In October 1993, Kombs Engineering was informed they wouldn’t be awarded the contracts with the U.S. Department of Energy (DOE). DOE expressed a lack of confidence in Kombs’ project management system. Eventually, Kombs Engineering ceased operations. What was the reason for the loss of the contract?
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In June 1993, Kombs Engineering had grown to a company with $25 million in sales. The business base consisted of two contracts with the U.S. Department of Energy (DOE), one for $15 million and one for $8 million. The remaining $2 million consisted of a variety of smaller jobs for $15,000 to $50,000 each. The larger contract with DOE was a five-year contract for $15 million per year. The contract was awarded in 1988 and was up for renewal in 1993. DOE had made it clear that, although they were very pleased with the technical performance of Kombs, the follow-on contract must go through competitive bidding by law. Marketing intelligence indicated that DOE intended to spend $10 million per year for five years on the follow-on contract with a tentative award date of October 1993.
On June 21, 1993, the solicitation for proposal was received at Kombs. The technical requirements of the proposal request were not considered to be a problem for Kombs. There was no question in anyone’s mind that on technical merit alone, Kombs would win the contract. The more serious problem was that DOE required a separate section in the proposal on how Kombs would manage the $10 million/year project as well as a complete description of how the project management system at Kombs functioned. When Kombs won the original bid in 1988, there was no project management requirement. All projects at Kombs were accomplished through the traditional organizational structure. Line managers acted as project leaders. In July 1993, Kombs hired a consultant to train the entire organization in project management. The consultant also worked closely with the proposal team in responding to the DOE project management requirements. The proposal was submitted to DOE during the second week of August. In September 1993, DOE provided Kombs with a list of questions concerning its proposal. More than 95 percent of the questions involved project management. Kombs responded to all questions. In October 1993, Kombs received notification that it would not be granted the contract. During a post-award conference, DOE stated that they had no “faith” in the Kombs project management system. Kombs Engineering is no longer in business.
What was the reason for the loss of the contract?
The reason for the loss of the contract was the lack of “faith” by the DOE in the Kombs project management system. While Kombs Engineering had a history of strong technical performance, they lacked a structured project management system when they originally won the contract in 1988. By 1993, the DOE had made project management a significant requirement for contract proposals, emphasizing its importance in executing large-scale projects efficiently and effectively.
Despite Kombs Engineering’s efforts to quickly integrate project management into their operations by hiring a consultant and training their organization, the changes may have been seen as too reactive, too recent, or not robust enough to instill confidence in the DOE. Over 95% of the questions from DOE after the proposal submission were about project management, highlighting the agency’s concerns in this area.
In essence, Kombs Engineering’s failure to have an established project management system in place prior to the new contract bid was a key factor in their loss of the contract.
Could it have been averted?
The loss of the contract by Kombs Engineering to the DOE was primarily due to the department’s lack of confidence in Kombs’ project management system. This situation could potentially have been averted if Kombs had, in my opinion:
- Recognized and adopted a structured project management approach earlier, emphasizing its importance for large contracts.
- Maintained regular communication with the DOE to understand their evolving needs and concerns.
- Engaged experts in project management well before the contract renewal to establish a robust system.
- Integrated project management principles into daily operations, ensuring consistent practices across the company.
- Provided detailed documentation and case studies showcasing their success in managing projects, formal system or not.
- Established a feedback loop post-proposal submission to address and clarify the DOE’s concerns more effectively.
- Proposed a collaborative approach with the DOE, offering to work together to meet the required project management standards.
By taking such proactive measures, Kombs might have demonstrated to the DOE their commitment and capability in project management, potentially securing the contract renewal.
Does it seem realistic that proposal evaluation committees could consider project management expertise to be as important as technical ability?
It’s entirely realistic for evaluation committees to value project management as much as technical ability, especially for complex government projects. Effective project management ensures that multidimensional tasks are coordinated, resources are efficiently used, and stakeholder expectations are managed. Additionally, for government contracts, adhering to schedules and budgets is paramount. Legal and regulatory compliance, which are common in such projects, also rely heavily on proficient project management. Past performance, indicating a company’s reliability and adaptability, can further highlight the importance of this skillset. In Kombs Engineering’s case, while their technical expertise was acknowledged, their lack of a robust project management system was seen as a risk by the DOE, highlighting the importance of such systems for large-scale efforts. Here’s a breakdown of why project management competence is as important as technical skill:
Complexity and risk: Large projects have numerous interconnected tasks that need efficient management to prevent missed deadlines and budget overruns.
Stakeholder management: Projects, especially government contracts, have varied stakeholders. It’s essential to manage their expectations, ensure open communication, and address concerns promptly.
Past experience: A company’s history of project failures, even with technical expertise, indicates a potential risk, often due to poor management.
Continuous improvement: Companies with a robust project management culture often learn from errors and enhance their processes, making them more adaptable and dependable.
Resource management: Coordinating vast resources, including personnel and finances, is crucial for large projects. Proper management ensures their optimal use.
Budget and schedule: Beyond technical skills, projects must be completed on time and within budget, especially when using taxpayer funds.
Legal compliance: Government projects have strict legal requirements. Good project management ensures compliance with these regulations.
This case, and questions, is take from the book “Project Management Case Studies – Sixth Edition” – 2022, by Harold Kerzner.
