Project Time Management

Introduction
• Pro esses i ol ed i the proje t ti e a age e t i lude:
Step 1. Define Activities
Step 2 Sequence Activities
Step 3 Estimate Activity Resources
Step 4 Estimate Activity Durations
Step 5 Develop Schedule
Step 6 Control Schedule
• Ea h of these pro esses o ur at least o e i e er proje t a d i
one or more project phases (if the project is divided into phases).
 I. Activity Definition
• An activity or task is an element of work normally found on the
WBS that has an expected duration, a cost, and resource
requirements.
• Project schedules grow out of the basic documents that initiate a
project.
– The project charter includes start and end dates and budget information.
– The scope statement and WBS help define what will be done.
• Activity definition involves developing a more detailed WBS and
supporting explanations to understand all the work to be done, so
you can develop realistic cost and duration estimates.
 Activity Definition
Activity Definition Overview
Inputs Tools and Techniques Output
1. Project Environmental 1. Decomposition 1. Activity List
Factors 2. Templates 2. Activity attribute
2. Organizational Process 3. Action on Project charter 3. List of Milestones
Assets 4. Expert Judgment 4. Requested Changes
3. Project Scope Statement 5. Planning Components
4. WBS
5. Project Scope
Management Plan
 Decomposition of Activities
Features of Decomposition of Activities
• Sub divide work packages into Schedule Activities.
• Define Activities to meet project objectives.
• Activities should be relatively smaller and manageable
components.
• Activities may be work packages or lower level items.
• WBS and Activity list may be developed sequentially or
concurrently.
 Activity Attributes
• An activity list is a tabulation of activities to be included on a
project schedule. The list should include:
– The activity name
– An activity identifier or number
– A brief description of the activity
• Activity attributes provide more information about each
activity, such as predecessors, successors, logical relationships,
leads and lags, resource requirements, constraints, imposed
dates, and assumptions related to the activity.
 II. Activity Sequencing
Activity Sequencing Overview
Inputs Tools and Techniques Outputs
1. Project Scope Statement 1. Precedence 1. Project Schedule
2. Activity List Diagramming Method Network Diagram
3. Activity Attributes 2. Arrow Diagramming 2. Updates Activity List
4. List of Milestones Method 3. Updates Activity
5. Approved Change 3. Schedule Network Attributes
Requests Templates 4. Requested Changes
4. Dependency
Determination
5. Apply Leads and Lags
 Network Diagram
• Network diagrams are the preferred technique for showing
activity sequencing.
• A network diagram is a schematic display of the logical
relationships among, or sequencing of, project activities.
• Two main formats are the arrow and precedence diagramming
methods.
 Precedence Diagramming Method (PDM)
• Activities are represented by boxes.
• Arrows show relationships between activities.
• More popular than ADM method and used by project
management software.
• Better at showing different types of dependencies.
 Arrow Diagramming Method (ADM)
• Also called activity-on-arrow (AOA) network diagram.
• Activities are represented by arrows.
• Nodes or circles are the starting and ending points of activities.
• Can only show finish-to-start dependencies.
 III. Activity Resource Estimating
• Before estimating activity durations, you must have a good
idea of the quantity and type of resources that will be assigned
to each activity.
• Consider important issues in estimating resources:
– How difficult will it be to complete specific activities on this project?
– What is the orga izatio ’s histor i doi g si ilar a ti ities?
– Are the required resources available?
 Activity Resource Estimating Overview

Activity Resource Estimating Overview

Inputs Tools and Techniques Outputs
1. Enterprise Environment 1. Expert Judgment 1. Activity Resource
Factor 2. Alternative Analysis Requirement
2. Organizational Process 3. Published Estimating 2. Updated Activity
Assets Data Attributes
3. Activity List 4. Project Management 3. Resource Breakdown
4. Activity Attributes Software Structure
5. Resource Availability 5. Bottom-up Estimating 4. Updated Resource
6. Project Management Calendar
Plan 5. Requested Changes
 IV. Activity Duration Estimating
• Duration includes the actual amount of time worked on an
activity plus the elapsed time.
• Effort is the number of workdays or work hours required to
complete a task.
• Effort does not normally equal duration.
• People doing the work should help create estimates, and an
expert should review them.
 Activity Duration Estimating Overview
Activity Duration Estimating Overview
Inputs Tools and Techniques Outputs
1. Enterprise Environmental 1. Expert Judgment 1. Activity Duration Estimates
Factor 2. Analogous Estimating 2. Updated Activity Attributes
2. Organizational Process Assets 3. Parametric Estimating
3. Project Scope Statement 4. Three Point Estimating
4. Activity List 5. Reserve Analysis
5. Activity Attribute
6. Activity Resource
Requirement
7. Resource Calendar
8. Project Management Plan
-- Risk Register
-- Activity cost estimates
 Multi(Three) Point Estimating
• Instead of providing activity estimates as a discrete number,
su h as four eeks, it’s ofte helpful to reate a three-point
estimate:
– An estimate that includes an optimistic, most likely, and pessimistic
estimate, such as three weeks for the optimistic, four weeks for the
most likely, and five weeks for the pessimistic estimate.
• Three-point estimates are needed for PERT estimates and
Monte Carlo simulations.
 Reserve Time
• A reserve time is a percentage of the project duration or a preset
number of work periods and is usually added to the end of the
project schedule.
• Reserve time may also be added to individual activity durations
based on risk or uncertainty in the activity duration. When
activities are completed late, the additional time for the activity is
subtracted from the reserve time.
• As the project moves forward, the reserve time can be reduced or
eliminated as the project manager sees fit.
• Reserve time decisions should be documented.
 V. Schedule Development
• Uses results of the other time management processes to
determine the start and end dates of the project.
• Ultimate goal is to create a realistic project schedule that
provides a basis for monitoring project progress for the time
dimension of the project.
• Important tools and techniques include Gantt charts, critical
path analysis, critical chain scheduling, and PERT analysis.
 Schedule Development(contd.)
• To develop a schedule, one needs to

– Define the activities (WBS),

– Put them in order of how the work will be done (activity sequencing),
and then

– Estimate the duration of each activity (activity duration estimating).

 Schedule Development
Schedule Development
Inputs Tools and Techniques Outputs
1. Organizational Process Assets 1. Schedule Network 1. Project Schedule
2. Project Scope Statement 2. Critical Path Method 2. Schedule Model Data
3. Activity List 3. Schedule Compression 3. Schedule Base Line
4. Activity Attributes 4. What-If scenario Analysis 4. Updated Resource
5. Project Schedule Network 5. Resource Leveling Requirements
Diagram 6. Critical chain Method 5. Updated Activity Attributes
6. Resource Calendar 7. Project Management 6. Updated Project Calendar
7. Activity Duration Estimates Software 7. Requested Changes
8. Project Management Plan 8. Applying Calendars 8. Updated Project Management
9. Risk Register 9. Adjusting Leads and Lags Plan
10.Schedule Model 9. Updated Schedule Management
Plan
 Definition of terms in a network
• Activity: any portions of project (tasks) which required by project, uses
up resource and consumes time – may involve labor, paper work,
contractual negotiations, machinery operations .Activity on Arrow
(AOA) showed as arrow, AON – Activity on Node
• Event : beginning or ending points of one or more activities,
instantaneous point in time, also called ‘nodes’
• Network: Combination of all project activities and the events

PRECEEDING SUCCESSOR
ACTIVITY

EVENT

20
 • Network analysis is the general name given to certain specific techniques which can be
used for the planning, management and control of projects

• Use of nodes and arrows

Arrows  An arrow leads from tail to head directionally
– Indicate ACTIVITY, a time consuming effort that is required to perform a part of the
work.
Nodes  A node is represented by a circle
- Indicate EVENT, a point in time where one or more activities start and/or finish.
• Activity
– A task or a certain amount of work required in the project
– Requires time to complete
– Represented by an arrow
• Dummy Activity
– Indicates only precedence relationships
– Does not require any time of effort 21
• Event
– Signals the beginning or ending of an activity
– Designates a point in time
– Represented by a circle (node)
• Network
– Shows the sequential relationships among activities using nodes and arrows

Activity-on-node (AON): nodes represent activities, and arrows show precedence relationships
Activity-on-arrow (AOA) : arrows represent activities and nodes are events for points in time

•Path - A connected sequence of activities leading from the starting event to the ending
event
•Critical Path- The longest path (time); determines the project duration
•Critical Activity - All of the activities that make up the critical path
22
 Situations of activities in network diagram
B
A
A must finish before either B or C can start

C
A
C both A and B must finish before C can start
B

A
B
A must finish before B can start
Dummy both A and C must finish before D can start

C
D 23
Situations of activities in network diagram: Concurrent Activities

3
Lay foundation Lay
Dummy
foundation
2 0
2 3
1
Order material 2 4
Order material

(a) Incorrect precedence (b) Correct precedence

relationship relationship

24
 EXAMPLES OF THE USE OF DUMMY ACTIVITY
Network concurrent activities
a
a 2

1 2 1 Dummy

b 3
b
WRONG!!! RIGHT 

Activity c not required for e WRONG !

a
a e
d
1
b 1 b
e
d
c
2
c
WRONG!!!
RIGHT 
RIGHT 

25
 WRONG!!! RIGHT!!!

a d a d
1 1

b e b
2 2 4
e

c f c f
3 3

a precedes d.
a and b precede e,
b and c precede f (a does not precede f)

26
Activity On Arc Diagrams for Concurrent Activity

A precedes B and C, B and C precede D

A B
1 2 3 D
4
C

3
B
A C
1 2 4 D 5
AOA Project Network for House having dummy Activity
3
Lay foundation Dummy

2 0 Build house Finish work

3 1
1 2 4 6 7
Design house and obtain Order and receive 3 1
financing materials Select paint 1 1 Select carpet

AON Project Network for House

Lay foundations Build house
2 4
Finish work
2 3
7
Start 1 1
3
Design house and obtain 6
3
financing 5 1
1
1 Select carpet
Order and receive materials
darla/smbs/vit Select paint 28
 Using CP Analysis to Make Schedule
• Free slack or free float is the amount of time an activity can be
delayed without delaying the early start of any immediately
following activities.
• Total slack or total float is the amount of time an activity can
be delayed from its early start without delaying the planned
project finish date.
• A forward pass through the network diagram determines the
early start and finish dates.
• A backward pass determines the late start and finish dates.
 Milestones
• A milestone is a significant event that normally has no
duration.
• It often takes several activities and a lot of work to complete a
milestone.
• Milestones are useful tools for setting schedule goals and
monitoring progress.
• Examples include completion and customer sign-off on key
documents and completion of specific products.
 Critical Path Method (CPM)
• CPM is a network diagramming technique used to predict total
project duration.
• A critical path for a project is the series of activities that determines
the earliest time by which the project can be completed.
• The critical path is the longest path through the network diagram
and has the least amount of slack or float.
• Slack or float is the amount of time an activity can be delayed
without delaying a succeeding activity or the project finish date.
 Calculating the Critical Path
• Develop a good network diagram.
• Add the duration estimates for all activities on each path
through the network diagram.
• The longest path is the critical path.
• If one or more of the activities on the critical path takes longer
than planned, the whole project schedule will slip unless the
project manager takes corrective action.
Figure Determining the Critical Path for Project X
 Criti al Path o t.….
• The critical path does not necessarily contain all the critical
activities; it only accounts for time.
• There can be more than one critical path if the lengths of two
or more paths are the same.
• The critical path can change as the project progresses.
 Network Example
Suppose you are a project manager. Construct the network for
the following activities.
Activity Predecessors
A --
B A
C A
D B
E B
F C
G D
H E, F
 Solution : Activity on Arrow(AOA) Network

D G
3 6 7
B E
A
1 2 5 H
C F
4
 Network Diagrams
• Advantages
– Show precedence well
– Reveal interdependencies not shown in other techniques
– Ability to calculate critical path
– A ilit to perfor hat if e er ises
• Disadvantages
– Default model assumes resources are unlimited
• You eed to i orporate this ourself Resour e Depe de ies he deter i i g the real
Critical Path
– Difficult to follow on large projects
 PERT
• Program Evaluation and Review Technique
• Based on idea that estimates are uncertain
– Therefore uses duration ranges
– And the probability of falling to a given range
• Uses a e pe ted alue or eighted a erage to deter i e duratio s
 PERT
• Use the following methods to calculate the expected durations,
then use as input to your network diagram
• Start with 3 estimates
– Optimistic
• Would likely occur 1 time in 20
– Most likely
• Modal value of the distribution
– Pessimistic
• Would be exceeded only 1 time in 20
 PERT Formula
• Combined to estimate a task duration
 PERT Formula
• Based on a standard deviation of the expected time
• Using a bell curve (normal distribution)
Variance = [(b-a)/6]2
• For the whole critical path use, If s = standard deviation
 PERT
• Advantages
– Accounts for uncertainty
• Disadvantages
– Time and labor intensive
– Assumption of unlimited resources is big issue
– Lack of functional ownership of estimates
– Mostly used on large, complex project
• PERT software is available to calculate it
 CPM vs. PERT
• Both use Network Diagrams
• CPM: deterministic
• PERT: probabilistic
• CPM: one estimate, PERT, three estimates
• PERT is infrequently used
 Benefits of CPM/PERT
• Useful at many stages of project management
• Mathematically simple
• Give critical path and slack time
• Provide project documentation
• Useful in monitoring costs
CPM can answer the following important questions:
•How long will the entire project take to be completed? What are the risks involved?
•Which are the critical activities or tasks in the project which could delay the entire
project if they were not completed on time?
•Is the project on schedule, behind schedule or ahead of schedule?
•If the project has to be finished earlier than planned, what is the best way to do this at
the least cost?
44
 The PERT/CPM Approach for
Project Scheduling
• PERT stands for Program Evaluation and Review Technique and CPM stands for
critical path method.
– Both ere ethods for proje t s heduli g de eloped i depe de tl i the late 95 ’s.
– The concepts have merged over the years so that now we simply call the approach the
PERT/CPM approach.
• It uses a network representation (a set of nodes and a set of arcs) of the project.
– Nodes represent the activities and reflect their completion times
– Arcs reflect immediate predecessor relationships with arrows
• PERT/CPM is used for s heduli g a ti ities su h that the proje t’s o pletio
time is minimized.
 Critical Chain Scheduling
• Technique that addresses the challenge of meeting project finish
• Developed by Eliyahu Goldratt in his books The Goal and Critical
Chain
• Critical chain scheduling is a method of scheduling that takes
limited resources into account when creating a project schedule
and includes buffers to protect the project completion date

• Critical chain scheduling assumes resources do not multitask

because it often delays task completions and increases total
durations
 Buffers and Critical Chain
• A buffer is additional time to complete a task
• Murphy’s Law states that if something can go wrong, it will, and
Parkinson’s Law states that work expands to fill the time allowed.
In traditional estimates, people often add a buffer and use it if it’s
needed or not
• Critical chain schedule removes buffers from individual tasks and
instead creates
– A project buffer, which is additional time added before the
project’s due date
– Feeding buffers, which are addition time added before tasks on
the critical path
 VI. Schedule Control
• Perform reality checks on schedules.
• Allow for contingencies.
• Do ’t pla for e er o e to ork at per e t apa it all the
time.
• Hold progress meetings with stakeholders and be clear and
honest in communicating schedule issues.

48
 Schedule Control
Schedule Control Overview
Inputs Tools and Techniques Outputs
1. Schedule 1. Progress Reporting 1. Updated Schedule Model Data
Management 2. Schedule change Control 2. Updated Schedule Baseline
Plan System 3. Performance Measurements
2. Schedule 3. Performance 4. Requested Changes
Baseline Management 5. Recommended Corrective Actions
3. Performance 4. Project Management 6. Updated Organizational Process
Reports Software Assets
4. Approved 5. Variance Analysis 7. Updated Activity List
Change 6. Schedule Comparison 8. Updated Activity Attributes
Requests Bar Chart 9. Updated Project Management
Plan
 Schedule Control
• Goals are to know the status of the schedule, influence factors that
cause schedule changes, determine that the schedule has changed,
and manage changes when they occur.
• Tools and techniques include:
– Progress reports.
– A schedule change control system.
– Project management software, including schedule comparison charts, such
as the tracking Gantt chart.
– Variance analysis, such as analyzing float or slack.
– Performance management, such as earned.

50
 Example
KLONE COMPUTERS, INC.
• KLONE Computers manufactures computers.

• It is about to design, manufacture, and market the Klonepalm 2000

palmbook computer.

• In broad terms, the three major tasks to perform are to:

– Design and manufacture the computer
– Train staff and vendor representatives on the features and use of the computer
– Advertise the computer
 Detailed Activities
Activity Description
A Prototype model design
B Purchase of materials
Manufacturing C Manufacture of prototype model
activities D Revision of design
E Initial production run

F Staff training
Training activities G Staff input on prototype models
H Sales training
I Pre-production advertising
Advertising activities campaign
J Post-redesign advertising campaign
 Precedence Relations
Starts Completion
Activity after
Immediate Predecessor's) Days
A-Prototype Design NONE 90
Starts
B-Purchase Materials A-Prototype Design 15
After
Starts
C-Manufacture Prototypes B-Purchase Materials 5
After
Starts C-Manufacture Prototypes and
D-Design Revision 20
After G-Staff Input
Starts
E-Initial Production Run D-Design Revision 21
After
Starts
F-Staff Training A-Prototype Design 25
After
Starts C-Manufacture Prototypes and
G-Staff Input 14
After F-Staff Training
Starts
H-Sales Training D-Design Revision 28
After
Starts
I-Pre-Production Advertising
After
A-Prototype Design 30
Starts D-Design Revsion and
J-Post Redesign Advertising 45
After I-Pre-Production Advertising
 The PERT/CPM Network

E
B C
21
15 5

A F G D H
90 25 14 20 28

J
I
45
30
 OBJECTIVES
• Management at KLONE would like to schedule the activities to minimize the
project completion time.
• Management wishes to know:
– The earliest start and finish times for each activity that will allow the project
to be completed in this minimal time.
– The latest start and finish times for each activity which will not alter this
minimal time.
– Which activities must adhere to rigid schedules and which activities have
slack in their schedules.
 Earliest Start (ES) and
Earliest Finish (EF) Times
• The ES and EF times are determined by making a forward pass through the
network as follows:
– For all the activities which have no immediate predecessors:
• The earliest start time (ES) = 0
• The earliest finish time (EF) = the a ti it ’s duratio
– Then select a node for which EF of all its immediate predecessors has been determined.
• ES = Max EF (of all its immediate predecessors)
• EF = ES + Activity Duration
– Repeat this process until all nodes have been evaluated

Minimum Project Completion Time

is
The maximum EF in the project.
 Earliest Start and Finish Times
• We enter these as (ES,EF) above each node.
(149, 170)
(90, 105) (105, 110)
E
B C 21
15
15 55
MAX(110,115)
(0, 90) (90, 115) (115, 129) (129, 149) (149, 177)
A F G D H
90 25 28
28
90 25 14 20

MAX(120,149)

(90, 120) (149, 194)

J
I 45
30 45
30
Earliest Project completion time = MAX(EF) = 194
 Latest Start (LS) and
Latest Finish (LF) Times
• The LS and LF times are determined by making a backward pass through the
network as follows:
– For all the activities which are not predecessors for any other activity
• The latest finish time (LF) = project completion time
• The latest start time (LS) = LF – Activity Duration
– Select a node which is the immediate predecessor for nodes whose LS times have all been
determined
• LF = Min LS (all nodes for which it is a predecessor)
• LS = LF - Activity Duration
– Repeat this process until all nodes have been evaluated
 Latest Start and Finish Times
• We enter these as (LS,LF) below each node.
(149, 170)
(90, 105) (105, 110)
E
B C 21
15 55
21
15
(173, 194)
(95, 110) (110, 115)
(0, 90) (90, 115) (115, 129) (129, 149) (149, 177)
A F G D H
90 25 14 20 28
28
90 25 14 20
(0, 90) (90, 115) (115, 129) (129, 149) (166, 194)

(90, 120) (149, 194)

MIN(95, 90, 119) MIN(173, 166, 149)
J
I 45
30 45
30
(149, 194)
(119, 149)
 Slack Times
• Activity start time and completion time may be delayed by deliberate
reasons as well as by unforeseen reasons.
• Some of these delays may affect the overall completion date.
• The effects of these delays can be determined by the slack time, for
each activity.

Slack time for an activity = LS-ES or LF-EF

 The Critical Path
The activities with 0 slack time form at least one critical path of
connected activities, each of which is an immediate predecessor for
another activity on the path from the beginning (time = 0) to the
end (the completion time of the project).
– Critical activities must be rigidly scheduled.
• Any delay in a critical activity will delay the entire project.
– The critical path is the longest in the network

Sum of the completion times of activities on a critical path

=
Project completion time
 Slack Time Calculations
• Slack time = LS - ES
Activity LS - ES = SLACK
A 0 - 0 = 0
B 95 - 90 = 5
- 105 5 Critical
C 110 =
Activities
D 129 - 129 = 0
E 173 - 149 = 24
F 90 - 90 = 0
G 115 - 115 = 0
H 166 - 149 = 17 Critical Path
I 119 - 90 = 29
A F G D  J
J 149 - 149 = 0
 The Critical Path
(149, 170)
(90, 105) (105, 110)
E
B C
21
15 5
(173, 194)
(95, 110) (110, 115)
(0, 90) (90, 115) (115, 129) (129, 149) (149, 177)
A F G D H
90 25 14 20 28
(0, 90) (90, 115) (115, 129) (129, 149) (166, 194)

(149, 194)
(90, 120)
J
I
45
30
(149, 194)
(119, 149)
 Possible Delays
• There could be a delay in just one activity.
– Any delay more than the slack time for the activity will delay the entire project by the
difference between the activity delay and the slack time
• There could be delays in more than one activity.
– If activities are on different paths or on the same path but separated by a critical activity,
each of the delays is evaluated separately. The project delay = max (these delays –
corresponding slack).
– Activities on the same path which are not separated by a critical activity share the slack.
Both will have the same value for the slack and any combined delays in these activities that
exceed this common slack results in a project delay equal to (total activity delay) –
(common slack).
– Usually with multiple delays the model is simply re-solved!
 Examples of Activity Delays
• Activity G is delayed 5 days
– G is on the critical path (has 0 slack) so the project will be delayed 5 days.
• Activity E is delayed 15 days
– E has 24 days of slack so the project will not be delayed
• Activity B is delayed 15 days
– B has 5 days of slack so the project will be delayed 10 days
• Activity E is delayed 30 days and Activity I is delayed 30 days
– E and I are on different paths. E has 24 days of slack which could cause a 30-24 = 6 day delay; I has 29 days of slack which
could cause 30-29 = 1 day delay. The project is delayed by the MAX(6,1) = 6 days.
• Activity B is delayed 4 days and Activity E is delayed 4 days
– B and E are on the same path but are separated by critical activities (G and D). This is the same as the case above. B has
5 days slack so delaying it 4 days would not delay the project; E has 24 days of slack so a 4 day delay will not delay the
project – Net effect– No delay.
• Activity B is delayed 4 days and Activity C is delayed 4 days
– B and C are on the same path with no critical activity in between. They share the same 5 days of slack. So sense both are
delayed 4 days for a total of 8 days, the project is delayed 8 – 5 = 3 days.
 Limitations to CPM/PERT
• Specified precedence relationships
• Over emphasis on critical paths
• Deterministic CPM model
• Activity time estimates are subjective and depend on judgment
• PERT assumes a beta distribution for these time estimates, but the actual distribution
may be different
• PERT consistently underestimates the expected project completion time due to
alternate paths becoming critical

To overcome the limitation, Monte Carlo simulations can be performed on the network
to eliminate the optimistic bias

66
 Monte Carlo Simulation
• The simulation can tell you:
• The probability of completing the
project on any specific day
• The probability of completing the
project for any specific amount of
cost
• The probability of any task
actually being on the critical path
• The overall project risk
 Cost consideration in project
• Project managers may have the option or requirement to crash the project, or
accelerate the completion of the project.
• This is accomplished by reducing the length of the critical path(s).
• The length of the critical path is reduced by reducing the duration of the activities
on the critical path.
• If each activity requires the expenditure of an amount of money to reduce its
duration by one unit of time, then the project manager selects the least cost critical
activity, reduces it by one time unit, and traces that change through the remainder
of the network.
• As a result of a reduction in an activity’s time, a new critical path may be created.
• When there is more than one critical path, each of the critical paths must be
reduced.
• If the length of the project needs to be reduced further, the process is repeated.
68
 Reducing Project Completion Time
• Crashing a project needs to balance
– Shorten a project duration
– Cost to shorten the project duration
• Crashing a project requires you to know
– Crash time of each activity
– Crash cost of each activity
Crash cost/duration = (crash cost-normal cost)/(normal time – crash time)

© Wiley 2010
 Project Crashing
• Crashing a project refers to reducing the total time to complete the project to
meet a revised due date.
• Crash time is the shortest possible time the activity can realistically be
completed.
• Crash cost is the total additional cost associated with completing an activity
in its crash time rather than in its normal time.
Goal – to reduce project duration at minimum cost
Crash cost per unit of time =
Crash Cost – Normal Cost
Normal Time – Crash Time
 Steps of Project Crashing
1. Find the normal critical path and identify the critical activities.
2. Compute the crash cost per week (or other time period) for all activities in the network using the
formula:
crash cost – normal cost
crash cost/time period = normal time – crash time

3. Select the activity on the critical path with the smallest crash cost per week. Crash this activity to
the maximum extent possible or to the point at which your desired deadline has been
reached.
4. Check to be sure that the critical path you were crashing is still critical. Often, a reduction in
activity time along the critical path causes a noncritical path or paths to become critical. If the
critical is still the longest path through the network, return to step 3. If not, find the new
critical path and return to step 3.
 Gantt Chart
• Gantt charts provide a standard format for displaying project
schedule information by listing project activities and their
corresponding start and finish dates in a calendar format.
• A GANTT chart is a type of bar chart that illustrates a project
schedule.
• After the CPM/PERT analysis is completed, the following phase is
to construct the GANTT chart and then to re-allocate resources
and re-schedule if necessary.
• GANTT charts have become a common technique for
representing the phases and activities of a project work
breakdown structure.
• It was introduced by Henry Gantt around 1910 – 1915.

72 Maria Petridou
Gantt Chart

73
 Gantt Chart
Characteristics:
– The bar in each row identifies the corresponding task
– The horizontal position of the bar identifies start and end times of the task
– Bar length represents the duration of the task
– Task durations can be compared easily
– Good for allocating resources and re-scheduling
– Precedence relationships can be represented using arrows
– Critical activities are usually highlighted
– Slack times are represented using bars with doted lines
– The bar of each activity begins at the activity earliest start time (ES)
– The bar of each activity ends at the activity latest finish time (LF).

74
 Adding Milestones to Gantt Charts
• Many people like to focus on meeting milestones, especially for
large projects.
• Milestones emphasize important events or accomplishments in
projects.
• You typically create milestone by entering tasks that have a
zero duration, or you can mark any task as a milestone.

75
 Gantt Chart

 Advantages
 Simple
 Good visual communication to others
 Task durations can be compared easily
 Good for scheduling resources

 Disadvantages
 Dependencies are more difficult to visualise
 Minor changes in data can cause major changes in the chart

76
 Constructing Gantt Chart
• The steps to construct a GANTT chart from the information obtained by
PERT/CPM are:
1. Schedule the critical tasks in the correct position.
2. Place the time windows in which the non-critical tasks can be
scheduled.
3. Schedule the non-critical tasks according to their earliest starting
times.
4. Indicate precedence relationships between tasks.

77
 Constructing Gantt Chart
• Example of an early GANTT chart construction:

78
 Constructing Gantt Chart
Step 1. Schedule critical tasks:

Software Project Management 79 Maria Petridou

 Constructing Gantt Chart
Step 2. Place time windows for non-critical tasks:

80
 Constructing Gantt Chart
Step 3. Schedule non-critical tasks
Step 4. Indicate precedence relationships:

81
 Example

Note: In Project 2003 darker bars are red to represent critical tasks.

82
 Reality Checks on Scheduling
• Review the draft schedule or estimated completion date in the
project charter.
• Prepare a more detailed schedule with the project team.
• Make sure the schedule is realistic and followed.
• Alert top management well in advance if there are schedule
problems.

83
Forward Pass :
Determine Earliest Start (ES) and Earliest Finish (EF) time for each Task

• For all Initial Tasks, ES = 0

• Earliest Start Time (ES)
– earliest time an activity can start
– ES = maximum EF of immediate predecessors
• Earliest finish time (EF)
– earliest time an activity can finish
– earliest start time plus activity time
EF= ES + t [where t is the normal time to complete the activity]
Project Complete time is the largest value of EF for all Final Task

84
Backward Pass:
Determine Latest Start (LS) and Latest Finish (LF) time for each Task
For all Final Tasks, LF = Project completion time
Latest Start Time (LS)
Latest time an activity can start without delaying critical path time

LS= LF – t [where t is the normal time to complete the activity]

Latest finish time (LF)
latest time an activity can be completed without delaying critical path time
LS = minimum LS of immediate predecessors
At least one Initial Task must have LS = 0; none may be negative.

Slack time[ST] - The length of time an activity can be delayed without affecting
the completion date for the entire project, computed as ST=LS-ES=LF-EF
 Latest start & latest finish time

• To find the critical path we need a backward pass calculation.

• Starting at the completion point (node 7) and using a latest

finish time (LF) of 26 for activity I, we trace back through the
network computing a latest start (LS) and latest finish time
for each activity

• The expression LS = LF – t can be used to calculate latest start

time for each activity. For example, for activity I, LF = 26 and t
= 2, thus the latest start time for activity I is
LS = 26 – 2 = 24

86
Determine Free Float (FF): Determine Total Float (TF):
Allowable delay in start of task Allowable delay in start of task
which will not delay start of any which will not delay Project
other task. Completion.
For task with tail [i] and head [j], For task with tail [i] and head [j],
FF[i,j] = ES[j] - ES[i] - t[i, j] TF[i,j] = (LF[j] – ES[i]) – t[i,j]
= ES[j] - EF[i,j]
=LS[i,j] – ES[i]

•ES[i] is earliest start for all tasks with tail [i].

•LF[j] is latest finish for all tasks with head [j].
•LS[i,j] is latest start for task with tail [i] and head [j].
Determine Critical Path
• All Tasks with zero Total Float are Critical.
• Any delay in these Tasks will delay Project Completion.
• Darken these Tasks to finish CPM Diagram.
CPM analysis
• Draw the CPM network
• Analyze the paths through the network
• Determine the float for each activity
– Compute the activity’s float
float = LS - ES = LF - EF
– Float is the maximum amount of time that this activity can be delay in its completion
before it becomes a critical activity, i.e., delays completion of the project
• Find the critical path is that the sequence of activities and events where there is no
“slack” i.e.. Zero slack
– Longest path through a network
• Find the project duration is minimum project completion time
88
Position of activity, duration, ES, EF, LS, LF, Slack (convention used
in the subsequent examples)

Activity ES = earliest start time EF = earliest finish time

Slack time[ST]/Float-The
length of time an activity can
be delayed without affecting
the completion date for the
entire project, computed as Event (any name can be
ST=LS-ES=LF-EF(in this 3 given or left blank)

case 8-5=3 or 12-9=3)

LF = latest finish time
2

LS = latest start time

Duration

Chapter 8 89
 Importance of Float (Slack) and Critical Path
1. Slack or Float shows how much allowance each activity has, i.e how long it can be delayed without
affecting completion date of project

2. Critical path is a sequence of activities from start to finish with zero slack. Critical activities are
activities on the critical path.

3. Critical path identifies the minimum time to complete project

4. If any activity on the critical path is shortened or extended, project time will be shortened or
extended accordingly

5. So, a lot of effort should be put in trying to control activities along this path, so that project can meet
due date. If any activity is lengthened, be aware that project will not meet deadline and some action
needs to be taken.

6. If can spend resources to speed up some activity, do so only for critical activities.

7. Don’t waste resources on non-critical activity, it will not shorten the project time.

8. If resources can be saved by lengthening some activities, do so for non-critical activities, up to limit
of float.

9. Total Float belongs to the path

90
 Network Exercise: Q.N. 1.
A social project manager is faced with a project with the following activities:

Activity Description Duration

Social work team to live in village 5w
Social research team to do survey 12w
Analyse results of survey 5w
Establish mother & child health program 14w
Establish rural credit programme 15w
Carry out immunization of under fives 4w

Draw network diagram and show the critical path. Calculate project duration.

91
Network Example : For the following set of Activities draw the network diagram,
compute LS, LF, ES, EF, ST, Project completion time and critical path.

Activity Immediate Completion

predecessors Time (week)
A - 5
B - 6
C A 4
D A 3
E A 1
F E 4
G D,F 14
H B,C 12
I G,H 2
Total 51
This information indicates that the total time required to complete activities is 51 weeks. However,
we can see from the network that several of the activities can be conducted simultaneously (A and B,
for example).

92
 Computing earliest start & earliest finish time
• We are interested in the longest path through the network, i.e., the critical
path.

• Starting at the network’s origin (node 1) and using a starting time of 0, we

compute an earliest start (ES) and earliest finish (EF) time for each activity in
the network.

• The expression EF = ES + t can be used to find the earliest finish time for a
given activity.
For example, for activity A, ES = 0 and t = 5; thus the earliest finish time for
activity A is
EF = 0 + 5 = 5

93
 Network with ES & EF time

D[5,8] 5
2 3

7
4
1 6

Earliest start time rule:

The earliest start time for an activity leaving a particular node is equal to the largest of the
earliest finish times for all activities entering the node.

94
 Network with LS & LF time

D[5,8] 5
2 3[7,10]

7
4
1 6

Latest finish time rule:

The latest finish time for an activity entering a particular node is equal
to the smallest of the latest start times for all activities leaving the
node.
95
 Slack or Free Time or Float
Slack is the length of time an activity can be delayed without affecting the completion date for the
entire project.
For example, slack for C = 3 weeks, i.e Activity C can be delayed up to 3 weeks
(start anywhere between weeks 5 and 8).
3

2
ES LS EF EF
5 8 9 12

LF-EF = 12 –9 =3

LS-ES = 8 – 5 = 3

LF-ES-t = 12-5-4 = 3

96
 Activity schedule for our example
Activity Earliest start Latest Earliest finish Latest finish Slack Critical path
(ES) start (LS) (EF) (LF) (LS-ES)

A 0 0 5 5 0 Yes
B 0 6 6 12 6
C 5 8 9 12 3
D 5 7 8 10 2
E 5 5 6 6 0 Yes
F 6 6 10 10 0 Yes
G 10 10 24 24 0 Yes
H 9 12 21 24 3
I 24 24 26 26 0 Yes
97
 IMPORTANT QUESTIONS
• What is the total time to complete the project?
– 26 weeks if the individual activities are completed on schedule.
• What are the scheduled start and completion times for each activity?
– ES, EF, LS, LF are given for each activity.
• What activities are critical and must be completed as scheduled in order to keep the project on
time?
– Critical path activities: A, E, F, G, and I.
• How long can non-critical activities be delayed before they cause a delay in the project’s
completion time
– Slack time available for all activities are given.

98
Network Example : For given Network Compute ES,EF,LS,LF,
Float/Slack time and Critical path

f, 15

g, 17 h, 9
a, 6
i, 6

b, 8

d, 13 j, 12

c, 5
e, 9

99
ES and EF Times : Forward Pass

f, 15

6 21
g, 17 h, 9
a, 6
21 30
0 6 6 23 i, 6

23 29
b, 8

0 8 d, 13 j, 12

8 21 21 33
c, 5

0 5 e, 9
Project’s EF = 33
5 14

100
LS and LF Times : Backward Pass

f, 15
6 21
9 24 h, 9
21 30
a, 6 g, 17
24 33
0 6 6 23
i, 6
4 9 10 27 23 29
27 33
b, 8
0 8 d, 13
j, 12
0 8 8 21
21 33
8 21
c, 5 21 33
0 5 e, 9
7 12 5 14
12 21
darla/smbs/vit 101
 Computing Float

f, 15

6 21
3 h, 9
9 24
21 30
a, 6 g, 17 3
24 33
0 6 6 23 i, 6
3 4
3 9 10 27 23 29
4
b, 8 27 33
0 8 d, 13
0 j, 12
0 8 8 21 21 33
0 0
c, 5 8 21 21 33
0 5 e, 9
7
7 12 5 14
7
12 21
102
 Critical Path: B-D-J
f, 15

g, 17 h, 9
a, 6

i, 6

b, 8
d, 13
j, 12

c, 5
e, 9

103
 Network Example
Construct a PERT network for a project with the following activities and times:

Activity Immediate Time

Predecessor (months)
A - 4
B - 6
C A 2
D A 6
E C, B 3
F C, B 3
G D, E 5

a) Find the critical path for this project network.

b) This project must be complete in 1 1/2 years; do you anticipate difficulty in meeting the
deadline? Explain.

104
Solution – first construct the network and label activities

D
2 4

1 5

105
Solution – adding time

D
2 6 4

1 5

106
 Solution: adding ES, LS, EF, LF

D [4,10]
2 6 [4,10] 4

1 5

a. Critical path: A-D-G; Time: 15 months

b. Activities on the critical path require 15 months to complete. Thus the project
should easily be completed in 1 1/2 years even if some activities take longer than
expected.

107
 Network Example
(times are in weeks)
C
2 7 5
A
D F H
5
6 3 8

1 G
B 4 10 6
3 E
7
3

a. Identify the critical path.

b. How long will it take to complete this project?
c. Can activity D be delayed without delaying the entire project? How about activity C? If so, how many weeks?
d. What is the schedule for activity E?

108
 Solution
C [5,12]
2 7 [7,14] 5

1 G [11,21]
4 10 [12,22] 6

a. Critical path: A - D - F - H
b. 22 weeks.
c. Activity D is on the critical path and cannot be delayed. Activity C can be delayed by 2 weeks.
d. Activity E schedule: ES =3, LS=4, EF=10, LF=11

109
 Network Example
A project involving the installation of a computer system consists of eight activities. The
immediate predecessor and activity time in weeks are shown below:

Activity Immediate Time

Predecessor (weeks)
A - 3
B - 6
C A 2
D B,C 5
E D 4
F E 3
G B,C 9
H F,G 3

a. Draw the CPM network for this project.

b. What are the critical path activities?
c. What is the expected project completion time?

110
 Solution:
a.

E
2 4 4 5

B G H
1 6 3 9 6 3 7

b. Critical path activities: B - D - E - F - H

c. Expected project completion time =21 weeks

111
 Solution contd…
Activity ES LS EF LF Slack Critical?
A 0 1 3 4 1
B 0 0 6 6 0 Yes
C 3 4 5 6 1
D 6 6 11 11 0 Yes
E 11 11 15 15 0 Yes
F 15 15 18 18 0 Yes
G 6 9 15 18 3
H 18 18 21 21 0 Yes
Critical path activities: B - D - E - F - H
112
 Solution contd….
a.

E
2 4 5
4

B G H
1 3 6 7
6 9 3

b. Critical path activities: B - D - E - F - H

c. Expected project completion time =21 weeks

113
 Network Example
Consider the PERT/CPM network shown below.
A 2 3
D
E F
B
G J
1 4 6 7
H
C
I

5
a. Add the dummy activities that will eliminate the problem of
activities having the same starting and ending nodes.
b. Add dummy activities that will satisfy the following immediate predecessor requirements:

Immediate
Activity Predecessor
H B, C
I B, C
G D, E
114
 Solution
D
2 3
A E F

G J
B 6 8 9
1 4

H
C

I 7

115
 Network Exercise: Q.N. 2.
Draw network diagram and show the critical path. Calculate project duration.

Activity Description Duration

1-2 Social work team to live in village 5w
1-3 Social research team to do survey 12w
3-4 Analyse results of survey 5w
2-4 Establish mother & child health program 14w
3-5 Establish rural credit programme 15w
4-5 Carry out immunization of under fives 4w

4
2

1 5

3
116
 Network Exercise: Q.N. 3.
Draw network diagram and show the critical path. Calculate project duration.

Event Description Time

Pred.
ID (Wks)
A None Prepare Site 1
B A Pour fdn. & frame 6
C B Buy shrubs etc. 3
D B Roof 2
E D Do interior work 3
F C Landscape 4
G E,F Move In 1
 Network Exercise: Q.N. 4 and 5.

Draw network diagram and show the critical path. Calculate project duration.
 Network Exercise: Q.N. 6.

Find the critical path for the following network of a project activities

d 6
2
(15)
j
a (8)
(22) e
(10)
1 f 7
3
b (14)
(20)
g
c
(4)
(10,) i
(18)
h 5
4
(11)

119
 Network Exercise: Q.N. 7.
Draw network diagram and show the critical path. Calculate project duration.
 Network Exercise: Q.N. 8.
Task. A project has been defined to contain the following list of activities along with their required times for
completion:

Activity Activity Expected completion Dependency

No time
1. Requirements collection 5 -
2. Screen design 6 1
3. Report design 7 1
4. Database design 2 2,3
5. User documentation 6 4
6. Programming 5 4
7. Testing 3 6
8. Installation 1 5,7

a. Draw a CPM network for the activities.

b. Calculate the earliest expected completion time.
121
c. Show the critical path.
 Activity crashing

Crash cost
Crashing activity

Slope = crash cost per unit time

Normal Activity
Normal
cost
Normal
time

Crash time Activity time

122
 Time-Cost Relationship
 Crashing costs increase as project duration decreases
 Indirect costs increase as project duration increases
 Reduce project length as long as crashing costs are less than indirect costs
Time-Cost Tradeoff
Min total cost = optimal Total project cost
project time
Indirect cost

Direct cost

time
123
 Example : Time Cost data

Activity Normal Normal Crash Crash cost Allowable slope

time cost Rs time Rs crash time
1 12 3000 7 5000 5 400
2 8 2000 5 3500 3 500
3 4 4000 3 7000 1 3000
4 12 50000 9 71000 3 7000
5 4 500 1 1100 3 200
6 4 500 1 1100 3 200
7 4 1500 3 22000 1 7000
75000 110700

124
 Computer Software for Project Management
• Microsoft Project (Microsoft Corp.)
• MacProject (Claris Corp.)
• PowerProject (ASTA Development Inc.)
• Primavera Project Planner (Primavera)
• Project Scheduler (Scitor Corp.)
• Project Workbench (ABT Corp.)

125
Thank You!
Project Cost Management
 What is Cost and Project Cost
Management?
 Cost is a resource sacrificed or foregone to achieve a
specific objective, or something given up in exchange.

 Costs are usually measured in monetary units, such as

dollars,Yen,Pounds, Rupees etc.

 Project cost management includes the processes

required to ensure that the project is completed within
an approved budget.

2
 Project Cost Management Processes
 Resource Planning:
 Determining what resources(people, equipment,
materials and what quantities of each should be used to
perform project activities
 Cost of the resources needed to complete Project
activities
 The cost of the procurement item may be measured
when committed, ordered, delivered, incurred or
recorded for accounting purposes.

3
 Resource Planning
 Input:-
 WBS
 Historical information
 Scope statement
 Organization policies
 Resource pool description
 (Identified the resources according to progress and
measure the exact number of required resources)

4
 Resource Planning
 Tools and technique
 Expert Judgment
 Alternative identification

 Output:-
 Resources requirements

5
 Project Cost Management Processes
 Cost estimating: Developing an approximation or
estimate of the costs of the resources needed to
complete a project.

 Cost budgeting: Allocating the overall cost estimate

to individual work items to establish a baseline for
measuring performance.

 Cost control: Controlling changes to the project

budget.

6
 Basic Principles of Cost Management
 Cash flow analysis determines the estimated annual costs and
benefits for a project and the resulting annual cash flow
 Too many projects with high cash flow needs in the same year
may not be able to be supported which will impact profitability
 Tangible costs or benefits are those costs or benefits that an
organization can easily measure in dollars
 A task that was allocated $150,000 but actually costs $100,000
would have a tangible benefit of $50,000 if the assets allocated
are used for other projects
 Intangible costs or benefits are costs or benefits that are difficult
to measure in monetary terms
 Costs – resources used to research related areas of a project but
not billed to the project
 Benefits – goodwill, prestige, general statements of improved
productivity not easily translated in dollars

7
 Basic Principles of Cost Management
 Direct costs are costs that can be directly related to producing
the products and services of the project
 Salaries, cost of hardware and software purchased
specifically for the project
 Indirect costs are costs that are not directly related to the
products or services of the project, but are indirectly related to
performing the project
 Cost of electricity, paper towels
 Sunk cost is money that has been spent in the past; when
deciding what projects to invest in or continue, you should not
include sunk costs
 To continue funding a failed project because a great deal of
money has already been spent on it is not a valid way to
decide on which projects to fund
 Sunk costs should be forgotten

8
 Basic Principles of Cost Management
 Learning curve theory states that when many items are
produced (or tasks are performed) repetitively, the unit cost of
those items decreases in a regular pattern as more units are
produced (or more tasks performed)
 Reserves are dollars included in a cost estimate to mitigate cost
risk by allowing for future situations that are difficult to predict
 Contingency reserves allow for future situations that may be
partially planned for (sometimes called known unknowns)
and are included in the project cost baseline
 Recruiting and training costs for expected personnel
turnover during a project
 Management reserves allow for future situations that are
unpredictable (sometimes called unknowns)
 Extended absence of a manager; supplier goes out of
business

9
 Cost Estimating
 After developing a good resource requirements list,
PMs and their teams must develop several estimates
of the costs for these resources
 Project managers must take cost estimates seriously if
they want to complete projects within budget
constraints
 It’s important to know the types of cost estimates,
how to prepare cost estimates, and typical problems
associated with IT cost estimates

1
0
 Cost Estimating
 A rough order of magnitude (ROM) estimate provides an estimate
of what a project will cost.
 Also referred to as a ballpark estimate, a guesstimate, a swag, or
a broad gauge.
 Done very early in a project, often three or more years prior to
project completion, or even before a project is officially started
to help PMs make project selection decisions.
 Accuracy is typically -50 percent to +100 percent, meaning the
project’s actual costs could be 50 percent below the ROM
estimate or 100 percent above.
 A ROM estimate that actually cost $100,000 would range between
$50,000 to $200,000. The accuracy range is often much wider for IT
projects.
 Often IT project estimates for software development are doubled because of
the history of cost overruns
1
1
 Cost Estimating
 A budgetary estimate is used to allocate money into
an organization’s budget.
 Many organizations develop budgets at least two years
into the future.
 Budgetary estimates are made one to two years prior to
project completion.
 The accuracy of budgetary estimates is typically -10% to
+25%
 A budgetary estimate that actually costs $100,000 would
range between $90,000 to $125,000.

1
2
 Cost Estimating
 A definitive estimate provides an accurate estimate of
project costs (most accurate of the three types).
 Definitive estimates are used for making many purchasing
decisions for which accurate estimates are required and for
estimating final project costs.
 For example, if a project involves purchasing 1000
personal computers from an outside supplier in the next
three months, a definitive estimate would be required to
aid in evaluating supplier proposals and allocating the
funds to pay the chosen supplier.
 Definitive estimates are made one year or less prior to
project completion
1
 Accuracy range is normally -5% to +10%
3
 Types of Cost Estimates

 It is important to provide supporting details (assumptions,

project scope, WBS, etc) used in computing estimates so that
it will be easier to prepare updates as needed or similar
1 estimates on other projects.
4
 Cost Estimation Tools and Techniques
 Basic tools and techniques for cost estimates:
 Analogous or top-down estimates: Use the actual cost of
a previous, similar project as the basis for estimating the
cost of the current project.
 Bottom-up estimates: Involve estimating individual work
items or activities and summing them to get a project total.
 Parametric modeling: Uses project characteristics
(parameters) in a mathematical model to estimate project
costs.
 Computerized tools: Tools, such as spreadsheets and
project management software, that can make working with
different cost estimates and cost estimation tools easier.

15
 Estimating process and accuracy
• Past experience Rough Order
• Scale factors Of Magnitude
• Parametric curves (top-down) Less accurate
• Capacity Estimates

• Reported from
Expert previous projects
Knowledge • Analogous Budgetary
Increases • Parametric (top-down)
Accuracy • Rule of thumb
of • Indexed
cost(adjusted to
Estimates
new scope)

• Grassroots built-up
• Well-defined
engineering data Definitive Most accurate
• Quotes from (bottom-up)
vendors
• WBS costing
Surveyor Pro Project Cost Estimate

17
Surveyor Pro Software Development Estimate

18
 Cost Budgeting
 Cost budgeting involves allocating the project cost
estimate to individual work items over time.

 The WBS is a required input for the cost budgeting

process because it defines the work items.

 Important goal is to produce a cost baseline:

 A time-phased budget that project managers use to

measure and monitor cost performance.

19
 Cost Control
 Project cost control includes:

 Monitoring cost performance.

 Ensuring that only appropriate project changes are

included in a revised cost baseline.

 Informing project stakeholders of authorized changes to

the project that will affect costs.

 Many organizations around the globe have problems with

cost control.
20
 Cost aggression
Schedule activity cost estimates are aggregated by
work package in accordance with the WBS. The work
package cost estimates are then aggregated for the
higher components level of the WBS .
 Cost control process

Cost control process includes:

 Monitoring cost performance
 Revised and update cost baseline
 Managing issue related to cost changes
 Cost control measures
 Influencing the factor that causes changes to the cost base line
 Ensuring all requested changes are agreed upon
 Managing the actual changes when and as they occur
 Assuring that potential cost overruns do not exceed the
authorized funding periodically or in total for the project
 Monitoring cost performance to detect and understand
variances form the cost baseline
 Recording all appropriate changes accurately against the cost
baseline
 Preventing incorrect, inappropriate or unapproved changed
from being include in the reported cost or resource usages
 Acting to bring expected cost overruns within acceptable
limits
 Earned Value Management (EVM)
 EVM is a project performance measurement technique
that integrates scope, time, and cost data.
 Given a baseline (original plan plus approved changes),
you can determine how well the project is meeting its
goals.
 You must enter actual information periodically to use
EVM.
 More and more organizations around the world are
using EVM to help control project costs.

24
 Earned Value Management Terms
 The planned value (PV), formerly called the budgeted cost of
work scheduled (BCWS), also called the budget, is that portion
of the approved total cost estimate planned to be spent on an
activity during a given period.
 Actual cost (AC), formerly called actual cost of work
performed (ACWP), is the total of direct and indirect costs
incurred in accomplishing work on an activity during a given
period.
 The earned value (EV), formerly called the budgeted cost of
work performed (BCWP), is an estimate of the value of the
physical work actually completed.
 EV is based on the original planned costs for the project or
activity and the rate at which the team is completing work on
the project or activity to date.
25
 Rate of Performance
 Rate of performance (RP) is the ratio of actual
work completed to the percentage of work planned
to have been completed at any given time during
the life of the project or activity.

26
Earned Value Formulas

27
Rules for Earned Value Numbers

 Negative numbers for cost and schedule variance

indicate problems in those areas.

 A CPI or SPI that is less than 100 percent indicates

problems.

 Problems mean the project is costing more than

planned (over budget) or taking longer than planned
(behind schedule).

28
 EVM benefits
 Performance tracking
 Profitability analysis
 Project forecasting
 Better accountability
 Preventing scope creep
 Improving communication visibility with
stakeholders
 Reducing risk
Earned Value Calculations for a One-Year
Project After Five Months

30
Earned Value Chart for Project after
Five Months

If the EV
line is
below the
AC or PV
line, there
are
problems
in those
areas.

31
 Cost Variance
Cost variance (CV) is the difference of Budgeted Cost
of Work Performed (earned value) minus Actual Cost
of Work Performed. It can be expressed as:

 CV = BCWP – ACWP,
where negative variance indicates cost overrun.

32
 Schedule Variance
 schedule variance (SV) is the difference of Budgeted
Cost of Work Performed (earned value) minus
Budgeted Cost of Work Schedule. It can be expressed
as:

SV = BCWP – BCWS
where negative variance indicates time overrun.

33
Cost & Schedule Performance
Cost performance
Cost performance can be obtained by dividing earned
value (BCWP) by Actual Cost of Work Performed
(ACWP), which can be expressed as:
Cost performance index = BCWP/ACWP
Schedule performance
Schedule performance can be obtained by dividing
earned value (BCWP) by Budgeted Cost of Work
Schedule, which can be expressed as:
Schedule performance index= BCWP/BCWS
34
 Formulas
 Cost variance  Cost variance in percentage
BCWP – ACWP BCWP – ACWP x 100
BCWP

 Schedule variance in percent

BCWP – BCWS x 100
 Schedule variance BCWS
BCWP – BCWS

Negative variance = cost overrun or behind schedule

Positive variance = cost under run or ahead of schedule

35
 Trend Analysis
Cost Performance Index (CPI) measure of cost efficiency

CPI = Value of Work Completed (BCWP)

Cost of Work Completed (ACWP)

Schedule Performance Index (SPI) measure of schedule efficiency

SPI = Value of Work Completed (BCWP)

Value of Work Planned (BCWS)

Closer to “1” the better

Less than 1 = overrun (CPI); behind schedule (SPI)
Greater than 1 = under run (CPI); ahead of schedule (SPI)
36
 S-Curve
Time for BCWS cost (Rs.)

2000
1500
1000
500
0
1 3 5 8 10 11

We can graphically present both the cost and schedule

variances by using S – Curve, which is also used as one of
the effective tool in project control.
37
 Variance Analysis
 Cost baseline refers what is expected to be spent on the project. It is usually
an S-curve. That is the expenditure is less in the beginning and the end. The
expenditure is maximum during the middle of the project.
 Compare expected project plan results with the actual results to determine
if variance exist.
 Project schedule and project cost are most common factors measured
 Variance at Completion(VAC)
The difference between the total amount the project was supposed to
cost(BAC) and the amount the project is now expected to cost(EAC).
VAC=BAC-EAC
 Percent Complete=BCWP/BAC(real value of work finished) or EV/BAC
 Percent Spent=ACWP/BAC or AC/BAC
 Using Software to Assist in Cost
Management
 Spreadsheets are a common tool for resource planning,
cost estimating, cost budgeting, and cost control.

 Many companies use more sophisticated and

centralized financial applications software for cost
information.

 Project management software has many cost-related

features, especially enterprise PM software.

39
 Chapter Summary
 Project cost management is traditionally a weak area in
IT projects, and project managers must work to
improve their ability to deliver projects within
approved budgets.

 Main processes include:

 Cost estimating

 Cost budgeting

 Cost control

40
THANK U ALL FOR YOUR ATTENTION

41
Project quality management
(PMI body of knowledge)
 Introduction
• Project quality management includes the process
required to ensure that the project satisfies the
needs for which it is undertaken.

• PQM includes all the activities of the overall

management function that determine the quality
policy, objectives, and responsibilities and implement
them within the quality system.
Cost of quality

1. Prevention costs

2. Appraisal costs

3. Internal failure costs

4. External failure costs

5. Opportunity costs
 Five Cost Categories Related to Quality
• Prevention cost: Cost of planning and executing a project
so it is error-free or within an acceptable error range.
• Appraisal cost: Cost of evaluating processes and their
outputs to ensure quality.
• Internal failure cost: Cost incurred to correct an identified
defect before the customer receives the product.
• External failure cost: Cost that relates to all errors not
detected and corrected before delivery to the customer.
• Opportunity Cost: Capital cost of equipment used to
perform prevention and appraisal activities. Cost that relate
to new innovation and chances to correct detected defect for
achieving quality of the product or services.
4
What is quality management all about?

Try to manage all aspects of the organization

in order to excel in all dimensions that are
important to “customers”

Two aspects of quality:

features: more features that meet customer needs
= higher quality
freedom from trouble: fewer defects = higher
quality
The Quality Gurus – Edward Deming

Quality is
“uniformity and
dependability”
Focus on
statistical tools
PDCA method
1900-1993

1986
 The Quality Gurus – Joseph Juran

Quality is
“fitness for use”
Pareto Principle
Cost of Quality
General
management
approach as well 1904 - 2008
as statistics
1951
 History

• Deming and Juran outlined the principles of Quality

Management.
• Tai-ichi Ohno applies them in Toyota Motors Corp.
• Japan has its National Quality Award (1951).
• U.S. and European firms begin to implement Quality
Management programs (1980’s).
• U.S. establishes the Malcolm Baldridge National
Quality Award (1987).
• Today, quality is an imperative for any business.
What does Total Quality Management encompass?

TQM is a management philosophy:

• continuous improvement
• leadership development
• partnership development

Technical
Tools
Cultural
Customer (Process
Alignment
Analysis)
 Who’s Respo si le fo the
Quality of Projects?
• Project managers are ultimately responsible for quality management on their
projects
• Several organizations and references can help project managers and their teams
understand quality
– International Organization for Standardization (www.iso.org)
• When products, systems, machinery and devices work well and safely, it
is often because they meet standards. The organization responsible for
many thousands of the standards which benefit the world is ISO (derived
from the Greek isos, ea i g e ual )
– IEEE – Standards Association (www.ieee.org)
• A leading, developer of industry standards in a broad-range of industries
(Power and Energy, Information Technology, Telecommunications,
Transportation, Medical and Healthcare, nanotechnology, cybersecurity,
information assurance, and green technology) . Globally recognized

10
Quality check in Information System
 Means of Implementation of PQM
• QUALITY PLANING
• QUALITY ASSURANCE
• QUALITY CONTROL
• These processes interact with each other as well as with the
processes of other knowledge areas
• Each process involves an effort of one or more individual or
group of individuals based on the need of the project.
• Each process occurs at least once in every project phase
during the project life cycle.
 Definition
• Quality Planning
- Quality Planning is identifying which
quality standards are relevant to the project
and determining how to satisfy them
 Definition
• Quality Assurance
– Quality assurance is evaluating the overall project
performance on a regular basis to provide a
confidence that the project will satisfy the
relevant quality standards.
 Definition
• Quality Control
– Quality Control is the monitoring of specific
project results to determine if they comply with
the relevant quality standards and identifying
ways to eliminate causes of unsatisfactory
performance.
 International Standards Organization (ISO)

• ISO 9000 is a quality system standard that:

– Is a three-part, continuous cycle of planning, controlling,

and documenting quality in an organization.

– Provides minimum requirements needed for an

organization to meet its quality certification standards.

– Helps organizations around the world reduce costs and

improve customer satisfaction.
 International Standards Organization (ISO)

Standards in the ISO 9000 family include:

• ISO 9001:2008 - sets out the requirements of a
quality management system
• ISO 9000:2005 - covers the basic concepts and
language
• ISO 9004:2009 - focuses on how to make a quality
management system more efficient and effective
• ISO 19011:2011 - sets out guidance on internal and
external audits of quality management systems.
 What is quality?
(ISO 8402)

The totality of features and

characteristics of a product or service
that bear upon its ability to satisfy stated
or implied needs.

18
 Other definitions
• Fitness for purpose or use (Juran)
• Conformance to requirements (Crosby)

OR
What the customer really needed
 Quality Gurus
• Dr Edward Deming
– Total Quality Management
– Plan-Do-Check-Act
– Rule of 85
• 85% of the cost of quality is responsibility of
Management
• Dr Joseph Moses Juran (Quality Planning,
Quality Control, Quality Improvement)
• Phillip Crosby (Conformance to Requirements,
Prevention, Zero Defect, Cost of Non
_conformance)
Quality Process
 PROJECT QUALITY MANAGEMENT

QUALIT PLANNING QUALITY ASSURANCE QUALITY CONTROL

1- INPUTS 1- INPUTS 1- INPUTS

-Quality policy -Quality management plan -work results

-Scope statement -result of quality control -quality management plan

measurements -Operational definitions
-Product description
-Operational definitions -checklists
-Standards and regulations
2- TOOLS AND TECH. 2- TOOLS AND TECH.
-Other process outputs
-Quality planning tools and -inspection
2- TOOLS AND TECH.
techniques
-benefit/ cost analysis -Control charts
-Quality audits
-Benchmarking -Pareto diagrams
3- OUTPUTS
-Flowcharting -Statistical sampling
-Quality improvement
-Design of experiments -flowcharting

3- OUTPUTS -Trend analysis

-Quality management plan 3- OUTPUTS

-Operational definitions -Quality improvement

-checklists -Acceptance decisions

-Inputs to other processes -rework

-Completed checklist
-Process adjustment
 PQM Approach compatibility
• Compatible with ISO 9000 and 1000 series of
standard guidelines
• Proprietary approaches to quality as
recommended by Deming, Juran, and Crosby,
and others.
• Non proprietary approaches such as TQM,
Continuous improvement approaches and
others.
 Nature of PQM
• Project quality management must address
both the management of the project and the
product of the project.
• Failure to meet quality requirements in either
dimension can have serious and negative
consequences for any or all of the project
stakeholders
 Examples of negative consequences

• Meeting the customer requirement by over

working the project team may lead to negative
consequence in employee turnover
• Meeting project schedules by rushing planned
quality inspections may produce negative
consequences when errors go undetected.
 Common understanding
Quality management should complement
modern project management as they both
recognize the importance of :
1- Customer satisfaction
2- Prevention over inspection
3- Management responsibility
4- Processes within phases
(plan – do –check – act cycle)
 Continuous improvement philosophy

Kaizen: Japanese term for continuous improvement. A

step-by-step improvement of business processes.
• PDCA: Plan-do-check-act as defined by Deming.

Plan Do

Act Check

• Benchmarking : what do top performers do?

QUALITY PLANNING
 Quality planning
• Quality Planning involves identifying with quality
standards
• It is a key facilitating process during the Project
planning Process
• In modern quality management,quality is planned in
and not inspected in
• Prior to the development of ISO 9000 series, quality
planning concepts were widely discussed as part of
quality assurance.
 Quality Planning Flowchart

INPUTS TOOLS AND OUTPUTS

TECHNIQUES

1-Quality policy 1- Benefit/ cost 1-Quality Management

2- Scope statement analysis plan
3- Product description 2- Benchmarking 2- operational;
4- Standards and 3- flowcharting definitions
regulations 4- Design of 3- checklists
5- Other process experiments 4-inputs to other
outputs processes
 Quality Planning Inputs
Quality policy
• the over all intentions and direction of an organization with
regard to quality, as formally expressed by the top
management
• In the case of a joint venture, a quality policy for the
individual project should be developed
• The management team is responsible for dissipating the
quality policy to all project stakeholders through appropriate
information distribution channels
 Quality Planning Inputs
Scope Statement

• The scope statement is a key input to quality

planning because it documents major project
deliverables as well as project objectives
which serve to define important stakeholder
requirements
 Quality Planning Inputs
Product description

• Although the elements of the product

description may be embodied in the scope
statement, the product description often
contains details of technical issues and other
concerns that may affect quality planning
 Quality Planning Inputs
Standards and Regulations

• The project management team any

application-area-specific standards or
regulations that may affect the project
 Quality Planning Inputs
Other Process Outputs

• In addition to the scope statement and product

description, processes in other knowledge areas may
produce outputs that should be considered as part of
the quality planning
• Example: procurement planning outputs may
identify contractor quality requirements that should
be reflected in the overall Quality Management Plan
 Tools and Techniques for Quality Planning

• Benefit / cost analysis

• The planning process must consider benefit/cost tradeoffs

• The Primary Benefit: Is less work, higher productivity, lower
costs, and increased stakeholder satisfaction
• The Primary Cost: Is the expenses associated with PQM
activities
Note: it is elementary that the benefit should outweigh the cost
 Tools and Techniques for Quality Planning

Benchmarking
• Benchmarking involves comparing actual or planned
project practices to those of other projects to
generate ideas to:
1- Generate ideas for improvement
2- provide a standard for measurement of performance

Note: other projects compared may be within the same

organization or out side and may be within the same
application area or in another
 Tools and Techniques for Quality Planning

Flow charting

• The flowcharting techniques in quality management

generally include
- cause and effect diagram
- System or process flow charts

• Flowcharting can help in anticipating probable

quality problems and thus helps to develop
approaches for dealing with them
 Tools and Techniques for Quality Planning

Design of Experiments

• This is an analytical technique which aims to define

variables that have most influence on the overall
outcome
• This technique is commonly applicable to the
product of the project issues.
• However this technique can also be used in project
management issues such as cost and schedule
tradeoffs to allow for optima solutions.
 Outputs from Quality Planning
Quality Management Plan

• The quality management plan should describe how a

project management team will implement its quality
policy
• Also called Quality System, (in ISO terminology), the
plan should define :
- The organizational structure
- Roles and responsibilities
- Resources needed for implementation of quality management
 Outputs from Quality Planning
Quality Management Plan (continued)

• The Quality Plan should address:

- Quality Control of the project
- Quality Assurance
- Quality Improvement of the project

Note: the project quality plan can be highly detailed or broadly

framed based on the needs of the project
 Outputs from Quality Planning
Operational Definitions
• An operational definition describes what something
is and how it is measured by the quality control
process. For example:
- the project management team must indicate the start and
end of every activity in a detailed schedule Whether the
whole activity or certain deliverables are to be measured
Operational definitions are also called Metrics in some
areas of application
 Outputs from Quality Planning
Checklists
• A checklist is a structured tool used to verify
that a set of required steps or requirements
have been performed.
• Many organizations have standard checklists
to ensure consistency of frequently performed
activities
 Outputs from Quality Planning
Inputs To Other Processes

• The quality planning process may identify

need for further activity in another area
QUALITY ASSURANCE
 Quality Assurance
• Quality assurance encompasses all the planned and
systematic activity implemented in a quality system to provide
confidence that the project will satisfy the relevant quality
standards
• Quality assurance is provided by a Quality Assurance dept.
• Quality assurance can be INERNAL ( from the project
management team to the performing organization)
• Quality assurance can be EXTERNAL (provided to the
customer and other parties actively involved in the work of
the project
 Quality Assurance Flowchart

INPUTS TOOLS AND OUTPUTS

TECHNIQUES

1-Quality management 1- Quality planning 1-Quality

plan tools and techniques improvement
2- Results of quality 2- Quality audits
control measurements
3- Operational
definitions
 Inputs To Quality Assurance

 Results of quality control measurements which are

records of quality control testing and measurement
in a format of comparison or analysis

 Operational definitions as previously described in

the output of the Quality Planning
 Tools and Techniques For Quality Assurance
• Quality Planning tools and techniques , which can be
used for quality assurance as well
• Quality Audits which are a structured review of other
quality management activities:
- they may be timely or carried out randomly
- They may be carried out by properly trained Internal-
auditors or by third parties such as quality systems
registration agencies
 Outputs From Quality Assurance
Quality Improvement

• Quality improvement includes taking action to increase the

effectiveness and efficiency of the project to be provide
added benefits to the stakeholders of that project .

• In many cases the implementation of quality improvements

will require preparation of change requests or taking
corrective actions and will be handled according to procedure
for overall change control
QUALITY CONTROL
 Quality Control
 Quality control involves monitoring specific project results to
determine if they comply with relevant standards and
identifying ways to eliminate causes of unsatisfactory results.
 Project results mentioned include both PRODUCT results such
as deliverables and MANAGEMENT results such as cost and
schedule performance
 Quality control is often performed by a quality control
department
 The project management team should have a working
knowledge of statistical quality control especially sampling
and probability to help evaluate and control outputs.
 Quality Control
 The project management should be aware of the following
among other subjects:

- prevention ( keeping errors out of the process)

- Inspection (keeping errors out of the customers hand
- Attribute sampling (for conformity of results)
- Variable sampling (where the results are rated on a continuous scale that
measures the degree of conformity or non conformity
- Special cause ( unusual events)
- Random causes ( normal process variations)
- Tolerances ( where results should fall with in a defined tolerance range
- Control limits ( the process is in control if it falls within these defined
limits)
 Quality Control Flowchart

INPUTS TOOLS AND OUTPUTS

TECHNIQUES

1-Work results 1- Inspection 1-Quality

2- Quality 2- Control charts improvement
management plan 3- Pareto diagram 2- Acceptance
3- Operational 4- Statistical sampling decisions
definitions 5- Flowcharting 3- Rework
4- Checklists 6-Trend analysis 4-Process adjustments
 Inputs To Quality Control
• Work results : including both product results
and process results
• The quality management plan
• Operational definitions
• Checklists
 Tools and Techniques for Quality Control

Inspection
• Inspection includes activities such as measuring,
examining and testing undertaken to determine
whether results conform to requirements
• Inspection can be carried out on the level of a single
activity or a final product
• Inspections can be called reviews, product reviews,
audits, and walk-throughs
 Tools and Techniques for Quality Control

Control Charts
• These charts are graphical representations that display the
result of a process over time and are used to determine if the
p o ess is i o t ol
• When in control the process should not be adjusted , however
it may be changed in order to provide improvements
• Control charts may be used to monitor any type of output
variable
• Control charts are most often used to monitor repetitive
activity in production but can also be used to monitor cost
and schedule variances
 Tools and Techniques for Quality Control

Pareto Diagram
• A Pareto diagram is a histogram ordered by frequency of
occurrence which shows how many results were generated by
what category or identified cause
• The project management team should take action to fix the
problems that are causing the greatest number of defects first
• Typically the Pareto diagram reflects that a relatively small
number of causes are responsible for the majority of the
problems or defects.
 Pareto Diagram
• Pareto analysis involves identifying the vital
few contributors that account for the most
quality problems in a system.

• Also called the 80-20 rule, meaning that 80

percent of problems are often due to 20
percent of the causes.
Pareto Diagram
Sample Pareto Diagram

61
 Tools and Techniques for Quality Control

Statistical Sampling
• Statistical sampling involves choosing a part of a
population of interest for inspection
• Appropriate sampling can effectively reduce the cost
of quality control
• There is a vast body of knowledge related to
statistical sampling and therefore the management
must be aware of the various sampling techniques
 Statistical Sampling
• Statistical sampling involves choosing part of a population of
interest for inspection
– This is needed when the population is too large be to be completely
sampled
• The size of a sample depends on how representative you want
the sample to be
• Sample size formula:
Sample size = .25 X (certainty factor/acceptable error)2
Desired Certainty Sample
certainty factor size
95% 1.960 384
90% 1.645 68
80% 1.281 10
63
 Six Sigma
• The term sigma means standard deviation.
• Standard deviation measures how much
variation exists in a distribution of data.
• Standard deviation is a key factor in
determining the acceptable number of
defective units found in a population.
 Six Sigma
• Six Sigma is a o p ehe sive a d flexi le
system for achieving, sustaining, and
maximizing business success. Six Sigma is
uniquely driven by close understanding of
customer needs, disciplined use of facts, data,
and statistical analysis, and diligent attention to
managing, improving, and reinventing business
p o esses. *

65
Six Sigma Quality
 6
• A philosophy and set of methods companies use to
eliminate defects in their products and processes
• Seeks to reduce variation in the processes that lead
to product defects
• The a e six sig a efe s to the va iatio that
exists within plus or minus six standard deviations of
the process outputs
 Normal Distribution and Standard Deviation

67
 Basic Information on Six Sigma
• Six Sigma projects normally follow a five-
phase improvement process called DMAIC.

68
 DMAIC
• DMAIC is a systematic, closed-loop process for continued
improvement that is scientific and fact based.
• DMAIC stands for:
– Define: Define the problem/opportunity, process, and
customer requirements.
– Measure: Define measures, then collect, compile, and
display data.
– Analyze: Scrutinize process details to find improvement
opportunities.
– Improve: Generate solutions and ideas for improving the
problem.
– Control: Track and verify the stability of the improvements
and the predictability of the solution.
69
 How is Six Sigma Quality
Control Unique?

• It requires an organization-wide commitment.

• Training follows the Fasten and secure system.
• Six Sigma organizations have the ability and willingness to adopt
contrary objectives, such as reducing errors and getting things
done faster.
• It is an operating philosophy that is customer focused and
strives to drive out waste, raise levels of quality, and improve
financial performance at breakthrough levels.

70
 Tools and Techniques for Quality Control

Flowcharting

• Flowcharting is used in quality control to help

analyze how a problem occurs
 Flowcharts
• Flowcharts are graphic
displays of the logic and
flow of processes that
help you analyze how
problems occur and
how processes can be
improved
• They show activities,
decision points, and the
order of how
information is
processed

72
 Tools and Techniques for Quality Control

Trend Analysis
• The trend analysis involves the use of mathematical
techniques to forecast future outcomes based on
historical results it is often used to monitor:
- Technical performance – how many defects have
been identified and how many remain uncorrected
- Cost and schedule performance – how many
activities in a certain period were completed with significant
variances
 Outputs for Quality Control
• Quality improvement
• Acceptance decisions, where the inspected items
will either be accepted or rejected and those
rejected may be reworked
• Rework, which is an action taken to bring defects or
nonconforming items into compliance with
requirements and specifications. Rework is a
frequent cause of project over-runs and the project
management team must make an effort to minimize
it .
 Outputs for Quality Control
• Completed Checklists, which become a part of
a project record when they are used
• Process Adjustments, which involves
immediate corrective or preventive action as a
result of quality control measurements. In
some cases the adjustment may need to be
handled according to procedures for overall
change control.
 TQM Basic approach
1. A committed management
2. Focused on customer
3. Involvement and utilization of the total work
force
4. Continuous improvement
5. Treating suppliers as partners
6. Establish performance measures for each
components/ persons

76
 Conclusion
In conclusion we find that in order to achieve PQM or
Project Quality Management , one has to integrate the
concepts of Project management with the processes of
quality management at the project scale and throughout
its different phases.

For effective PQM it is essential that the project

management team be aware of the concepts of quality
management to be able to make use of the described
processes and implement them to achieve the required
end product
Thank you!
Project Communications
Management

1
 Communication management

Communication management is a group of processes

required to ensure timely and appropriate development,
collection, dissemination, storage, and ultimately,
disposition of project information.

2
 Importance of Good
Communications
 The greatest threat to many projects is a failure to
communicate.
 Our culture does not portray IT professionals as being
good communicators.
 Research shows that IT professionals must be able to
communicate effectively to succeed in their positions.
 Strong verbal skills are a key factor in career
advancement for IT professionals.

3
 Project Communications
Management Processes
 Communications planning: Determining the information
and communications needs of the stakeholders.
 Information distribution: Making needed information
available to project stakeholders in a timely manner.
 Performance reporting: Collecting and disseminating
performance information, including status reports, progress
measurement, and forecasting.
 Managing stakeholders: Managing communications to
satisfy the needs and expectations of project stakeholders
and to resolve issues.

4
 Communications Planning
 Every project should include some type of
communications management plan, a document that
guides project communications.

 Creating a stakeholder analysis for project

communications also aids in communications planning.

5
 Communication Techniques
• Formal, Impersonal ( • Informal, Interpersonal
• Always keeping approaches
distant)approaches – group meetings for information
dissemination and problem
– project documents
solving
– deliverables
– memos
• E-communication
– change requests – E-mail
– project schedules – E-bulletin boards
– data dictionaries – Web sites
– error tracking procedures • Interpersonal Network
• Formal, Interpersonal – informal discussion with those
outside the project
approaches
– status review meetings
– design review meetings
– code inspections
6
Communication Requirement Analysis
• The analysis of the communication requirements results in the
sum of the information needs of the project stakeholders.
• Information required to determine project communication
requirements includes:
• Organization Chart
• Project organizations and stakeholders responsibility relationships
• Disciplines, departments and specialties involved in the project
• Logistics
• Internal information needs
• External information needs
• Stakeholder information
• Project scope statement
• Project management plan
• Number of people involved and communication Channels

7
 Determining the Number of
Communications Channels
 As the number of people involved increases, the
complexity of communications increases because there
are more communications channels or pathways
through which people can communicate.
 Number of communications channels = n(n-1)
2
where n is the number of people involved.

8
The Impact of the Number of People on
Communications Channels

9
Sample Stakeholder Analysis for
Project Communications

10
 Running Effective Meetings
 Define the purpose and intended outcome of the
meeting.
 Determine who should attend the meeting.
 Provide an agenda to participants before the meeting.
 Prepare handouts and visual aids, and make logistical
arrangements ahead of time.
 Run the meeting professionally.
 Build relationships.

11
 Using E-Mail Effectively
 Make sure that e-mail is an appropriate medium for
what you want to communicate.

 Be sure to send the e-mail to the right people.

 Use meaningful subject lines.

 Limit the content to one main subject, and be as clear

and concise as possible.

12
 Using E-Mail Effectively (cont’d)
 Limit the number and size of attachments.

 Delete e-mail you don’t need, and don’t open e-mail if

you question the source.

 Make sure your virus software is current.

 Respond to and file e-mails quickly.

 Learn how to use important features.

13
Communication Management Plan
The communication management plan provides
• Stakeholder communication requirements
• Information to be communicated, including format, content and
level of detail
• Person responsible for communicating the information
• Person or groups who will receive the information
• A description of a collection and filing structure for gathering
and storing various types of information
• A distribution structure describing what information goes to
whom, when, and how
• A format for communicating key project information including
information security issues
• Methods or methodologies used to convey the information such
as memoranda, e-mail, press release 14
Communication Management Plan contd…
• Frequency of communication
• A project schedule for producing the information
• Access methods for obtaining the information
• A method for updating the communication
management plans as the project progress and
develops
• Escalation process identifying time frames and the
management chain(names) for escalation of issues that
can not be resolved at a lower staff level
• A stakeholder communication analysis
• Glossary of common terminology

15
 Information Distribution
 Getting the right information to the right people at
the right time and in a useful format is just as
important as developing the information in the first
place.

 Important considerations include:

 Using technology to enhance information distribution.

 Formal and informal methods for distributing

information.

16
 Distributing Information in an
Effective and Timely Manner
 Don’t hide crucial information.

 Don’t be afraid to report bad information.

 Oral communication via meetings and informal talks

helps bring important information—good and bad—out
into the open.

17
 Importance of Face-to-Face
Communication
 Research says that in a face-to-face interaction:
 58 percent of communication is through body language.
 35 percent of communication is through how the words
are said.
 7 percent of communication is through the content or
words that are spoken.
 Pay attention to more than just the actual words
someone is saying.
 A person’s tone of voice and body language say a lot
about how he or she really feels.

18
 Encouraging More Face-to-Face
Interactions
 Short, frequent meetings are often very effective in IT
projects.

 Stand-up meetings force people to focus on what they

really need to communicate.

 Some companies have policies preventing the use of e-

mail between certain hours or even entire days of the
week.

19
Media Choice Table

20
 Understanding Group and
Individual Communication Needs
 People are not interchangeable parts.

 As illustrated in Brooks’ book The Mythical Man-

Month, you cannot assume that a task originally
scheduled to take two months of one person’s time can
be done in one month by two people.
 Nine women cannot produce a baby in one month!

21
 Personal Preferences Affect
Communication Needs
 Introverts like more private communications, while
extroverts like to discuss things in public.
 Intuitive people like to understand the big picture,
while sensing people need step-by-step details.
 Thinkers want to know the logic behind decisions,
while feeling people want to know how something
affects them personally.
 Judging people are driven to meet deadlines while
perceiving people need more help in developing and
following plans.
22
 Other Communication
Considerations
 Rarely does the receiver interpret a message exactly as
the sender intended.

 Geographic location and cultural background affect the

complexity of project communications.

 Different working hours

 Language barriers

 Different cultural norms

23
 Traceability Matrix
• A traceability matrix ties together requirements, functional
specifications, tasks, test cases, source code and other
relevant artifacts.
• It helps the team visualize the relationships between various
elements of the system and the requirements
Table: Traceability Matrix
Proposal Scope Development QA Impleme Latest
ntation Status
Goal URS SRS Functions Code Unit Peer Tests End Latest
set test review Users status

24
Information Gathering and retrieval system
•Information can be gathered and retrieved through
variety of media including filing system, electronic
database, Project management software and system that
allow access to technical documentation such as
engineering drawings, design specification and test
plans

25
 Lessons Learned Reports
 The project manager and project team members should
each prepare a lessons-learned report.
 A reflective statement that documents important things
an individual learned from working on the project.
 The project manager often combines information from
all of the lessons-learned reports into a project
summary report.
 Some specific results form lesson learned includes
 Update of the lessons learnt knowledgebase
 Input to knowledge management system
 Update corporate policies, procedures and processes
 Improved business skills
 Overall product and service improvements
 Update to risk management plan
26
 Performance Reporting
 Performance reporting keeps stakeholders informed
about how resources are being used to achieve project
objectives.

 Status reports describe where the project stands at a

specific point in time.

 Progress reports describe what the project team has

accomplished during a certain period of time.

 Forecasts predict future project status and progress

based on past information and trends.

27
 Some useful reports
• Project Velocity: Number of work item vs date, Use case vs
date- shows how fast the project is moving towards completion
• Effort variance: Developer vs Average difference between
planned effort and actual effort-Shows the accuracy of estimates
• Schedule Failure: Number of work items vs Days due - to know
about the missed scheduled worked items
• Bug rates: Number of bugs vs date-helps in release planning
and customer satisfaction
• Bug fixing time: Developer vs Average Bug-fixing time-shows
how long it takes a developer to resolve bugs
• Defect Density: Application module vs number of defects-to
identify hot spots in the application system

28
 Managing Stakeholders
 Project managers must understand and work with
various stakeholders.

 Need to devise a way to identify and resolve issues.

 Two important tools include:

 Expectations management matrix

 Issue log

29
 Expectations
Management Matrix

30
Issue Log

31
 Conflict Handling Modes
1. Confrontation: Directly face a conflict using a
problem-solving approach.
2. Compromise: Use a give-and-take approach.
3. Smoothing: De-emphasize areas of difference and
emphasize areas of agreement.
4. Forcing: The win-lose approach.
5. Withdrawal: Retreat or withdraw from an actual or
potential disagreement.

32
 Conflict Can Be Good
 Conflict often produces important results, such as new
ideas, better alternatives, and motivation to work
harder and more collaboratively.

 Groupthink: Conformance to the values or ethical

standards of a group. Groupthink can develop if there
are no conflicting viewpoints.

 Research suggests that task-related conflict often

improves team performance, but emotional conflict
often depresses team performance.

33
Developing Better Communication
Skills
 Companies and formal degree programs for IT
professionals often neglect the importance of speaking,
writing, and listening skills.

 As organizations become more global, they realize they

must invest in ways to improve communication with
people from different countries and cultures.

 It takes leadership to improve communication.

34
 Using Templates for Project
Communications
 Many technical people are afraid to ask for help.

 Providing examples and templates for project

communications saves time and money.

 Organizations can develop their own templates, use

some provided by outside organizations, or use samples
from textbooks.

 Recall that research shows that companies that excel in

project management make effective use of templates.

35
Sample Template for a
Project Description

36
Sample Template for a Monthly Progress
Report

37
 Final Project
Documentation Items

38
 Project Web Sites
 Many project teams create a project Web site to store
important product documents and other information.

 Can create the site using various types of software.

39
Sample Project Web Site

40
 Developing a Communications
Infrastructure
 A communications infrastructure is a set of tools,
techniques, and principles that provide a foundation for the
effective transfer of information.
 Tools include e-mail, project management software,
groupware, fax machines, telephones, teleconferencing
systems, document management systems, and word processors.
 Techniques include reporting guidelines and templates,
meeting ground rules and procedures, decision-making
processes, problem-solving approaches, and conflict resolution
and negotiation techniques.
 Principles include using open dialog and an agreed upon work
ethic.
41
Using Software to Assist in Project
Communications
 There are many software tools to aid in project
communications.

 Today more than 37 percent of people telecommute or

work remotely at least part-time.

 Project management software includes new capabilities

to enhance virtual communications.

 New tools, such as instant messaging and blogs, can

enhance project communications.

42
Communication and Collaboration
Matrix

43
Thank You

44
Project Risk Management

1
 Understanding Risk
Project risk “An uncertain event or condition that, if it occurs, has a
positive or a negative effect on at least one project objective…”

Risk management
• “…includes the processes concerned with conducting risk
management planning, identification, analysis, responses, and
monitoring and control on a project…”
• Includes “increasing the probability and impact of positive events,
and decreasing the probability and impact of events adverse to the
project”
Source: PMBOK® Guide

1. A definable event
Elements of Risk 2. Probability of occurrence
3. Impact (consequence) of occurrence
 The Importance of Project Risk
Management
 Project risk management is the art and science of
identifying, analyzing, and responding to risk
throughout the life of a project and in the best interests
of meeting project objectives

 Risk management is often overlooked in projects, but it

can help improve project success by helping select
good projects, determining project scope, and
developing realistic estimates

3
 Research Shows Need to Improve
Project Risk Management
 Study by William Ibbs and Kwak shows risk has the
lowest maturity rating of all knowledge areas
 A similar survey was completed with software
development companies in Mauritius, South Africa in
2003, and risk management also had the lowest
maturity
 KLCI study shows the benefits of following good
software risk management practices

4
 Project Management Maturity by Industry Group
and Knowledge Area*
KEY: 1 = LOWEST MATURITY RATING 5 = HIGHEST MATURITY RATING
Engineering/ Telecommunications Information Hi-Tech
Knowledge Area Construction Systems Manufacturing

Scope 3.52 3.45 3.25 3.37

Time 3.55 3.41 3.03 3.50
Cost 3.74 3.22 3.20 3.97
Quality 2.91 3.22 2.88 3.26
Human Resources 3.18 3.20 2.93 3.18

Communications 3.53 3.53 3.21 3.48

Risk 2.93 2.87 2.75 2.76
Procurement 3.33 3.01 2.91 3.33

*Ibbs, C. William and Young Hoon Kwak. “Assessing Project Management Maturity,”
Project Management Journal (March 2000).
5
 Benefits from Software Risk
Management Practices*

*Kulik, Peter and Catherine Weber, “Software Risk Management Practices – 2001,”
6 KLCI Research Group (August 2001).
 Negative Risk
 A dictionary definition of risk is “the possibility of
loss or injury”

 Negative risk involves understanding potential

problems that might occur in the project and how they
might impede project success

 Negative risk management is like a form of insurance;

it is an investment

7
 Risk Can Be Positive
 Positive risks are risks that result in good things
happening; sometimes called opportunities

 A general definition of project risk is an uncertainty

that can have a negative or positive effect on meeting
project objectives

 The goal of project risk management is to minimize

potential negative risks while maximizing potential
positive risks

8
 Best Practice
 Some organizations make the mistake of only
addressing tactical and negative risks when
performing project risk management
 David Hillson (www.risk-doctor.com) suggests
overcoming this problem by widening the scope of
risk management to encompass both strategic risks
and upside opportunities, which he refers to as
integrated risk management

9
 Broad Categories of Risk
 Market risk

 Financial risk

 Technology risk

 People risk

 Structure/process risk

1
0
Risk Function
Dual Nature of Risk
 Risk Types
Three Most Recognized Types of Risk in
Government and Commercial Practice

1. Technical

2. Cost

3. Schedule
 Risk Types
1. Technical
• The degree to which technology is sufficiently
mature and has been demonstrated as capable
of satisfying program objectives.
• Technical risk is frequently the driver in
development phase of a program.
 Risk Types
2. Cost
• Availability and sufficiency of funding for the
program.
• Government appropriations and funding cycles
are also subject to political risks.
• Commercial programs are subject to market
risks.
 Risk Types
3. Schedule
• Adequacy of time allocated for the defined
tasks.
• Includes effects of changes due to
unpredictable events such as: program and
technical decisions, time-to-market pressure,
labor problems, weather and customer directed
changes.
 Responsibilities in Risk Management

Project manager
• Initiate and lead the risk management process
• Provide direction to the project team on the
risk management process and tools

Project team
• Understand and follow the risk management
process
• Execute risk management strategies
• Report status on the risk management process
Risk Management Model
Risk Management Process
 Project risk and process risk
 Project risk : Caused by technical aspect of work or
work product.
 Process risk: Caused by formation, processes of the
project or methodologies used in the project will be
affected

20
 Risk Management Planning Process
 An appropriate sequence for risk management activities is
risk identification, risk quantification, risk response
development and control
 Questions to be addressed:
 What it is important to take/ not to take “this risk” in relation to the
project objective?
 How is the risk going to be mitigated?
 What is the specific risk and what are the risk mitigation approaches?
 Who are the individual responsible for implementing the risk management
plan?
 When will the project milestone associated with the mitigation approach
occur?
 How much is required in terms of resources to mitigate this particular
risk?
21
 Risk Triangle
Risk triangle represents impacts of project risk and issues on
project schedule

Schedule

Risk Issue
Fig: Risk Triangle 22
 Possible Areas of project risk
 Skill/ Expertise: Scarcity related risk
 Commitment of resources: commitment failure risk
 Timeline: Schedule baseline related risk
 Project Schedule: schedule management related risk
 Clarity of requirement/ Scope: requirements elicitation
related risk
 Financials: costing and fund management related risk
 Methodology/ Process: development methodology related
risk
 External environment : industry practice, competition
related risk
 Technology: failure of choosing appropriate technology
related risk 23
Knowledge area and risk contradiction
PM’s Risk Condition
Knowledge Area
Integration Inadequate planning; poor resource allocation; poor integration
management; lack of post project review
Scope Poor definition of scope or work package; incomplete definition of
quality requirements; inadequate scope control
Time Errors in estimating time or resource availability; poor allocation and
management of float; early release of competitive products
Cost Estimating errors; inadequate productivity, cost, change or
contingency control; poor maintenance, security, purchasing etc
Quality Poor attitude towards quality; substandard design/ material/
workmanship; inadequate quality assurance program
Human Resource Poor conflict management; poor project organization and definition of
responsibilities; absence of leadership
Communication Carelessness in planning and communication; lack of consolation
with key stakeholders
Risk Ignoring risk; unclear assignment of risk; poor insurance management
Procurement Unenforceable conditions or conflict clauses; adversarial relations
24
 Risk Management Plan
 Methodology used
 Role and responsibilities of different stakeholders
 Budgeting for risk management
 Timing-Scheduling for risk management activities
 Risk categories
 Determining risk probability and impact of risk
 Probability and impact matrix
 Revised stakeholders’ tolerances
 Reporting formats
 Tracking of related tasks and issues

25
 Risk identification
 Risk identification is an iterative process, involving the
project team, management team, stakeholders and
subject matter experts (if required)
 Any “ Genuine feelings” on possibilities of any disaster
could be identified as a potential “risk item”
Risk Identification Techniques
 Brainstorming
 Wideband Delphi Techniques
 Nominal Group Technique
 SWOT analysis
 Interviewing
26
 Expert Judgment
 Many organizations rely on the intuitive feelings and
past experience of experts to help identify potential
project risks.
 Experts can categorize risks as high, medium, or low
with or without more sophisticated techniques.
 Can also help create and monitor a watch list, a list of
risks that are low priority, but are still identified as
potential risks.

27
 Sample Risk Register/Risk Analysis
No. Rank Risk Description Category Root Triggers Potential Risk Probability Impact Severity Status
Cause Responses Owner

R44 1

R21 2

R7 3

 Project severity = expectation (1-10) * impact (1-10)

 When should risk analysis be formed?
 Is not a time activity
 Periodic update and reviewed

28
 Qualitative Risk Analysis
 Assess the likelihood and impact of identified risks
to determine their magnitude and priority.
 Risk quantification tools and techniques include:
 Probability/impact matrixes
 The Top Ten Risk Item Tracking
 Expert judgment

Qualitative risk representations are often used for quick

evaluations and screening.

29
 Probability/Impact Matrix
 A probability/impact matrix or chart lists the relative
probability of a risk occurring on one side of a matrix
or axis on a chart and the relative impact of the risk
occurring on the other.
 List the risks and then label each one as high, medium,
or low in terms of its probability of occurrence and its
impact if it did occur.
 Can also calculate risk factors:
 Numbers that represent the overall risk of specific events
based on their probability of occurring and the
consequences to the project if they do occur.

30
 Probability Impact Matrix
Effect of Occurrence
Probability
of Occurrence Very Low Low Moderate High Very High

Very Low
Low
Moderate
High
Very High

Low Risk Medium Risk High Risk

 Risk Prioritization

3
Red
Severity of
2
Occurrence
Yellow
1
Green

1 2 3

Probability of Occurrence
 Quantitative Risk Analysis
 Often follows qualitative risk analysis, but both
can be done together.
 Large, complex projects involving leading edge
technologies often require extensive quantitative
risk analysis.
 Main techniques include:
 Decision tree analysis
 Monte Carlo Approach – Modeling and Simulation
 Sensitivity analysis

33
 Decision Trees and Expected
Monetary Value (EMV)
 A decision tree is a diagramming analysis technique
used to help select the best course of action in
situations in which future outcomes are uncertain.
 Estimated monetary value (EMV) is the product of a
risk event probability and the risk event’s monetary
value.
 You can draw a decision tree to help find the EMV.

34
Expected Monetary Value (EMV)Example

35
 Sensitivity Analysis
 Sensitivity analysis is a technique used to show the
effects of changing one or more variables on an
outcome.
 For example, many people use it to determine what the
monthly payments for a loan will be given different
interest rates or periods of the loan, or for determining
break-even points based on different assumptions.
 Spreadsheet software, such as Excel, is a common tool
for performing sensitivity analysis.

36
Sample Sensitivity Analysis for
Determining Break-Even Point

37
 Top Ten Risk Item Tracking
 Top Ten Risk Item Tracking is a qualitative risk
analysis tool that helps to identify risks and maintain an
awareness of risks throughout the life of a project.
 Establish a periodic review of the top ten project risk
items.
 List the current ranking, previous ranking, number of
times the risk appears on the list over a period of time,
and a summary of progress made in resolving the risk
item.

38
Example of Top Ten Risk Item Tracking
Monthly Ranking
Risk Item This Last Number Risk Resolution
of Months Progress
Month Month
Inadequate 1 2 4 Working on revising the
planning entire project plan
Poor definition 2 3 3 Holding meetings with
of scope project customer and
sponsor to clarify scope
Absence of 3 1 2 Just assigned a new
leadership project manager to lead
the project after old one
quit
Poor cost 4 4 3 Revising cost estimates
estimates
Poor time 5 5 3 Revising schedule
estimates estimates

39
 Risk Response Planning
Process of developing options to enhance opportunities
and reduce threats to the project’s objective, ultimately
reducing overall risk

Resolution of risk
Once possible risks are listed, the PM has to take some
definite actions for each risk item. Typical risk resolution
actions are:
 Research and review
 Eliminate and review
 Reduce and protect
 Accept and protect
40
 Risk Response Strategies
 After identifying and quantifying risks, you must decide how to
respond to them.
 Response strategies for negative risks:
 Risk avoidance : Eliminating a specific threat or by eliminating
its cause
 Risk transference: Shifting the consequence of a risk and
responsibility a third party such as another person, group
location etc
 Risk mitigation: Reducing the impact of a risk event by
reducing possibility of its occurrence; applying preventive
measure; changing to alternate situation

41
 Risk Response Strategies
Response strategies for positive risks:
 Risk exploitation : Enhance plan to ensure that the
opportunity is realized; eliminate uncertainty to ensure
opportunity happens
 Risk sharing: Involve third party who are better able to
realize opportunity
 Risk enhancement: Modify the size of the opportunity by
increasing probability and maximizing key drivers of positive
impact risks

42
 Risk Response Strategies
Response strategies for both risks:

 Risk acceptance: Allowing the consequences should a

risk occur in an known and controlled manner; If
unable to identify any suitable response strategy, live
with consequences
 Contingent Response Strategy: Develop contingency
plans, create contingency allowance procedure, plan for
alternative development

43
General Risk Improvement Strategies for
Technical, Cost, and Schedule Risks

44
 Residual and Secondary Risks
 It’s also important to identify residual and secondary
risks.
 Residual risks are risks that remain after all of the
response strategies have been implemented.
 Secondary risks are a direct result of implementing a
risk response.

45
 Risk Monitoring and Control
It is the process of keeping track of identified risks, monitoring residual risks,
executing risk plans and evaluating the effectiveness in reducing risk.
• Monitoring means the knowing their status
• Controlling means carrying out the risk management plan as risk occur

Risk Management and Control Overview

Inputs Tools and techniques Output
Risk Management  Risk assessment  Updated risk register
plan  Risk audit  Requested changes
Risk Register  Variance and trend  Recommended
Approved change analysis corrective actions
request  Technical  Updated
Work performance performance organizational
info measurement process assets
Performance report  Reserve analysis  Updated project
 Status Meeting/ management plan
Review meeting
46
 Risk Audit
 Risk audits examine and document the effectiveness of
risk responses in dealing with “ identified risks and
their root causes”, as well as the effectiveness of the
overall risk management process.
 Can be performed as part of regular Quality Assurance
audit

47
Using Software to Assist in Project
Risk Management
 Risk registers can be created in a simple Word or Excel
file or as part of a database.
 More sophisticated risk management software, such as
Monte Carlo simulation tools, help in analyzing project
risks.
 The PMI Risk Specific Interest Group’s Web site at
www.risksig.com has a detailed list of software
products to assist in risk management.

48
 Benefits of Risk Management
 Minimize management by crisis
 Encourage proactive management
 Minimize surprises and problems
 Gain competitive advantage
 Decrease overall probability of project variances
 Increase probability of project success
 Increase profitability
 Focus on building the right product the first time
 Prevent problems from occurring, or if they occur,
from escalating
 Chapter Summary
 Project risk management is the art and science of
identifying, analyzing, and responding to risk
throughout the life of a project and in the best interests
of meeting project objectives.
 Main processes include:
 Risk management planning
 Risk identification
 Qualitative risk analysis
 Quantitative risk analysis
 Risk response planning
 Risk monitoring and control

50
THANK YOU

51
Project Procurement Management

•1
 Importance of Project Procurement
Management
• Procurement means acquiring goods and/or services
from an outside source
• Other terms include purchasing and outsourcing
• Experts predict that global spending on computer
software and services will continue to grow
• People continue to debate whether offshore
outsourcing helps their own country or not

•2
 Debates on Outsourcing
• Some companies, such as Wal-Mart, prefer to do no
outsourcing at all, while others do a lot of outsourcing

• Most organizations do some form of outsourcing to

meet their IT needs and spend most money within
their own country

• The U.S. temporary workforce continues to grow as

people work for temporary job agencies so they can
more easily move from company to company

•3
 Why Outsource?
• To reduce both fixed and recurrent costs

• To allow the client organization to focus on its

core business

• To access skills and technologies

• To provide flexibility

• To increase accountability
•4
 Contracts
• A contract is a mutually binding agreement that obligates
the seller to provide the specified products or services and
obligates the buyer to pay for them
• Contracts can clarify responsibilities and sharpen focus on
key deliverables of a project
• Because contracts are legally binding, there is more
accountability for delivering the work as stated in the
contract
• A recent trend in outsourcing is the increasing size of
contracts

•5
•6
Project Procurement Management Processes
• Project procurement management: acquiring goods and
services for a project from outside the performing organization
• Processes include:
– Planning purchases and acquisitions: determining what to
procure, when, and how
– Planning contracting: describing requirements for the
products or services desired from the procurement and
identifying potential sources or sellers (contractors,
suppliers, or providers who provide goods and services to
other organizations)

•7
 Project Procurement Management
Processes (continued)
• Requesting seller responses: obtaining information,
quotes, bids, offers, or proposals from sellers, as
appropriate
• Selecting sellers: choosing from among potential
suppliers through a process of evaluating potential
sellers and negotiating the contract
• Administering the contract: managing the relationship
with the selected seller
• Closing the contract: completing and settling each
contract, including resolving any open items

•8
Procurement Management Process Flow

•9
Planning Purchases and Acquisitions
• Identifying which project needs can best be
met by using products or services outside the
organization

• If there is no need to buy any products or

services from outside the organization, then
there is no need to perform any of the other
procurement management processes

•10
 Tools and Techniques for Planning
Purchases and Acquisitions
• Make-or-buy analysis: general management
technique used to determine whether an
organization should make or perform a
particular product or service inside the
organization or buy from someone else

• Often involves financial analysis

• Experts, both internal and external, can provide

valuable inputs in procurement decisions
•11
 Make-or-Buy Example
• Assume you can lease an item you need for a
project for $800/day; to purchase the item,
the cost is $12,000 plus a daily operational
cost of $400/day

• How long will it take for the purchase cost to

be the same as the lease cost?

•12
 Make-or Buy Solution
• Set up an equation so both options, purchase and lease, are
equal
• In this example, use the following equation; let d be the
number of days to use the item:
$12,000 + $400d = $800d
Subtracting $400d from both sides, you get:
$12,000 = $400d
Dividing both sides by $400, you get:
d = 30
• If you need the item for more than 30 days, it is more
economical to purchase it

•13
 Types of Contracts
A contract is an agreement between two parties that creates an
legal obligation to perform (or not perform) a particular duty.
• Different types of contracts can be used in different
situations
– Fixed price or lump sum contracts: involve a fixed total price for
a well-defined product or service
– Cost reimbursable contracts: involve payment to the seller for
direct and indirect costs
– Time and material contracts: hybrid of both fixed price and cost
reimbursable contracts, often used by consultants
– Unit price contracts: require the buyer to pay the seller a
predetermined amount per unit of service
• A single contract can actually include all four of these
categories, if it makes sense for that particular procurement
•14
 Point of Total Assumption
• The Point of Total Assumption (PTA) is the cost at
which the contractor assumes total responsibility
for each additional dollar of contract cost
• Contractors do not want to reach the point of
total assumption because it hurts them
financially, so they have an incentive to prevent
cost overruns
• The PTA is calculated with the following formula:
PTA = (ceiling price – target price)/government share +
target cost
•15
 Cost Reimbursable Contracts
• Cost plus incentive fee (CPIF): the buyer pays the
supplier for allowable performance costs plus a
predetermined fee and an incentive bonus
• Cost plus fixed fee (CPFF): the buyer pays the supplier
for allowable performance costs plus a fixed fee
payment usually based on a percentage of estimated
costs
• Cost plus percentage of costs (CPPC): the buyer pays
the supplier for allowable performance costs plus a
predetermined percentage based on total costs

•16
Contract Types Versus Risk

17
 Considerations When Selecting
Contract Types
• Unstable labor conditions
• Unstable market conditions
• Improvement in production is required
• Complexity of product or service
• Product or service requires development
• Design is not completed or may change
• Learning must take place
• Short time to prepare for a bid or negotiation
• Short delivery period
– Which may require additional resources to meet deadlines
 Contract Clauses
• Contracts should include specific clauses to
take into account issues unique to the project

• Can require various educational or work

experience for different pay rights

• A termination clause is a contract clause that

allows the buyer or supplier to end the
contract
•19
 Procurement Management Plan

• Describes how the procurement processes will

be managed, from developing documentation
for making outside purchases or acquisitions
to contract closure

• Content varies based on project needs

•20
Contract Statement of Work (SOW)
• A statement of work is a description of the work
required for the procurement
• If a SOW is used as part of a contract to describe only
the work required for that particular contract, it is
called a contract statement of work
• A SOW is a type of scope statement
• A good SOW gives bidders a better understanding of
the u er’s e pe tatio s

•21
Statement of Work (SOW) Template
I. Scope of Work: Describe the work to be done to detail. Specify the hardware and
software involved and the exact nature of the work.
II. Location of Work: Describe where the work must be performed. Specify the
location of hardware and software and where the people must perform the work
III. Period of Performance: Specify when the work is expected to start and end,
working hours, number of hours that can be billed per week, where the work must
be performed, and related schedule information.
IV. Deliverables Schedule: List specific deliverables, describe them in detail, and
specify when they are due.
V. Applicable Standards: Specify any company or industry-specific standards that
are relevant to performing the work.
VI. Acceptance Criteria: Describe how the buyer organization will determine if the
work is acceptable.
VII. Special Requirements: Specify any special requirements such as hardware or
software certifications, minimum degree or experience level of personnel, travel
requirements, and so on.
22
 Planning Contracting
• Involves preparing several documents needed for potential
sellers to prepare their responses and determining the
evaluation criteria for the contract award
– Request for Proposals: used to solicit proposals
from prospective sellers
• A proposal is a document prepared by a seller when there are
different approaches for meeting buyer needs
– Requests for Quotes: used to solicit quotes or bids
from prospective suppliers
• A bid, also called a tender or quote (short for quotation), is a
document prepared by sellers providing pricing for standard
items that have been clearly defined by the buyer

•23
Request for Proposal (RFP) Template
I. Purpose of RFP
II. Organization’s Background
III. Basic Requirements
IV. Hardware and Software Environment
V. Description of RFP Process
VI. Statement of Work and Schedule Information
VII. Possible Appendices
A. Current System Overview
B. System Requirements
C. Volume and Size Data
D. Required Contents of Vendor’s Response to RFP
E. Sample Contract

24
 Evaluation Criteria
• It’s i porta t to prepare so e for of
evaluation criteria, preferably before issuing a
formal RFP

• Beware of proposals that look good on paper;

be sure to evaluate factors, such as past
performance and management approach

• Can require a technical presentation as part of

a proposal
•25
 Requesting Seller Responses
• Deciding whom to ask to do the work, sending
appropriate documentation to potential sellers, and
obtaining proposals or bids
• Organizations can advertise to procure goods and
services in several ways
– Approaching the preferred vendor
– Approaching several potential vendors
– Advertising to anyone interested
• A idders’ o fere e a help larif the u er’s
expectations

•26
 Selecting Sellers
• Also called source selection

• Involves:

– Evaluating proposals or bids from sellers

– Choosing the best one

– Negotiating the contract

– Awarding the contract

•27
Sample Proposal Evaluation Sheet

28
 Seller Selection Process
• Organizations often do an initial evaluation of
all proposals and bids and then develop a
short list of potential sellers for further
evaluation

• Sellers on the short list often prepare a best

and final offer (BAFO)

• Final output is a contract signed by the buyer

and the selected seller
•29
 Administering the Contract
• E sures that the seller’s perfor a e eets o tra tual
requirements

• Contracts are legal relationships, so it is important that legal

and contracting professionals be involved in writing and
administering contracts

• It is critical that project managers and team members watch

for constructive change orders, which are oral or written
acts or omissions by someone with actual or apparent
authority that can be construe(integrate) to have the same
effect as a written change order

•30
 Change Control in Contracts
• Changes to any part of the project need to be reviewed,
approved, and documented by the same people in the
same way that the original part of the plan was approved

• Evaluation of any change should include an impact

analysis; how will the change affect the scope, time, cost,
and quality of the goods or services being provided?

• Changes must be documented in writing; project team

members should also document all important meetings
and telephone phone calls

•31
Change Control in Contracts (continued)
• Project managers and teams should stay closely
involved to make sure the new system will meet
business needs and work in an operational
environment

• Have backup plans

• Use tools and techniques, such as a contract change

control system, buyer-conducted performance
reviews, inspections and audits, and so on

•32
 Closing the Contract
• Involves completing and settling contracts and
resolving any open items
• The project team should:
– Determine if all work was completed correctly and
satisfactorily
– Update records to reflect final results
– Archive information for future use
• The contract itself should include requirements for
formal acceptance and closure

•33
 Tools to Assist in Contract Closure
• Procurement audits identify lessons learned in
the procurement process

• A records management system provides the

ability to easily organize, find, and archive
procurement-related documents

•34
 Using Software to Assist in Project
Procurement Management
• Word-processing software helps write proposals and
contracts, spreadsheets help evaluate suppliers,
databases help track suppliers, and presentation
software helps present procurement-related information
• E-procurement software does many procurement
functions electronically
• Organizations also use other Internet tools to find
information on suppliers or auction goods and services

•35
 Chapter Summary
• Project procurement management involves
acquiring goods and services for a project from
outside the performing organization
• Processes include:
– Planning purchases and acquisitions
– Planning contracting
– Requesting seller responses
– Selecting sellers
– Administering contracts
– Closing contracts
•36
Thank You!

•37
Developing Custom Processes for IT Projects
 Why Custom Processes for IT Projects?
• Custo er’s role is do i a t
• Environment is more dynamic
• Tasks are mental, unique, and complex
• Society is more democratic and educated
• Individuals have higher aspirations and expectations
• Go er e t’s role is less lear, a d its perfor a e ore
closely scrutinize
• Sources of knowledge are different (tacit knowledge, the
practitioner)
 Economics: Law of Supply and Demand
• Project Status
• Maximizing benefits
Economics of Project

Demand Side Supply Side

CUSTOMER
Management
PROJECT MANAGER
• Business Strategy • Project Deliverables
•Business Requirements • Project Performance
• Operational Resources • ICT Resources

Demand Management Supply Management

1. E ha e isi ility of usto er’s operatio s 1. Track work progress and benefits
2. Assess usto er’s de a d agai st apital 2. Conduct what-if analysis against available
funding resources both for project work and non-project
work

Apprehend(Capturing) State of Balance between Supply and Demand

• Measure Client Satisfaction
•Access the state of IT governance

Regulating Supply
• Cost Analysis- Peoples, work flow etc
 Managing Supply and Demand for a PM

SUPPLY
Efficiency MAX. BUSINESS VALUE
DO THE PROJECT RIGHT
• Business centric IT
• Reliable Delivery
HIGH solution

MODULE THROUGH DO THE PROJECT RIGHT

• Lack of creditability • At risk for over-
LOW
committing

HIGH DEMAND Efficiency

LOW
Figure: Managing Supply and Demand for a PM
 Developing an IT Project Management Methodology
Many organization develop their own project management
methodologies, especially for IT projects.
a. Project Initiation b. Project Planning
•Recognizing and starting a new project or • Main purpose of planning is to guide
project phase execution.
•Key outputs include: •Key outputs include:
•Assigning the project manager •A team contract
•Identifying the key stakeholders • A scope statement
•Completing a business case • A work breakdown structure (WBS)
•Completing the project charter and • Project Schedule (Gantt, etc)
• list of prioritize risks
getting signature on it. •Project Planning Documents
•Project Initiation Documents • Project Executing
• Business Case Study • Project controlling
• Project Charter • Project closing
• Stakeholder Analysis • Post-project follow-up
 A customized SDLC(Software development life cycle) Model for IT
Projects
• To desig a d de elop a usto ized +tailored +tu ed proje t a age e t
methodology – A multi-pass model
• Multi-pass model need not be a full fledged development methodology, rather it
e o passes oth the iterati e & i re e tal odel a d the agile odel i a
erge a d fit a er.
• Key logical phases of multi-pass model are:
– Outline initial requirements, focus on mission – critical issues and develop
proof of concept – Agile(Responsive) way.
– Sort out major requirements, prioritize according to business need and
develop an initial stable solution – Iterative & Incremental way.
– I rease lie t’s i ol e e t, de elop ore fu tio al a d relati ely ore
sensible solution – Agile way.
– Finalize requirements, enhance design, develop complete solution, test
rigorously – iterative & incremental way
 Activity Management Schedule & Resource
Management Workflow Select & Take Tasks from WBS Management
Customizing Project

Put estimated duration for

each task
Assign Preliminary Resource Perform Scheduling & Prepare
for Each Task Gantt Chart
Check for Dependencies,
Update Gantt Chart
Add Summary Task &
Milestone
Adjust Schedule & Resource
Utilization
Collect Actual Data, Make Compare & Update Project
Decisions on Corrections Plan
Update Project Status, Report
& Distribute
Figure: A Guideline for Project Management workflow
 IT Project Process Tailoring

SDLC PMI Guideline

Project Info Tailored Project

Organization Inputs Tailoring of Project Process
External Input Process

Lesson Learned

Figure: Tailoring of Project Process

 Barriers to Implementation of Tailored Project Management
• External Environment • Task
– Unpredictability, hostility and – Degree of innovation (previous experience)
heterogeneity – Scope (size and duration)
– Degree of dependence on – Interdependence and heterogeneity of
environment task’s o po e ts
– Customer, consumer (public, private, – Type (Technical, business, organizational)
culture, experience) • Organizational and Human Resources
• Objectives and Constraints – Structure, systems, culture (of parent
– Ambiguity, conflicts, stability organization & project)
– Strategic importance – Top management support
– Level of required performance, speed – Project leader (competence, experience)
– Special constraints and risks (e.g. – Team members, other contributors (
funding) experience, skills, culture)
– Type of contract
 Project Management Maturity
The foundation for achieving excellence in project management can best be described as
the project management maturity model (PMMM), which is comprised of five levels.
Each of the five levels represents a different degree of maturity in project management.
• Level 1—Common Language: good understanding of the basic knowledge on project
management.
• Level 2—Common Processes: common processes need to be defined and developed such
that successes on one project can be repeated on other projects.
• Level 3—Singular Methodology: the synergistic effect of combining all corporate
methodologies into a singular methodology, the center of which is project management.
• Level 4—Benchmarking: process improvement is necessary to maintain a competitive
advantage. Benchmarking must be performed on a continuous basis.
• Level 5—Continuous Improvement: evaluates the information obtained through
benchmarking and must then decide whether or not this information will enhance the
singular methodology.
Project Management Maturity .. Contd.

Fig: the five levels of maturity

• Promoting Project Excellency through Awards and
Assessment
• Certification Process Flow
 Project Management Maturity Model

• Project Management Maturity Model

• Level 1: Common Language
• The first level towards achieving project management excellence is common language. The
organization should actively recognize the importance of project management and promote the
sharing of the project management basics and associated terminology. The common characteristics
of organizations at Level1 of Project Management Maturity Model are: inconsistent use of project
management, few people interested in project management and no serious commitment by the
organization to recognize the importance of project management. Level1 organizations should take
the following steps to graduate to a higher level of project management maturity:
• Provide training in project management and hire certified project managers
• Support the use of project management terminology in projects
• Encourage the use of various project management tools, templates, checklists, and forms
 Project Management Maturity Model

• Level2: Common Processes

• The second level in the Project Management Maturity Model is common processes.
The organization should make a sincere effort to use project management
methodology and establish standard processes to be replicated in future projects to
ensure the repetition of success. The common characteristics of organizations at
Level2 of Project Management Maturity Model are: an understanding of the
benefits of project management, support to project management across various
levels, and a defined process and methodology for managing projects. Level2
organizations should take the following steps to graduate to a higher level of project
management maturity:
 Project Management Maturity Model

• Develop a support for project management throughout the organization

• Recognize the long term benefits of project management
• Choose one of the project management methodologies and then ensure the defined
process is replicated in all projects.
• 1.3 Level3: Singular Methodology
• This is the third level of the Project Management Maturity Model. The level 3 organization
understands the value of combining corporate methodologies into one singular
methodology for project management. The common characteristics of organizations at
Level3 of Project Management Maturity Model are: integrated processes, whole-hearted
support by the organization to the singular project management methodology, and less
paperwork for rigid policies and procedures. Level3 organizations should take the following
steps to graduate to a higher level of project management maturity:
• Integrate all processes into a universally accepted project management methodology
• Develop a sense of shared responsibility for the principles of project management
 Project Management Maturity Model
• Level4: Benchmarking
• This is the fourth level of the Project Management Maturity Model. Level 4
organizations understand the essence of continuous process improvement for
maintaining competitiveness in the market. These organizations continuously
compare their project management with those of the leaders in the market to set
benchmarks. The common characteristics of organizations at Level4 of Project
Management Maturity Model are: existence of a project management office (PMO)
dedicated to improving processes and performance of both quantitative and
qualitative benchmarking. Level4 organizations should take the following steps to
graduate to a higher level of project management maturity:
• Create a culture of benchmarking within the organization
• Set up a project management benchmarking process as utilised in Six Sigma
projects.
 Project Management Maturity Model

• Level5: Continuous Improvement

• This is the fifth level of the Project Management Maturity Model.
Level 5 organizations continuously analyze the information
obtained from benchmarking and implement it to improve their
project management process. Such organizations constantly strive
towards project management excellence. The common
characteristics of organizations at Level5 of Project Management
Maturity Model are: creation of lessons learned after each project
and application of lessons learned from previous projects into
subsequent projects.
 The Project Management Profession
• Professional societies such as the Project Management
Institute (PMI) have grown significantly.
• There are specific interest groups in many areas, such as
engineering, financial services, health care, and IT.
• Project management research and certification programs
continue to grow.

Information Technology Project Management, Fourth

18
Edition
 Project Management Certification
• PMI provides certification as a Project Management
Professional (PMP).
• A PMP has documented sufficient project experience, agreed
to follow a code of ethics, and passed the PMP exam.
• The number of people earning PMP certification is increasing
quickly.
• PMI and other organizations are offering new certification
programs .

19
 Certification
In an increasingly projectized world, professional certification ensures that project managers
are ready to meet the demands of projects across the globe. Learn more about PMI’s
certifications and find one that’s right for you. If you already have a credential, get what you
need to maintain it, or look into earning another one.
Solidify your skill set and face project challenges head-on with a PMI certification.

What are PMI certifications?

PMI offers a comprehensive certification program for project practitioners of all education
and skill levels. There are currently six credentials available, rigorously developed, globally
accredited and easily transferable across borders and industries.
Regardless of where you are in your career, PMI has a certification for you. Demonstrate
your expertise and your commitment to the profession with a PMI certification.
Which certification is right for you?
Certified Associate in Project Management (CAPM)®
Project Management Professional (PMP)®
Program Management Professional (PgMP)®
PMI Agile Certified Practitioner (PMI-ACP)®
PMI Risk Management Professional (PMI-RMP)® http://www.pmi.org/Certification/What-are-PMI-
PMI Scheduling Professional (PMI-SP)® Certifications.aspx
The Certified Associate in Project Management (CAPM)® is a good entry-le el ertifi atio if you’re e to
project management, or still figuring out your career path.

The Project Management Professional (PMP)® is the most important globally-recognized and independently
validated credential for project managers, perfect if you have demonstrated experience and competence in
leading project teams.

The Program Management Professional (PgMP)® is designed for those who manage multiple, complex projects
to achieve strategic and organizational results.

The PMI Agile Certified Practitioner (PMI-ACP)® is designed for practitioners who utilize Agile approaches to
project management in their projects.

The PMI Risk Management Professional (PMI-RMP)® is a specialty credential that demonstrates competence in
assessing project risks, mitigating threats and capitalizing on opportunities.

The PMI Scheduling Professional (PMI-SP)® is a specialty credential for practitioners who want to focus on
developing and maintaining project schedules.

The OPM3® Professional Certification recognizes your experience with, and practical knowledge of, organization
project management and project management maturity.
Why Choose a PMI Certification?
You may have seen other project management certifications. What makes PMI’s special?
Our credentials:
Are flexible. PMI certifications are not based on one specific methodology, so they’re flexible and
adaptable. You can easily transfer them between industries, market segments and geographic
locations.
Keep you up-to-date. PMI continually conducts in-depth studies to ensure that our credentials
actually reflect the current skills, knowledge and best practices you need to succeed.
Encourage professional growth. You never have to worry about a PMI certification becoming
obsolete. Our certification maintenance program requires you to earn professional development
units (PDUs), which encourages you to continually develop your skills and stay current as the
profession changes.
Help you get ahead. PMI certification offers financial benefits — The PMI Project Management
Salary Survey — Seventh Edition shows that certification positively impacts project manager
salaries — and helps you stand out and better market yourself to prospective employers.
Are renowned throughout the world. Part of that marketability comes from the prestige of PMI
certifications. PMI has provided project management certifications for over 25 years, and our
PMP®credential was the first one designed specifically for project managers. Also, the quality of
our certification governance is an advantage to those or earn or seek one of our certifications.
http://www.pmi.org/Certification/What-are-PMI-Certifications.aspx
 Growth in PMP Certification, 1993-2003
80,000
76,550

70,000
60,000
52,443
50,000
# PMPs

40,000 40,343

30,000 27,052

20,000 18,184

10,000 10,086
6,415
4,400
1,900 2,800
1,000
0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Year
Information Technology Project Management, Fourth
23
Edition
 Ethics in Project Management

• Ethics is an important part of all professions.

• Project managers often face ethical dilemmas.
• In order to earn PMP certification, applicants must agree to the
PMP code of professional conduct.
• Several questions on the PMP exam are related to professional
responsibility, including ethics.

Information Technology Project Management, Fourth

24
Edition
 Code of Ethics
Project Management Institute (PMI) sets ethical standards by
which professionals must abide when completing tasks.
• Responsibility (towards community)
• Respect (relationship between employers and clients)
• Fairness (work performance)
• Honesty (personal performance)
 How to Create a Code of Ethics
1) Decide why are you writing your code of ethics. Is it to inspire
your employees? Is it to spell out the expected behavior?
2) Begin with introduction that explains the purpose of the code of
ethics and what you hope to achieve by instituting such a code.
3) Add the items to your code of ethics. Cover the issues like
interpersonal relationships, behavior expected around customers
and clients and other items specific to your company/industry.
4) Decide how you will implement code of ethics.
 Ethical Origins
Societal Ethics:
Standards of Members of Society
use when dealing with
each other.
Based on
Values & sta dards
27
 Societal Ethics:
Fou d i “o iety’s
Legal Rules,
Norm, & Mores.
Codified in the
For of Law
& Society Customer.
28
 Norms dictate
how people
Should behave.
Societal ethics vary based
On a given Society.
Strong beliefs in one country
differ elsewhere.
29
 Professional Ethics:
Values & sta dards used y
Group of Ma agers i orkpla e .
Applied when Decision
ot Clear-Cut Ethi ally .
Physicians/Lawyers
Professional Associates
– (PMA, Bar Council)
30
 Values

An i di idual’s Basic
convictions of
What is Right & Wro g

31
 Values

Basic beliefs About what

one should or
should not do?
& What is &
is not important?
32
 Individual Ethics:
Values of an individual
resulting from their
family & upbringing.

33
 Behavior
not illegal,
Yet People still
disagree
If not
ethical.
34
Ethics of top Project
Manager
–set the
–tone for
–Project

35
 Ethics Codes
& Policies
Pro ide sig of top Ma age e t’s desires
in
Project Based
Organizational culture

36
 Why Behave Ethically?
Project Manager should behave ethically
To Avoid Harming others. Managers
Responsible for Prote ti g & Nurturi g
Resources
In their Charge.

37
 Leadership, Culture, I e ti e
Co pe satio Pla s help “hape
I di idual Ethi al eha ior
in Project Management

38
 Promoting Ethics

E ide e “ho i g Ethi al

Ma agers
benefit
over long term .
39
Ethical Control System in Project Management
Formal System to encourage
Ethical Management.
Project Management Firms appoint an Ethics Ombudsman to
monitor practices. Co u i atio sta dards
To all employees.

40
Ethical culture: firms increasingly
seek to make good ethics part
of norm & organizational
culture.

41
 Ethical decisions involve

Normative Judgment implies

so ethi g is good or ad,
right or ro g, etter or orse.
Morality “o iety’s a epted
norms of behavior

42
 Views of Ethical Decision-Making

Decisions are Decision makers

Decisions made
concerned with seek to impose
solely on the basis
respecting and pro- and enforce rules
of outcomes or
tecting basic rights fairly and
consequences
of individuals impartially

43
CODE OF ETHICS FOR PROJECT MANAGERS

PREAMBLE: Project Managers, in the pursuit of their profession,

affect the quality of life for all people in our society. Therefore, it
is vital that Project Managers conduct their work in an ethical
manner to earn and maintain the confidence of team members,
colleagues, employees, clients and the public.

44
ARTICLE I: Project Managers shall maintain high standards of personal and
professional conduct.
a) Accept responsibility for their actions.
b) Undertake projects and accept responsibility only if qualified by training or
experience, or after full disclosure to their employers or clients of pertinent
qualifications.
c) Maintain their professional skills at the state -of-the-art and recognize the
importance of continued personal development and education.
d) Advance the integrity and prestige of the profession by practicing in a
dignified manner.
e) Support this code and encourage colleagues and co-workers to act in
accordance with this code.
f) Support the professional society by actively participating and encouraging
colleagues and coworkers to participate.
g) Obey the laws of the country in which work is being performed.
45
 ARTICLE II: Project Managers shall, in their work:

a) Provide the necessary project leadership to promote maximum productivity

while striving to minimize costs.
b) Apply state-of-the-art management tools and techniques to ensure
schedules are met and the project is appropriately planned and coordinated.
c) Treat fairly all project team members, colleagues and co-workers, regardless
of race, religion, sex, age or national origin.
d) Protect project team members from physical and mental harm.
e) Provide suitable working conditions and opportunities for project team
members.
f) Seek, accept and offer honest criticism of work, and properly credit the
contribution of others.
g) Assist project team members, colleagues and co-workers in their
professional development.
46
ARTICLE III: Project Managers shall, in their relations
with employers and clients:

a) Act as faithful agents or trustees for their employers or clients in

professional or business matters.
b) Keep information on the business affairs or technical processes of an
employer or client in confidence while employed, and later, until such
information is properly released.
c) Inform their employers, clients, professional societies or public agencies of
which they are members or to which they may make any presentations, of
any circumstances that could lead to a conflict of interest.
d) Neither give nor accept, directly or indirectly, any gift, payment or service
of more than nominal value to or from those having business relationships
with their employers or clients.
e) Be honest and realistic in reporting project cost, schedule and
performance. 47
ARTICLE IV: Project Managers shall, in fulfilling their responsibilities
to the community:
a) Protect the safety, health and welfare of the public and speak out
against abuses in those areas affecting the public interest.
b) Seek to extend public knowledge and appreciation of the project
management profession and its achievements.

48
THANK YOU
The Balanced Scorecard

Planning for long-run

organizational success
 The Balanced Scorecard
What is it?
Definition:
The Balanced Scorecard is a
management tool that provides
stakeholders with a comprehensive
measure of how the organization is
progressing towards the achievement
of its strategic goals.
The Balanced Scorecard
Why do it?

 To achieve strategic objectives.

 To provide quality with fewer resources.
 To eliminate non-value added efforts.
 To align customer priorities and expectations with the customer.
 To track progress.
 To evaluate process changes.
 To continually improve.
 To increase accountability.
The Strategy-Focused-Organization
• The Balanced Scorecard is the main management
tool that has been used by successful organizations
in various fields
– Private and Public Sector
– For- Profit and Not For- Profit
– Different industries
• These successful organizations placed their strategies
at the centre of their operations. Their strategies,
guided Their day- to- day activities
Organizations Often Have A Gap Between
Strategy and Action
Strategy Is a Step In a Continuum
MISSION
Why we exist
VALUES
What’s important to us
VISION
What we want to be
STRATEGY
Our game plan

STRATEGIC OUTCOMES

Satisfied Delighted Efficient and Effective Motivated & Prepared

SHAREHOLDERS CUSTOMERS PROCESSES WORKFORCE
The Balanced Scorecard Links Vision and Strategy to
E plo ees’ E er da A tio s
VISION
What we want to be
MISSION
Why we exist

VALUES
What’s important to us

STRATEGY
Our game plan

BALANCED SCORECARD
Translate, Focus and Align
STRATEGIC INITIATIVES
What are the priorities
TOTAL QUALITY MANAGEMENT
What we must improve
EMPOWERMENT / PERSONAL OBJECTIVES
What I need to do

STRATEGIC OUTCOMES

Satisfied Delighted Efficient and Effective Motivated & Prepared

SHAREHOLDERS CUSTOMERS PROCESSES WORKFORCE
 Balanced Scorecard
• Balance between

– Financial measures of performance

– Long-range competitive abilities

 Balanced Scorecard
• Four aspects of firm performance

– Financial
– Customer
– Internal business
– Innovation and learning
 Financial Perspective
• How do we look to stakeholders?

– Survive

– Succeed

– Prosper
 Customer Perspective
• How do our customers see us?

– New products

– Responsiveness

– Quality
 Internal Business Perspective
• At what must we excel currently?

– Manufacturing/service excellence

– New product/service introduction

 Innovation and Learning Perspective
• Can we continue to improve and create value?

– Technological leadership
– Time to market
– Employee training and satisfaction
 Perspectives are Interrelated
• Innovation pleases customers which are
necessary for good financial results

• Good financial results make financing

improvements possible
 The e E a ple fro “outh est Airli es’ Bala ed
Scorecard
Strategy Map: Diagram of the
cause-and-effect relationships
between strategic objectives

Strategic Theme:
Operating Efficiency Statement of How success
what strategy in achieving The level of Key action
Financial
Profitability must achieve the strategy performance programs
and what’s will be or rate of required to
Increase critical to its measured and improvement achieve
Lower Costs
Revenue
success tracked needed objectives
Customer
Flight Lowest
is on time prices

Objectives Measurement Target Initiative

Internal
Fast ground • Fast ground • On Ground Time • 30 Minutes • Cycle time
turnaround turnaround • On-Time • 90% optimization
Departure
Learning

Ground crew
alignment
 The Complete Balanced Scorecard Strategy Map
Improve Shareholder Value
Financial Productivity Strategy Shareholder Value Revenue Growth Strategy
ROCE
Perspective:
the drivers of Improve Cost Create Value from
Increase Asset Enhance Customer
shareholder Structure Utilization Value New Products &
Services
value  Customer
 Cost per Unit  Asset Turnover  New Revenue
Profitability Sources

• Market and Account Share  Customer Acquisition  Customer Retention  Customer Satisfaction
Customer Product Leader
Perspective: Customer Solutions
the
Customer Value Proposition Low Total Cost
differentiating
Product/Service Attributes Relationship Image
value
proposition Price Quality Time Function Service Relations Brand

Internal
Operations Theme Customer Innovation Theme Regulatory and
Perspective: Management Society Theme
how value is Theme (Processes that (Processes that
Create New
created and (Processes that Produce (Processes that
Products and
Improve the
and Deliver Products Enhance Customer Environment
sustained & Services) Value) Services) and
Communities)

Learning & Growth

Human, Information, and Organizational Capital
Perspective: role for
intangible assets – Strategic Strategic Climate for
people, systems, Competencies Technologies Action
climate and culture
..the question..?

What is our strategy?

 Environmental Scan

Strengths Weaknesses

A Model Opportunities Threats

for
Strategic Values
Planning
Mission &
Vision

Strategic Issues
Strategic Priorities
Objectives, Initiatives, and Evaluation
Business Strategy
Business Strategy
Corporate Culture
 Corporate Culture

• The beliefs and values shared by people who

work in an organisation
 How people behave with each other
 How people behave with customers/clients
 How people view their relationship with stakeholders
 People’s respo ses to e erg use, o u it
involvement, absence, work ethic, etc.
 How the organisation behaves to its employees –
training, professional development, etc.
 Corporate Culture

• May be driven by:

• Vision – where the organisation wants to go in
the future
• Mission Statement – summary
of the beliefs of the organisation and where it
is now
 Corporate Culture

• May be reflected in:

– Attitude and behaviour of the leadership
– Attitude to the role of individuals in the workplace – open
plan offices, team based working, etc.
– Logo of the organisation
– The image it presents to the outside world
– Its attitude to change
The Strategy Focused
Organization

The Five Principles

1. Translate the strategy to operational

terms.

2. Align the organization to the strategy.

Source: The Strategy Focused Organization, Norton & Kaplan

The Strategy Focused
Organization

The Five Principles (cont.)

3. Make strategy everyone’s job.

4. Make strategy a continual process.

5. Mobilize change through executive leadership

Source: The Strategy Focused Organization, Norton & Kaplan

 Overall Concepts
• Not just a set of measures

– Measures must relate to strategy

• Critical success factors

– Measures are interrelated

• Must understand how the perspectives influence each other

 Overall Concepts
• Not a quick process

– Implementation requires

• Thought
• Analysis
• Data-gathering
• Time
 Overall Concepts
• Thought

– What is our strategy?

– What is critical to implementing the strategy?

– How can we measure our progress?

 Overall Concepts
• Analysis

– What are the linkages between functions?

– What drives the achievement of goals?

– What measures correlate with the drivers?

 Overall Concepts
• Data-gathering

– What data is a aila le? What is ’t?

– How should it be gathered? Reported?

 Overall Concepts
• Time

– Cannot be done in an afternoon

– Successful implementation may take several months

– Never-ending process
 Implementation Steps
• Initiative must start at the top

– Only senior management has grasp of overall strategy

• And the authority to make strategic decisions

– Doomed without commitment from the top

 Implementation Steps
• Requires teamwork, collaboration

– Different perspectives, expertise required

– Not a one-person job

• Wo ’t produ e u -in
 Implementation Steps
• Interview senior managers

– Input on strategic objectives

– Input on critical success factors

– Input on possible measures

 Implementation Steps
• Gain consensus

– Senior managers develop tentative scorecard as a group

• Individual reactions

– Suggested refinements
 Implementation Steps
• Expand consensus

– Larger group refines tentative scorecard

• Finishing touches

– Consensus on vision, objectives, measures, targets,

implementation program, etc.
 Implementation Steps
• Selection of metrics
– Must relate to strategic goals
– Both leading and lagging
– Ma ot e e a t
– May come from external sources
– Not too many
– Not too few
 Implementation Steps
• Roll-out

– Link to data bases and information system

– Communicate to employees

– Develop scorecards for lower levels

 Implementation Steps
• Periodic reviews

– Has strategy changed?

– Are the objectives valid?
– Are the activities valid?
– Are the measures valid?

• The scorecard evolves with the organization

 The Road to Disaster
• Senior management not committed

– No one else will be either

• Lack of consensus

– Lack of commitment
 The Road to Disaster
• Consultants

– Good
• Provide needed expertise

– Bad
• Take over the project
• Consensus, commitment of employees is lost
 The Road to Disaster
• Failure to communicate

– E plo ees do ’t u dersta d:

• Strategy
• Their roles
• Importance of the scorecard measures
 The Road to Disaster
• La k of push-do

– Lower levels operating as before

• Operations are not tied to corporate scorecard

• Scorecard is ignored at lower levels

 The Road to Disaster
• Carve it in stone

– It o ’t e perfe t, e er

• Must evolve

– Delay implementation until perfect

 The Road to Disaster
• The compensation issue

– Powerful motivator of performance

• Poorly designed scorecard will not show

strategic improvements even if individual
measures show progress
 The Scorecard as a Change Agent
• Four steps

– Translating the vision into action

– Communicating and linking
– Business planning
– Feedback and learning
 Translating the Vision
• Strategy must be reduced to a set of
objectives and measures which can be
operationalized

– We a t to e the est o ’t do
 Communicating and Linking
• Corporate strategy must be communicated to
all levels

– Lower levels must have objectives linked to

corporate objectives
 Business Planning
• Integrate the financial plan with the business
plan

– Use the scorecard to allocate resources to critical

activities

• Avoids the short-term spending mentality

 Feedback and Learning
• Monitor short-term results to determine if
progress is being made toward long-term
objectives

– May need to refine measures, activities,

objectives, even strategy
Thank You