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Project Root Cause Analysis (RCA)

Problem Statement

Project PBA-086 is experiencing severe margin erosion and a projected significant financial loss. The project’s Estimated at Completion (EAC) is rapidly increasing while the Total Planned Revenue (TPR) remains stable, indicating that the costs to complete the remaining work will exceed the available budget, leading to a substantial negative profit margin. This has critical business impact, directly impacting company profitability, potentially causing reputational damage, and misallocating scarce resources that could be used on more profitable ventures.

Causal Factor Analysis (The 5 Whys)

• Why is the project experiencing severe margin erosion and a projected significant financial loss?

  • Because the Estimate at Completion (EAC) is rapidly increasing while the Total Planned Revenue (TPR) remains stable, meaning the costs to complete the project are projected to exceed the revenue.

• Why is the Estimate at Completion (EAC) rapidly increasing?

  • Because there is an accelerating increase in Severe Issues and unmitigated Risk Exposure, leading to higher-than-expected execution costs, requiring additional unplanned work, and consuming more resources and time.

• Why is there an accelerating increase in Severe Issues and unmitigated Risk Exposure?

  • Because the project’s risk and issue management processes are not effectively identifying, mitigating, or resolving these problems in a timely or proactive manner.

• Why are the risk and issue management processes not effective or proactive?

  • Because there was insufficient upfront proactive risk identification and planning at the project’s outset, and inadequate ongoing attention or resources allocated to continuous risk and issue monitoring and resolution throughout the project’s execution.

• Why was there insufficient proactive planning and ongoing attention/resources for risk and issue management?

  • Because organizational project management standards or project initiation frameworks did not mandate or prioritize a robust, continuously resourced risk and issue management discipline as an foundational element of project governance and execution.

Identified Root Cause

The fundamental root cause of the severe margin erosion and financial loss is the insufficient investment in and enforcement of proactive and continuous risk and issue management processes during project planning and execution, leading to unmanaged risks materializing as costly severe issues that drive up the Estimate at Completion.

Recommendations

1. Mandatory Comprehensive Risk Assessment: Implement a mandatory and comprehensive risk assessment and mitigation planning phase for all new projects before execution begins. This phase should require dedicated resources, formal documentation of identified risks, their potential impacts, and detailed mitigation strategies, with formal approval required to proceed.
2. Integrated Continuous Risk & Issue Management: Establish a robust, continuous risk and issue monitoring framework integrated into all future project execution phases. This framework must include clear roles and responsibilities for risk and issue owners, defined escalation paths, and regular, documented reviews to track progress on mitigation actions and issue resolution, ensuring sufficient resources are allocated for these critical activities.