Chapter 5

Project Management and

Planning

1
 Introduction
 Project management is application of knowledge,
skills, tools and techniques to project activities to
achieve project requirements.

 Project management is accomplished through the

application and integration of the project management
processes of initiating, planning, executing,
monitoring and controlling, and closing.

2
 Cont’d ….
 Project planning is the process of defining an
orderly arrangement of activities and resources to
deliver a unique product or service.

 The project planning organizes the project’s

deliverables and resources within realistic time
frames.
 The planning prepares the project for successful
implementation.
 It links the resources to the project’s activities.
 The purpose of project planning is therefore to define
the exact parameters of a project and ensure that all
the pre-requisites for project execution are in place. 3
 Cont’d ….

 Planning a project involves answering

key questions such as:
 What work to be performed?
 Who will be responsible for each piece of work?
 In what order should the work be completed?
 How long will it take to complete each item of the
work?
 What resources are needed to complete each item
of the work?
 How can the work be scheduled to meet the
requested deadline?
4
Planning is answering the following questions

5
Project Management knowledge
Areas

7
 9 knowledge areas

Scope mgt Time mgt Cost mgt Quality mgt

Stakeholders’

Tools & techniques

needs and
expectations Project
P r oject integ r a tion m a n a g em ent
success

HR mgt Communication Risk mgt Procurement mgt

mgt

Facilitating functions

Fig: Project management framework

8
5.1. Project Scope Management

9
Scope definition…..

10
 What is Project Scope Management?
 Scope refers to all the work involved in creating the
products or a deliverable of the project and the
processes used to create them.
 a deliverable is a product produced as part of a
project, such as hardware or software, planning
documents, or meeting minutes, building, ….
 Project scope management includes the processes
involved in defining and controlling what is or is not
included in a project.

11
Project Scope Management Processes
1. Scope planning: Deciding how the scope will be
defined, verified, and controlled.
2. Scope definition: Reviewing the project charter and
preliminary scope statement and adding more
information as requirements are developed and change
requests are approved.
3. Creating the WBS: Subdividing the major project
deliverables into smaller, more manageable components.
4. Scope verification: Formalizing acceptance of the
project scope.
5. Scope control: Controlling changes to project scope.

12
 Step 1: Scope Planning and the Scope
Management Plan
 The scope management plan is a document that
includes descriptions of how the team will prepare the
project scope statement, create the WBS, verify
completion of the project deliverables, and control
requests for changes to the project scope.

 Key inputs include the project charter, preliminary

scope statement, and project management plan.

13
 Project Charter
 A Project Charter is a statement of the scope,
objectives and participants in a project and is a critical
document to ensure that everyone involved in the
project is aware of its purpose and objectives.
 It outlines the project objectives, identifies the main
stakeholders, and defines the authority of the project
manager.
 It serves as a reference of authority for the future of the
project and its management.
 The detail within the charter should be proportionate
with the size of the project

14
Table 1: Sample Project Charter

15
Table 1. Sample Project Charter (cont’d)

16
 Step 2: Scope Definition and the Project
Scope Statement
 The preliminary scope statement, project charter,
organizational process assets, and approved
change requests provide a basis for creating the
project scope statement.

 As time progresses, the scope of a project should

become clearer and more specific.

17
Table 2. Further Defining Project Scope

18
 Step 3: Creating the Work Breakdown
Structure (WBS)
 A WBS is a deliverable-oriented grouping of the work
involved in a project that defines the total scope of the
project.
 The WBS is a hierarchical description of all the work
that must be done to complete the project.
 It is a foundation document that provides the basis for
planning and managing project schedules, costs,
resources, and changes.

19
 Work Breakdown Structure (WBS)…..

Steps in WBS Development

1. Develop Level 1 of the WBS
2. Decompose WBS: Decomposition is subdividing
project deliverables into smaller pieces. Involves
listing the sub activities or tasks for major activities
3. Assign Responsibility
4. Define WBS Elements

20
 WBS…..
The characteristics a complete WBS are:
 The unit of a task must be measurable in terms of cost,
effort, resources and time
 it must result in a single end product which can be
checked
 it must be the responsibility of a single individual or
functional group.

21
 WBS Format
 There are two methods of presenting the WBS:

1. Graphic
2. Text indents

22
 Example (text indent)
1.0.0. House Project
1.1. Civil
1.1.1. Foundation
1.1.2. Walls and Roofs
1.2. Plumbing
1.2.1. Piping
1.2.2. Sewerage
1.3. Electrical
1.3.1. Wiring
1.3.2. Appliance

23
Figure 1. Sample Intranet WBS Organized by Product

24
Figure 2. Sample Intranet WBS Organized by Phase

25
Figure 3. Intranet WBS and Gantt Chart in Project xx

Project 98 file

27
The WBS Dictionary and Scope Baseline
 Many WBS tasks are vague and must be explained in
more detail so people know what to do and can
estimate how long the work will take and what it will
cost.
 A WBS dictionary is a document that describes
detailed information about each WBS item.
 The approved project scope statement and its WBS and
WBS dictionary form the scope baseline, which is
used to measure performance in meeting project scope
goals.

31
 Advice for Creating a WBS and WBS
Dictionary
 A unit of work should appear in only one place in the
WBS.
 The work content of a WBS item is the sum of the WBS
items below it.
 A WBS item is the responsibility of only one
individual, even though many people may be working
on it.
 The WBS must be consistent with the way in which
work is actually going to be performed; it should serve
the project team first, and other purposes only if
practical.
32
 Advice for Creating a WBS and WBS Dictionary (cont’d….)

 Project team members should be involved in

developing the WBS to ensure consistency and buy-in.
 Each WBS item must be documented in a WBS
dictionary to ensure accurate understanding of the
scope of work that is included and not included in that
item.
 The WBS must be a flexible tool to accommodate
inevitable changes while properly maintaining control
of the work content in the project according to the
scope statement.

33
 What are the benefits of WBS?
1. Clarify ambiguity
2. Facilitate resource allocation to specific activities
3. It makes easier to hold people accountable for
completing tasks
4. It helps in setting up of project organization
5. It helps to identify activities that are individually and/or
collectively carried out in order to ensure the timely
completion of the project.

34
 Step 4: Scope Verification
 It is very difficult to create a good scope
statement and WBS for a project.
 It is even more difficult to verify project scope
and minimize scope changes.
 Many projects suffer from scope creep and poor
scope verification

35
 Step 5: Scope Control
 Scope control involves controlling changes to the
project scope.
 Goals of scope control are to:
 Influence the factors that cause scope changes.
 Ensure changes are processed according to procedures
developed as part of integrated change control.
 Manage changes when they occur.
 Variance is the difference between planned and actual
performance.

36
 Group Activity
 Develop a work break down
structure for you project idea.

37
Using Software to Assist in Project Scope
Management
 Word-processing software helps create scope-related
documents.
 Spreadsheets help perform financial calculations and
weighed scoring models, and help develop charts and
graphs.
 Communication software, such as e-mail and the Web,
helps clarify and communicate scope information.
 Project management software helps create a WBS, the basis
for tasks on a Gantt chart.
 Specialized software is available to assist in project scope
management.
39
 Summary
 Project scope management includes the processes
required to ensure that the project addresses all the
work required—and only the work required—to
complete the project successfully.
 Main processes include:
 Scope planning
 Scope definition
 WBS creation
 Scope verification
 Scope control

40
……. END …….

41
2. Project Time Management

PM knowledge areas
 Introduction
 Time management is not the right term to use because
it implies personal efforts to manage one’s time.

 For projects, time mgt refers to developing a schedule

that can be met, then controlling work to ensure that
this happens!

 It’s that simple. Because everyone refers to this as

scheduling, it should really be called schedule
management.

45
 Importance of Project Schedules
 Managers often cite delivering projects on time as
one of their biggest challenges.
 Most projects suffer a problem of completing on
time.
 Schedule issues are the main reason for conflicts
on projects, especially during the second half of
projects.
 Time has the least amount of flexibility; it passes
no matter what happens on a project.

46
 Project Time Management Processes
1. Activity definition: Identifying the specific activities that the
project team members and stakeholders must perform to
produce the project deliverables.
2. Activity sequencing: Identifying and documenting the
relationships between project activities.
3. Activity resource estimating: Estimating how many resources
a project team should use to perform project activities.
4. Activity duration estimating: Estimating the number of work
periods that are needed to complete individual activities.
5. Schedule development: Analyzing activity sequences, activity
resource estimates, and activity duration estimates to create the
project schedule.
6. Schedule control: Controlling and managing changes to the
project schedule.
47
Project time management

48
 1. Activity identification & 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.

49
 Identification of Activities ……..
Example: For the irrigation project Nine activities are
identified
A. Field survey & design
B. Repair of canal earth works
C. Detailed design of drainage system
D. Repair barrage
E. Lay road foundation
F. Build canal structures (including lining)
G. Construction of drainage system
H. Road paving
I. Trial operations

50
 2. Activity Lists and 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.

51
 3. 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.

52
 4. Estimating Activity Duration
 Key concepts:
 Duration includes the actual amount of time worked
on an activity plus the elapsed time.
 Duration of Activities: A number of approaches can be
used to estimate the time required in carrying out a
project activity.
 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.

53
 Activity duration …..

 Once the WBS is complete, the next step is

estimating the time required to complete each
task.
 Estimating the work time
 Gives an idea of the level of effort required to
complete a project
 Enable to produce realistic plan
 Is the basis for developing a project implementation
schedule.

54
Factors to consider in estimating Activity
duration
 The following factors should be considered when
estimating the time required for project activities
1. Availability of non-labor support
2. Complexity of the work
3. Degree of available information to estimate
4. Degree of uncertainty or risk in achieving the
outcome
5. Experience knowledge and expertise of the team
members of the project
6. Priority of tasks
7. Number of people assigned to the task
8. Project size

55
 Techniques of estimating time

1. Single estimate also called Deterministic

approach - this estimate is done by an expert
based on previous experiences and historical
data.

56
 Techniques…..
2. Multiple estimate/probabilistic Approach/PERT

- Here probabilities are used to each of the multiple

estimate.
 Program Evaluation and Review Technique
(PERT) is a network analysis technique used to
estimate project duration when there is a high degree
of uncertainty about the individual activity duration
estimates.
 Duration estimates based on using optimistic, most likely,
and pessimistic estimates of activity durations, or a
three-point estimate.

57
 Cont’d….
• Here probabilities are used to each of the multiple
estimate.
1. The most likely time (m): This represents the most
likely estimate and is known as modal value in
statistics.
2. Optimistic time (a): This is the minimum time
required to complete the activity under most
favorable conditions.
3. Pessimistic Time (b): This represents the maximum
time needed to complete the project activity under
unfavorable situations.
58
 Cont’d…
• The single expected time (t) required is given by the
following formula as follows.
t= (a+4m+b)
6
• The table below provides the three values and the single
expected value t for each activity of the irrigation
project we presented earlier.
• Note that the single expected values of the last columns
shall be used in this approach.

59
 Duration of activities for Irrigation Project

Activity Estimated Duration

Expected
Duration
(t)
No. Task Optimistic Most Likely Pessimistic
(a) (m) (b)
A Field Survey & Design 1 1.5 5 2
B Repair Canal Structure 2 11.75 18 12
C Re-design Drainage System 4 9.5 12 9
D Repair Barrage 7 12 17 12
E Lay Road Foundation 1 2 9 3
F Build Canal Structures 2 5 8 5
G Construct Drainage System 6 11.5 20 12
H Surface Road 0.5 1 1.5 1
I Trial Operations 0.5 1 1.5 1
J Dummy Activities* 0 0 0 0
* A dummy is an activity which does not require time or resources, but which nevertheless
helps construct the network in a logical manner

60
 5. Activity Sequencing
 Involves reviewing activities and
determining dependencies.
 A dependency or relationship relates to
the sequencing of project activities or
tasks.
 You must determine dependencies in
order to use critical path analysis.

61
 Three Types of Dependencies
 Mandatory dependencies: Inherent in the nature of
the work being performed on a project; sometimes
referred to as hard logic.
 Discretionary dependencies: Defined by the project
team; sometimes referred to as soft logic and should be
used with care because they may limit later scheduling
options.
 External dependencies: Involve relationships between
project and non-project activities.

62
 Network Diagrams
 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. We will use arrow method;

63
Figure 2. Sample Activity-on-Arrow (AOA)
Network Diagram for Project X

64
 Work Breakdown Structure
Start a New Business

Strategic Plan Define Business Plan for Proceed With

Opportunity Action Startup Plan

Provide Staffing Provide Physical Establish Business

Facilities Structure

Develop Select Bank Select Name Find Location

Install
Marketing
Operating
Plan
Control Base
Figure 8.2

65
X Hospital construction
project

66
 X Hospital project
Immediate
Activity Description Predecessor(s) Responsibility

A Select administrative and medical staff.

B Select site and do site survey.
C Select equipment.
D Prepare final construction plans and layout.
E Bring utilities to the site.
F Interview applicants and fill positions in
nursing, support staff, maintenance,
and security.
G Purchase and take delivery of equipment.
H Construct the hospital.
I Develop an information system.
J Install the equipment.
K Train nurses and support staff.

Example 8.1
67
XYZ Hospital project
Immediate
Activity Description Predecessor(s) Responsibility

A Select administrative and medical staff. — Yohannes

B Select site and do site survey. — Taye
C Select equipment. A Adamu
D Prepare final construction plans and layout. B Taye
E Bring utilities to the site. B Bulti
F Interview applicants and fill positions in A Yohammes
nursing, support staff, maintenance,
and security.
G Purchase and take delivery of equipment. C Adamu
H Construct the hospital. D Taye
I Develop an information system. A Simon
J Install the equipment. E,G,H Adamu
K Train nurses and support staff. F,I,J Yohannes
 St. Adolf’s Hospital
Immediate
Activity Description Predecessor(s) Responsibility
AOA Network
A Select administrative and medical staff. — Johnson
B Select site and do site survey. — Taylor
C Select equipment. A Adams
D Prepare final construction plans and layout. B Taylor
E Bring utilities to the site. B Burton
F Interview applicants and fill positions in A Johnson
nursing, support staff, maintenance,
and security.
G Purchase and take delivery of equipment. C Adams
H Construct the hospital. D Taylor
I Develop an information system. A Simmons
J Install the equipment. E,G,H Adams
K Train nurses and support staff. F,I,J Johnson

Example 8.1
69
 St. Adolf’s Hospital
Immediate
Activity Description Predecessor(s) Responsibility
AOA Network
A 2
Select administrative and medical staff. — Johnson
B Select site and do site survey. — Taylor
C Select equipment. A Adams
D A final construction plans and layout. B
Prepare Taylor
E Bring utilities to the site. B Burton
F Interview applicants and fill positions in A Johnson
Start nursing, support staff, maintenance,
1 and security.
G Purchase and take delivery of equipment. C Adams
H Construct the hospital. D Taylor
I Develop an information system. A Simmons
J Install the equipment. E,G,H Adams
K Train nurses and support staff. F,I,J Johnson

Example 8.1
70
 St. Adolf’s Hospital
Immediate
Activity Description Predecessor(s) Responsibility
AOA Network
A 2
Select administrative and medical staff. — Johnson
B Select site and do site survey. — Taylor
C Select equipment. A Adams
D A final construction plans and layout. B
Prepare Taylor
E Bring utilities to the site. B Burton
F Interview applicants and fill positions in A Johnson
Start nursing, support staff, maintenance,
1 and security.
G Purchase and take delivery of equipment. C Adams
H Construct the hospital. D Taylor
I B
Develop an information system. A Simmons
J Install the equipment. E,G,H Adams
K Train nurses and support staff. F,I,J Johnson
4

Example 8.1
71
 St. Adolf’s Hospital
Immediate
Activity Description Predecessor(s) Responsibility
AOA Network
A 2
Select administrative and medical staff. — Johnson
B Select site and do site survey. — Taylor
C C
Select equipment. A Adams
D A final construction plans and layout. B
Prepare Taylor
E Bring utilities
3 to the site. B Burton
F Interview applicants and fill positions in A Johnson
Start nursing, support staff, maintenance,
1 and security.
G Purchase and take delivery of equipment. C Adams
H Construct 5 the hospital. D Taylor
I B
Develop an information system. A Simmons
J Install the equipment.
D E,G,H Adams
K Train nurses and support staff. F,I,J Johnson
4

Example 8.1
72
 St. Adolf’s Hospital
Immediate
Activity Description Predecessor(s) Responsibility
AOA Network
F
A 2 8
Select administrative and medical staff. — Johnson
B Select site and doIsite survey. — Taylor
C C
Select equipment. A Adams
D A final construction plans and layout. B
Prepare Taylor
E Bring utilities
3 to the site.7 B Burton
F Interview applicants and fill positions in A Johnson
Start nursing,Gsupport staff, maintenance,
1 and security.
G Purchase and takeH delivery of equipment. C Adams
H 5
Construct the hospital. 6 D Taylor
I B
Develop an information system. A
E E,G,H
Simmons
J Install the equipment.
D Adams
K Train nurses and support staff. F,I,J Johnson
4

Example 8.1
73
 St. Adolf’s Hospital
Immediate
Activity Description Predecessor(s) Responsibility
AOA Network
F
A 2 8
Select administrative and medical staff. — Johnson
B Select site and doIsite survey. — Taylor
C C
Select equipment. A Adams
D A final construction plans and layout. B
Prepare Taylor
E Bring utilities
3 to the site.7 B Burton
F J
Interview applicants and fill positions in A Johnson
Start nursing,Gsupport staff, maintenance,
1 and security.
G Purchase and takeH delivery of equipment. C Adams
H 5
Construct the hospital. 6 D Taylor
I B
Develop an information system. A
E E,G,H
Simmons
J Install the equipment.
D Adams
K Train nurses and support staff. F,I,J Johnson
4

Example 8.1
74
 St. Adolf’s Hospital
Immediate
Activity Description Predecessor(s) Responsibility
AOA Network
F
A 2 8
Select administrative and medical staff. — Johnson
B Select site and doIsite survey. — Taylor
C C
Select equipment.
Dummy
A Adams
D A final construction plans and layout. B
Prepare Taylor
E Bring utilities
3 to the site.7 B Burton
F J
Interview applicants and fill positions in A Johnson
Start nursing,Gsupport staff, maintenance,
1 and security.
G Purchase and takeH delivery of equipment. C Adams
H 5
Construct the hospital. 6 D Taylor
I B
Develop an information system. A
E E,G,H
Simmons
J Install the equipment.
D Adams
K Train nurses and support staff. F,I,J Johnson
4

Example 8.1
75
 St. Adolf’s Hospital
Immediate
Activity Description Predecessor(s) Responsibility
AOA Network
F
A 2 8
Select administrative and medical staff. — Johnson
B Select site and doIsite survey. — Taylor
C C
Select equipment.
Dummy
A Adams
K
D A final construction plans and layout. B
Prepare Taylor
E Bring utilities
3 to the site.7 B Burton
F J
Interview applicants and fill positions in A Johnson
Start nursing,Gsupport staff, maintenance,
Finish
1 and security.
G Purchase and takeH delivery of equipment. C 9 Adams
H Construct 5the hospital. 6 D Taylor
I B
Develop an information system. A
E E,G,H
Simmons
J Install the equipment.
D Adams
K Train nurses and support staff. F,I,J Johnson
4

76
 St. Adolf’s Hospital
Immediate
Activity
Completion TimeDescription I Predecessor(s) Responsibility
15
A Select administrative and medical staff. — Johnson
B Select site and do site survey. — Taylor
C Select Aequipment. F A Adams K
12 10
D Prepare final construction plans and layout. 6B Taylor
E Bring utilities to the site. B Burton
F Interview applicants and fill positions in A Johnson
Start nursing,Csupport staff,
G maintenance,
Finish
10 35
and security.
G Purchase and take delivery of equipment. C Adams
H Construct
B the hospital.D HD JTaylor
I Develop 9 an information
10 system.40A 4Simmons
J Install the equipment. E,G,H Adams
K Train nurses and support staff. F,I,J Johnson
E
24

77
 St. Adolf’s Hospital
Immediate
Activity
Completion TimeDescription I Predecessor(s) Responsibility
15
A Select administrative and medical staff. — Johnson
B Select site and do site survey. — Taylor
C Select Aequipment. F A Adams K
12 10
D Prepare final construction plans and layout. 6B Taylor
E Bring utilities to the site. B Burton
F Interview applicants and fill positions in A Johnson
Start nursing,Csupport staff,
G maintenance,
Finish
10 35
and security.
G Purchase and take delivery of equipment. C Adams
H Construct
B the hospital.D HD JTaylor
I Develop 9 an information
10 system.40A 4Simmons
J Install the equipment. E,G,H Adams
K Train nurses and support staff. F,I,J Johnson
E
24

78
 St. Adolf’s Hospital
Immediate
Activity
Completion TimeDescription I Predecessor(s) Responsibility
15
A Select administrative and medical staff. — Johnson
B Select site and do site survey. — Taylor
C Select Aequipment. F A Adams K
12 10
D Prepare final construction plans and layout. 6B Taylor
E Bring utilities to the site. B Burton
F Interview applicants and fill positions in A Johnson
Start nursing,Csupport staff,
G maintenance,
Finish
10 35
and security.
G Purchase and take delivery of equipment. C Adams
H Construct
B the hospital.D HD JTaylor
I Develop 9 an information
10 system.40A 4Simmons
J Install the equipment. E,G,H Adams
K Train nurses and support staff. F,I,J Johnson
E
24

79
 St. Adolf’s Hospital
Immediate
Activity
Completion TimeDescription I Predecessor(s) Responsibility
15
A Select administrative and medical staff. — Johnson
B Select site and do site survey. — Taylor
C Select Aequipment. F A Adams K
12 10
D Prepare final construction plans and layout. 6B Taylor
E Bring utilities to the site. B Burton
F Interview applicants and fill positions in A Johnson
Start nursing,Csupport staff,
G maintenance,
Finish
10 35
and security.
G Purchase and take delivery of equipment. C Adams
H Construct
B the hospital.D HD JTaylor
I Develop 9 an information
10 system.40A 4Simmons
J Install the equipment. E,G,H Adams
K Train nurses and support staff. F,I,J Johnson
E
24

80
 St. Adolf’s Hospital
Immediate
Activity
Completion TimeDescription I Predecessor(s) Responsibility
15
A Select administrative and medical staff. — Johnson
B Select site and do site survey. — Taylor
C Select Aequipment. F A Adams K
12 10
D Prepare final construction plans and layout. 6B Taylor
E Bring utilities to the site. B Burton
F Interview applicants and fill positions in A Johnson
Start nursing,Csupport staff,
G maintenance,
Finish
10 35
and security.
G Purchase and take delivery of equipment. C Adams
H Construct
B the hospital.D HD JTaylor
I Develop 9 an information
10 system.40A 4Simmons
J Install the equipment. E,G,H Adams
K Train nurses and support staff. F,I,J Johnson
E
24

81
 St. Adolf’s Hospital
Immediate
Activity
Completion TimeDescription I Predecessor(s) Responsibility
15
A Select administrative and medical staff. — Johnson
B Select site and do site survey. — Taylor
C Select Aequipment. F A Adams K
12 10
D Prepare final construction plans and layout. 6B Taylor
E Bring utilities to the site. B Burton
F Interview applicants and fill positions in A Johnson
Start nursing,Csupport staff,
G maintenance,
Finish
10 35
and security.
G Purchase and take delivery of equipment. C Adams
H Construct
B the hospital.D HD JTaylor
I Develop 9 an information
10 system.40A 4Simmons
J Install the equipment. E,G,H Adams
K Train nurses and support staff. F,I,J Johnson
E
24

82
 X Hospital
Path Expected Time (wks)
Immediate
Activity Description I Predecessor(s) Responsibility
Completion
A-F-K Time28 15
A-I-K A 33administrative and medical staff.
Select — Johnson
B
A-C-G-J-K Select
67Asite and do site survey. — Taylor
C Select equipment. F A Adams K
B-D-H-J-K
D 6912final construction
Prepare 10
plans and layout. 6B Taylor
B-E-J-K E 43utilities to the site.
Bring B Burton
F Interview applicants and fill positions in A Johnson
Start nursing,Csupport staff,
G maintenance,
Finish
10 35
and security.
G Purchase and take delivery of equipment. C Adams
H Construct
B the hospital.
D HD JTaylor
I Develop 9 an information
10 system.40A 4Simmons
J Install the equipment. E,G,H Adams
K Train nurses and support staff. F,I,J Johnson
E
24

83
 St. Adolf’s Hospital
Path Expected Time (wks)
Immediate
Activity Description I Predecessor(s) Responsibility
Completion
A-F-K Time28 15
A-I-K A 33administrative and medical staff.
Select — Johnson
B
A-C-G-J-K Select
67Asite and do site survey. — Taylor
C Select equipment. F A Adams K
B-D-H-J-K
D 6912final construction
Prepare 10
plans and layout. 6B Taylor
B-E-J-K E 43utilities to the site.
Bring B Burton
F Interview applicants and fill positions in A Johnson
Start nursing,Csupport staff,
G maintenance,
Finish
10 35
and security.
G Purchase and take delivery of equipment. C Adams
H Construct
B the hospital.
D HD JTaylor
I Develop 9 an information
10 system.40A 4Simmons
J Install the equipment. E,G,H Adams
K Train nurses and support staff. F,I,J Johnson
E
24

84
 St. Adolf’s Hospital
Immediate
Activity
Completion TimeDescription I Predecessor(s) Responsibility
15
A Select administrative and medical staff. — Johnson
B Select site and do site survey. — Taylor
C Select Aequipment. F A Adams K
12 10
D Prepare final construction plans and layout. 6B Taylor
E Bring utilities to the site. B Burton
F Interview applicants and fill positions in A Johnson
Start nursing,Csupport staff,
G maintenance,
Finish
10 35
and security.
G Purchase and take delivery of equipment. C Adams
H Construct
B the hospital.D HD JTaylor
I Develop 9 an information
10 system.40A 4Simmons
J Install the equipment. E,G,H Adams
K Train nurses and support staff. F,I,J Johnson
E
24

85
X Hospital

86
 X Hospital
I

15

A F K

12 10 6

C G
Start Finish
10 35

B D H J

9 10 40 4
Earliest Start
and
E
Earliest Finish Times
24 Example 8.2

87
 X Hospital
I

15
Earliest start time

0
A F K

12 10 6

C G
Start Finish
10 35

B D H J

9 10 40 4
Earliest Start
and
E
Earliest Finish Times
24 Example 8.2

88
 X Hospital
I

Earliest start time

15 Earliest finish time

0
A 12 F K

12 10 6

C G
Start Finish
10 35

B D H J

9 10 40 4
Earliest Start
and
E
Earliest Finish Times
24

89
St. Adolf’s Hospital I

15

0
A 12 F K

12 10 6

C G
Start Finish
10 35

0
B 9 D H J

9 10 40 4
Earliest Start
and
E
Earliest Finish Times
24

90
St. Adolf’s Hospital I

15

0
A 12 F K

12 10 6

C G
Start Finish
10 35

0
B 9 9
D 19 H J

9 10 40 4
Earliest Start
and
9 E 33
Earliest Finish Times
24

91
St. Adolf’s Hospital 12
I 27

15

0
A 12 12
F 22 K

12 10 6

12
C 22 G
Start Finish
10 35

0
B 9 9
D 19 H J

9 10 40 4
Earliest Start
and
9 E 33
Earliest Finish Times
24

92
St. Adolf’s Hospital 12
I 27

15

0
A 12 12
F 22 K

12 10 6

12
C 22 G
Start Finish
10 35

0
B 9 9
D 19 19
H 59 J

9 10 40 4
Earliest Start
and
9 E 33
Earliest Finish Times
24

93
St. Adolf’s Hospital 12
I 27

15

0
A 12 12
F 22 K

12 10 6

12
C 22 22
G 57
Start Finish
10 35

0
B 9 9
D 19 19
H 59 J

9 10 40 4
Earliest Start
and
9 E 33
Earliest Finish Times
24 Example 8.2

94
St. Adolf’s Hospital 12
I 27

15

0
A 12 12
F 22 K

12 10 6

12
C 22 22
G 57
Start Finish
10 35

0
B 9 9
D 19 19
H 59 59
J 63

9 10 40 4
Earliest Start
and
9 E 33
Earliest Finish Times
24 Example 8.2

95
St. Adolf’s Hospital 12
I 27
Earliest start time Earliest finish time
15

0
A 12 12
F 22 63 K 69
12 10 6

12
C 22 22
G 57
Start Finish
Critical 10 35
path

0
B 9 9
D 19 19
H 59 59
J 63

9 10 40 4
Earliest Start
and
9 E 33
Earliest Finish Times
24
 St. Adolf’s Hospital 12
I 27

15

0
A 12 12
F 22 63 K 69
12 10 6

12
C 22 22
G 57
Start Finish
10 35

0
B 9 9
D 19 19
H 59 59
J 63

9 10 40 4
Latest Start
and
9 E 33
Latest Finish Times
24 Example 8.3

97
 St. Adolf’s Hospital 12
I 27

15

0
A 12 12
F 22 63 K 69
12 10 63 69
6 Latest
finish
time
12
C 22 22
G 57
Start Finish
10 35

0
B 9 9
D 19 19
H 59 59
J 63

9 10 40 4
Latest Start
and
9 E 33
Latest Finish Times
24 Example 8.3

98
 St. Adolf’s Hospital 12
I 27

15

0
A 12 12
F 22 Latest 63 K 69
12 10 start 63 69
6 Latest
time finish
time
12
C 22 22
G 57
Start Finish
10 35

0
B 9 9
D 19 19
H 59 59
J 63

9 10 40 4
Latest Start
and
9 E 33
Latest Finish Times
24 Example 8.3

99
 St. Adolf’s Hospital 12
I27
48 15 63

0
A 12 12
F22 63 K 69
53 10 63 63 69
12 6

12
C 22 22
G 57
Start Finish
10 35

0
B 9 9
D 19 19
H 59 59
J 63
40 59 4 63
9 10
Latest Start
and
9 E 33
Latest Finish Times
24 Example 8.3

100
 St. Adolf’s Hospital 12
I27
48 15 63

0
A 12 12
F22 63 K 69
53 10 63 63 69
12 6

12
C 22 22
G 57
Start Finish
10 24 35 59

0
B 9 9
D 19 19
H 59 59
J 63
19 40 59 59 4 63
9 10
Latest Start
and
9 E 33
Latest Finish Times 35 24 59
Example 8.3

101
 St. Adolf’s Hospital 12
I 27
48 15 63

0
A 12 12
F 22 63 K 69
53 10 63 63 69
12 6

12
C 22 22
G 57
Start Finish
14 10 24 24 35 59

0
B 9 9
D 19 19
H 59 59
J 63
9 10 19 19 40 59 59 4 63
9
Latest Start
and
9 E 33
Latest Finish Times 35 24 59
Example 8.3

102
 St. Adolf’s Hospital 12
I 27
Earliest start time Earliest finish time
48 15 63
Latest start time Latest finish time

0
A 12 12
F 22 63 K 69
2 12 14 53 10 63 63 69
6

12
C 22 22
G 57
Start Finish
14 10 24 24 35 59
Critical
path

0
B 9 9
D 19 19
H 59 59
J 63
0 9 9 9 10 19 19 40 59 59 4 63
Latest Start
and
9 E 33
Latest Finish Times 35 24 59
Figure 8.8

103
 St. Adolf’s Hospital
Gantt
Charts

Figure 8.9(a)
104
 X Hospital
12
I 27
48 15 63

0
A 12 12
F 22 63 K 69
2 12 14 53 10 63 63 69
6

12
C 22 22
G 57
Start Finish
14 10 24 24 35 59

0
B 9 9
D 19 19
H 59 59
J 63
0 9 9 9 10 19 19 40 59 59 4 63

Activity Slack
9 E 33
Analysis 35 24 59
 St. Adolf’s Hospital
Activity Slack
12
I 27
48 15 63

0
A 12 12
F 22 63 K 69
2 12 14 53 10 63 63 69
6

12
C 22 22
G 57
Start
14 10 24 24 35 59 Finish

0
B 9 9
D 19 19
H 59 59
J 63
0 9 9 9 10 19 19 40 59 59 4 63

Activity Slack
9 E 33
Analysis 35 24 59
 St. Adolf’s Hospital
Activity Slack
12
I 27
48 15 63
Slack = LS – ES
or A F
0 12 12 22 63 K 69
Slack = LF – EF 2 12 14 53 10 63 63
6 69

12
C 22 22
G 57
Start
14 10 24 24 35 59 Finish

0
B 9 9
D 19 19
H 59 59
J 63
0 9 9 9 10 19 19 40 59 59 4 63

Activity Slack
9 E 33
Analysis 35 24 59
 St. Adolf’s Hospital
Activity Slack
12
I 27
48 15 63
SlackK = 63 – 63
or 0
A 12
F 63 K 69
12 22
2 12 14 53 10 63 63 69
SlackK = 69 – 69 6

12
C 22 22
G 57
Start
14 10 24 24 35 59 Finish

0
B 9 9
D 19 19
H 59 59
J 63
0 9 9 9 10 19 19 40 59 59 4 63

Activity Slack
9 E 33
Analysis 35 24 59
 St. Adolf’s Hospital
Activity Slack
12
I 27
48 15 63
SlackK = 0
or 0
A 12
F 63 K 69
12 22
2 12 14 53 10 63 63 69
SlackK = 0 6

12
C 22 22
G 57
Start
14 10 24 24 35 59 Finish

0
B 9 9
D 19 19
H 59 59
J 63
0 9 9 9 10 19 19 40 59 59 4 63

Activity Slack
9 E 33
Analysis 35 24 59
 St. Adolf’s Hospital 12
I 27
48 15 63

0
A 12 12
F 22 63 K 69
2 12 14 53 10 63 63 69
6

12
C 22 22
G 57
Start
14 10 24 24 35 59 Finish

0
B 9 9
D 19 19
H 59 59
J 63
0 9 9 9 10 19 19 40 59 59 4 63

Activity Slack
9 E 33
Analysis 35 24 59
Node Duration ES LS Slack
St. Adolf’s Hospital 12
I 27
48 15 63

0
A 12 12
F 22 63 K 69
2 12 14 53 10 63 63 69
6

12
C 22 22
G 57
Start
14 10 24 24 35 59 Finish

0
B 9 9
D 19 19
H 59 59
J 63
0 9 9 9 10 19 19 40 59 59 4 63

Activity Slack
9 E 33
Analysis 35 24 59
Node Duration ES LS Slack
St. 12Adolf’s
A 0 2 Hospital
2
12
I 27
B 9 0 0 0 48 15 63
C 10 12 14 2
D 10 9 9 0
E 24 9 35 26
A 12 F
0 12 22 63 K 69
F 10 12 53 41
2 53 10 63 63 69
G 35 22 24 122 14 6
H 40 19 19 0
I 15 12 48 36 C G
J 4 59 59 0 12 22 22 57
Start
14 10 24 24 35 59 Finish
K 6 63 63 0

0 9
B 9
D 19 19
H 59 59
J 63
0 9 9 9 10 19 19 40 59 59 4 63

Activity Slack
9 E 33
Analysis 35 24 59
Node Duration ES LS Slack
St. 12Adolf’s
A 0 2 Hospital
2
12
I 27
B 9 0 0 0 48 15 63
C 10 12 14 2
D 10 9 9 0
E 24 9 35 26 F
12 22 63 K 69
F 10 12 53 41
53 10 63 63 69
G 35 22 24 2 6
H 40 19 19 0
I 15 12 48 36 C G
J 4 59 59 0 12 22 22 57
14 10 24 24 35 59 Finish
K 6 63 63 0

0
B 9 9
D 19 19
H 59 59
J 63
0 9 9 9 10 19 19 40 59 59 4 63

9 E 33
Critical Path 35 24 59
Example 8.4

113
 X Hospital
12
I 27
48 15 63

0
A 12 12
F 22 63 K 69
2 12 14 53 10 63 63 69
6

12
C 22 22
G 57
Start Finish
14 10 24 24 35 59

0
B 9 9
D 19 19
H 59 59
J 63
0 9 9 9 10 19 19 40 59 59 4 63

9 E 33
Critical Path 35 24 59
 X Hospital

Probabilistic Time Estimates I

A F K

Mean
Start C G Finish
a + 4m + b
te = 6
B D H J

Variance E

( )
b–a 2

2 = 6
 X Hospital
Probabilistic Time Estimates
I

A F K

Activity B
Most Start C G Finish
Optimistic Likely Pessimistic
(a) (m) (b)
B D H J
7 8 15

E
 X Hospital

Probabilistic Time Estimates I

A F K

Activity B
Most Start C G Finish
Optimistic Likely Pessimistic
(a) (m) (b)
B D H J
7 8 15

7 + 4(8) + 15 E
te = 6 = 9 weeks

( )
15 - 7 2

 = 6
2
= 1.78
 X Hospital

Time Estimates (wk) Activity Statistics

Optimistic Likely Pessimistic Expected Variance
Activity (a) (m) (b) Time (te ) (2 )
A 11 12 13 12 0.11
B 7 8 15 9 1.78
C 5 10 15 10 2.78
D 8 9 16 10 1.78
E 14 25 30 24 7.11
F 6 9 18 10 4.00
G 25 36 41 35 7.11
H 35 40 45 40 2.78
I 10 13 28 15 9.00
J 1 2 15 4 5.44
K 5 6 7 6 0.11
Example 8.6
 X Hospital

Probabilities

Critical Path = B - D - H - J - K

T = 72 days TE = 69 days

T – TE
 =  (variances of activities)
2 z=
2
2 = 1.78 + 1.78 + 2.78 + 5.44 + 0.11 = 11.89
72 – 69
z=
11.89
 X Hospital

Probabilities

Critical Path = B - D - H - J - K

T = 72 days TE = 69 days

T – TE
 =  (variances of activities)
2 z=
2
2 = 1.78 + 1.78 + 2.78 + 5.44 + 0.11 = 11.89
72 – 69 From Appendix 2
z= = 0.87 Pz = .8078  .81
11.89
St. Adolf’s Hospital
Probabilities
Normal distribution:
Critical Path = B - D - H - J - KMean = 69 weeks;
Length of
critical path  = 3.45 weeks
T = 72 days TE = 69 days
Probability of T–T
 =
2 meeting the of activities)
(variances z Probability
=
exceeding 72
ofE

weeks 
schedule is 2
0.8078 is 0.1922

2 = 1.78 + 1.78 + 2.78 + 5.44 + 0.11 = 11.89

z=
72 – 69
= 0.87 69 From
72 Appendix 2
11.89 Pz = .8078  .81
Project duration (weeks)
Figure 8.13
 X Hospital

Probabilities

Path = A - C - G - J - K

T = 72 days TE = 67 days

T – TE
 =  (variances of activities)
2 z=
2
2 = 0.11 + 2.78 + 7.11 + 5.44 + 0.11 = 15.55
72 – 67 From Appendix 2
z= = 1.27 Pz = .8980  .90
15.55
 St. Adolf’s Hospital
TABLE 8.2 SLACK CALCULATIONS AFTER ACTIVITIES A
AND B HAVE BEEN COMPLETED
I
Activity Duration Earliest Start Latest Start Slack

C 10 16 A F 14 K –2
G 35 26 24 –2
J 4 61 C
59 G
–2
Start Finish
K 6 65 63 –2
D 10 10 9 –1
H 40 20 B D 19 H J –1
E 24 10 35 25
I 15 16 E
48 32
F 10 16 53 37
 Process for Creating AOA Diagrams
1. Find all of the activities that start at node 1. Draw their finish
nodes and draw arrows between node 1 and those finish
nodes. Put the activity letter or name and duration estimate on
the associated arrow.
2. Continuing drawing the network diagram, working from left
to right. Look for bursts and merges. A burst occurs when a
single node is followed by two or more activities. A merge
occurs when two or more nodes precede a single node.
3. Continue drawing the project network diagram until all
activities that have dependencies are included in the diagram.
4. As a rule of thumb, all arrowheads should face toward the
right, and no arrows should cross in an AOA network diagram.

125
 6. 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 organization’s history in doing similar
activities?
 Are the required resources available?

127
 7. 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 (CPM), and PERT
analysis.

128
 7.1. Gantt Charts
 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.
 Symbols include:
 Black diamonds: Milestones
 Thick black bars: Summary tasks
 Lighter horizontal bars: Durations of tasks
 Arrows: Dependencies between tasks

129
Figure: Gantt Chart for Project X

130
Figure: Gantt Chart for Software Launch Project

131
 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.

132
 7.2. 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.

135
 Calculating the Critical Path
1. Develop a good network diagram.
2. Add the duration estimates for all activities on
each path through the network diagram.
3. The longest path is the critical path.
4. 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.

136
Figure: Determining the Critical Path for Project X

137
 More on the Critical Path ….
 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.

138
 Using Critical Path Analysis to Make
Schedule Trade-offs
 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.

139
 Reading Assignment

 Read about Calculating Early and Late Start

and Finish Dates

140
Figure: Calculating Early and Late Start and Finish
Dates

141
Table 1. Free and Total Float or Slack for Project X

142
 Using the Critical Path to Shorten a
Project Schedule
 Three main techniques for shortening
schedules:
 Shortening the duration of critical activities or tasks
by adding more resources or changing their scope.
 Crashing activities: by obtaining the greatest
amount of schedule compression for the least
incremental cost. [read the calculation]
 Fast tracking activities: by doing them in parallel
or overlapping them.
143
 Many Horror Stories Related to Project
Schedules
 Creating realistic schedules and sticking to
them is a key challenge of project management.
 Crashing and fast tracking often cause more
problems, resulting in longer schedules.
 Organizational issues often cause schedule
problems.

144
Importance of Updating Critical
Path Data
 It is important to update project schedule
information to meet time goals for a project.

 The critical path may change as you enter actual

start and finish dates.

 If you know the project completion date will

slip, negotiate with the project sponsor.

145
 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.
 Parkinson’s Law states that work expands to fill the time
allowed.
 In traditional estimates, people often add a buffer to each
task and use the additional time whether it’s needed or not.
 Critical chain scheduling removes buffers from individual
tasks and instead creates:
 A project buffer or additional time added before the project’s
due date.
 Feeding buffers or additional time added before tasks on the
critical path.

146
 Schedule Control
 Perform reality checks on schedules.
 Allow for contingencies.
 Don’t plan for everyone to work at 100 percent
capacity all the time.
 Hold progress meetings with stakeholders and
be clear and honest in communicating schedule
issues.

147
 Schedule Control (Cont’d…..)
 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 value
148
 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.

149
 Using Software to Assist in Time
Management

 Software for facilitating communication helps people

exchange schedule-related information.

 Decision support models help analyze trade-offs that

can be made.

 Project management software can help in various time

management areas.

150
 Words of Caution on Using Project
Management Software

 Many people misuse project management software

because they don’t understand important concepts and
have not had training.

 You must enter dependencies to have dates adjust

automatically and to determine the critical path.

 You must enter actual schedule information to compare

planned and actual progress.

152
 Summary
 Project time management is often cited as the main
source of conflict on projects, and most projects exceed
time estimates.
 Main processes include:
 Activity definition
 Activity sequencing
 Activity resource estimating
 Activity duration estimating
 Schedule development
 Schedule control

153
 Exercise
Activity Dependencies
number (preceding activities)
A -
B After a
C After a
D After b
E After c
F After d, e

154
3. Project Cost Management

Project Management Knowledge areas

 What is Project Cost Management?

 Project cost management includes the processes

required to ensure that a project team completes a
project within an approved budget.
 There are four project cost management processes:
 Resource planning
 Cost estimating
 Cost budgeting
 Cost control

156
 1. Resource Planning
 Resource planning involves determining what resources (people,
equipment, and materials) a project team should use to perform
project activities and the quantities of each resource.
 The main output of the resource planning process is a list of
resource requirements, including people, equipment, and
materials.
 The nature of the project and the organization will affect resource
planning.
 Expert judgment and the availability of alternatives are the only
real tools available to assist in resource planning.
 The people who help determine what resources are necessary
include people who have experience and expertise in similar
projects and with the organization performing the project.

157
 2. Cost Estimating
 Cost estimating involves developing an approximation
or estimate of the costs of the resources needed to
complete a project.
 The main outputs of the cost estimating process are:
 Cost estimates;
 Supporting detail; and
 A cost management plan
 Types of cost estimates are:
 Rough order of magnitude (ROM) estimate;
 Budgetary estimate; and
 Definitive estimate

158
 Types of Cost Estimates
 Rough order of magnitude (ROM) Estimate
 ROM estimate provides a rough idea of what a
project will cost.
 This type of estimate is done very early in a project
or even before a project is officially started.
 Project managers and top management use this
estimate to help make project selection decisions.
 The timeframe for this type of estimate is often three
or more years prior to project completion.

159
 Types of Cost Estimates (Cont.)
 Budgetary estimate
 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.

160
 Cont’d…..
 Definitive estimate
 A definitive estimate provides an accurate estimate
of project costs.
 Definitive estimates are used for making many
purchasing decisions for which accurate estimates
are required and for estimating final project costs.
 Definitive estimates are made one year or less prior
to project completion.
 A definitive estimate should be the most
accurate of the three types of estimates.

161
 Cont’d….
 Supporting detail
 It is very important to include supporting details with all
cost estimates because it would make it easier to prepare an
updated estimate or similar estimate as needed.
 The supporting details include:
 The ground rules and assumptions used in creating the estimate;
 A description of the project (scope statement, WBS, and so on)
used as a basis for the estimate; and
 Details on the cost estimation tools and techniques used to create the
estimate.
 A cost management plan is a document that describes
how the organization will manage cost variances on
the project.

162
 Cost Estimation Tools & Techniques
 Top-down estimates
 Using the actual cost of a previous, similar project as the basis for
estimating the cost of the current project
 Requiring much of expert judgment
 Being generally less costly but less accurate than others are
 Bottom-up estimating
 Involving estimating individual work items and summing them to get a
project total
 Being more accurate with smaller work items
 Being usually time-intensive and therefore expensive to develop
 Parametric modeling
 Using project characteristics (parameters) in a mathematical model to
estimate project costs
 Being most reliable when:
 The historical info. that was used to create the model is accurate;
 The parameters are readily quantifiable; and
 The model is flexible in terms of the size of the project

163
 3. Cost Budgeting
 Cost budgeting involves allocating the overall project
cost estimate to individual work items to prepare
budgetary estimates and to establish a cost baseline for
measuring project performance.
 These work items are based on the WBS (a required
input to the cost budgeting process) for the project.
 The main output of the cost budgeting process is a cost
baseline.
 A cost baseline is a time-phased budget that project
managers use to measure and monitor cost performance.

164
 4. Cost Control
 Cost control involves controlling changes to the project
budget.
 Project cost control includes:
 Monitoring cost performance;
 Ensuring that only appropriate project changes are included in
a revised cost baseline; and
 Informing project stakeholders of authorized changes to the
project that will affect costs.
 The inputs to the cost control process are the cost
baseline, performance reports, change requests, and the
cost management plan.
 The main outputs of the cost control process are revised
cost estimates, budget updates, corrective action, revised
estimates for project completion, and lessons learned.
165
END

166
4: Project Human Resource
Management

Project Management Knowledge areas

 Group activity

 Why HRM in project mgt?

 What are the elements/activities of HRM?
 What are the challenges of project HRM?

169
 1. What is Project HRM?
 It focuses on making the most effective use of the people
involved with a project.
 HRM Processes include:
 Human resource planning: Identifying and documenting
project roles, responsibilities, and reporting relationships.
 Acquiring the project team: Getting the needed personnel
assigned to and working on the project.
 Developing the project team: Building individual and group
skills to enhance project performance.
 Managing the project team: Tracking team member
performance, motivating team members, providing timely
feedback, resolving issues and conflicts, and coordinating
changes to help enhance project performance.

170
 2. Keys to Managing People
 Psychologists and management theorists have
devoted much research and thought to the field
of managing people at work.
 Important areas related to project management
include:
 Motivation
 Influence and power
 Effectiveness

171
Motivating HR

172
 1. Intrinsic and Extrinsic Motivation
 Intrinsic motivation causes people to participate in an
activity for their own enjoyment.

 Extrinsic motivation causes people to do something

for a reward or to avoid a penalty.

173
 Maslow’s Hierarchy of Needs
 Abraham Maslow argued that human beings
possess unique qualities that enable them to
make independent choices, thus giving them
control of their destiny.

 Maslow developed a hierarchy of needs, which

states that people’s behaviors are guided or
motivated by a sequence of needs.

174
Figure 1. Maslow’s Hierarchy
of Needs

175
 Herzberg’s Motivational and Hygiene
Factors
 Frederick Herzberg wrote several famous books and
articles about worker motivation. He distinguished
between:
 Motivational factors: Achievement, recognition, the
work itself, responsibility, advancement, and growth.
These factors produce job satisfaction.
 Hygiene factors: Larger salaries, more supervision, and
a more attractive work environment. These factors cause
dissatisfaction if not present, but do not motivate
workers to do more.

176
 McClelland’s Acquired-Needs Theory
 Specific needs are acquired or learned over time and are shaped
by life experiences. The following are the main categories of
acquired needs:
 Achievement (nAch): People with a high need for achievement
like challenging projects with attainable goals and lots of feedback.
 Affiliation (nAff): People with high need for affiliation desire
harmonious relationships and need to feel accepted by others, so
managers should try to create a cooperative work environment for
them.
 Power (nPow): People with a need for power desire either
personal power (not good) or institutional power (good for the
organization). Provide institutional power seekers with
management opportunities.

177
 McGregor’s Theory X and Y
 Douglas McGregor popularized the human relations approach to
management in the 1960s.
 Theory X: Assumes workers dislike and avoid work, so
managers must use coercion, threats, and various control
schemes to get workers to meet objectives.
 Theory Y: Assumes individuals consider work as natural as play
or rest and enjoy the satisfaction of esteem and self-actualization
needs.
 Theory Z: Introduced in 1981 by William Ouchi and is based on
the Japanese approach to motivating workers, which emphasizes
trust, quality, collective decision making, and cultural values.

178
 Thamhain and Wilemon’s Ways to
Have Influence on Projects
1. Authority: The legitimate hierarchical right to issue
orders.
2. Assignment: The project manager's perceived ability to
influence a worker's later work assignments.
3. Budget: The project manager's perceived ability to
authorize others' use of discretionary funds.
4. Promotion: The ability to improve a worker's position.
5. Money: The ability to increase a worker's pay and
benefits.
179
 Thamhain and Wilemon’s Ways (cont’d)

6. Penalty: The project manager's ability to cause

punishment.
7. Work challenge: The ability to assign work that
capitalizes on a worker's enjoyment of doing a
particular task.
8. Expertise: The project manager's perceived special
knowledge that others deem important.
9. Friendship: The ability to establish friendly personal
relationships between the project manager and others.

180
Influence and Power

181
 Ways to Influence that Help and Hurt
Projects
 Projects are more likely to succeed when
project managers influence people using:
 Expertise
 Work challenge
 Projects are more likely to fail when project
managers rely too heavily on:
 Authority
 Money
 Penalty

182
 Power
 Power is the potential ability to influence behavior to
get people to do things they would not otherwise do.
 Types of power include:
 Coercive power
 Legitimate power
 Expert power
 Reward power
 Referent power

183
Effectiveness

184
 Improving Effectiveness:
Covey’s Seven Habits
 Project managers can apply Covey’s seven habits to
improve effectiveness on projects.
 Be proactive
 Begin with the end in mind
 Put first things first
 Think win/win
 Seek first to understand, then to be understood.
 Synergize
 Sharpen the saw

185
Empathic Listening and Rapport
 Good project managers are empathic listeners,
meaning they listen with the intent to understand.
 Before you can communicate with others, you have
to have rapport, which is a relation of harmony,
conformity, accord, or affinity.
 Mirroring is the matching of certain behaviors of the
other person, and is a technique used to help establish
rapport.
 IT professionals need to develop empathic listening
and other people skills to improve relationships with
users and other stakeholders.

186
 Project HRM Functions
 Acquisition
 Training and Development
 Compensation

187
 Acquiring the Project Team
 Acquiring qualified people for teams is crucial.
 The project manager who is the smartest person on the
team has done a poor job of recruiting!
 Staffing plans and good hiring procedures are important,
as are incentives for recruiting and retention.
 Some companies give their employees one dollar for
every hour that a new person who they helped hire works.
 Some organizations allow people to work from home as
an incentive.

188
 Why People Leave Their Jobs?
 They feel they do not make a difference.
 They do not get proper recognition.
 They are not learning anything new or
growing as a person.
 They do not like their coworkers.
 They want to earn more money.

189
 Developing the Project Team
 The main goal of team development is to help
people work together more effectively to
improve project performance.

 It takes teamwork to successfully complete most

projects.

190
Tuckman Model of Team Development
 Forming involves the introduction of team members.
 Storming occurs as team members have different opinions as to
how the team should operate. People test each other, and there is
often conflict within the team.
 Norming is achieved when team members have developed a
common working method, and cooperation and collaboration
replace the conflict and mistrust of the previous phase.
 Performing occurs when the emphasis is on reaching the team
goals, rather than working on team process. Relationships are
settled, and team members are likely to build loyalty towards
each other. The team is able to manage tasks that are more
complex and cope with greater change.
 Adjourning involves the break-up of the team after they
successfully reach their goals and complete the work.

191
 HR Training and development
 Training can help people understand themselves
and each other, and understand how to work
better in teams.

 Team building activities include:

 Physical challenges

 Psychological preference indicator tools

192
 Reward and Recognition Systems
 Team-based reward and recognition systems can
promote teamwork.

 Focus on rewarding teams for achieving specific goals.

 Allow time for team members to mentor and help each

other to meet project goals and develop human
resources.

193
 Managing the Project Team
 Project managers must lead their teams in performing
various project activities.
 After assessing team performance and related
information, the project manager must decide:
 If changes should be requested to the project.
 If corrective or preventive actions should be
recommended.
 If updates are needed to the project management plan or
organizational process assets.

194
 Tools and Techniques for Managing
Project Teams
 Observation and conversation
 Project performance appraisals
 Conflict management
 Issue logs

195
 General Advice on Teams
 Be patient and kind with your team.
 Fix the problem instead of blaming people.
 Establish regular, effective meetings.
 Allow time for teams to go through the basic
team-building stages.
 Limit the size of work teams to three to seven
members.

196
 General Advice on Teams (cont’d)
 Plan some social activities to help project team
members and other stakeholders get to know
each other better.
 Stress team identity.
 Nurture team members and encourage them to
help each other.
 Take additional actions to work with virtual
team members.

197
 Summary
 Project human resource management includes the
processes required to make the most effective use of
the people involved with a project.
 Main processes include:
 Human resource planning
 Acquiring the project team
 Developing the project team
 Managing the project team

198
5. Project Communications Management

Project Knowledge area

 Learning Objectives
 Understand the importance of good communications in
projects.
 Explain the elements of project communications planning,
including how to create a communications management
plan and perform a stakeholder communications analysis.
 Describe various methods for distributing project
information and the advantages and disadvantages of
each, discuss the importance of addressing individual
communication needs, and calculate the number of
communications channels in a project.

200
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201
 Importance of Good
Communications
 The greatest threat to many projects is a failure to
communicate.
 There is a belief that project managers lack
communication skills
 Research shows that project professionals must be able
to communicate effectively to succeed in their
positions.
 Strong verbal skills are a key factor in career
advancement

202
 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.

203
 1. 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.

204
 Communications Management Plan
Contents

 Stakeholder communications requirements.

 Information to be communicated, including
format, content, and level of detail.
 The people who will receive the information
and who will produce it.
 Suggested methods or technologies for
conveying the information.

205
 Communications Management Plan Contents (cont’d)

 Frequency of communication.

 Escalation procedures for resolving issues.

 Revision procedures for updating the communications

management plan.

 A glossary of common terminology.

206
Table 1. Sample Stakeholder Analysis for Project
Communications

207
 2. 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.

208
 Distributing Information in an
Effective and Timely Manner
 Don’t bury 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.

209
 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.

210
 Encouraging More Face-to-Face
Interactions
 Short, frequent meetings are often very effective
in projects.
 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.

211
Table 2. Media Choice Table

212
 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.

213
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

214
 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.

215
Figure 1. The Impact of the Number of
People on Communications Channels

216
 3. 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.

217
 Managing Stakeholders
 Project managers must understand and work
with various stakeholders.
 Need to devise a way to identify and resolve
issues with stakeholders.

218
END

219
6: Project Risk Management

Project Knowledge areas

 Learning Objectives
 Understand what risk is and the importance of good project risk
management.
 Discuss the elements involved in risk management planning and
the contents of a risk management plan.
 List common sources of risks in projects.
 Describe the risk identification process, tools, and techniques to
help identify project risks
 Discuss the qualitative and quantitative risk analysis process
and explain how to calculate risk factors, create
probability/impact matrixes, apply the Top Ten Risk Item
Tracking technique, and use expert judgment to rank risks.
 Discuss what is involved in risk monitoring and control.
 Describe how software can assist in project risk management.
221
 The Importance of Project Risk
Management
 Project Risk can be defined as:
 An uncertain event or condition that, if it occurs,
has a positive or negative effect on the project
objectives.
 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. 222
 The Need to Improve Project Risk
Management
 study found that majority of projects that have
significant cost or schedule overruns did no risk
management at all.

223
 Table 1. 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).

224
 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.

225
 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.

226
 Risk Utility
 Risk utility or risk tolerance is the amount of
satisfaction or pleasure received from a potential
payoff.
 Utility rises at a decreasing rate for people who are
risk-averse.
 Those who are risk-seeking have a higher tolerance for
risk and their satisfaction increases when more payoff
is at stake.
 The risk-neutral approach achieves a balance between
risk and payoff.

227
Figure 2. Risk Utility Function and
Risk Preference

228
 Project Risk Management Processes
 Risk management planning: Deciding how to
approach and plan the risk management activities for the
project.
 Risk identification: Determining which risks are likely
to affect a project and documenting the characteristics of
each.
 Qualitative risk analysis: Prioritizing risks based on
their probability and impact of occurrence.

229
 cont’d….
 Quantitative risk analysis: Numerically
estimating the effects of risks on project
objectives.
 Risk response planning: Taking steps to
enhance opportunities and reduce threats to
meeting project objectives.
 Risk monitoring and control: Monitoring
identified and residual risks, identifying new
risks, carrying out risk response plans, and
evaluating the effectiveness of risk strategies
throughout the life of the project.
230
 1. Risk Management Planning
 The main output of risk management planning is a risk
management plan—a plan that documents the
procedures for managing risk throughout a project.

 The project team should review project documents and

understand the organization’s and the sponsor’s
approaches to risk.

 The level of detail will vary with the needs of the

project.

231
 Table 2. Topics Addressed in a Risk
Management Plan
 Methodology
 Roles and responsibilities
 Budget and schedule
 Risk categories
 Risk probability and impact
 Risk documentation

232
 Contingency and Fallback Plans,
Contingency Reserves
 Contingency plans are predefined actions that the
project team will take if an identified risk event occurs.
 Fallback plans are developed for risks that have a high
impact on meeting project objectives, and are put into
effect if attempts to reduce the risk are not effective.
 Contingency reserves or allowances are provisions
held by the project sponsor or organization to reduce
the risk of cost or schedule overruns to an acceptable
level.

233
 Broad Categories of Risk
 Market risk
 If the IT project is to produce a new product or service, will it be
useful to the organization or marketable to other?
 Will user accept and use the product or service?
 Will someone else create a better product or service faster?
 Financial risk
 Can organization afford to undertake the project?
 How confident are stakeholders in the financial projections?
 Will the project meet NPV, ROI, and payback estimates?
 Technology risk
 Is the project technically feasible?
 Will it use mature, leading edge, or bleeding edge technologies
 Will hardware, software, and networks function properly?
 Will the technology be available in time to meet project objectives?

234
 Broad Categories of Risk …..
 People risk
 Does the organization have or can they find people with
appropriate skills to complete the project successfully?
 Do people have the proper managerial and technical skills?
 Do they have enough experience?
 Does senior management support the project?
 Structure/process risk
 What is the degree of change the new project will introduce
into user areas and business procedure?
 How many distinct user groups does the project need to
satisfy?
 Does the organization have processes in place to complete
the project successfully?

235
 Risk Breakdown Structure
 A risk breakdown structure is a hierarchy of potential
risk categories for a project.

 Similar to a work breakdown structure but used to

identify and categorize risks.

236
Figure 3. Sample Risk Breakdown Structure

237
 Table 4. Potential Negative Risk Conditions
Associated With Each Knowledge Area
Knowledge Area Risk Conditions
Integration Inadequate planning; poor resource allocation; poor integration
management; lack of post-project review
Scope Poor definition of scope or work packages; 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 toward quality; substandard
design/materials/workmanship; inadequate quality assurance
program
Human Resources Poor conflict management; poor project organization and
definition of responsibilities; absence of leadership
Communications Carelessness in planning or communicating; lack of consultation
with key stakeholders
Risk Ignoring risk; unclear assignment of risk; poor insurance
management
Procurement Unenforceable conditions or contract clauses; adversarial relations

238
 2. Risk Identification
 Risk identification is the process of understanding
what potential events might hurt or enhance a
particular project.
 Risk identification tools and techniques include:
 Brainstorming
 The Delphi Technique
 Nominal Group Technique
 Interviewing
 SWOT analysis
 Cause and Effect Diagram

239
 Brainstorming
 Brainstorming is a technique by which a group
attempts to generate ideas or find a solution for a
specific problem by amassing ideas spontaneously and
without judgment.
 An experienced facilitator should run the brainstorming
session.
 Be careful not to overuse or misuse brainstorming.
 Psychology literature shows that individuals produce a
greater number of ideas working alone than they do
through brainstorming in small, face-to-face groups.
 Group effects often inhibit idea generation.

240
 Delphi Technique
 The Delphi Technique is used to derive a consensus
among a panel of experts who make predictions about
future developments.

 Provides independent and anonymous input regarding

future events.

 Uses repeated rounds of questioning and written

responses and avoids the biasing effects possible in
oral methods, such as brainstorming.

241
 Nominal Group Technique (NGT)
a. Each individual silently writes her or his ideas on a piece of
paper
b. Each idea is then written on a board or flip chart one at a time in
a round-robin fashion until each individual has listed all of his
or her ideas.
c. The group then discusses and clarifies each of the ideas.
d. Each individual then silently ranks and prioritizes the ideas.
e. The group then discusses the rankings and priorities of the ideas.
f. Each individual ranks and prioritizes the ideas again.
g. The rankings and prioritizations are then summarized for the
group.

242
 Interviewing
 Interviewing is a fact-finding technique for collecting
information in face-to-face, phone, e-mail, or instant-
messaging discussions.

 Interviewing people with similar project experience is

an important tool for identifying potential risks.

243
 SWOT Analysis
 SWOT analysis (strengths,
weaknesses, opportunities,
and threats) can also be used
during risk identification.

 Helps identify the broad

negative and positive risks
that apply to a project.

244
Cause and Effect Diagram

245
 Risk Register
 The main output of the risk identification process is a list of
identified risks and other information needed to begin creating a
risk register.
 A risk register is:
 A document that contains the results of various risk management
processes and that is often displayed in a table or spreadsheet
format.
 A tool for documenting potential risk events and related
information.
 Risk events refer to specific, uncertain events that may occur to
the detriment or enhancement of the project.

246
 Risk Register Contents
 An identification number for each risk event.
 A rank for each risk event.
 The name of each risk event.
 A description of each risk event.
 The category under which each risk event falls.
 The root cause of each risk.

247
 Risk Register Contents (cont’d)
 Triggers for each risk; triggers are indicators or
symptoms of actual risk events.
 Potential responses to each risk.
 The risk owner or person who will own or take
responsibility for each risk.
 The probability and impact of each risk occurring.
 The status of each risk.

248
 Table 5. Sample Risk Register
No. Rank Risk Description Category Root Triggers Potential Risk Probability Impact Status
Cause Responses Owner

R44 1

R21 2

R7 3

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 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

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 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.

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Figure 4. Sample Probability/Impact Matrix

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 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.

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 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
 Simulation
 Sensitivity analysis

254
 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.

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Figure 6. Expected Monetary Value
(EMV) Example

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 Simulation
 Simulation uses a representation or model of a system
to analyze the expected behavior or performance of the
system.
 Monte Carlo analysis simulates a model’s outcome
many times to provide a statistical distribution of the
calculated results.
 To use a Monte Carlo simulation, you must have three
estimates (most likely, pessimistic, and optimistic) plus
an estimate of the likelihood of the estimate being
between the most likely and optimistic values.

257
 Steps of a Monte Carlo Analysis
1. Assess the range for the variables being considered.
2. Determine the probability distribution of each
variable.
3. For each variable, select a random value based on the
probability distribution.
4. Run a deterministic analysis or one pass through the
model.
5. Repeat steps 3 and 4 many times to obtain the
probability distribution of the model’s results.

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Figure 7. Sample Monte Carlo Simulation
Results for Project Schedule

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 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.

260
Figure 8. Sample Sensitivity Analysis for
Determining Break-Even Point

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 3. Risk Response Planning
 After identifying and quantifying risks, you
must decide how to respond to them.
 Four main response strategies for negative risks:
 Risk avoidance
 Risk acceptance
 Risk transference
 Risk mitigation

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Table 8. General Risk Mitigation Strategies for
Technical, Cost, and Schedule Risks

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 Response Strategies for Positive
Risks
 Risk exploitation: doing whatever you can to make
sure the positive risk happens.
 Risk sharing: allocating ownership of the risk to
another party.
 Risk enhancement: changing the size of the opportunity
by identifying and maximizing key drivers of the
positive risk.
 Risk acceptance: the project team cannot or choose not
to take any action toward a risk.

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 5. Risk Monitoring and Control
 Monitoring risks involves knowing their status.
 Workarounds are unplanned responses to risk
events that must be done when there are no
contingency plans.
 Main outputs of risk monitoring and control are:
 Requested changes.
 Recommended corrective and preventive actions.
 Updates to the risk register, project management
plan, and organizational process assets.

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 Risk Monitoring and Control…..

 Tools for monitoring and controlling

project risk
 Risk Audits by external people
 Risk Reviews by internal team members
 Risk Status Meetings and Reports

266
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.

267
 Results of Good Project Risk
Management
 Unlike crisis management, good project risk
management often goes unnoticed.
 Well-run projects appear to be almost effortless, but a
lot of work goes into running a project well.
 Project managers should strive to make their jobs look
easy to reflect the results of well-run projects.

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 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

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Chapter 7: Project Procurement
Management

Project Management Knowledge areas

 Learning Objectives
 Understand the importance of project procurement management
and the increasing use of outsourcing projects.
 Describe the work involved in planning purchases and
acquisitions for projects, the contents of a procurement
management plan and contract statement of work, and
calculations involved in a make-or-buy analysis.
 Discuss what is involved in planning contracting, including the
creation of various procurement documents and evaluation
criteria for sellers.
 Understand the process of requesting seller responses and the
difference between proposals and bids.
 Describe the seller selection process and recognize different
approaches for evaluating proposals or selecting suppliers.
 Discuss the importance of good contract administration.
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 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.

272
 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.

273
 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.
274
 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).

275
 cont’d…
 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.

276
Project Procurement Management
Processes

277
 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.

278
 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.

279
 Make-or-Buy Example
 Assume you can lease an item you need for a
project for Br. 800/day. To purchase the item,
the cost is Br.12,000 plus a daily operational
cost of Br. 400/day.

 How long will it take for the purchase cost to

be the same as the lease cost?

280
 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:
Br.12,000 + Br. 400d = Br. 800d
Subtracting Br. 400d from both sides, you get:
Br. 12,000 = Br. 400d
Dividing both sides by Br. 400, you get:
d = 30
 If you need the item for more than 30 days, it is more
economical to purchase it.

281
 Types of Contracts
 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.
282
 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.

283
 Procurement Management Plan
 Describes how the procurement processes will be
managed, from developing documentation for making
outside purchases or acquisitions to contract closure.

 Contents varies based on project needs.

284
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 buyer’s expectations.

285
 Figure 2. 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.

286
 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.

287
 Figure 3. 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

288
 Evaluation Criteria
 It’s important to prepare some form of evaluation
criteria, preferably before issuing a formal RFP or
RFQ.

 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.

289
 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 bidders’ conference can help clarify the buyer’s
expectations.

290
 Selecting Sellers
 Also called source selection.

 Involves:

 Evaluating proposals or bids from sellers.

 Choosing the best one.

 Negotiating the contract.

 Awarding the contract.

291
Figure 4. Sample Proposal Evaluation Sheet

292
 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.

293
 Administering the Contract
 Ensures that the seller’s performance meets
contractual requirements.

 Contracts are legal relationships, so it is

important that legal and contracting professionals
be involved in writing and administering
contracts.

 Many project managers ignore contractual issues,

which can result in serious problems.
294
 Suggestions for 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.

295
 cont’d….
 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.

296
 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.

297
 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.

298
 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.
299
 QUALITY MANAGEMENT
Quality
 the extent to which the final deliverable conforms to the customer’s requirements.
Quality perspectives:
 the quality of each deliverable produced for the customer and
 the quality of the management processes undertaken to produce each deliverable.
quality plan
 defines the approach taken to ensure the level of quality of each deliverable,
 highlights the management processes required to influence deliverable quality, such
as change, risk and issue management.
 summarizes the quality targets to be met and the management processes to be
undertaken,
Quality planning process
1. Defining deliverable quality
2. Identifying Quality targets
3. Developing Quality assurance plan
4. Develop Quality control plan
5. Define process quality 300
300
END of Chapter 5

301