The Problem with Line-Item Vetoes

All the fishing boats in New England love their lighthouses, but nobody wants to pay for them.

SAP is truly designed as a make-to-stock ERP system, with misfit modules to help it masquerade as a make-to-order system. In particular, the massively complex and much-maligned module called GPD was a badly misaligned retrofit, designed to gain entry into the Aerospace/ Defense industry, with its rigid project costing requirements. In a nutshell, GPD attempts to allocate costs of parts common to multiple projects in a fair and equitable manner, without any pretense whatsoever of tracking to actual usage, as in an As Built Configuration. In other words, GPD tells you which part you paid for, not which part you used… and the two are often not the same.

How does this apply to usage probability?

If each program or project manager is granted a “line item veto” on the purchase of parts with probable usage, it is essentially inevitable that scenarios will emerge that match the parable which follows:

Program A, (led by swine in straw houses), facing daunting budget constraints and frighteningly low profit projections, decides that it will not fund the probable purchase of expensive component X, preferring instead to assume the associated schedule risk that component X may fail, prove to be beyond physical or economic repair, and a new replacement X will at some future point need to be made or bought, with lead times injecting highly significant delays in the completion of contract deliverables for their program. Fingers remained crossed (to the extent physically possible) in hopes that the statistical probabilities might prove significantly overstated.

Meanwhile, Program B (led by wiser swine who build their houses out of brick), decide to mitigate significant schedule risk by investing in a data-driven expertly revised quantity of X, based on the weekly published and quarterly reviewed statistical analysis of its probability of usage.

The problem is that Program A and Program B live in a duplex, with an interior wall made of 1/4 inch sheet rock.

First-level demythologizing: 

(I love that word!)

Program A and Program B did not actually decide whether to PURCHASE a reasonable quantity of component X (despite their passionate adherence to persistent myth #1); they only decided whether to be honest with the data-driven community about their likelihood of NEEDING some of component X. The compassionate community being tightly connected and deeply caring, when Program A belatedly realizes and admits they actually NEED one (or two) of Component X, they will likely be fortunate enough to find that the community chest had actually purchased a few Xs (due to the forward-thinking anticipation of the wise swine managing Program B). Program A is of course allowed to use however many of expensive component X it actually needs, because after all, they are all on the same team, and if one of their houses falls, they all suffer.

The next morning, the managers of Program B wake up with migraines, for their wise efforts to mitigate schedule risk have now been undermined, and the Big Bad Wolf of Probability is now huffing and puffing at their door. The compassionate community assures Program B that more Xs will be procured with all due haste, but alas, it is clear that any degree of haste will prove insufficient to hold off the Wolf, who has now realized that he can gain entry into the brick house by first blowing down the straw house, then kicking down the sheetrock divider of the vulnerable duplex.

Second level demythologizing:

After moving to a new duplex, this one made of wood on the west and brick on the east, the leaders of Programs A and B now wisely decide to be honest about how many of expensive component X they are statistically likely to need, even though that honestly will negatively affect the already dismal profit projections, which are even worse after absorbing the unforeseen cost of rebuilding their duplex. More fearful of fretful stockholders than even of the oversized unrighteous canis lupus still lurking in the nearby forest, the managers of Program A resort to confident proclamation of myth #2: that while the official government mandated and independently audited projects would still LOOK LIKE they would be hit with the cost of a statistically probable quantity of Component X, their good friends at the local General Store had assured them that they would hold off on actually purchasing any Xs for Program A, unless the managers of Program A personally and persuasively squealed in urgent desperation that their imagined need for one (or two) Xs had somehow, like Pinocchio and the Velveteen Rabbit, magically become real. Naturally, the managers of Program B negotiated a different arrangement with the General Store, agreeing to pay for the Xs they believed they would need, with the understanding that they would check back regularly to make any small adjustments in their order that might be necessary, understanding that the distant warehouse might have some reasonable limitations on their flexibility, particularly on short notice.

Some months later, sadly unaware of the implicit fallacy of myth #2, the managers of Program B were quite distraught to learn that the Xs they had wisely and diligently procured had indeed arrived as scheduled, but had then been placed on the common shelves, with all of the other varieties of sundries and supplies. In fact it had not been two hours earlier that a sounder of frantic sows had been quite ecstatic to find that the shelves were stocked with the precise number of expensive component X needed to meet a completely unexpected crises that had emerged just that morning. The shopkeeper remembered quite vividly the grunts of gratitude shared by the sows that lived on the western wood-reinforced side of the duplex; they had graciously credited the helpful shopkeeper with “saving their bacon”.

Needless to say, the brick-housed sows were more than slightly disgruntled to find no more Xs on the store shelves. The best the well-intentioned shopkeeper could offer was to now place the order he had been holding for months, perhaps with a few accounting corrections, since it seemed that Program A now had all the Xs they needed.

At the next quarterly review, the pigs in Program A were highly praised and rewarded, both for their conservative use of funds and for achieving 100% on-time delivery on their projects. On the other hand, the pigs in Program B were rather harshly grilled for their woeful mismanagement, and blantant lack of foresight to anticipate potential shortages of critical components, particularly in light of the readily available and well reviewed statistical analysis projecting precisely such a probable shortfall. 

Perhaps most tragically of all, that evening’s celebration on the western wooden half of the duplex drew the attention of the always attentive White Fang, who had no difficulty at all in dismantling the haphazard stack of saplings that only briefly separated him from his fattened feast. Only White Fang lived happily ever after. 

Moral of the story: If you find yourself in a community of fools, three brick walls are not enough. 

Secondary insight: Pigs don’t have fingers, and they typically can’t cross their toes.