitude of the risk and focus it down.

The basic methodology of SCA can also be applied to timescale uncertainties (ie using STA) and benefit uncertainties (ie using SBA). It should be noted that to do an effective SCA it is necessary to do a STA first as the cost of the potential delays will need to quantified. The good news is that, with all of these techniques, the analysis process is very fast ie days rather than weeks, even for mega-programmes.