Project Management

Case Study 4: Boeing’s Virtual Fence
On January 14, 2011, Secretary of Homeland Security Janet Napolitano made it official: The Virtual
Fence Project was to be officially cancelled. In her statement explaining the decision, Napolitano
cited the difficulty in creating a unified, fully integrated security system and promised to “pursue a
new path forward.” What was left  unsaid were the reasons that led to the final decision—principally,
struggling with a too- complicated technical system that did not work but was leading to ballooning
costs. Illegal crossing into the United States along the Mexican border has reached epidemic
proportions in recent years.
Fear of drug smuggling, illegal aliens, and possible terrorist incursions have made the issue of
homeland security one of the major “hot buttons” in the political arena, both in Washington, DC, and
within states located along the southern border as well as those in proximity to Canada. The problem
is compounded by the sheer sizes of the borders involved. The Mexican/ U.S. border runs for nearly
2,000 miles, much of it across desert wastelands and inhospitable and remote areas. Establishing any
sort of border security, in the wake of the 9/11 attacks, is a national necessity but a daunting and
difficult task. The Department of Homeland Security (DHS), organized following the attacks on the
World Trade Center towers, is charged with the responsibility of securing all borders and points of
illegal entry into the United States, in cooperation with Customs and Border Protection.
As part of its mandate, it has developed plans for creating a more secure and stable border with
Mexico to prevent the continuous flow of undocumented immigrants, drugs, and potential terrorists.
For the first stage in this process, DHS proposed a project to physically and electronically seal the
stretch of the desert between the United States and Mexico under a multibillion-dollar contract named
the Secure Border Initiative Net (SBInet). President Bush in May 2006 called SBInet “the most
technologically advanced border security initiative in American history.”
A 28-mile stretch of desert, centered on Nogales, Texas, was to be the pilot stage in a project that
eventually would be used to monitor and control some 6,000 miles of border with both Mexico and
Canada. In late 2006, Boeing was selected as the major contractor for the SBInet project. Although
better known for their military weapon systems, Boeing’s Integrated Defense Systems Unit was made
responsible for overall coordination of a massive system of towers as well as listening devices, motion
sensors, cameras, and radar to be used to detect and help apprehend illegals crossing the border.
In fact, the U.S. government chose to outsource the entire project to private firms; that is, they
expected that contractors would design the program’s elements, build them, and then handle full
oversight of their own work. In a nutshell, the system used a chain of 100-foottall towers that each
scanned a 360-degree radius for a distance of 10 miles. Ground radar sensors also attempted to detect
footsteps, bicycles, and vehicles. The first $20 million pilot phase, named Project 28 after the length
of the part of the desert that it was supposed to cover, was to be completed by mid-June 2007. Boeing
selected more than 100 subcontractors to build various components of the system, with its project
managers maintaining overall control of the development process.
Unfortunately, their structure was unwieldy, and the project was further compromised by the sheer
number of distinct elements and technical systems Boeing was attempting to integrate. The technical
challenge of integrating systems including watch towers, sensors, radar, and specialized cameras was
beyond anything Boeing had attempted before. The problem was particularly noteworthy when we
consider that integration, in many ways, was the project. The various technical elements were difficult
but attainable.

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The challenge for SBInet lay in the ability of Boeing to find a means to bring all these new and
unproven technologies together under one umbrella. So complicated was the challenge, in fact, that
the virtual fence failed a series of initial tests, significantly delaying the full deployment of Project 28.
Unfortunately, these technical and coordination problems were never resolved. In the nearly three
years after original testing was done on one section of the fence, SBInet had cost the government
$672 million dollars, with the end nowhere in sight. Although the total project cost was anticipated at
$1.1 billion, congressional watchdog groups argued that the final cost of the project could soar to over
$30 billion. Costs, in fact, were a sore point with the project from the time it was bid. Originally
promising to complete SBInet for $1.1 billion, Boeing’s revised estimates went to $2.5 billion and
then, just a few months later, to $8 billion.
This rapid escalation of projected costs finally prompted a congressional oversight committee hearing,
in which Boeing endured withering criticism from Representatives who questioned their motives in
asking for more money and time to complete the project. In the meantime, beset by continuing
problems, Boeing had also revised its estimates for the completion date to 2016, more than seven
years after the date in the original plan.
A major concern was Boeing’s pyramid-like management structure that critics said caused confusion
and a lack of clear responsibility. Worse, it made it easier for hidden costs to be charged to the
project. Because Boeing embedded multiple subcontracting layers in the Virtual Fence development,
they were able to add charges at each level. The larger problem was the clear conflict of interest that
emerged by placing Boeing in charge of project oversight, while allowing them to manage sub-
contractors, and monitor the progress of the project. Not surprisingly, with this configuration, little
information came to light about cost overruns or schedule slippages until quality and overrun
problems were simply too large to ignore . . . or hide.
Critics compared this attitude of easy oversight and loose control to the huge problems that had
plagued Boston’s “Big Dig” construction project (see Case Study 8.2 in text). Admittedly, the
problems that sank the SBInet project were complicated and came from multiple sources. Besides the
technical challenges of managing 100 subcontractors, all required to provide critical components that
Boeing would integrate, the project had effectively shut out most federal agencies and oversight
groups. It was difficult to get accurate project status information given the government’s decision to
“farm out” border security to private contractors.
As a result, congressional investigators found that Homeland Security officials were simply standing
by while Boeing provided information that was “replete with unexplained anomalies, thus rendering
the data unfit for effective contractor management and oversight.” Furthermore, many critics
questioned the feasibility of the original intent of the project itself, wondering about the likelihood of
ever effectively sealing a border that runs through some of the most inhospitable terrain in North
America. Whether through a combination of poor oversight, over- optimistic scope expectations, or
simple inability to make this cutting-edge technology work, SBInet remains an example of a
significant program failure at the taxpayer’s expense.
Questions
1. What problems do you see emerging from a project such as SBInet where the government allows
the contractor to determine scope, manage all contractor relations, and decide how to share project
status information with oversight bodies?
2. Consider the following two arguments: “The failure of SBInet is due to poor scope management,”
versus “SBInet failed because of poor oversight and project controls.” Take one side or the other
in this argument, and justify your response.