Chapter 1
process: ongoing, daytoday activities in which an organization engages while producing goods or
services
process use existing systems, properties, and capabilities in a continuous, fairly repetitive manner
projects take place OUTSIDE the normal, processoriented world of the firm
• have a specific objective to be completed with certain specifications
• have defined start and end dates
• have funding limits
• consume human and nonhuman resources
• are multifunctional
projects are complex, onetime processes
projects are limited by budget, schedule, and resources
projects are developed to resolve a clear goal or set of goals
• the project’s goal is also called the deliverables
projects are customerfocused
General project characteristics
1) projects are ad hoc endeavors with a clear life cycle
2) projects are building blocks in the design and execution of organizational strategies
3) projects are responsible for the newest and most improved products, services, and organizational
processes
4) projects provide a philosophy and strategy for the management of change
5) project management entails crossing functional and organizational boundaries
6) the traditional management functions of planning, organizing, motivation, directing, and control apply to
project management
7) the principal outcomes of a project are the satisfaction of customer requirement within the constraints of
technical, cost, and schedule objectives
8) projects are terminated upon successful completion of performance objective
Why are projects important?
1. shortened product life cycles
2. narrow product launch windows
3. increasingly complex and technical products
4. emergence of global market
5. an economic period marked by low inflation
Project Life Cycle stages
1) conceptualization
• the development of the initial goal and technical specifications for a project
2) planning
• all details are developed
• individual pieces of the project (work packages) are broken down
3) execution
4) termination
• occurs when the completed project is transferred to the customer, its resources reassigned, and
the project formally close out
the life cycle is signaled by the actual kickoff of project development
five components of a project may change over the course of its life cycle • client interest: the level of enthusiasm or concern expressed by the project’s intended customer
clients can be either internal or external
Ushaped curve
Reflecting initial enthusiasm, lower levels of interest during development phases
Renewed interest as the project nears completion
• project stake: the amount of corporate investment in the project. The longer the life of the
project, the greater the investment
• resources: the commitment of financial, human, and technical resources over the life of the
product
• creativity: the degree of innovation required by the project, especially during certain
development phases
• uncertainty: the degree of risk associated with the project ( the number of unknowns)
Determinants of project success
four criteria of project success
1) time
2) budget
3) performance
triple constraint
4) client acceptance
the traditional tripleconstraint model has come under increasing criticism
adding the external criterion of client acceptance corrects the shortcomings in the assessment process
• it refocuses corporate attention outside the organization and toward the customer
• it recognizes that the final arbiter of project success is the market place
• the criterion of client acceptance requires the teams to be open and communication throughout
the development of the project
four relevant dimensions of project success
1) project efficiency: meeting budget and schedule expectations
2) impact on customers: meeting technical specifications, addressing customer needs, and creating a
project that satisfies the client’s needs
3) business success: determining whether the project achieved significant commercial success
4) preparing for the future: determining whether the project opened new markets or new product
lines or helped to develop new technology
Developing project management maturity
project management maturity allow organizations to benchmark the best practices of successful project
management firms
• the purpose of benchmarking is to systematically manage the process improvement of project
delivery by a single organization over a period of time
Project elements and text organization
project manager is faced with a number of responsibilities
• selecting a team
• developing project objectives and a plan for execution
• performing risk management activities
• cost estimating and budgeting
• scheduling
• managing resources Chapter 2: The organizational context
Strategic management
Strategic management: the science of formulating, implementing, and evaluating crossfunctional
decisions that enable an organization to achieve its objectives
1) developing vision statement and mission statement
• an ultimate vision can serve as a “tie breaker”, which is highly beneficial in establishing
priorities
2) formulating, implementing, and evaluating
3) making crossfunctional decisions
4) achieving objectives
• project management allow firms to be effective in the external market as well as internally
efficient in operations
Stakeholder Managment
Stakeholder management consists of formulating strategies to identify and manage for positive results
the impact of stakeholders on the project
• Intervenor groups: groups external to the project but possessing the power to effectively
intervene and disrupt the project’s development
internal
• top management
• accounting
• other functional managers
situation can create confusion, conflict, and the need for negotiate between project
manager and functional supervisors
• project team members
external
• clients
many projects start before clients needs are fully defined
client does not in every case refer to the entire customer organization
• competitors
• suppliers
ensure each supplier receives the input information necessary to implement its part
of the project in a timely way
monitor the deliveries
• environmental, political, consumer, and other intervenor groups
Managing stakeholders
1) assess the environment
2) identify the goals of the principal actors
3) assess your own capabilities
4) define the problem
5) develop solutions
• developing solutions means precisely that :creating an action plan to address, as much as
possible, the needs of the various stakeholder groups in relation to the other stakeholder
groups
• it is necessary that we do our political homework prior to developing solutions
6) test and refine the solutions Project stakeholder management cycle
1) identify stakeholders
2) gather information on stakeholders
3) identify stakeholders’ mission
4) determine stakeholders strength and weaknesses
5) identify stakeholder strategy
6) predict stakeholder behavior
7) implement stakeholder management strategy
Organizational structure
three key elements
1) organizational structures designates formal reporting relationship
• number of levels in the hierarchy and the span of control of managers and supervisors
2) organizational structure identifies the grouping together of individuals into departments and
departments into the total organization
• functions grouping people performing similar activities
• product grouping people working on similar products
• geography grouping people within similar geographical regions or physical locations into
departments
• projectgrouping people involved in the same product
3) organizational structure includes the design of systems to ensure effective communication,
coordination, and integration of effort across departments
within the project management context, two distinct structures operate simultaneously
1) the overall structure of the organization that is developing the project
2) the internal structure of the project team
Forms of organizational structure (pg.47)
1. Functional organizations
companies are structured by grouping people performing similar activities into departments
most common
weakness
• relates to the tendency for employees to become fixated on their concerns and work assignments
to the exclusion of the needs of other departments
• functional siloing: occurs when similar people in a work group are unwilling or unable to
consider alternative viewpoints, collaborate with other groups, or work in crossfunctional ways
• a generally poor responsiveness to external opportunities and threats
• communication channel tend to run and down the hierarchy, rather than across functional
boundaries
• may not be very innovative
• provides no logical location for a central project management function
• it is easy to suboptimize (To make the best of one part of the whole without making the best of
the whole) the project’s development
• customers are not the primary focus of everyone within the functionally structured organization
a serious drawback for running projects in this operating environment is that they often must be layered,
or applied on top of the ongoing duties of members of functional groups
functional structure is well suited to firms with relatively low levels of external uncertainty
2. Project organization
advantages
• all major decisions and authority remain under the control of the project manager • the functional structure and its potential for siloing or communication problems are bypassed
• promotes the expertise of a professional cadre of project management professionals
• encourage flexibility and rapid response to environmental opportunities
disadvantages
• setting up and maintain teams can be expensive
• potential for project team members to develop loyalty to the project rather than to the overall
organization
• difficult to maintain a pooled supply of intellectual capital
• concern among project team members about their future once the project ends
3. matrix organization
combination of functional and project activities
creates a dual hierarchy in which there is a balance of authority between the project emphasis
there are two common form of the matrix structure
1) weak matrix
• sometimes called the functional matrix
• functional departments maintain control (but not direct authority) over their resources and
are responsible for managing their components of the project
2) strong matrix
• the balance of power is shifted in favor of the project manager
matrix structures are useful under circumstances
• there is pressure to share scarce resources across product or project opportunities
provides an environment in which the company can emphasize efficient use of
resources for the maximum number of projects
• there is a need to emphasize two or more different types of output
• the environment of the organization is complex and dynamic
advantages
• suited to dynamic environment
• emphasizes the dual importance of project management and functional efficiency
• promotes coordination across functional units
• maximize scarce resources between competing project and functional responsibilities
disadvantages
• dual hierarchies mean two bosses
• requires significant time to be spent negotiating the sharing of critical resources between projects
and departments
• can be frustrating for workers caught between competing project and functional demands
Heavyweight Project Organizations
the belief that organizations can sometimes gain tremendous benefits from creating a fully dedicated
project organization
no one goes directly to the autonomous team stage when it comes to running project
the project organizational form represents the last transitional stage in a systematically planned shift in
corporate thinking
heavyweight project organizations have realigned their priorities away from functional maintenance to
market opportunism, a realignment that can occur only when the resources needed to respond rapidly to
market opportunities rest with the project team rather than being controlled by higher level
Project management offices
PMO: a centralized unit within an organization or department that oversees or improves the management
of project It is designed to support the activities of the project manager, not replace them
PMO’s one of three different roles
1) weather station
• used only as a tracking and monitoring device
2) control tower
• treats project management as a business skill to be protected and supported
• intended to directly work with and support the activities of project manager
• performs four functions
establishes standards for managing projects
consults on how to follow these standards
enforce the standards
improve the standards
3) resource pool
• maintain and provide a cadre of trained and skilled project professionals as they are
needed
critics
• it is a mistake to place all the eggs in one basket with PMOs by concentrating all project
professionals in one location
• the PMO can simply become another layer of oversight and bureaucracy
• PMO may serve as a bottleneck for communication flow across the organization
Organizational culture
organizational culture: the solution to external and internal problems that has worked consistently for a
group and that is therefore taught to new members as the correct way to perceive, think about, and feel
in relation to these problems
culture
• unwritten
• rules of behavior
• held by some subset of the organization
• taught to all new members
How do cultures form?
1) technology: an organization’s conversion process whereby it transforms inputs into outputs
2) environment
3) geographical location
4) reward systems
5) rules and procedures
6) key organizational members
7) critical incidents
Organizational culture and project management
culture can affect project management in four ways
1) it affects how departments are expected to interact and support each other
2) the culture influences the level of employee commitment to the goals of the project on balance
with other
3) the organizational culture influences project planning processes
4) the culture affects how managers evaluate performance and view outcomes
escalation of commitment occurs when, in spite of evidence identifying a project as failing, no longer
necessary, or beset by huge technical difficulties, organizations continue to support it past the point an
objective viewpoint would suggest that it should be terminated • one important reason is the unwillingness of the organization to acknowledge failure
culture must be managed, constantly assessed, and when necessary, changed in ways
Chapter 3: Project Selection
Project selection
Six important issues that managers should consider when evaluating screening models
1) Realism
• Reflect organizational objectives
• Take into account both commercial risks and technical risks
2) Capability
• Flexible enough to respond to changes
3) Flexibility
• Easily modified if trial applications require changes
4) Ease of use
• Simple enough to be used by people in all areas of the organization
5) Cost
• Cost effective
6) Comparability
• Broad enough to be applied to multiple projets
project selection models come in two general classes
1) numeric
• use numbers as inputs for the decision process involved in selecting projects
• can be objective or subjective
• most selection processes for project screening involve a combination of subjective and
objective data assessment and decision making
2) nonnumeric
• do not rely on numbers
Approaches to project screening and selection
Method One: Checklist Model
Method Two: simplified scoring models
each criterion is ranked according to its relative importance
1) assign importance weights to each criterion
2) assign score values to each criterion in terms of its ratings
3) multiply importance weights by scores to arrive at a weighted score for each criterion
4) add the weighted scores to arrive at an overall project score
advantages
• easy to use in tying critical strategic goals for the company to various project alternatives
• easy to comprehend and use
limitations
• a scale from 1 – 3 is not very accurate
• only know 3 is better than 2, but we don’t know by how much
• can not assume the difference between different numbers are the same • depend on the relevance of the selected criteria and the accuracy of the weight given them
• it does not ensure that there is a reasonable link between the selected and weighted criteria
Method Three: the analytical hierarchy process
1) Structuring the hierarchy of criteria
• first level and second level
2) allocating weights to criteria
• pairwise comparison approach: every criterion is compared with every other criterion
• resolves the problem of double counting in scoring models
3) assigning numerical values to evaluation dimensions
4) evaluating project proposals
limitations
• current research suggest that the model does not adequately account for “negative utility”; that is,
the fact that certain choice options do not contribute positively to the decision goals but actually
lead to negative results
• requires all criteria be fully exposed and accounted for at the begging of the selection process
Method Four: Profile Models
plot risk/return options for various alternatives and then select the project that maximizes return while
staying within a certain range of minimum acceptable risk
advantage
• offers another method by which o compare project alternatives
disadvantage
• limit decision criteria to just two – risk an return
• in order to be evaluated in terms of an efficient frontier, some value must be attached to risk
Financial models
time value of money suggest that money earned today is worth more than money we expect to earn in
the future
future money worth less because of i) the impact of inflation, and ii) the inability to invest the money
Payback Period
Payback period is the estimated amount of time that will be necessary to recoup the investment ( when
it will begin to generate positive cash flow)
• payback period = investment / annual cash savings
Discounted cash flow (DCF) method is to estimate cash outlays and expected cash inflows resulting
from investment in a project
Net present value
projects the change in the firm’s value if a project is undertaken
Discounted payback
straight payback is useful for accounting purposes
discounted payback is more representative of the financial realities because it put into consideration of
the effects of inflation and future investment opportunities
Internal Rate of Return
advantages
• ability to compare alternative projects from the perspective of expected ROI
disadvantages • IRR is NOT the rate of return for a project. IRR equals the project’s rate of return ONLY when
projectgenerated cash inflows can be reinvested in new projects at similar rates of return
• IRR and NPV calculations typically agree only when projects are independent of each other
• If cash flows are not normal, IRR may arrive at multiple solutions
Project portfolio management
project portfolio management is the systematic process of selecting, supporting, and managing a firm’s
collection of projects
Objectives and initiatives
1) decision making
• often influenced by market conditions, capital availability, perceived opportunity, and acceptable
risk
2) prioritization
• criteria that are often used to prioritize:
cost
opportunity
top management pressure
risk
strategic “fit”
desire for portfolio balance
3) review
4) realignment
5) reprioritization
Developing a proactive portfolio
an integrated family of projects, usually with a common strategic goal
Key to successful project portfolio management
1) flexible structure and freedom of communication
2) low cost environmental scanning
• constantly building and testing new products prior to fullscale development
3) time paced transition
Problems in implementing portfolio management
1) conservative technical communities
• technical professionals unwillingness, whether out of pride, organizational inertia, or due to
arguments supporting pure research, to give up project ideas that are too risky, too costly, or out
of sync with strategic goals
2) outofsync projects and portfolios
• sometimes after a firm has begun realigning and reprioritizing its strategic outlook, it continues
to develop projects or invest in a portfolio that no longer accurately reflects its new strategic
focus
3) unpromising projects
• pursuing poorquality or unnecessary projects
4) scarce resources Chapter 5: Scope Management
project’s scope is everything about a project
scope management: the function of controlling a project in terms of its goals and objectives through the
processes of conceptual development, full definition, execution, and termination
5.1 Conceptual Development
the process of that addresses project objectives by finding the best ways to meet them
reduce the project’s overall complexity to a more basic level
1) Problem statement
2) Information gathering
3) Constraints
4) Alternative analysis
5) Project objectives
6) Statement of work
A detailed narrative description of the work required for a project
The SOW is important because it typically serves as the summary of the conceptual
development phase of the project plan
Some elements in an effective SOW
o Introduction and background
o Technical description of the project
o Timeline and milestones
5.2 The Scope Statement
the heart of scope management
key steps include
1) establishing the project goal criteria
deliverables: any measurable, tangible, verifiable outcome, result, or item that must be
produced to complete a project of part of a project
2) developing the management plan for the project
3) establishing a work breakdown structure
until a project has gone through WBS, it is impossible to determine the relationships
among the various activities
4) creating a scope baseline
a document that provides a summary description of each component of the project’s goal,
including basic budget and schedule information for each activity
The WBS
“a deliverableoriented grouping of project elements which organizes and defines the total scope of the
project. Each descending level represents an increasingly detailed definition of a project component
Purposes of the WBS
1) it echoes project objectives.
2) It is the organization chart for the project 3) It creates the logic for tracking costs, schedule, and performance specifications for each element in the
project
4) It may be used to communicate project status
5) It may be used to improve overall project communication
• The WBS not only dictates how to break the project into identifiable process, but it also shows
how those pieces fit together in the overall scheme of development
6) It demonstrates how the project will be controlled
work packages are defined as WBS elements of the project that are isolated for assignment to “work
centers” for accomplishment;
• they are the lowest level of WBS
• composed of short duration tasks that have a defined beginning and end, are assigned costs, and
consume some resources
subdeliverables are “rolled up” summaries of the outcomes of the two or more work packages
• do not have a duration of their own, do not consume resources, and do not have direct assignable
costs
• any resources and costs attached to a subdeliverable are simply the summary of all the work
packages that support it
The organization breakdown structure
Another benefit to have WBS is the ability to organize the work needed to be performed into cost
control accounts that are assignable to various units engaged in performing project activities within the
company
OBS allow companies to define the work to be accomplished and assign it to the owners of the work
packages
The responsibility assignment matrix
Often developed in conjunction with the WBS for a project
The RAM identifies where each person can go for task support, who should be notified of the task
completion status at each stage, and any signoff requirements.
Allows the project manager to determine how best to team people for maximum efficiency
5.3 Work Authorization
contractual documentation possesses some key identifiable features:
1) contractual requirements
2) valid considerations
3) contracted terms
a number of contractual arrangements can serve to codify the relationship between a project organization
and a customer
the most common contracts range from lumpsum or turnkey contracts, in which the project organization
assumes all responsibility for successful performance, to costplus contracts, which fix the company’s
profit for a project in advance
• cost plus minimize the risk that accompany would incur if it were to undertake a highly technical
project with the potential for uncertain outcomes
• lumpsum contracting work best when the parameters of the project are clearly understood by
both sides
advantage to the customer because the selected project contractor has accepted the
majority of the risk
5.4 Scope Reporting
fulfills the function by determining the types of information that will be regularly reported, who will
receive copies of this information, and how this information will be acquired and disseminated 5.5. Control Systems
vital to ensure that any changes to the project baseline are conducted in a systematic and thorough
manner
• configuration control
includes procedures that monitor emerging project scope against the original baseline
scope
• design control
relates to systems for monitoring the project’s scope, schedule, and costs during the
design stage
• trend monitoring
the process of tracking the estimated costs, schedules, and resources needed against those
planned
• document control
ensures that important documentation is compiled and disseminated in an orderly and
timely fashion
• acquisition control
monitors systems used to acquire necessary project equipment, materials, or services
needed for project development and implementation
• specification control
ensures that project specifications are prepared clearly, communicated to all concerned
parties, and changed only with proper authorization
Configuration management
“ a system of procedures that monitors emerging project scope against the scope baseline. It requires
documentation and management approval on any change to the baseline.”
Baseline: the project’s scope fixed at a specific point in time
The need to make project changes or specification adjustments come about for one of several reasons:
• Initial planning errors, either technological or human
• Additional knowledge of project or environmental conditions
• Uncontrollable mandates
• Client requests
four stages in configuration management
1) configuration identification
2) configuration reviews
3) configuration control
4) status accounting
5.6 Project Closeout
This step requires project managers to consider the types of records and reports they and their clients
will require at the completion of the project
The earlier in the scope development that these decisions are made, the more useful the information
collected over the project’s development can be
Closeout information can be important
(1) in the case of contractual disputes after the project has been completed
(2) useful training tool
(3) facilitate project auditing tasks
project leader may decide to track:
1) historical records
2) post project analysis
3) financial closeout one of the most important lessons for successful project managers it to “start with the end in mind”
Chapter 9: Project Scheduling
9.1 PROJECT SCHEDULING
project scheduling defines network logic for all activities; that is, tasks must either precede or follow
other tasks from the beginning of the project to its completion
network diagram: a schematic display of the project’s sequential activities and the logical relationships
between them
it is important for project networks and scheduling to be done well
1) a network clearly illustrates the interdependence of all tasks and work packages
2) facilitates communication flows
3) a network helps with master scheduling of organizational resources because it shows times when
various personnel must be fully committed to project activities
4) a network identifies the critical activities and distinguishes them from the less critical
5) networks determine when you can expect projects to be completed
6) a network demonstrates which activities are dependent on which other activities
Key scheduling terminology
Scope: the work content and products of a project or component of a project
Work Breakdown Structure(WBS): a taskoriented “family tree” of activities that organizes, defines,
and graphically displays the total work to be accomplished in order to achieve the final objectives of a
project. Each descending level represents an increasingly detailed definition of the project objective.
Work package: a deliverable at the lowest level of the WBS
Project Network Diagram: any schematic display of the logical relationships of project activities
Path: a sequence of activities defined by the project network logic
Event: a point when an activity is either started or completed. Often used in conjunction with AOA
networks, events consume no resources and have no time to completion associated with them
Node: one of the defining points of a network; a junction point joined to some or all of the others by
dependency lines
Predecessors: those activities that must be completed prior to initiation of a later activity in the network
Successors: activities that cannot be started until previous activities have been completed
Early Start (ES) date: the earliest possible date on which the uncompleted portion of an activity can
start, based on the network logic and any schedule constraints.
Late start (LS) date: the latest possible date that an activity may begin without delaying a specified
milestone
Forward pass Network calculations that determine the earliest start/earliest finish time for each
activity
Backward pass: calculations of late finish times for all uncompleted network activities
Merge activity: an activity with two or more immediate predecessors
Burst activity: an activity with two or more immediate successor activities
Float: the amount of time an activity may be delayed from its early start without delaying the finish of
the project
Critical path: the path through the project network with the longest duration
Critical Path Method (CPM): a network analysis technique used to determine the amount of
scheduling flexibility (the amount of float) on various logical network paths in the project schedule
network, and to determine the minimum total project duration
Resource limited schedule: a project schedule whose start and finish dates reflect expected resources
availability. Program Evaluation and Review Technique(PERT): an event and probabilitybased network analysis
system generally used in projects where activities and their durations are difficult to define
The two most common methods for constructing activity network:
1) ActivityonArrow (AOA)
• The arrow represent the task and the node signifies an event marker that suggest the completion
of one activity and the potential to start the next
2) Activity –on Node (AON)
• The node represents an activity
• The path arrows demonstrate the logical sequencing from node to node through the network
9.3 Development a Network
two primary methods for development activity networks
1) Program Evaluation and Review Technique (PERT)
2) CPM (Critical Path Method)
• Assumes hat durations are primarily in the assumptions it makes about estimating
activity durations
• Assumes that durations easier to ascertain and can be assigned to activities with greater
confidence
Rules of Thumb prior to constructing an activity network
1. Some determination of activity precedence ordering must be done prior to creating the network
2. Network diagrams usually flow from left to right
3. An activity cannot begin until all preceding connected activities have been completed
4. Arrows on networks indicat precedence and logical flow
5. Each activity should have a unique identifier associated with it
6. Looping, or recycling through activities, is not permitted
7. It is common to start a project from a single beginning node
Labeling Nodes
noes should at least contain the following data: (1) identifier, (2) descriptive label, (3) activity duration,
early start time, early finish time, late start time, late finish time and activity float
Serial Activities
those that flow from one to the next, in sequence
Cocurrent activities
when the nature of the work allows for more than one activity to be accomplished at the same time,
these activities are called concurrent
Merge Activities
those with two or more immediate predecessors
Burst Activities
activities are those with two or more immediate successor activities
9.4 Duration estimation
activity durations can be estimated in a number of different ways, including
• experience • expert opinion
• mathematical derivations
the activity’s most likely duration
the activity’s most pessimistic duration
the activity’s most optimistic duration
in project management, it is more common to see probability distribution that are asymmetrical; the beat
distributions
TE = (a+ 4m +b)/6
Where:
• TE= Esimated time for activity
• a= most optimistic time to complete the activity
• m= most likely time to complete the activity, the mode of the distribution
• b= most pessimistic time to complete the activity
the standard formula for estimating expected activity duration times is based on the weighting ratio of 1
x optimistic, 4 x likely, and 1 x pessimistic
• one argument holds that the ratio is far too optimistic and does not take into consideration the
negative impact created when the pessimistic estimated proves accurate
9.5 Constructing the critical path
the project network is first developed using activity precedence logic, then, following task duration
estimates, these values are applied in a structured process to each activity to determine overall project
length
Calculating the network
two steps
1) forward pass from first activity to last
an additive process that calculates the earliest times an activity can begin and end
2) backward pass from last activity to first
a subtractive process that gives us information on when the latest activities can begin and
end
critical path: the series of interdependent activities of a project, connected endtoend, which determines
the shortest total length of the project”
the shortest total length of time needed to complete a project is determined by the longest path
through the network
The forward pass
early finish for any activity (EF) is found by taking its early start (ES) time and adding its activity
duration (ES+Dur=EF)
there are three steps for applying the forward pass
1) add all activity times along each as we move through the networks (ES+Dur=EF)
2) carry the EF time to the activity nodes immediately succeeding the recently completed node. That
EF becomes the ES of the next node, unless the succeeding node is a merge point
3) at a merge point, the largest preceding EF becomes the ES for that node when two or more immediate predecessors have varying EF times, the earliest the successor can begin is
when all preceding activities have been completed
The backward pass
rules for the backward pass
1) subtract activity times along each path as you move through the network (LFDur=LS)
2) carry back the LS time to the activity nodes immediately preceding the successor node. That LS
becomes the LF of the next node, unless the preceding node is a burst point.
3) In the case of a burst point, the smallest succeeding LS becomes the LF for that node
activity float is determined as a result of performing the forward and backward passes through the
network
the project critical path is the network path with no activity slack associated with it
negative float refers to delays in which we have used up all available safety, or float, and are now facing
project delays
Probability of project completion
the project variance information is useful for assessing the probability of ontime project completion
because PERT estimates make two more helpful assumptions:
(1) total project completion times use a normal probability distribution
(2) the activity times are statistically independent
Laddering activities
laddering is a technique that allows us to redraw the activity network to more closely sequence project
subtasks to make the overall network sequence more efficient
Hammock activities
used as summaries for some subsets of the activities identified in the overall project network
allow the project team to better disaggregate the overall project network into logical summaries
also helpful when the project budget is shared among a number of cost centers or departments
Steps to reduce the critical path
1. eliminate tasks on the critical path
2. replan serial paths to be in parallel
3. overlap sequential tasks
• laddering identifies subpoints within the activities where project team members can begin to
perform concurrent operations
4. shorten the duration of critical path tasks
5. shorten early tasks
6. shorten longest tasks
• it is less likely that shortening longer activities will lead to any schedule problems for the overall
project network because longer duration tasks can more easily absorb cuts without having an
impact on the overall project
7. shorten easiest tasks
• the learning curve for a project activity can make it easier to adjust an activity’s duration
downward
8. shorten tasks that cost the least to speed up
Chapter 8: Cost estimation and budget 8.1Cost management
cost estimation processes create a reasonable budget baseline for the project and identify project
resources as well, creating a timephased budget for their involvement in their project
some of the more common sources of project costs include:
(1) Labor – those associated with hiring and paying the various personnel involved in developing the
project
(2) Material – apply to the specific equipment and supplies the project team will require in order to
complete project tasks
(3) Subcontractors – when subcontractors provide resources (exp. Expertise)
(4) Equipment and facilities – projects may be developed away from firm’s home office
(5) Travel – expenses that are related to business travel
Direct versus indirect cost
direct costs: those clearly assigned to the aspect of the project that generated the cost
indirect costs: generally linked to two features: overhead, and selling and general administration
Recurring versus nonrecurring costs
nonrecurring costs might be those associated with charges applied once at the beginning or end of the
project
recurring costs: typically continue to operate over the project’s life cycle
Fixed versus variable costs
Normal versus expedited costs
normal costs: those incurred in the routine process of working to complete the project according to the
original, planned schedule agreed to by all project stakeholders at the beginning of the project
expedited costs: unplanned costs incurred when steps are taken to speed up the project’s completion
Cost estimation
the more clearly you define the project’s various costs in the beginning, the less chance there is of
making estimating errors
the more accurate your initial cost estimations, the greater the likelihood of preparing a project budget
that accurately reflects reality for the project
most common cost estimation methods
(1) ballpack estimates
sometimes referred to as order of magnitude estimates
typically used when either information or time is scarce
aim for +/ 30% accuracy
(2) comparative estimates
based on the assumption that historical data can be used as a frame of reference for current
estimates on similar projects
the key to making comparative estimates meaningful lies in the comparability to previous
project work
(3) Feasibility estimates
Based as guideline on real numbers, or figures derived after the completion of the
preliminary design work
Developed farther down the life cycle
Degree of accuracy of +/ 10%
(4)
Can be given only upon the completion of most design work, at a point when the scope
and capabilities of the project are quite well understood At this point, all major purchase orders have been submitted based on known prices and
availabilities
Accuracy of +/ 5%
Learning curves in cost estimation
Yx = a*X^b
Yx= the time required for the steady state, x, unit of output
a= the time required for the initial unit of output
X= the number of units to be produced to reach the steady state
b= the slope of the learning curve, represented as: log decimal learning rate/log 2
learning curve effects may occur differentially across projects
• projects with redundant work may allow for the use of learning curve multipliers while other
projects with more varied work will not
• likely learning curve effects apply in greater proportion to projects in some industries
(construction) than in others (R&D)
Function points – Software project estimation
function point analysis: a system for estimating the size of software projects based on what the
software does
function point: a standard unit of measure that represents the functional size of a software application
the size of an application can be measured by the number of function points it delivers to the user of the
application
• the size of the application being measured is based on the user’s view of the system
• based on what the user asked for, not what is delivered
technical complexity assesses the sophistication of the application to be built
environmental complexity considers the nature of the setting in which the system is designed to work
Problems with cost estimation
(1) low initial estimates
• low estimates may be the result of a corporate culture that rewards underestimation
(2) unexpected technical difficulties
(3) lack of definition
• the result of poor initial scope development is often the creation of projects with poorly defined
features, goals, or even purpose
(4) specification changes
(5) external factors
8.3 Creating a project budget
the project budget is a plan that identifies the allocated resources, the project’s goals, and the schedule
that allows an organization to achieve those goals
effective budgeting seeks to integrate corporatelevel goals with departmentspecific objectives
Top Down budgeting
requires the direct input from the organization’s top management
can create a certain amount of friction within the organization, both between top and lower levels
the process naturally leads to jockeying among different functions as they seek to divide up the budget
pie in what has become a zerosum game
• the more budget money engineering receives, the less there is for procurement to use top management estimate of project costs are often quite accurate
Bottom-up budgeting
emphasizes the need to create detailed project plans, particularly WBS, as a first step for budget
allocations
facilitates coordination between the project managers and functional department heads
allows top managers a clear view for prioritization among projects competing for resources
disadvantages
• reduces top management’s control of the budget process to one of oversight
• the finetuning that often accompanies bottomup budgeting can be timeconsuming
Activity-based costing
four steps
(1) identify the activities that consume resources and assign cost to them
(2) identify the cost drivers associated with the activity
(3) compute a cost rate per cost drive unit
(4) assign costs to projects by multiplying the cost driver rate times the volume of cost driver units
consumed by the project
8.4 Developing budget contingencies
budget contingency: the allocation of extra funds to cover the uncertainties and improve the chances that
the project can be completed within the time frame originally specified
reasons why we need budget contingencies
(1) Project scope is subject to changes
(2) Murphy’s Law is always present.
• Murphy’s Law suggests that if something can go wrong, it often will
(3) Cost estimation must anticipate interaction costs.
• Rework cycles that link product activities interactively
(4) Normal conditions are rarely encountered.
several benefits to the use of contingency funding for projects
(1) recognizes that the future contains unknowns, and the problem that do arise are likely to have a
direct effect on the project budget
(2) provision is made in the company plans for an increase in project cost
• contingency has sometimes been called the first project fire alarm
(3) application to the contingency fund gives an early warning signal of a potential overdrawn budget
Chapter 4: Leadership and the Project
Manager
4.1 Leaders versus managers
the idea of leadership as partnership is critical to project management because it highlights the important
manner in which all leaders are ultimately dependent on their teams to achieve project goals
four things are necessary to promote the partnership idea between the project manager and the team:
1) exchange of purpose
• require every worker be responsible for defining the project’s vision and goals
2) a right to say no • it is critical that all members of the project team feel they have the ability to disagree and
to offer contrary positions
3) joint accountability
• each member of the project team is responsible for the project’s outcomes and the current
situation
4) absolute honesty
• partnerships demand participants
leadership is less about administration and more about interpersonal relationships
• involves inspiring, motivating, influencing, and changing behaviors of others in pursuit of
a common goal
• leadership aim for effectiveness, managers aim for efficiency
4.2 How the project manager leads
Acquiring project resources
project resources refer to all personnel and material resources necessary to successfully accomplish
project objectives
the lack of resource support can occur for several reasons, including:
(1) the project’s goals are deliberately vague
(2) the project lacks a top management sponsor
(3) the project requirements were deliberately understands
(4) so many projects may be under development that there is simply not enough money to go around
(5) an attitude of distrust between top management and project managers
recognizing and responding to resource needs is a critical function of project leadership
Motivating and building teams
Having a vision and fighting fires
successful project managers must operate on boundaries
also the boundary of the distinction between being a strategic visionary and a daytoday firefighter
Communicating
meetings serve a number of purposes for the project team
1. They define the project and the major team players
2. They provide an opportunity to revise, update, and add to all participants’ knowledge base,
including facts, perceptions, experience, judgments, and other information pertinent to the project
3. They assist team members in understanding how their individual efforts fit into the overall whole
of the project as well as how they can each contribute to project success
4. They help all stakeholders increase their commitment to the project through participation in the
management process
5. They provide a collective opportunity to discuss the project and decide on individual work
assignments
6. They provide visibility for the project manager’s role in managing the project
two forms of leadership behaviors are critical for effectively running project meetings
1) taskoriented
• it is intended to emphasize behaviors that contribute to completing project assignments,
planning and scheduling activities and resources, and providing the ne
More
Less
