7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
1/59
Author: Remi MalahieudeBased on: Release PR-A2-engb 2/2008 (1006) John Rhoton 's PM Notes from 2010 Date: June 09, 2010
Dear fellow students,
This notes are based on John Rhotons notes from 2010. They are pretty much the same, in a slightly differentlayout and with some additions or some removals, based on my own taste.
My final notes were much more complete that this document. The reason being is that I printed the whole file onone sided pages, bonded the whole, and completed them with either hand-written notes from Past Papers, or theblack book such as diagrams and figures (not hand-written, just printed them on big etiquette and pasted them inmy notes binder.
Whatever you decide to do, my suggestion is to customize any notes to your own taste so that they becomeYOUR notes.
I wish you all the best in your study.
Remi Malahieude
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
2/59
- 2/ -
Module 1 Introduction1. What is a Project?2. What is Project Management?3. Characteristics of Project Management4. Potential Benefits and Challenges of Project Management5. The History of Project Management6. Project Management Today
Module 2 Individual and Team Issues1. Introduction
2. The Project Manager3. The Project Team4. Project Team Staffing Profile and Operation5. Project Team Evolution6. Project Team Motivation7. Project Team Communications8. Project Team Stress9. Conflict Identification and Resolution
Module 3 Project Risk Management1. Introduction2. Background to Risk3. Risk Handling4. Types of Risk5. Risk Conditions and Decision making
6. The Concept of Risk Management7. Risk, Contracts and Procurement
Module 4 Project Management Organisational Structures and Standards1. Introduction2. Organisational Theory and Structures3. Examples of Organisational Structures4. Project Management Standards
Module 5 Project Time Planning and Control1. The Concept of Project Time Planning and Control2. The Process of Project Time Planning3. Project Replanning4. Trade-off Analysis5. Resource Scheduling
6. Project Planning Software
Module 6 Project Cost Planning and Control1. Introduction2. Project Cost Planning and Control Systems3. The Project Cost Control System
Module 7 Project Quality Management1. Introduction2. Quality Management as a Concept3. The Quality Gurus4. The Quality Management Six Pack5. Total Quality Management6. Configuration Management7. Concurrent Engineering and Time-Based Competition
Module 8 Case Study1. Aims and Objectives of the Case Study2. Introduction (Module 1)3. Individual and Team Issues (Module 2)4. Risk Management (Module 3)5. Case Study First Supplement6. Organisational Structures (Module 4)7. Case Study Second Supplement8. Time Planning and Control (Module 5)9. Cost Planning and Control (Module 6)
10. Quality Management (Module 7)
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
3/59
- 3/ -
Module 1 - Introduction
1 What Is a Project?
Projectone-off process with single definable end-result or product.
Three key variables: Time, Cost, Quality.
Production system takes resource inputs, passes through transformation, changes into desired outputs.
Projects and Other Production Systems
Mass productionlargenumber of repetitive items, maximum efficiency, capital intensive, mechanistic, little managementBatch productionnon-continuous demand, modifications at intervals, less mechanistic, more management, functional groupingsProject productionone-off, non-repetitive, no learning curve, complex management planning and control
A programme is a set of identifiable projects aimed at achieving some goal or objective. Some no specified enddate until decision taken to stop or replace them.
Characteristics of Projects
Single definable purpose, product or result Defined constraints, targets
Skills & talents from multiple professions/ organisations
Unique, unfamiliar
Temporary
Interlinked process; directed at achieving goal
Secondary importance to organisation
Complex
Project management
Plans, coordinates, controls complex & diverse activities in projects
Is in essence the General management of an organisation Requires skills
- Financial awareness- Marketing appreciation- Technical knowledge- Planning skills- Strategic awareness- Quality management
Project types
External (revenue source)
Internal (improve operations)&
Hardware (tangible physical result)
Software (end result is system or process)
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
4/59
- 4/ -
Definition of Project Management
Achieving time, cost, quality targets
Within context of overall strategic and tactical clientrequirements
By using project resources
Planning and controlling from inception to completion (life cycle)
Decide on success criteria (time, cost, quality)
Running the project as single entity
Driving the team to success
The Basic Project Management Structures
Internal (non-executive) Project Management
Project members also part of functional structure
Single designated responsible (the project manager)
Acts independently (outside functional structure)
Equal authority to functional managers
Single leader coordinates resources to achieve objectives
Multidisciplinary group to integrate
Negotiates with functional managers shared resources Two lines of authority for members
Decision-making, accountability, rewards shared
Temporary structure
Can originate from any organisational level (pdt dev from Mkg, IT systems upgrade) Require assistance from support structures (FI, HR, IT)
External Project Management
Agent on behalf of client
More flexible than internal system
Instructions/communications cross organisational boundary
Lower team allegiance
PM has direct control Functional structure not relevant
Requirement for risk transfer and contractual control
No built-in knowledge of firm
Characteristics of Project Management
Differences to traditional management
Uses both international standards and
industry-specific benchmarks
Advise on the full life-cycle
Multiple Objectives
Ensure project-success criteria are met within changing constraints of time-cost-quality continuum.
International Co-operation and Standards
IPMA International Project Management Association
National agencies allow for cultural and economic differences:- APM Association for Project Management (UK)- PMI Project Management Institute (US)
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
5/59
- 5/ -
Multi-Industry/Multidisciplinary Practitioners
Largest membership groups in APM:- Information Technology (IT)- Process engineering- Construction
Generic BenchmarksBS6079current UK standard for PM practice
ISO10006European code of practicePRINCE2controlled environment industries and UK governmentCny-specific responses: British Telecom and Construction Industry Council codes of practice
Specific Provisions
Professional project managerspecialist manager, trained in PM with relevant industry experience in PM
Project Life Cycle
Inceptionassemble basic proposalFeasibilityvalidate the proposal (financial, time-dependent, technological, political perspectives) PrototypeFull design development
Tendering and contractual arrangementsManufacturingCommissioning (switching system on)Operation (may be longest part but not always, e.g. moon rockets)Decommissioning (switching system off)Removal and recycling (legislative and environmental concerns)
Potential Benefits and Challenges of PM
Potential Benefits of PM
Focus on objectivesEfficient use of resourcesAccountability
Competition with functional unitsReduced disruptionVisibilityLife-cycle costsRelease speedCommunicationsControl multiple objectivesSecurity of project informationTeam spirit/cohesionInnovationSkill development
Potential Challenges to PM
Impact on functional performanceDetrimental effect to compete for resourcesConflicting ordersFunctional manager deprives resourcesAdditional level of authorityContingency on flexible approach/attitudeReadjustment to functional working after project
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
6/59
- 6/ -
The History of Project Management
Pyramids, Great Wall, Roman roads/aqueductsIndustrial Revolution: traditional management practicesworked well for batch/mass production1900s Gantt chart1940s Los Alamos/ Manhattan Projectfirst complex, high-tech project1950 Network diagrams for industrial processes1957 DuPontCPM Critical Path Method
1958 US NavyPERT Program Evaluation and Review TechniqueLate 1960s Project Management Institute (PMI) & Association for Project Management (APM)
1988 APM Body of Knowledge (BoK)1996 BS60791997 ISO10006
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
7/59
- 7/ -
Module 2 - Individual and Team Issues
No urgent need for developing tools further. People make projects succeed or fail.
The term project manager means different things to different peopleWide variation in roles and duties
Selecting the Project Manager Charged with organising and managing a project team to meet objectives
Sole responsibility for outcome
Responsible to project sponsor
Temporary role without traditional hierarchical power
Authority to make decisions about priorities
No authority to issue direct orders
Sources of influence:Competency
ProfessionalismProject Reputation FunctionalManager Skill Managers
Interpersonal skills
Alliances
May manage across functional, departmental, organisational and geographic boundaries
Central position High volume of communications
Intellect to devise strategy and diligence to ensure execution
Primary requirements
- Planning
- Organising team
- Interfacing
- Negotiating
- Managing resources
- Monitoring/controlling status
- Identifying issues
- Finding solutions
- Resolving conflicts
Interface managementwith a balance between managerial and technical functionsTo control project creep or creeping scope i.e. any changes. Only changes agreed are authorized orcontracted for.
Soft management skills
- Flexibility
- Parallel focus
- Initiative
- Persuasiveness
- Communications
- Organization
- Generalist rather than specialist
- Planning & Implementing
- Problem identification
- Time management
- Negotiation / influence / diplomacy
Hard skills
- Team set-up and management
- Complex time/ cost plans
- Contracts, procurement, purchasing,personnel
- Training / Development
- Technology
- Business strategytranslate into objectives
Selection
- Internal (best) good functional manager with PM skillsshould not retain functional role!- External consultant is alternativeLearning curveDisparity of interest (no allegiance)
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
8/59
- 8/ -
Some Essential Project Manager Requirements
Functions1. Project planning2. Authorizing3. Team organizing4. Controlling
5. Directing6. Team building7. Leadership8. Life-cycle leadership
Constraints/ success-failure criteria:TimeCostQualityRisk levelEnvironmental impactHealth and safety
1. Project Planning
Time, cost, quality
Define authority linkages with Task Responsibility Matrix (TRM)
- Milestones
- Important activities
- General & Specific responsibilities
- responsibilities
- Dates
2. Authorising
Accumulate sufficient authority to get the job done
Delegate to others
Authority is the ability to control and direct (Power is given)
Approval Preparation Checking Making and input Authorising
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
9/59
- 9/ -
3. Team organising
Classical/ traditional theory
- People are merely components of a production process (e.g. automotive)
- Emphasis on the produced goods or services
Empirical theory
- Essential similarities between systems and processes
- Observation and interpretation
- Correct process will materialise from sample and data set
- e.g. trains
Behavioural theory
- Human relations school Interpersonal relationship between people and work/ organization (Intrinsic links) Profit sharing Expectancy theory
- Social system school Social characteristics of organisations and individuals Evolution as people leave/join External influences e.g. smoking ban, health and safety regulations
Decision theory
- Mathematical: management science - operations research
Systems management theory
- Organisation characterised by throughput of resources
- Inputprocessingoutput
Functional managers favour Classical, Empirical, Behavioural theory.Project managers favour Decision and Systems management theory.
Organising throughout the life-cycle but greatest organisational development at beginning.Clarify at first meeting:
- Individual responsibilities
- Organisational Breakdown Structure OBS
- Task Responsibility Matrix TRM
- Communication links
- Authority links
- Configuration Management System CMS
- Project programme
4. Controlling1. Targeting
- Aligned with success and failure criteria
- Cost, output, quality2. Measuring
- Formal (objective eg EVA), informal (subjective)
3. Evaluating
- Identification/isolation of problem
- Alternative options
- Corrective action
- Variance analysis in conjunction with forecasting4. Correcting
- Identify source of problem
- Correct it
- Monitor actual and planned correction performance (2nd level variance analysis)
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
10/59
- 10/ -
5. Directing
Setting up project team
Training and development
Supervision
- Individual targets, evaluation, discipline, definition of objectives and responsibilities
Motivation (team and individual)
- Rewards, evaluation, feedback, reconciliation of individual/organisational goals
Co-ordination
- Prioritisation of work; monitoring resources
6. Team buildingEarly stages most critical (initial culture often continues)1. Team/ Individual commitment
- Common objectives, reward system, motivation drivers2. Team spirit (not same as commitment)3. Obtaining necessary resources
- Number of people, mix of skills4. Clear team/individual goals and success criteria5. Formalisation of visible management support (attendance at key meetings)6. Effective programme leadership
- Accuracy of planning, efficiency of monitoring/control. Ownership of large problems
7. Open formal/informal communications8. Rewards and retribution systems (good performers rewarded, poor performers reprimanded)9. Identification /management of conflict
- High pressure is common source
- Sudden change in energy levels can be a sign10. Heterogeneity and cohesiveness
7. Leadership
Decision-making ability
Problem-solving ability
Integration of new members (flexibility, provision of sufficient learning time)
Interpersonal skills (comradeship and trust) Identify and manage conflict (when objectives/limitations are changed)
Communication skills(most important tool)
Interface management (upward, downward, horizontal)
Factor-balancing skills
8. Life-cycle leadership
- Project teams last relatively short period of time
- Project team changes to meet needs/challenges
Phase Characteristic Task People Effect1 Inception High Low Telling
2 Development High High Persuading3 Stabilisation Low High Participating
4 Maturity Low Low Delegating
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
11/59
- 11/ -
The Project Team
Project Teams within Functional Organisations
Allocated to most appropriate department
Using resources from one function or across several
Contrast with Pure project organisation for relatively large one-off projects (e.g. Millennium Dome)
Advantages of projects within functional organisation
- Flexibility and full use of employees
- Employees gain new experience/skills
- Cross-functional working attitude
- Experts create new synergies outside rigid functional structure
- Follow primary career path within function or new career path through project
- Less costly than external consultants
Disadvantages
- Function is depleted of resources
- Functional managers offload less efficient people
- Difficulty in adapting to the demands of project environment
- Prioritisation of simultaneous projects
- Communication barriers (compared established channels of functional units)
- Motivation (unless senior management support)
Team Multi-disciplinary & Heterogeneity Issues
Sentience: tendency to identify with own profession/background rather than with project and organisation
Interdependency: tendency for teams to depend on input from more than one individual
- Pooled interdependency (sections/divisions make contributions)
- Sequential interdependency (input from multiple individuals required to move to next phase)
- Reciprocal interdependency
Integration: process of defining responsibilities and control, ensuring everyone adheres to same definition
Differentiation (specialism) contributes to sentience
Multidisciplinary nature tends to increase sentience and interdependencyGreater range of backgrounds reduces overall bias (but more discussion and conflict)
Group and Team Processes
Group: collection of individuals with common objective
Team: group working under direction of team leader
Organisation contains many formal and informal groups.Informal tend to form quickly and voluntarily for social reasons.
Groups better at problem solving than individuals. Groups tend to:
- Brainstorm
- Consider wider range of factors
- Enhanced logic flow
- Generate more original ideas
- More potential solutions
- Solve problems more accurately and quickly
Project Team Performance
Most important factors contributing to performance:
- Heterogeneityin qualifications, experience, outlook- Cohesivenessalignment of personal and team goals; commitment and morale of members
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
12/59
- 12/ -
Project Team Staffing Profile and Operation
Project Team Staffing
Balance of skills:
- Technical
- Management
- Administrative
- Interpersonal
Other considerations:
- Immediate and long-term availability
- Ability
- Continuity requirements
- Teamworking skills
- Special skills
Trade-off between continuity and ability
Mix of internal and external staff
Guidelines:
- Voluntary staffing
- Staffed to add value to project
- Operated less formally than functional teams
- PMgr Lead by example
- Flexible and responsive
- Interface across organisational boundaries
- Teams innovate and evolve
- Functional managers receive recognition and credit for provided resources
- Conflict should be promoted during staffing (the sooner the better)
Project Team Profile
Widest interpretation of project team:
- Contractors personnel-
Subcontractors- Clients
- In-house staff
- Other interested bodies (inspectors, government, lobby groups)
In almost everyones interests to meet objectives in timely and cost -effective manner
Project office: focal point, physical hub of project
Three specials project-management positions:
- Project manager (managing director)- Project planner (operations director)- Project controller (financial director)
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
13/59
- 13/ -
Project Team Operation
1. Establish measurable objectives
- Identify and acknowledge stakeholders
- Establish dimensions of success
- Agree on criteria for success
2. Stakeholder management
- Invisible team can provide great source of support
- Protect image of team
- Develop network of useful contacts
- Exploit network for quality project resources
3. Establish/plan measurable targets
- Understandable and practicable
- Multi-level
- Plan for unknown (contingencies)
- Realistic milestones
4. Plan and establish processes
- Firm ground rules
- Create open environment to be creative and take responsibility
- Develop relationships
- Flexible environment when needed
5. Leadership
- Clear direction, stimulate high performance
- Reward good performance
6. Membership and identity
- Members must trust PM
- Active followership more valuable than passive
- Temporary drafts must be seen in positive light
- Clear understanding of roles
- Members recognise their own value
7. Communication systems
- Formal/informal meetings to confirm identity, provide opportunities, reinforce rules, celebrate success
- Accept and address conflict
- Efficient communication with external bodies
- Meetings result in actions, documented with time scales and responsibilities
8. Team separation
- Members can rely on fellow team members
- Commitment and momentum maintained even when physically separated
- Regular contact enables clear communications
9. Information technology
Advantages
- Reduced need for specific facilities (video)-
Reduced direct interactionfewer personality clashes- Record keeping, simplified accountability and audit- Less direct supervision
- Less control bureaucracy
Disadvantages
- Expensive remote support
-
Loneliness- Loss of managerial control
- Time differencecoordination- IT can go wrong
- Cohesion severely restricted
10. Teams in general (optimal when)
- Regular face-to-face meetings
- Performance measures and criteria are clear
- Members have responsibility and accountability
- Clear time commitments established
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
14/59
- 14/ -
Project Team Evolution
Project Life CyclesConception and feasibilityOutline proposals and definitionTooling upOperation and productionDecommissioning
Project Change Control and Management
Historically little attempt to standardise life-cycle phasesBS6079 proposes Strategic Project Plan (SPP) defining standard planning & control system
Project Team Evolution
Forming
- TRM Task Responsibility Matrix
- OBS Organisational Breakdown Structure
- Project staff register
- Baseline set of team and project objectives
Storming
- Establish cohesiveness
- Increasing tendency of conflict
- Attempts to depose leader
Norming
- Formal/informal
- Behaviour
- Performance
Performing
- Team members satisfied that team is balanced
- New conflicts dealt with by team
Groupthink
Groupthink is the tendency for teams to delude themselves over the quality and reliability of the product. Most oftenencountered in long-term teams where there has been initial success.
Typical symptoms:Absolute commitment to the projectLack of respect for competitorsIntolerance of dissentersFear (of authority or majority)Self-delusion (invincibility)common in successful teams with high cohesion and commitmentSelective reporting
Project Team Motivation
McGregor
Theory Xoperatives are basically lazy and unmotivated. Require threat and punishment.(Often espoused by autocratic functional managers.)
Theory Yoperatives are willing to work and complete job without close supervision. Want to successbecause it generates greater self-respect. (Typically preferred by project managers.)
Maslows hierarchy of needs
Self-actualisation
Esteem
Belongingness
Safety
Physiology
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
15/59
- 15/ -
Implications:
Relative importance of needs
Time-based requirements (higher levels require more time)
Unsatisfied needs (no guarantee) Complex needs (higher level needs more subjective)
Anticipation (fulfilled needs become hygiene factors rather than motivators)
Equity theoryperceived fairness compared to othersChoices during perceived inequity
Seek promotion
Seek increased reward level
Reduce contribution
Increase other inputs
Expectancy theorymotivated in obtaining desired rewards
Project Team Communications
Inward and outwardFormal and informal
Project Communication
High-quality information sharing and exchange
Quantity and Quality of face-to-face meetingAccess to meetings should be open to all team membersEncouraged to attend
Communication methods:
- Meetings
- Telephone
- Letters/memos
- Notice boards
- Chats
- Seminars
- Project plans and reports
- Newsletters
Formal and Informal Communication
Operational islands: sections defined by power and functional boundaries
Formal lines of communication essential for collecting and disseminating project information
Formal communication tools:
- Frequent reports on all aspects with clearly defined distribution lists
- Regular project meetings (debate encouraged)
- Project memos
-
Newsletters- Notice-board
- Away-days and events
Informal communication revolves around the grapevineInfluence ita gauge of feeling- Identify and expose issues quickly
- unhealthy grapevine harbours resentmentand disillusionment
Lunch and dinner
- Telephone
- Coffee breaks
- Evenings in the bar
- Social events
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
16/59
- 16/ -
Internal and External Communications
Typically internal are informalOpen communication encouraged
External is formal, explicitrequire absolute control on dissemination of information
Project Team Stress
Origins and Symptoms of Team Member Stress Sources of project stress
- Dual reportingproject manager & functional manager- Strict time, cost and quality limits
- Short life span of teams
- Project complexity
- Frequently changing environment
Main sources of stress
- Personal
- Work (project and functional)
- Environment
Symptoms- Psychological
- Physiological
- Behavioural
Stress Management
Individual stress management
- Diet
- Reduced alcohol, tobacco
- Exercise
- Physiological awareness
- Communication (most important single element)
- Realignment of goals and self-limits
- Psychological self-examination
- Breaks/holidays
Project-team stress management
- Deregulation (rigid to flexible working times)
- Reasonableness
- Fairness
- Open-mindedness
- Flexibility
- Approachableness
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
17/59
- 17/ -
Conflict Identification and Resolution
Constructive/ meaningful conflict
Sources of Conflict
Onerous resource constraints
Pressure to increase speed/reduce costs
Imposition of new aims/objectives
Change and realignment Conflicting function and project demands
Personality clashes
Different interpretations of requirements
Incorrect/ late information/ communication
Perceived inequalities
Underlying resentment
Conflict Characteristics
Potential for conflict increased by
- Heterogeneity, multidisciplinary nature
- Lower PM authority in functional organisation
-
Lower degree of specified/ quantifiable objectives- Lower communication and accountability
- Greater degree of change
- Lower perceived prestige of project
Approaches to Conflict
Areas of conflict
- Onerous deadlines
- Change occurs
- Errors/ omissions discovered
- Resources reduced or inadequate
- Personality clash
- Agreeing on areas for concentration
- Agreeing on priorities
- High uncertainty
Questions to ask
- What is source
- Why?
- Impact?
- How to reduce or eliminate
- How to foresee and avoid in future
Project objectives should be SMART, and also:
- Compatible with strategic plan
- Agreed by senior management
- Communicated to team
- Communicated to stakeholders
Conflict Management
Conflict avoidance
Conflict absorption
Conflict resolution imposition
Negotiated conflict resolution
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
18/59
- 18/ -
Module 3 - Project Risk Management
Human beings naturally consider risk and reward as part of the decision-making process.Project manager inherent risk takerPrimary Function to identify and control risk
Background to Risk
The Concept of Risk
Risk management evolved from design of nuclear reactors (1950s),Energy source is inherently dangerous, consequences catastrophic, no point in examining single events
Riskmeasure of probability and consequence of not achieving specific goal.
(event, uncertainty, consequence) = 1st level equation for risk
Risksomethingor the lack of somethingcauses a risky situation.
(event, hazard, safeguard) = 2nd level equation for riskHazardsource of dangerSafeguardmitigation against the hazard
Exposure: vulnerability of parts of organisation to risk impacts
Sensitivity to risk composed of 3 elements: significance(severity/impact), likelihood, ability to manage implications
Effective Risk Exploitation (ERE) makes use of non-balance-sheet assets (SCM, IP, KM)
Risk is the distribution of possible outcomes in performance over time due to changes in key variables (greater range = greater risk
Considerations:World is uncertainRisk cannot always be eliminatedRisk is a function of opportunityRisk can be an advantage (intimidates competition)Risk management is set of analytical toolsOperates at all levelsRisks may be foreseeable, partially foreseeable and wholly unforeseeable.No risk management is infallible
The Human Cognitive Process
Cognitive process in risk assessment:
Pattern recognition
Attention
Memory
Bounded Rationality
- Generally we opt for rational behaviour within constraints
- Examine possible actions and possible outcomes
- Risk forecasting
Based on experience, present, extrapolation (aka Prediction Momentum) Combination of subjective and complex modelling (chaos theory)Success factors:
Accurate data
Time limits
Cost (effort)
VisionoIntuitioncombination of experience and extrapolationsoBiastendency to misinterpret data because of own perceptions/preferences
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
19/59
- 19/ -
Risk Handling
Risk Assessment and Control
Risk analysis determination of probability of risk events and establishing measure of consequencetogether with monitoring and control system
Risk handling process of dealing with riskRisk feedback occurred risks are analysed and results fed back to system for future strategiesRisk control risk analysis, handling and feedback
Typically risk management considered: risk assessment and risk control.
Risk assessmentiterative process identifying and assessing all potential risksRiskcombination of uncertainty and constraint (e.g. legislative deadline)
Risk controlinvestigation of entire project (project plans, scrutiny of critical path)
Risk identificationsource and effects Individual perception of risks will vary according to:
- Organisational position
- Power level
- Area of authority
- Responsibilities
Project and Strategic Risk
Project risk limited to risk considered entirely within project (delays, errors, cost increases)Strategic risk long-term, complex, difficult to model (economy, competition)Variance envelope allows divergence to a certain limit
Types of Risk
Generic Risk Headings
Strategic risk long-term performance of organisationOperational risk process itself, asset base, project members, legal controls (e.g. project risk)
Financial risk market, credit, capital structure, reportingKnowledge risk IT hw/ sw, IM, KMCatastrophic risk cannot be predicted or quantified, usually covered with reserve/contingency sum
Market Risk and Static RiskMarket risk (Dynamic risk)potential gains/lossesCannot be reduced or controlledonly diversified
Market business risk (MBR) company trading with its assetsconcern to all stakeholders (shareholders, creditors, employees) Market financial riskgearing ratio, concern to equity holders
Static risk (specific risk or insurable risk)losses only; potential losses and safeguards. Insurance policy Fire insurance, tortuous liability insurance (professional indemnity), personnel insurance
External Risk and Internal Risk
External risks
Competitor risk
Market demand risk
Innovation risk
Exposure risk (e.g. gearing ratio)
Shareholder risk
Political risk
Statute risk
Impact risk
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
20/59
- 20/ -
Internal risk
Operational processes risk
- Resource availability
- Production capacity
- Process failure
- Time-based competition
Financial risk
- Borrowing
- Cash flow
- Exchange rate
Management risk
- Management error
- Strategy implementation
- Communications
IT and Technology risk
- System obsolescence
- Breakdown and failure
- Malicious virus
- Capacity limit
Predictable Risks (known unknowns)and Unpredictable Risks (unknown unknowns)
Risk Conditions and Decision making
Conditions of certainty gravity
Conditions of risk weather/rain
Conditions of uncertainty earthquake, hurricane
Decision Making under Conditions of Certainty
Example: when same strategy optimal for all possible states/conditions (pay-off matrix)
Decision Making under Conditions of Risk
Typically: higher profits implies higher potential risks/losses
Payoff-matrix: Profit-matrix for strategy x state, whereby each state has assigned probabilityMultiply payoff by probabilitysum for each strategy
Decision making under Conditions of Uncertainty
Assigned probabilities are not known. Sources of uncertainty can be
Externally drivenenvironment: inflation, interest rates, demographic changes
Internally drivenprocess: motivation, loyalty, new products, innovation
Decision-driveninformation: strategy planning, R&D, investmentMaximax / Hurwicz criterion always optimistic, maximise profits irrespective of lossMaximin / Wald criterion pessimistic, minimise losses (minimum profits in worst-case scenario)Minimax / Savage criterion minimise maximum regretLaplace criterionassign equal probabilities to all outcomes (assumes Bayesian theory)
The Need for a Risk Management Strategy
Total Strategic Risk Management (TSRM) must be holistic and pre-emptive (similar to TQM)
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
21/59
- 21/ -
The Concept of Risk Management
Risk management system must be
Practical
Realistic
Compliant (with internal & external standards)
Cost-efficient
Risk Management areas
identification classification
analysis
attitude
response
control, policy and reporting
Risk Identification
Detailed and thorough, identify source of risk
Internal risks use WBS to identify most obvious risk areas (3-4 level)
External risks e.g. interest rates, economic activitydifficult to identify and evaluateProject risks project administration and control techniquese.g. OBS, team membership, leadership, communication
Risk Objective sourcessum total of past experienceRisk Subjective sourcessum total of current knowledge (e.g. PERT analysis)
Brainstorming (Delphi, Nominal group, SWOT M7)1. Creative phase2. Evaluation phase
Risk Classification
Portfolio theoryconsiders from a financial point of view (beta coefficient)Classify as market risk (business/ dynamic risk) or static risk (systemic risk)
Three-level classification
Risk type
Risk extent
Risk impact (consequence)
- Maximum probably loss
- Most likely cost of loss
- Cost of covering loss
- Cost of insuring against event
- Reliability of predictions about event
Risk Analysis
1. Evaluate all options2. Consider risk attitude3. Consider characteristics of risks (internal/external, controllable)4. Establish measurement system5. Interpret results6. Make decision
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
22/59
- 22/ -
Alternative methodology1. Identify source2. SWOT analysisMap risk drivers3. Assess probably and impactActual risk map4. Consider all optionsDevelop target risk map5. Assess value added with recommended risk response6. Set up monitoring and reporting
Risk mapping = Risk profiling (aka Risk footprinting)4 quadrants reflecting high/low probability and impactRisk migrationfrom actual to target risk mapselected risks = controllable & internalShape (e.g. ellipse) versus point reflects variation limits
Risk gridtable Dimensions: multiple levels of probability and severity
Cell: indicates action (e.g. Retain, Part insurance, Full insurance, Cease activity)
Risk Attitude Risk seeking AGAP = all goes according to plan
Risk averse WHIF = what happens if
Individuals more risk averse than teamsInclination to risk increases with age of team (time since formed)Multidisciplinary teams seek more risk than unidisciplinary teams.
Risk Response
Considerations
Company policy
Missing information on cause/effect
Time of exposure Individual/team interests
Involuntary/voluntary risk
Alternatives
Risk distributionContracttool to allocate/share riskConsiderations
Is the outcome worth the risk?
Who controls most risk
Who is most liable?
Incentives?
High impact
Low probability(Quadrant 2)
High impact
High probability(Quadrant 1)
Low impactLow probability(Quadrant 4)
Low impactHigh probability
(Quadrant 3)Impact
Damage
Probability
Impact
Damage
Probability
A B
C
D Impact
Damage
Probability
C1C2
C3
NeutralSeeker
ImpactIe. max. reward or opportunity available
AverseEffort
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
23/59
- 23/ -
Response Options
Retentionignore risk (low-probability, low-impact) Reduction
Transfer (insurancecontract: General Terms and Condition)- Insurability of risk (not all are insurable)
- Cost of insurance
- Maximum probable loss
- Likely loss
- Likely cost of covering loss
Avoidance
- Pre-contract negotiations
- Rescission
- Exemption clauses
- Scope redefinition
Seeking further information
Risk Control, Policy and Reporting
Risk handbookit documents experience with risk and risk managementRisk reports should be regular and integral to strategy
Risk policy:
Overall aims and objectives
Accountability for managers (TRM)
Formalised reporting channels
Risk tolerances (variance)
Authorisation
Risk, Contracts and Procurement
Contract is tool for risk transfer and mitigation. It transfers liability.
To insurance company for premium
Between suppliers/subcontractors Tender price reflects risk absorption
Reasons for conflict
Defective documentation
Inappropriate arrangements
Incorrect estimating/pricing
Unreasonable risk allocation
Communications breakdown
Insolvency
Ambiguity
Contract defines rights, dues, obligations, liabilities.
Commensurate riskinability to fulfill obligation due to own inadequacy,incapacity, inadvertence or errorUberrimae fidei (utmost good faith) obligation to disclose all relevant information to contract
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
24/59
- 24/ -
Basic Contract Theory
Contract items
- Signature block & project title
- Definition of terms and scope
- Information/facilities provided by client
- Project approvals
- Payment systems
- Working drawing
- Specification
- Schedules
- General conditions (sector-generic)
- Specific conditions
- Provisions for change
- Form of tender
- Dispute resolution
- Bonds and warranties
Contract requisites
- Offer and acceptance
- Consideration (e.g. deposit)depending on legal system- Capacity
- Legal relations
- Communication (acceptance to offeror)
Performanceall parties complete all duties and liabilities
Alternatives to performance
- Breachone party in contravention to terms- Frustrationcannot be fulfilled although both parties wish to- Rescissionerror or misunderstanding, rescinded by court if terms are not acceptable (contradictory term- Rectification
- Void (e.g. if goods are illegal)
- Termination/determinationin accordance with provisions of contract
ProcurementMost large organisations have Legal Services for procurement of contractsStrategic vs. Project procurement
Procurement phases
Objective phase
Exposure phase (advertisement, investigation into possible sources)
Alternatives phase (sources analysis)
Documentation (of requirements)
Tendering
Award
Contract administration
Characteristics of ContractsControllable (e.g. human error, decision making) vs. uncontrollable (adverse weather)
Fundamental contractual risks
Design defectslatent and patent Project cost
Safety and indemnification
3rd party insurance
Fire, flood Completion deadlines: Damages may be punitive, liquidative (cash) or ascertained (actual)
Express/implied terms (e.g. PII professional indemnity/ liability insurance)
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
25/59
- 25/ -
Transfer of Risk in Contracts
Indemnity clause transfers riskCourts unsympathetic to excessive transfer
Variation Orders(EU)& Change Notices(US)
Variationsallow for changes to contract without invalidating itMust be possible to price to compensate affected party
Claims Risk
Client risks
Failure to provide information
Late instructions
Errors/omissions in contract documents
Delays by nominated subcontractors or client consultants
Changes in statute
Non-availability of labour
Civil commotion, war, natural disasters Adverse weather
Determination of contract by contractor
Obligation of client to insure against:
Fire
Flood
Lightning
Impact of aerial devices
Radiation
Contractor insurance
Employer liability for employees
Liability for damage to 3rd party persons and property Escape of hazardous materials
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
26/59
- 26/ -
Module 4PM Organisational Structures and Standards
Internal (operational, non-executive) project managementExternal (executive) project managementInternal with external specialist support
Organisational Theory and Structures
People make projects succeed or failPeople are more difficult to predict/control than schedule/cost
1. The Project within an Existing Organisation
Most common form of PM groupingFundamental consideration is relationship between organisation and project; dependent on:
Size, status and importance of project
Resources available
Strategic fit
Functional organisational structure
Most common; preferred by inflexible organisations, examples:
- Government
- Police forces
- Military
- Most large private companies
Power/status defined by vertical hierarchy
Horizontal communications only at top levels
Projects may be contained within function
Benefits:
- Clear reporting, rules, responsibilities, chain of command
- Mirrors traditional authority structures
- Simple; intuitive
- Specialisation & focus (shared knowledge)
Disadvantages:
- Inflexible
- Cross-functional activity discouraged
- Boundaries, barriers
- Greater need for central support
- Development of organisational and operational islands
Pure project structure
Can exist within functional structure
Often have complete freedom within limits of final accountability
Set up to deliver very visible projects
Benefits:
- Flexible & responsive to change
- Encourages innovation and evolution
- Operational costs can be adjusted to workload variations
- No need to negotiate with functional manager for resources
- Shorter in/formal communication lines
- Authority contained within project
- Team members not distracted by functional loyalty
- Easier to incorporate external consultants
- Easier to execute related projects as programme
- In summary, best structure for a project
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
27/59
- 27/ -
Disadvantages:
- Concurrent projects may lead to duplication of effort
- High initial operating costs (until any projects are completed)
- Centralized direction
- Increased early operating costs if PMs think ahead to resources needed- Team members concern about long-term- Competition between project teams
- Deadlines may force to cut corners
- Prolonged absence from function can dilute specialisation
Matrix structure (internal, Non-executive)
Blend of mechanistic/ repititive (pure functional) and research/ innovative (project)
Very popular for organisations undertaking projects
Generally restricted to large organisations with constant/ predictable workload
Main characteristics
- Functional (vertical) boundaries
- Power/status (horizontal) boundaries
- Organisational islands
- Project sponsorAdjudicate disputesAllocate resources
Make executive decisions- PM chair
Four legs: PM, sponsor, functional manager, teamThree interfaces for PM Three levels of control (subordinate, peer, superior)
- Interfaces
- Bidding
- Time-recording and cost-centre charging
Most internal structures make at least some use of external resources
2. The Project External to the Existing Organisation
Project team may comprise
All internal resources managed by external PM
All external consultants managed by consultant PM
Mixture of internal and external resources
Surrogacyextent to which client wishes to delegate control/authorityRisk transfernormally cover non-performance/ negligence but not supplier breaches
External (Executive) PMmeans PM has full authority (does not need to negotiate over resources)
Distinctive characteristics
Multidisciplinary nature / shared loyalty Open and competitive fee structures
- Fee bid package
- Paid in TranchesPre-contract worksPost-contract worksFinal account
- Percentages based on measured works totals or final account total
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
28/59
- 28/ -
External contractual linkages
- Primary typesCompletion contractsTerm contracts (long-term agreements)Service-level agreements
- Competitive contracts (tender) versus negotiated contracts
- Pricing forms Fixed-pricelowest clients risk
Cost/cost-plusgreatest clients risk Reimbursement + a fee Target-price + a fee
- Forms Standard form (clear terms and conditions)Professional services (implied terms) Supply contracts (supply of goods)Subcontract agreements
o Domestic subcontractor (free choice by contractor)o Nominated subcontractor (stipulated by client)
- Pro-forma contractsnear/ monopoly- Links
Client to PM and design teamprofessional service contractsClient to main contractorClient to service authoritiesgas/ electricity/ water pro-forma contracts Client to nominated subcontractors and suppliersClient to local authority
External non-contractual linkages
- Authority linksclassic agency arrangement, contractual risk of consultants borne by client - Communication linkscreeping scope = uncontrolled changes,
is the classic tendency for poorly controlled projects to gradually increase in size and content
Advantages of external PM
Flexible, responsive
New ideas/approaches
Outsource where no internal expertise
Quick ramp-up / easy disbanding Internal risks (resources) avoided
Disadvantages
Expensive
Lack of loyalty
Difficult recourse over poor performance
New administrative and control system
More stringent communication and coordination systems
Risk profile changes
Arbitration and litigation possibility
Complexity for PM
3. Criteria for Selecting the Organisational Structure
Authority (project has shorter accountability lines)
Communication (matrix reduces barriers)
Knowledge transfer (e.g. between function and project)
Loyalty
Technology/ Innovation
Cost (pure project has lower running costs, function has large fixed costs)
Coordination(function has formal reporting, therefore low coordination requirement)
Support functions(pure project requires less)
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
29/59
- 29/ -
Function Matrix Pure project
Workload Constant Variable Significant variance
Project Frequency Infrequent Frequent Frequent / dominant
Focus Functional objectives P secondary, though of significant importance Project focus
Informal Communications Not required Acceptable
R&D / Innovation Some High
Centralised support Required Present Little or none
Clear authority Required Split authority ok Devolved to PM
Change propensity Unlikely Some HighSize Small Small to medium Large, resource intensive
Response time Not fast Fast not generally required Fast
Project Management Standards
For any given industry/ profession there are three standards:
IPMA guidelines for UK APM BoKUS PMI BoK: = standards and areas of responsibilities for PMgrs BS6079(UK)ISO10006(EU) - - - Working guidelines for PM practice, such as SPP Industry-specific (e.g. PRINCE2)- - - PRoject management IN a Controlled Environment (IT industry)
APM and APM Body of Knowledge
AMP Objectives:
1st point of contact (national authority on PM)
Lead professional development
Champion interest representation
Standardise qualifications
Develop national branch network
Establish practice and procedures for training
APM BoK Profile4 primary areas (UK and US)
1. Project Management Project life cycles, Project strategy, Project environments2. Organisation and people Leadership, communication and team building
3. Techniques and procedures Planning, estimating, control, monitoring
4. General management Finance, law
BS6079
Focus is standardizationE.g. different methods of planning and control measurement
Most important section is standard strategic project plan (SPP)
1. Preliminaries Title page, project description, contents list, introduction, names
Control reference, Security levels for different team members
2. Project aims and objectives Time, cost, qualityhealth and safety, environmental
3. Subject-specific sections BS6079 proposes standard numbering Scheduling, cost control, project history, project policy, certification procedures
Acts as both a document and benchmarkClients may use SPP (up to baseline stage) as basis for competitive bids
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
30/59
- 30/ -
PRINCE2
PRoject management IN a Controlled Environment version 2Alternative to BS6079developed by Central Computer Telecommunications Agency (CCTA) in 1989 for IT PM in UK government
Based on process model of a project
Project breakdown into processes with key inputs/ outputs and aims/ objectives
Driven by project business case
Advantages
Standard project structurestart, middle, end Regular detailed reviewsmeasured against business case and planned progress Flexible decision points
Automatic control of deviations
Optimises involvement of stakeholders
Encourages communications
For bureaucratique and IT-driven project
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
31/59
- 31/ -
Module 5 - Project Time Planning and Control
5.1 The Concept of Project Time Planning and Control
Time-planning intrinsically linked to life cycle (separate from implementation) Not staticreplanning in parallel with implementation Variancecomparison of actual with planned performancebasis of management reporting Also feedback for future projects Extrapolation allows prediction of future performancepredictive/ proactive analysis
Aims and Objectives of the Planning Process
Plot course from current position to end position
Establish variance limits
Allow contingencies and resources for divergences
Ensure correction for divergences
More specifically
Consider strategic objectives
Establish project objectives
Compartmentalise work
Determine interdependencies Determine resources
Determine cost/duration/sequence of packages
Establish communications system
Define responsibilities, deadlines
Set up organisational structure
Identify critical activities
Motivation
Produce Strategic Project Plan
Project Time Planning and Control and the Generic Project Plan
SPP includes time, cost, quality and planning for:
Organisational and authority Risk management
Communications system
Finance
Conflict and stress management
Authorisation and compliance
Health and safety
Change management
Project Time Planning involves identifying, sequencing and scheduling activities and resources.
Project Time Planning and the Project Life Cycle
Continuous planning/ replanning throughout the life cycle but intensity varies
Most intense in early stages
Critical changes increase replanning
Replanning process critical in large projects
Becomes more complex as project progresses
Examples of replanning reasons:
Internal (optional) changeclient-initiated External (imposed) changee.g. supplier/subcontractor fails Sequential disruptionresource reallocation (within project) Miscalculation
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
32/59
- 32/ -
5.2 The Process of Project Time Planning
Factors Affecting the Time Planning Process
Sources of time planning data
Knowledge, experience, environmental conditions, form of contract
Project uniqueness
Extent of knowledge transfer Geographical location
Objectives
Availability of contractors, suppliers
Contractual conditions
Client characteristics
Time of year
Local conditions, government regulations, environment
People issues
Stakeholder buy-in
View as fair, reasonable and achievable
ComplexityAnalyze components for Position in sequence
Importance of package
Criticality of package
Acceptable time/cost overrun
Resources required
Uncertainty & Change
Not possible to eliminate risks completely
Not cost-effective to eliminate some risks
Eliminating some risks may give rise to others
Difficult to assess some risks
Relative importance may change over time
Accuracy & Reliability
Unfamiliarity with software
Misguided assumptions
Insufficient data
Incomplete understanding of implications and linkages
Communication
Software promotes tendency to issue too much information
The Planning Process
1. Statement of Work (SOW)2. Work breakdown structure (WBS)3. Project Logic Evaluation (PLE)4. Separate time, cost, quality planning5. Network analysis (CPM, PERT)to generate DMS6. Trade-off analysis to replan7. Project Master Schedule (PMS)
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
33/59
- 33/ -
Statement of Workdefines overall content and limits of work; all required information for tender/bid Signature block, project title
Terms and scope
Information/ facilities provided by client
Approval requirements
Payment terms
Working drawings
Specification, schedules
General and specific conditions Variations procedures
Dispute resolution
Bonds/ insurance
Work Breakdown Structure
Purpose
- Improve accuracy of estimates
- Define baseline for performance measurement and control
- Identify tasks and responsibilities
Levels of definition (typically six)
Logical numbering system
- Align with Cost Accounting Codes (CAC) in use
- Typically generated by Computerised Database Estimating System (CDES)
Dividing the WBS
- Work type
- Responsibility
- Location
Project Logic Evaluation (PLE)
Define sequence of individual packages
- Resource driven
- Logic driven Sequential, parallel
- Precedence diagrams with resource sheet
Draft Master Schedule (DMS)
Purposes & uses
- Project completion date
- Supply order/delivery dates
- Subcontractor notification dates
- Milestones for progress planning
- Risk management system
- Logic incompatibilities
- Contractual compatibilities
- Basis for Replanning & trade-off analysis, Resource levelling , Earned value analysis
Critical Path Method (CPM)deterministic Program Evaluation and Review Technique (PERT)probabilistic Gantt Charts Network Diagrams (precedence diagram with activity durations)
- Activity on arc (AOA)Activities shown as arcs Events shown as nodes (circles) with duration Dummy activities required represent dependencies (shown as broken line)
- Activity on node (AON)Activities as nodes (boxes) Temporal relationship dependent on placement of arrow end-points
Finish to start (most common, simplest)
Finish to finish
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
34/59
- 34/ -
Start to start
Start to finish
Critical Path Method (CPM)DuPont 1960- Assign durations for each activity
Modular technique (decompose activities) Benchmark technique (recorded time for similar works) Modelling technique (generate formula/model from previous activities) Computerised Database Estimating System (CDES) technique Parametric technique (dependent/independent variables e.g. time& length of digging tunn
- Identify start & finish window for each activity Forward pass: Identify Earliest Event Times (EET)
Earliest Start time (EST)
Earliest Finish time (EFT) Backward pass: Identify Latest Event time (LET)
- Critical path (no float window i.e. EET=LET)
- Replan/ Rationalise resources Import new activities Decrease work (cut corners) Reshuffle resources Re-evaluate sequence Increase workload Overlap phases Speed up approvals Smooth resource utilisation Prioritise activities (allocate resources to critical path)
- Form Draft Master Schedule (DMS)
- Refine into Project Master Schedule (PMS)
Program Evaluation and Review Technique (PERT)
- Assign three durations to each activityoptimistic, most likely, pessimistic
- Calculate mean duration and standard deviation for each activity (Beta distribution)
Activity Duration (Beta Average): T = (a + 4m + b) a = optimistic time
6 m = most likely time
Activity Standard Deviation: s = (b a) b = pessimistic time
6
- Forward/ Backward pass, CP
- Calculate project mean duration and standard deviation
Project Mean Duration: TCPProject Standard Deviation: (SCP)2
- Identify target completion date and calculate variance about target (Normal distribution)
Nb. of standard deviations between Project Mean Duration and Target Duration (client-reques
Project Mean Difference = PMDTarget Project Duration
Standardised Mean Difference = PMDiffPSD
Event within 1 standard deviation of the Mean ~ 68% of meeting deadlineEvent within 1 standard deviation above Average mean ~ 84% (50%+68% of 50%)
Event within 1 standard deviation bellow Average mean ~ 16% (50% 68% of 50%)
Event within 2 standard deviation ~ 95%Event within 3 standard deviation ~ 99%
- Replan/ Rationalise resources
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
35/59
- 35/ -
- DMS
- PMS
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
36/59
- 36/ -
5.3 Project Replanning
Quality = performance in following sections. Elsewhere it may refer to specific measurable aspect of quality
Crash analysishow much can project be accelerated and at what cost?
Crash Analysis
Trade-off between time and cost. Assumes Quality is fixed.
Process:1. Define project logic2. Add duration to each activity3. Establish critical path4. Calculate crash cost per activity5. Calculate crash cost per unit time6. Determine most cost-effective crash sequence7. Check critical path8. Crash network to limit
- Optimum cost point (starting point) --- additional time beyond this will accrue fixed overhead
- First crash point (using cheapest critical path component to crash)
- Maximum crash point
5.4 Trade-off Analysis
Methodology for Trade-off Analysis
1. Identify the reason for the problem2. Reevaluate the project objectives3. Allow for any other relevant factors4. Assemble a shortlist of solutions scenarios5. Select and test the best (or approved) alternative6. Implement the best alternative
1. Identify reason for problem Pre-execution trade-offs (during DMS)
- Change in client requirements; strategic objectives
- Design incompatibilities
- Subcontractors/ suppliers/ external consultants changes
- Misunderstandings/ miscommunications
Execution trade-offs
- Client requirements
- Human error
- Execution problems
- Emerging risk
- Project-specific
2. Re-evaluate project objectives Competitor behaviour, customer demand, economy, technology, legislation
3. Allow for other relevant factors
Strategic and/or operational
4. Shortlist solutions
5. Select and test the best alternative
6. Implement
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
37/59
- 37/ -
Trade-off Classification
Type 1: Time is fixedType 2: Cost is fixedType 3: Performance is fixed
Type 4: Time & Cost are fixed
Type 5: Time & Performance are fixedType 6: Cost & Performance are fixed
Type 7: Everything is fixed
- Unusual; typically in small, simple projects
- Unlikely change
Type 8: Nothing is fixed
- Also unusual
- Emergency works
- Stop-lossing (fulfill contractual obligations as soon as possible)
-
5.5 Resource Scheduling
Seven types of resources:1. People
2. Materials3. Equipment4. Funds5. Information6. Technology7. Space
Considerations:
Resource productivityProject productivity not a simple sum of individual productivity Resource availability
Resource Aggregationis a way of estimating the total resource requirements on an ongoing basis throughout the life cycle of the project
Large variations may lead to periodic idle time if resources cannot be easily redeployed
Resource Utilisation (Efficiency)
Resource Utilisation = # of person days worked on project t# of person days available for project
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
38/59
- 38/ -
Resource Levelling (or Resource Smoothing)
Levelling out peaks and troughs in resource demand so that utilisation approaches an average
Depends on:
Flexibility of completion date
Availability of resources
Benefits:
Reduced peaks in demand means fewer people on project at any one time reduces coordination and control Individuals work for longer period of timeBenefits in team dvpt & learning curve Reduced float times lead to greater continuity
Reduce overall time subcontractors are required
5.6 Project Planning Software
Advantages of Computer-based Project Planning and Control
Speed
Cost
Capacity
Reliability
Combined analysis (e.g. simultaneous planning for time and cost)
Disadvantages of Computer-Based Project Planning and Control
Relianceprotected and backup Over-emphasis on time-consuming detail
Information dump
Potential misdirectionExcessive trust in well-presented material if based on erroneous data
General Factors for Consideration
Lead-in timeimplementation time of the software Transition
Training Software Updates
Networking CMS, security and access implications Wider compatibilityin linking the configuration management system to external consultants/ contractors/ suppliers
Critical success factors
Usableuser-friendly Familiar displays
CMS compatibility
Extendable
General Features of Project Planning and Control Software Systems
Project planningAutomaticGantt charts, network diagrams, critical path analysis Resource managementresource loading, conflicts, costs, budgets, forecasts Tracking and monitoringcompared to baseline Report generationstatus, budget, cash flow, resources, schedules Analysis and decision aidingwhat-if analysis, at least straightforward analysis
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
39/59
- 39/ -
Common Commercial Project Planning and Control Software
High-end
Power Project Professional
Primavera Project Planner
Artemis Views
Open Plan
Cobra
Enterprise PM Micro Planner X-Pert
Mid-range(up to 2000 tasks)
Microsoft Project
Micro-Planner Manager
Primavera Suretrak
Low-end (less than 100)
Milestone Simplicity
Project Vision
Quick Gantt
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
40/59
- 40/ -
Module 6 - Project Cost Planning and Control
6.2 Project Cost Planning and Control Systems
Cost planning Breaking down project into elements WBS, assigning realistic estimate of cost and rolling up costsStrategic, establishes aims & objectives before
Cost control Ensuring adherence to cost limits set by cost planningTactical, reactive
Monitoring expenditures Identifying variances Determining reasons for variance Corrective action Monitoring to ensure resolution Taking further corrective action if necessary
Cost Planning and Control as a Concept
Target costs identified by account code systemNo direct time measurement but time does affect costCost variances from internal sources easier to control than from external sources
General requirements
Project schedule must be accurate
Estimating system must be reliableTypically electronic estimating system, some still use price books
Clear project scopeunambiguous, non-overlapping tasks
Realistic budgetfair and reasonable
Clear authorisation systemmulti-layer approvals filter
Flexible and responsive system variation orders (EU) = change notices (US)
Reliable approach to tracking varianceCDES
Time-dependent variance sensitivitydiminishes over time
Flexible use of reserves and contingencies
Types of Control System: 1. Cybernetic 2. Analogue 3. Feedback
Cybernetic
Most common approach Automatic response mechanism= its key feature
Used by animals and some plants to make decisions
Set of inputs establish context
Outputs subject to monitoring system
Bounded rationality(see page 17)approach to information processing i.e. analysis
Multi-level cybernetic control
- Low-level: e.g. shower control with temperature sensor, instrument controls, animals Most cost-control systems Detecting time and cost variances Adjusting likely final time/cost estimates Re-programming schedule change
- Mid-level: greater flexibility, complexity; automobile engine management Adjusting estimates for individual cost rates Establishing cost of change notices Releasing contingency sums
- High-level: introduces intelligence, memory, experience, original thought Tactical solutions to programming problems Updating risk profile Developing negotiation strategy For controlling overall project performance
- Human mind operates at all three levels
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
41/59
- 41/ -
Analogue
Appropriate for smaller elements/packages
Series of yes/no questions elimination process
- Basis of human reasoning process
- Eliminate unfeasible solutions and break feasible solutions into subsections
Every aspectdetermine if preconditions met For rigid time, cost, performance limits
Feedback control Post-project evaluation and feedback to future projects
Cybernetic are automatic and therefore continuous; Analogue are invoked as neededCybernetic and analogue for ongoing use. Feedback applied after project completion
Costs and Allowances
Classification:
Fixed and variable costsdepends on the level of project activity
Direct and indirect costs
Factory coststotal fixed/variable costs without any mark-up for profit Measured worksindividual and unit prices
Contingencies and reserveempirically calculated, 10% or more
Fluctuationsinflation
Prime cost(pass-through)and provisional sums(foreseen but undefined work)
Direct payments(local authorities or utilities)
Bonds and warranties
Exchange rates and currency fluctuations
Insurance
Life Cycle Costs
Life-cycle costing (LCC)
Considers long-term implications of early design decisions
Typical Life-Cycle Phases
- Inception
- Feasibility
- Detailed development
- Production
- Project termination, system operation, maintenance
- System divestment
Additional (optional) phases and costs
- Research and development
- Prototype
- Design
- Production
- Commissioning
- Operation
- Maintenance
- Decommissioningrunning the project down prior to recycling
- Product retirement, phase-outdemolition, dismantling, decontamination, recycling
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
42/59
- 42/ -
LCC Process
- Establish life-cycle characteristics
- Build process cost model
- Calibrate model (benchmark with standard)accurately measuring what is supposed to be measured
- Input relevant data
- Generate LCC and define strategybalance between long-term and project ramp-up
LCC Advantages
- Long-range considerations
- Life-cycle viability
- Strategic decision making
- Future awareness
- Market position
- Compliance/ regulation
LCC Disadvantages
- Prediction accuracyinvalid assumptions
- CostFull LCC is expensive
- Sensitivityto change may produce inaccuracy
- Competitionin case of unbalanced analysis
- Riskimplications of inaccuracy
6.3 The Project Cost Control System
Two cycles1. Cost planning cycle - Phase 12. Cost control cycle
- Phase 2: Work initiation
- Phase 3: Cost data collection
- Phase 4: Variance generation
- Phase 5: Cost reporting
The PCCS Planning Cycle
Estimating procedure Professional estimator
- Trained, experienced, unbiased, no loyalty
Project team
- Estimators are responsible
- on the ground, best knowledge of resources and requirements - Aware of system limitations
- Can confer, negotiate on resources
- May cost low to win or high to succeed
- Greater risk making mistake or over-optimistic estimates
Other considerations
- Project success criteria consistent with estimating assumptions
- Project linkagessynergies
- Standardised approachleverage central data and systems
- Feedback
Estimating elements
Labour
Materials
Plant
Also many others, e.g.
Fuel
Maintenance
waste
= Operating Cycle
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
43/59
- 43/ -
Additional considerations for materials and equipment
Packaging and shipping costs (also insurance, duties) Availability (may need to pre-order or find alternate source)
Detailed specifications may not be available on first issue of estimate
Data gathering
Standard tables
Company-specific tables
Previous project data Estimator skill and knowledge; estimator categories (increasingly dangerous):
- Accurate
- Pessimistic
- Optimistic
- Inconsistent
Presenting the Estimate
The order-of-magnitude estimate feasibility assessment
Indicative estimate based on known information and published data
Definitive estimate
Project Estimating
Top-down- Strategic alignment
- More stable/static
- Less local influence and bias
- Executive commitmentBut:
- Senior management disconnect from operational costs
- Team may feel budget is unrealistic => reduced motivation
- Politics
Bottom-up
- More team commitment if people own decisionBut:
- Less status
- Difficult to adapt to strategic changes
- Easily overridden by senior management
- Tendency to over-estimate
Iterative [based on negotiation](interactive between task managers [operational]and senior managers [strategic])
- Prepared by operational manager
- Aligned to strategic objectives
- Maintains market influenceBut:
- Timely and costly negotiation
- Requires control procedures
- Dependency on negotiation skill of operational manager (more important than estimating skill)
Bidding strategy and Estimate reporting1. Formulate estimating strategy2. ROM estimates3. Carry out preliminary refinement4. Indicative estimate5. Add for profit and risk6. Compare to cost limit7. Subjective evaluation of bid success probability8. Final/definitive estimatefinal or baseline budget plan
Consider difference between type x acquisitions (one-off with no follow-on) and type y acquisitions (follow-on likely)
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
44/59
- 44/ -
Computerised Database Estimating System (CDES)
Scan or digitise quantity information directly from drawings
Description librarycollection of standard descriptions (arranged in same format as WBS) Price codes and unit rates
Other database elements
- Digitised drawings
- Bill preparation systems Bill with tender, bill with estimated prices budget plan
Project Budget Plan
Perceived as the most important performance indicator
Standard Method of Measurement (SMM)standard form to measure and quantify costs- How to measure work
- What descriptions to use
- What to include/exclude
- Units of measurement
- Assembly into bill of quantities for tenderer
Role of project budget
Forecast costs to particular project tasks
Budget baseline
Projected cost curves (for each element) Reference for variance analysis
Moderation of spending
Data for trade-off analysis
Estimate effects of change notices
Psychological effects (motivation, demotivation)
Budget Development and Layout
Objectives and activities measurable outputs
Financial resources allocated
Start/finish points of each activity
Facility to compare actual and planned performance
Preliminary items general project overheads
Prime cost sumswork is sublet to nominated subcontractor
Provisional sumsexact extend of works in not known (e.g. excavation)
Direct Paymentspayments made through project but not to project team
Dayworksunforeseen and unmeasurable works (e.g. specialist to debug software)
Measured worksphysically measured from specifications
Contingencies, fees and taxes
Budget changes
Transparency importantvisibility of original budget, all changes, current budget
Change control system (CCS)monitors all changes and predicts implications before authorising
Cost account variation notice (CAVN) formalised process using CMS (for large projects)
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
45/59
- 45/ -
The PCCS Operating Cycle= cost & control system
Phase 2: Work initiationPhase 3: Cost data collectionPhase 4: Variance generationPhase 5: Cost reporting
Phase 2: Work initiation
Controlled release of work: Project works order (PWO)
Variation Order (VO)
Describe work, standards, cost-centre to charge
Phase 3: Cost data collection
Earned Value analysis (EVA) required by APM, PMI, ISO10006, BS6079
End result is generation of cost variance and schedule variance
- Basis for evaluating performance and, if necessary, corrective action
Milestone monitoring
- Milestonedefinitive stage in the project, appropriate point to measure performance
- Most suitable when plans not very detailed
- Disadvantages Reaction time lagintervals too great Residual accumulated overspendin case of late detection Replanning issuesmilestones rescheduled easily Time scale issues do not allow for work in progress
- Earned Value Analysis (EVA) Dynamic Combined time/performance assessment Frequent reporting Demonstrates value as well as cost Accurate assessment of cost implications of delays Easier trade-off analysis
Earned Value Analysis
Earned Value = cost of work originally estimated
Cost variance = difference between budgeted cost and actual cost of works
- Measurable effortseparate elements within defined schedule with tangible results- Support effortproject actions difficult to quantify (Project support, administrative services)
Variance analysis
- Identify / validate variance
- Quantify variance
- Determine source
- Determine impact on project
- Determine impact on other elements
- Determine extent of ongoing tactical response
- Determine range of possible outcomes of corrective actions
= Operating Cycle
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
46/59
- 46/ -
Earned Value Analysis variables
- Actual Cost of Works Performed (ACWP)
- Budgeted Cost of Works Performed (BCWP) = Actual earned value
- Budgeted Cost of Works Scheduled (BCWS) = Planned earned value
- Scheduled Time for Work Performed (STWP)
- Actual Time for Work Performed (ATWP)
- Cost Variance (CV) CV = BCWPACWP
- Schedule Variance (SV) SV = BCWPBCWS
- Time Variance (TV) TV = STWPATWP
- Budget At Completion (BAC) BAC = BCWS = project baseline
- Estimate To Complete (ETC)
- Estimate At Completion (EAC) EAC = ACWP + ETC = planned estimate approach
EAC =BACCV
EAC = x BAC = current estimate approach
- Variance At Completion (VAC) VAC = BACEAC
- Cost Variance Index CVI =
- Schedule Variance Index SVI =
- Time Variance Index TVI =
Multi-level Earned Value Analysis
- Allows roll-up analysis
- Diagnostic analysis
Phase 4: Generation of Variances
Variance and Variance envelope
Earned Value AnalysisEarned Valuecost of work originally estimated
Alarm system:
Critical Ratio = x = x
Zone A: take no action eg. 0.901.00
Zone B: record and monitor eg. 0.750.90
Zone C: Act immediately eg. 0.600.75
Zone D: Emergency response required eg. 0.500.60
Zone A1: Observe and note eg. 1.001.25
Zone A2: Investigate and correct(excessively pessimistic estimating or other errors)
BCWP
ACWP
BCWP
BCWS
STWP
ATWP
ACWP
BCWP
actual progress
scheduled progress
budget cost
actual cost
AP
SP
BC
AC
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
47/59
- 47/ -
Phase 5: Cost reporting
Report guidelines
- Punctual reporting
- Include only relevant information
- Highlight important information
- Allow interrelationships
- Honest and accurate
- Issued to everybody involved
- Where appropriate Propose solutions Clarify responsibilities & time scales
Basic report types
- Routine reports Cost, schedule, quality, risk
- Development review reports Common for R&D Assessment of progress in relation to success criteria
- Exception reports
Issued to highlight anomalies Initial report highlights exception Subsequent reports describe progress of corrective actions (audit trail)
- Subject-specific reports Monitor and control areas of concernhigh impact high probability risks (M3)
- Project variance and analysis reports (PVAR)
Project Variance Analysis Reporting (PVAR)
- Common reporting tool for EVA
- Shows variance (and all EVA metrics) for whole project and all 6 levels of WBS
- For each cost centre WBS identifiers CAC identifiers and budget limits Current metricsACWP, BCWP, BCWS, CV, SV, BAC, EAC, ETC and VAC figures Previous (Month) metrics YTD metrics Differences between current and previous metrics Summary of significant differences Current EAC, ETC, ECTC, ETTC May show graphic curves in appendix Can calculate
Earned value
Earned value hours
Anticipated final hours
Project efficiency
Project progress
Level 1: The programme2: The project3: The element4: The sub-elemen
5: The work packag6: The wp. compon
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
48/59
- 48/ -
Module 7 - Project Quality Management
Projects non-repetitive therefore standard sampling techniques for batch production are insufficient
7.2 Quality Management as a Concept
Through 1960s low-cost was the primary priority in protected economies1970s the Japanese entered market at higher-quality and equal or better costQuality control standards (BS5750, ISO9000, BS6079, ISO10006) give equal importance to quality as to time and cos
The Traditional Japanese View
Overall value of quality
- Curvilinear relationship to cost linear at some range but asymptotic at ultra-high-quality
- Must be balanced with cost of defects which can be also addressed through warranties Not always an option (high-speed tyre blow-out)
- Apparent value of quality what people will pay for a good-quality product- True value of quality also includes premium based on prestige/goodwill or reputation for reliability/quality
- Overall value = apparent value + true value
Overall cost of defects
- True cost of a defect greater than apparent cost of fixing it
- Loss of customers (churn)
- Bad reputation
- Overall cost = apparent cost + true cost
Quality dividends
- Employee motivation, company status and image
- Better productivity
- Industry respect/relations
- Prospects in M&A, partnerships and alliances
- Share price, risk profile- True payback = overall benefitimplementation costs
Involving people
- Japanese culture linked employee interest with company
- Motivated employees to proactively ensure quality without expensive quality control systems
Proactive planning
- Preventive rather than responsive action
- Cheaper and more effective quality systemsmove upstream/ more attention to pdt dvpt
- Difficult / expensive for Western companies to emulate
Involving whole organisation- Extended to non-production activities (sales, marketing, R&D)TQM
Educating customer to expect quality
- Differentiation in a competitive market
Quality Standards
2000 BCEgyptian quality control for funeral goods; imprint from government inspector1963: US Military standard MIL-Q-9858A
1974: UK standard BS5179BS5750 first major UK Quality Management standardNow superseded by ISO 9000**
ISO9000: Quality Management and Quality Assurance StandardsGuidelines for Selection and UseISO9001: Quality SystemsModel for Quality Assurance in Design, Development, Production, Installation and ServicingISO9002: Quality SystemsModel for Quality Assurance in Production and InstallationISO9003: Quality SystemsModel for Quality Assurance in Final Inspection and TestISO9004: Quality Management and Quality System ElementsGuidelines
Main drawbacks:
Bureaucratic
Measures performance at one point in time
Attempts generic measure across countries with different standards, process and cultures
*** Superseded by ISO 9001:2008
7/26/2019 1.RMJJ ProjectManagementNotes June2010 59
49/59
- 49/ -
ISO9000 Twenty main parts:1. Management responsibility and quality policy2. Quality system3. Contract review4. Design control5. Document control6. Purchasing7. Purchaser-supplied product
8. Product identification and traceability9. Process control10. Inspection and testing11. Inspection measuring and test equipment12. Inspection and test status13. Control of non-conforming products14. Corrective action15. Handling, storage, packing and delivery16. Quality records17. Internal quality audits18. Training19. Servicing20. Statistical techniques
7.3 The Quality Gurus
Common agreement:1. Quality pro