Managing Complex Programs: Insights on Avoiding Costly Pitfalls
Without clear boundaries, program management can feel like a circus act.
Don't let scope creep and shifting requirements turn your project into a juggling act. Learn how strong contractual discipline and strategic adaptability can keep your program on course.
Introduction
With over 40 years in and around program management, my career has spanned roles from engineering on large-scale programs like nuclear submarines to leading helicopter projects as a program manager, advancing to director of program management for inertial navigation systems, and eventually overseeing an entire business unit with a dedicated program management team. Across these diverse sectors in aerospace and defense, I’ve seen many of the same challenges surface repeatedly: cost overruns, schedule delays, and customer dissatisfaction. Despite their complexity, these issues often stem from a few core principles that, when managed well, can keep even the most challenging projects on course.
In this blog, I’ll explore critical insights into managing complex programs, focusing on the importance of clear contracts, consistent customer alignment, and strategic adaptability. When expectations, contractual responsibilities, and communication align, productivity and profitability can thrive. Here’s what I’ve learned about safeguarding against these common program pitfalls.
Insight 1: Establish Strong Contractual Discipline, Especially with Mixed Contract Structures
One critical challenge I’ve observed is in managing contractual risk when a firm-fixed price (FFP) contract is accepted for a combined development and production program, but subcontractors operate on a cost-plus basis. In such cases, as the prime contractor, you’re absorbing nearly all financial risk. Without rigorous oversight and contractual discipline, these mixed contract structures can lead to substantial cost overruns. In one program, for example, our subcontractors operated on cost-plus fixed fee (CPFF) and cost-plus incentive fee (CPIF) contracts, which allowed them to pass any additional costs back to us. Without stringent contract controls, these cost-plus contracts often led to increased costs and significant unplanned work.
Contracts, particularly in defense and large-scale government projects, are not merely formalities; they’re vital for setting clear expectations. Without a disciplined adherence to these agreements, unplanned costs can spiral, and valuable resources are quickly wasted on unplanned work. In my experience, both the contractor and the customer can go off course without a shared commitment to the contract.
Takeaway: Set clear contract boundaries and ensure strict oversight. When managing an FFP contract with cost-plus subcontractors, define and enforce specific requirements, deliverables, and processes for each subcontractor to minimize unplanned work. Instituting rigorous oversight and establishing a clear process for any scope changes can prevent subcontractors’ excess costs from undermining the overall budget. This approach not only safeguards the prime contractor’s profitability but also reinforces discipline in meeting cost, scope, and schedule targets across the entire supply chain.
Insight 2: Build Institutional Knowledge to Enhance Customer Alignment
When managing complex defense projects, program managers often work closely with the customer, creating both opportunities and challenges. Direct customer involvement can lead to beneficial real-time feedback, but when personnel turnover is high—especially on the customer side—it can disrupt the program’s continuity and efficiency. In one large program I was involved in, rotating teams of customer personnel were stationed at our facilities to provide on-site support and oversight. While their presence was helpful, the frequent personnel changes often meant revisiting past decisions or re-explaining project details to incoming team members, leading to redundant work and delays.
This kind of turnover can also lead to what I call “contractual amnesia,” where new customer personnel may interpret contract terms differently from their predecessors. Without a consistent understanding of the project’s progress and prior decisions, the risk of rework increases, and resources are diverted to rehashing settled matters.
Takeaway: Document everything and maintain a “project memory.” A well-maintained project memory ensures that every team member, both internal and customer-side, can quickly familiarize themselves with prior decisions, which minimizes disruptions. Documenting decisions, rationale, and lessons learned helps prevent confusion, saves time, and supports consistent customer alignment.
Insight 3: Watch for Scope Creep—The Silent Project Killer
Scope creep, the gradual expansion of work without corresponding resources or schedule adjustments, is a major cause of project failures and is typically due to unanticipated requirements or underappreciated complexity of the project. Often, it arises from unclear or evolving requirements, and sometimes even from subjective expectations. For example, in one program involving system safety engineering, a contract specified the need for a “system safety program” but left the requirements open-ended. This allowed for subjective interpretations from the customer, who continually requested additional safety features without considering the impact on the budget or timeline. As a result, our team spent countless hours debating and defending the “safety” of certain design features that, from an engineering perspective, were already sufficient and met the agreed upon system safety criteria for acceptable risk. This scope creep impacted both the engineering and program management teams, diverting resources from other critical tasks. These new requirements were not accounted for in the original scope, resulting in hours of unplanned work and heightened project costs.
In another example, involving a complex maritime helicopter, the lack of well-defined contractual requirements around the helicopter’s human-machine interface—specifically the glass cockpit used by aircrew—were initially broad. This vagueness led to ongoing adjustments to meet evolving interpretations of “user-friendliness”, and derived requirements, which, while valuable, wasn’t accounted for in the original budget or timeline. Although we eventually secured contract modifications in certain areas, the time and costs invested were already unrecoverable by that point.
Takeaway: Prevent scope creep with precise language and strong oversight. Ambiguity in specifications creates space for subjective interpretations and scope creep. Ensure that contracts clearly specify requirements and include mechanisms for how to handle derived requirements and negotiated scope changes as needed. This can prevent endless rounds of adjustments and protect resources for planned work. Document all requirements in terms that are specific, measurable, and achievable. When changes become inevitable, ensure a formal change process is in place so that additional requirements are balanced with corresponding resources or timeline adjustments. This protects the project’s focus and budget, keeping it on track.
Insight 4: Avoid ‘Optimistic Scheduling’
One of the biggest challenges in complex programs is creating realistic timelines. In the past, I’ve seen programs where schedules were set with best-case scenarios, often to avoid delivering bad news to stakeholders. However, optimistic scheduling almost always falls short when faced with real-world conditions. Early in one international helicopter development program, we encountered this issue when the timeline for a system integrator supplier was set without accounting for delays in deliverables from other subcontractors. When these delays surfaced, they created dependencies and bottlenecks that rippled through the project, setting back schedules and driving up costs.
Takeaway: Stay grounded in reality with your scheduling. Build schedules based on realistic timelines, factoring in known project risks, interdependencies, the team’s past performance, and potential delays. Honest scheduling helps prevent “unexpected” delays and reduces the likelihood of repeated milestone shifts. Senior management should ask critical questions about the schedule and how it was developed and understand any built-in assumptions and how risks are considered in the schedule.
Insight 5: Prioritize Measurable Outcomes
Without a system for tracking and measuring progress, it’s difficult to manage complex programs effectively. On one project, we initially used an earned value management system (EVMS) to track cost and schedule performance. But as the project progressed, this was abandoned, resulting in a lack of visibility into unplanned work and cost impact. Without measurement, it became nearly impossible to manage costs or identify the effects of deviations from the original plan.
Takeaway: Use EVMS or similar tracking tools. While it requires discipline, EVMS offers invaluable insights into cost and schedule performance, helping teams address issues early. These systems provide quantitative insights that help prevent cost overruns and enable effective decision-making.
Insight 6: Know When (and how) to Renegotiate for a Win-Win Outcome
In complex programs, contractual terms are defined to ensure clear expectations. But when unforeseen risks arise or liabilities emerge, renegotiating specific terms can sometimes be essential to protect the program’s integrity and the company’s bottom line. Strategic renegotiation of specific terms, far from being an admission of fault, can often enhance the customer relationship and set up a more successful framework for both sides.
From my experience, renegotiation is especially valuable when existing terms introduce unsustainable risks—such as substantial financial liability, excessive inventory costs, or penalties that could compromise profitability. In one instance, a customer’s erratic demand changes created by their schedule delays created inventory problems, inflated work-in-progress (WIP) costs, and strained resources. By negotiating to shift the burden of inventory to the customer’s distributor we transferred the risk of the customer’s demand fluctuations and established a balanced solution that minimized costs on both sides while maintaining production stability.
In another case, we renegotiated an initially accepted “counterfeit parts” clause that was accepted by our new parent company’s legal representative, which would have made us responsible for not only repair and replacement of counterfeit parts but also for all customer costs which included fielded aircraft throughout the world. The revised clause capped our liability, protecting the company from a potentially massive financial burden while still addressing the customer’s concerns about counterfeit risks. This was a substantial win-win that maintained our accountability but within manageable limits.
In a contract with a foreign customer, liquidated damages for late delivery posed a financial risk that could have exceeded the contract’s value, especially as delays led to worker furloughs on their side. During a meeting at their facility, we successfully renegotiated to remove these penalty clauses from the current and future contracts. Additionally, we secured a commitment to a realistic delivery schedule and a 15% price increase on the next order.
Takeaway: Identify renegotiation opportunities as part of risk management. When faced with potentially crippling financial terms or logistical challenges, initiate a discussion with the customer, focusing on the mutual benefits of revised terms. Effective renegotiation requires a deep understanding of leverage points, an ability to present realistic win-win solutions, and support from senior leadership to reinforce these initiatives. Thoughtful renegotiation can transform potentially harmful contracts into manageable frameworks.
Conclusion
Managing complex programs requires disciplined contract management, realistic scheduling, measurable outcomes, and, when necessary, strategic renegotiation. Over the years, I’ve learned that these principles are essential to keeping programs on track and avoiding cost overruns, schedule delays, and strained customer relationships.
While maintaining contractual discipline and avoiding scope creep are crucial, recognizing when to renegotiate terms can be just as valuable. Strategic renegotiation not only protects your organization from excessive liabilities but also fosters stronger customer relationships, creating a foundation for long-term success.
Each of these insights underscores one overarching principle: clarity. Whether through defined contracts, realistic schedules, measurable milestones, or renegotiated terms, clarity empowers teams to work productively, manage risks, and deliver successful outcomes. Investing in clarity and adaptability upfront isn’t just about preventing problems—it’s about building a successful program that benefits both the customer and the organization.
At HMC, we specialize in managing complex programs, especially diagnosing and turning around troubled programs, helping you transform complex challenges into opportunities for growth. Share your thoughts or reach out to explore how our expertise can support your program objectives. Let’s drive success together.