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Introduction to

Project Management

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Topics
• Introduction
• Project Management Context and Process
• Integration Management
• Scope Management
• Time Management
• Cost Management
• Quality Management
• Human Resource Management
• Communications Management
• Risk Management
• Procurement Management
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The Need...
• Most IT Projects fail
• A 1995 Standish Group study found that only 16.2% of IT
projects were successful
• Over 31% of IT projects were canceled before
completion, costing over $81 B in the U.S. alone

• A 1999 ComputerWorld article listed Project


Manager as the #1 position IT managers say they
need most for contract help

• The need for IT projects keeps increasing

• Companies in general are emphasizing projects

3
What Is a Project?
• A temporary endeavor undertaken to
accomplish a unique purpose
• Results on a product of some kind

• Require resources, often from


various areas
• Involves uncertainty
• Has a sponsor and customer(s)
• Different from an ongoing program
4
The Triple Constraint
• Every project is constrained in different
ways by its:
• Scope/quality goals Scope Time
• Time goals
• Cost goals Cost

• It is the project manager’s duty to


balance these three often competing
goals

5
What is Project Management?

“The application of knowledge, skills, tools,


and techniques to project activities in order
to meet or exceed stakeholder needs and
expectations from a project”

(PMI*, Project Management Body of Knowledge (PMBOK Guide), 1996, p. 6)

6
Advantages of Project
Management
• Clear definition of scope
• Clear definitions of roles
• Early identification of performance
errors
• Means of accountability
• Product integrity
• Team participation
7
Project Stakeholders
• Stakeholders are all of the people
involved, in or affected by, project
activities
• Stakeholders include:
• The project sponsor and project team
• Support staff
• Customers
• Users
• Suppliers
• Business partners
• Opponents to the project

8
9 Project Management
Knowledge Areas
• Knowledge areas describe the key
competencies that project managers must
develop
• 4 core areas lead to specific project objectives
(Scope, Time, Cost, and Quality)
• 4 facilitating areas are the means through
which the project objectives are achieved
(Human Resources, Communication, Risk, and
Procurement Management)
• 1 area (Project Integration Management)
affects and is affected by all of the other areas

9
Project Management Framework

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Project Management Tools and
Techniques
• Assist project managers and their teams
in various aspects of project
management, such as:
• Scope: Project Charter and WBS
• Time: Gantt charts, PERT charts, critical path
analysis
• Cost: Cost estimates and Earned Value
Analysis

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Sample WBS Chart

Intranet Project

Concept Web Site Design Web Site Development Rollout Support

Develop Pages and


Design User Interface
Links

Design Server Setup Develop Functionality

Design Server Support Content Management/


Infrastructure Integration

Testing

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Sample Gantt Chart
WBS Gantt Chart

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Sample PERT Chart
A D H J

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Each box is a project task from the WBS. Arrows show dependencies
between tasks. The tasks in red are on the critical path. If any tasks
on the critical path take longer than planned, the whole project will slip
unless something is done.

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Advantages of Project Management
• Stakeholders do not like surprises
• Good project management (PM) reduces risk
• PM provides the tools and environment to
plan, monitor, track, and manage schedules,
resources, costs, and quality
• PM provides a metrics base for future
planning, as well as good (lean)
documentation
• Project members learn and grow by working
in a cross-functional team environment
15
How Project Management (PM)
Relates to Other Disciplines
• Much Project Management knowledge is
unique
• However, project managers must also
have knowledge and experience in
• General management
• The application area of the project
• The technology of the project

• Project managers must focus on meeting


specific project objectives
16
Project Management and Other
Disciplines

17
The Project Management
Context and Processes

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Projects Function Within a
Larger Environment
• Projects operate in a broad
organizational environment
• Project managers need to take a
holistic of a project, and understand
how it is situated within the larger
organization

19
Project Phases and the Project
Life Cycle
• A project life cycle is a collection of
project phases
• Project phases vary by project or
industry
• General phases include:
• Concept
• Development
• Implementation
• Close-out
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Phases of the Project Life Cycle

Concept Development Implementation Closeout

Management Project Plan Last Work Completed work


Plan Package
Budgetary Cost Lessons learned
Preliminary Estimate Definitive Cost
Cost Estimate Estimate Customer
6+ level WBS acceptance
3 level WBS Bulk of time
spent here

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Product Life Cycles
• Products also have life cycles
• The Systems Development Life
Cycle (SDLC) is a framework for
describing the phases involved in
developing and maintaining
information systems
• Typical SDLC phases include
planning, analysis, design,
implementation, and support
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Sample SDLC Models
• Waterfall model: has well-defined, linear stages
of systems development and support
• Spiral model: software is developed using an
iterative or spiral approach rather than a linear
approach
• Modified Waterfall model: iterative phases within
a basic waterfall model
• Incremental release model: progressive
development of operational software
• Prototyping model: used for developing
prototypes to clarify user requirements

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Waterfall SDLC
Initiation

Analysis

Design

Implement

Administer

24
Spiral Model
of Software Development

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Distinguishing Project Life Cycles
from Product Life Cycles
• The project life cycle applies to all projects,
regardless of the products being produced
• Product life cycle models vary considerably,
based on the nature of the product
• Most large IT projects are developed as a
series of products
• Project management is a cross life cycle
activity done in all of the product life cycle
phases
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Why Have Project Phases and
Management Reviews?
• A project should successfully pass
through each of the project phases in
order to continue on to the next
• Management reviews (also called phase
gates or kill points) should occur after
each phase, to evaluate the project’s
progress, likely success, and continued
compatibility with organizational goals

27
Functional, Project, and Matrix
Organizational Structures
Functional

Project

Matrix

28
Recognize the Importance of
Project Stakeholders
• Project stakeholders are the people
involved in or affected by project
activities
• Project managers must take time to
identify, understand, and manage
relationships with all project stakeholders
• Stakeholders may be either internal or
external
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Project Management Functions
• Define scope of project
• Identify stakeholders, decision-makers,
and escalation procedures
• Develop detailed task list (work
breakdown structures)
• Estimate time requirements
• Develop initial project management flow
chart
• Identify required resources and budget
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Project Management Functions
• Evaluate project requirements
• Identify and evaluate risks
• Prepare contingency plan
• Identify interdependencies
• Identify and track critical milestones
• Participate in project phase review
• Secure needed resources
• Manage the change control process
• Report project status - Communicate!
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Skills of a Project Manager
• Communication skills: listening, persuading
• Organizational skills: planning, goal-setting, analyzing
• Team Building skills: motivation, esprit de corps,
empathy
• Leadership skills: sets example, energetic, vision,
delegates, positive
• Coping skills: flexibility, creativity, patience,
persistence
• Technological skills: experience, project knowledge

32
Characteristics of Effective
Project Managers
Effective Project Manager Ineffective Project Manager
• Leadership by example • Sets poor example
• Visionary • Functionary
• Technically competent • Lacks technical expertise
• Decisive • Not self-assured
• Good communicator • Poor communicator
• Good motivator • Poor motivator
• Stands up to upper • Defers to upper management
management when necessary on all issues
• Encourages new ideas • Stifles creativity
• Supports team members • Concerned with self

33
Project Management
Process Groups
• Project management can be viewed as a
number of interlinked processes:
• Initiating processes
• Planning processes
• Executing processes
• Controlling processes
• Closing processes

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Level of Process Group Activity
Over Time

35
Project
Integration Management

36
Project Management Framework

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The Key to Overall Project
Success: Good Project
Integration Management
• Project managers must coordinate all of
the other knowledge areas throughout a
project’s life cycle
• Many new project managers have trouble
looking at the “big picture”, focusing on
too many details

38
Project Integration Management
Processes

• Project Plan Development: taking the


results of other planning processes and
putting them into a consistent, coherent
document, the Project Plan
• Project Plan Execution: carrying out the
Project Plan
• Overall Change Control: coordinating
changes across the entire project
39
Interface Management

• Identifying and managing the points of


interaction between various elements of
the project
• Project managers must establish and
maintain good communication and
relationships across organizational
interfaces

40
Project Plan Development

• A Project Plan is a document used to


coordinate all project planning documents
• Its main purpose is to guide project
execution
• Project plans assist the project manager
in leading the project team and assessing
project status

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Attributes of Project Plans

• Just as projects are unique, so are project


plans
• Plans should first and foremost guide
project execution
• Plans should be:
• Dynamic
• Flexible
• Updated as changes occur

42
Common Elements of a
Project Plan

• Overview of the project


• Description of the project organization
• Management and technical processes
used on the project
• Scope
• Schedule
• Budget
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Stakeholder Analysis
• A stakeholder analysis documents
important (often sensitive) information
about stakeholders such as:
• Stakeholders’ names and organizations
• Roles on the project
• Unique facts about stakeholders
• Level of influence and interest in the project
• Suggestions for managing relationships

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Sample Stakeholder Analysis

Ke y Sta ke hole rs
Ahm e d Susa n Erik Ma rk Da vid
Project Manager
internal senior mgt. Project team Project team Hardware vendor for other internal
Orga niza tion project
sponsor of project and Supplies some Competing for
Role on proje ct one of company's DNA sequencing expert Lead programmer instrument company
founders hardware resources
start-up company,
demanding, likes very smart, Ph.D. in best programmer I Nice guy, one of
he knows we can
Unique fa cts details, business biology, easy to work know, weird sense oldest people at
make him rich if
focus, Stanford MBA with, has a toddler of humor company
this works
Le ve l of inte re st very high very high high very high low - medium
very high - can call the subject matter expert - high - hard to low - other vendors
Le ve l of influe nce low - medium
shots critical to success replace available
keep him happy he knows his
make sure she reviews
keep informed, let him so he stays, just give him project takes a
Sugge stions on specs and leads
lead conversations, do emphasize stock enough lead time back seat to this
m a na ging re la tionship testing, can do some
as he says and quickly options, likes to deliver hardware one, but I can
work from home
Mexican food learn from him

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Project Plan Execution
• Involves managing and performing the
work described in the project plan
• The majority of time and money is usually
spent on execution
• The application area or the product
directly affects project execution because
the products of the project are produced
during execution

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Important Skills for
Project Execution

• General management skills:


• Leadership
• Communication
• Political skills

• Product skills and knowledge


• Use of specialized tools and techniques

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Tools and Techniques for Project
Execution
• Work Authorization System: provides a
method for ensuring that qualified people
do work at the right time and in the proper
sequence
• Status Review Meetings: regularly
scheduled meetings used to exchange
project information
• Project Management Software: special
software to assist in managing projects

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Overall Change Control
• Involves identifying, evaluating, and
managing changes throughout the project
life cycle
• Three main objectives of change control:
• Influence the factors that create changes to
ensure they are beneficial
• Determine that a change has occurred
• Manage actual changes when and as they
occur

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Change Control System
• A formal, documented process that
describes when and how official project
documents and work may be changed
• Describes who is authorized to make
changes and how to make them
• Includes a Change Control Board,
configuration management, and a process
for communicating changes

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Change Control Board (CCB)

• A formal group of stakeholders


responsible for approving or rejecting
changes on a project
• Provides guidelines for preparing change
requests, evaluates them, and manages
the implementation of approved changes
• Evaluates the impact of proposed
changes on quality, schedule, budget

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Configuration Management
• Ensures that the products and their
descriptions are correct and complete
• Concentrates on the management of
technology by identifying and controlling
the functional and physical design
characteristics of products
• Configuration management specialists
identify and document configuration
requirements, control changes, record and
report changes, and audit the products to
verify conformance to requirements
52
Suggestions for Managing
Overall Change Control
• Plan for change
• Establish a formal change control system,
including a Change Control Board (CCB)
• Use good configuration management
• Define procedures for making quick decisions
on smaller changes
• Use written and oral performance reports to help
identify and manage change
• Use automated tools to help manage and
communicate changes

53
Need for Top Management
Commitment
• Several studies cite top management
commitment as one of the key factors
associated with project success
• Top management should:
• Help project managers secure adequate
resources
• Get approval for unique project needs in a
timely manner
• Receive cooperation from people throughout
the organization
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What Helps Projects Succeed?
1987 Pinto and Slevin 1995 Standish Group

• Clear project mission • User involvement


• Top management • Executive management
support support
• Good project • Clear statement of
schedule/plan requirements
• Good client • Proper planning
consultation

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Need for Organizational
Commitment to Information
Technology (IT)
• If the organization has a negative attitude
toward IT, it will be difficult for an IT project to
succeed
• Having a Chief Information Officer (CIO) at a
high level in the organization helps IT projects
• Assigning business staff to IT projects also
encourages more commitment

56
Need for Organizational
Standards
• Standards and guidelines help project
managers be more effective
• Senior management should encourage:
• Use of standard forms and software for project
management
• Development and use of guidelines for writing
project plans or providing status information
• Creation of a project management office or
center of excellence

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Project Scope Management

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What is Project Scope
Management?
• Scope refers to all the work involved in creating
the products of the project and the processes
used to create them
• Project scope management includes the
processes involved in defining and controlling
what is or is not included in the project
• The project team and stakeholders must have the
same understanding of what products will be
produces as a result of a project and what
processes will be used in producing them
• Projects with poor scope management often fail

59
Project Scope Management
Processes
• Initiation: beginning a project, or continuing to
the next phase
• Scope planning: developing documents to
provide the basis for future project decisions
• Scope definition: subdividing the major project
deliverables into smaller, more manageable
components
• Scope verification: formal acceptance of the
project scope
• Scope change control: controlling changes to
project scope

60
Project Initiation: Strategic
Planning and Project Selection

• The first step in initiating projects is to


evaluate the project in the context of the
organization’s strategic plan
• Strategic planning involves determining
long-term business objectives
• IT projects should support strategic and
financial business objectives

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Identifying Potential Projects
• Many organizations follow a formal
planning process for selecting IT
projects:
• Develop an IT strategic plan based on the
organization’s overall strategic plan
• Perform a business area analysis
• Define potential projects
• Select IT projects and assign resources

62
Methods for Selecting Projects
• There are usually more projects than
available time and resources to implement
them
• It is important to follow a logical process
for selecting IT projects to work on, such
as:
• Focusing on broad needs
• Categorizing projects
• Financial methods
• Weighted scoring models

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Focusing on Broad
Organizational Needs
• It is often difficult to provide strong
justification for many IT projects, but
everyone agrees they have a high value
• Three important criteria for projects:
• There is a need for the project
• There are funds available
• There’s a strong will to make the project
succeed

64
Financial Analysis of Projects

• Financial considerations are often an


important consideration in selecting
projects
• Three primary methods for determining
the projected financial value of projects:
• Net present value (NPV) analysis
• Return on investment (ROI)
• Payback analysis

65
Net Present Value Analysis
• Net present value (NPV) analysis is a
method of calculating the expected net
monetary gain or loss from a project by
discounting all expected future cash
inflows and outflows to the present point
in time
• Projects with a positive NPV should be
considered, if financial value is a key
criterion
• The higher the NPV, the better

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Net Present Value Example

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Return on Investment
• Return on investment (ROI) is income
divided by investment
ROI = (total discounted benefits - total discounted
costs) / discounted costs
• The higher the ROI, the better
• Many organizations have a required rate
of return, or minimum acceptable rate of
return, on investment for projects

68
Payback Analysis
• Another important financial consideration
is payback analysis
• The payback period is the amount of time
it will take to recoup, in the form of net
cash inflows, the net dollars invested in a
project
• Payback occurs when the cumulative
discounted benefits and costs are greater
than zero
• Many organizations want IT projects to
have a fairly short payback period
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Payback Analysis Sample
OAO Project Payback

2,500,000

2,000,000

1,500,000
Total ongoing incremental cost of
OAO
Accumulated Savings

1,000,000

500,000

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Month 70
Project Charter
• After deciding what project to work on, it
is important to formalize projects
• A Project Charter is a document that
formally recognizes the existence of a
project and provides direction on the
project’s objectives and management
• The Project Sponsor should sign the
Project Charter to acknowledge
agreement on the need and intent of the
project

71
Scope Planning and the
Scope Statement
• A scope statement is used to develop and
confirm a common understanding of the
project scope.
• It should include:
• A project justification
• A brief description of the project’s products
• A summary of all project deliverables
• A statement of what determines project
success

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The Work Breakdown Structure
• After completing scope planning, the next
step is to further define the work by
breaking it into manageable pieces
• Good scope definition:
• Helps improve the accuracy of time, cost, and
resource estimates
• Defines a baseline for performance
measurement and change control
• Aids in communicating clear work
responsibilities

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The Work Breakdown Structure

• A work breakdown structure (WBS) is an


outcome-oriented analysis of the work
involved in a project.
• It defines the total scope of the project
• It is a foundation document in project
management because it provides the
basis for planning and managing project
schedules, costs, and changes

74
Sample Intranet WBS Organized
by Product

75
Sample Intranet WBS Organized
by Phase

76
Intranet WBS in Tabular Form
1.0 Concept
1.1 Evaluate current systems
1.2 Define Requirements
1.2.1 Define user requirements
1.2.2 Define content requirements
1.2.3 Define system requirements
1.2.4 Define server owner requirements
1.3 Define specific functionality
1.4 Define risks and risk management
approach
1.5 Develop project plan
1.6 Brief web development team
2.0 Web Site Design
3.0 Web Site Development
4.0 Roll Out 77
5.0 Support
WBS and Gantt Chart
WBS Gantt Chart

78
Approaches to Developing
WBSs
• Using guidelines: Some organizations
provide guidelines for preparing WBSs
• The analogy approach: Reviewing WBSs of
similar projects
• The top-down approach: Start with the
largest items of the project, and keep
breaking them down
• The bottoms-up approach: Start with the
detailed tasks, and roll them up

79
Basic Principles for Creating a WBS
1. A unit of work should appear at only one place in the WBS
2. The work content of a WBS item is the sum of the WBS items
below it
3. A WBS item is the responsibility of only one individual, even
though many people may be working on it
4. 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
5. Project team members should be involved in developing the WBS
to ensure consistency and buy-in
6. Each WBS item must be documented to ensure accurate
understanding of the scope of work included and excluded
7. The WBS must be flexible, to accommodate inevitable changes,
while properly maintaining control of the work content in the
project according to the scope statement

80
Scope Verification and Scope
Change Control
• 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 IT projects suffer from scope creep and
poor scope verification
• FoxMeyer Drug filed for bankruptcy after scope creep on
a robotic warehouse

81
Factors Causing
IT Project Problems
Factor Rank
Lack of user input 1
Incomplete requirements and specifications 2
Changing requirements and specifications 3
Lack of executive support 4
Technology incompetence 5
Lack of resources 6
Unrealistic expectations 7
Unclear objectives 8
Unrealistic time frames 9
New Technology 10

82
Suggestions for Improving
User Input
• Insist that all projects have a Sponsor from
the user organization
• Have users on the project team
• Have regular meetings and document them
• Deliver something to project users and
sponsor on a regular basis
• Co-locate users with the developers
• Use JAD and JAD/Plan Sessions
83
Suggestions for Reducing Incomplete
and Changing Requirements
• Develop and follow a requirements management
process
• Employ techniques such as prototyping, use
case modeling, and Joint Application Design to
thoroughly understand user requirements
• Put all requirements in writing
• Use a process for reviewing requested changes
• Track changes to requirements
• Emphasize completion dates
• Provide adequate testing

84
Project Time Management

85
Importance of Project Schedules
• Managers often cite delivering projects
on time as one of their biggest
challenges
• Average time overrun from 1995 CHAOS
report was 222%
• Time has the least amount of flexibility;
it passes no matter what
• Schedule issues are the main reason for
conflicts on projects, especially during
the second half of projects
86
Project Time Management
Processes
• Project time management involves the
processes required to ensure timely
completion of a project, including:
• Activity definition
• Activity sequencing
• Activity duration estimating
• Schedule development
• Schedule control

87
Schedules Come From
Defining Activities
• Project schedules grow out of the basic
document that initiates a project
• Project Charter includes schedule and budget
information
• 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
88
Activity Sequencing

• Involves reviewing activities and


determining dependencies
• Mandatory dependencies: inherent in the
nature of the work; hard logic
• Discretionary dependencies: defined by the
project team; soft logic
• External dependencies: involve relationships
between project and non-project activities

• You must determine dependencies in


order to use critical path analysis

89
Project Network Diagrams
• The preferred technique for showing
activity sequencing
• A schematic display of the logical
relationships among, or sequencing of,
project activities

90
Sample Activity-on-Arrow (AOA)
Network Diagram for Project X

91
Arrow Diagramming Method
(ADM)
• Also called activity-on-arrow (AOA)
project network diagrams
• Activities are represented by arrows
• Nodes or circles are the starting and
ending points of activities
• Can only show finish-to-start
dependencies

92
Precedence Diagramming
Method (PDM)
• Activities are represented by boxes
• Arrows show relationships between
activities
• More popular than ADM method and used
by project management software
• Better at showing different types of
dependencies

93
Task Dependency Types

94
Sample Precedence Diagramming
Method (PDM) Network Diagram

95
Activity Duration Estimating

• After defining activities and determining


their sequence, the next step in time
management is duration estimating
• Duration includes the actual amount of
time worked on an activity plus elapsed
time
• People doing the work should help create
estimates, and an expert should review
them

96
Schedule Development
• Uses results of the other time management
processes to determine the start and end
date of project activities
• Ultimate goal is to create a realistic project
schedule that provides a basis for
monitoring project progress
• Important tools and techniques include
Gantt charts, PERT analysis, and critical
path analysis

97
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:
• A black diamond: milestones or significant
events on a project with zero duration
• Thick black bars: summary tasks
• Lighter horizontal bars: tasks
• Arrows: dependencies between tasks
98
Sample Gantt Chart

99
Gantt Chart

100
Sample Tracking Gantt Chart

white diamond: slipped milestone


two bars: planned and actual times
101
Critical Path Method (CPM)
• CPM is a project network analysis
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

102
Finding the Critical Path

• First develop an accurate project


network diagram
• Add the durations for all activities on
each path through the project network
diagram
• The longest path is the critical path

103
Determining the Critical Path

104
Techniques for Shortening a
Project Schedule
• Crashing tasks by adding more
resources
• Fast tracking tasks by doing them in
parallel or overlapping them

105
Shortening Project Schedules
Original
schedule

Shortened
duration

Overlapped
tasks

106
Many Horror Stories Related to
Project Schedules

• The Mythical Man Month - adding


resources to a late project often makes it
later
• Creating realistic schedules and sticking
to them is a key challenge of project
management

107
Importance of Updating Critical
Path Data
• 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

108
Program Evaluation and Review
Technique (PERT)
• 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
• PERT uses probabilistic time estimates
based on using optimistic, most likely,
and pessimistic estimates of activity
durations

109
PERT Formula and Example
• PERT weighted average formula:
optimistic time + 4X most likely time + pessimistic time
6

• Example:
PERT weighted average =
8 workdays + 4 X 10 workdays + 24 workdays = 12 days
6
where 8 = optimistic time, 10 = most likely time, and 24 =
pessimistic time

110
Controlling Changes to the
Project Schedule
• Perform reality checks on schedules
• Allow for contingencies
• Don’t plan for everyone to work at 100%
capacity all the time
• Hold progress meetings with stakeholders
and be clear and honest in
communicating schedule issues

111
Working with People
• Strong leadership helps projects succeed
more than good PERT charts
• Project managers should use:
• Empowerment
• Incentives
• Discipline
• Negotiation

112
Project 98 Features Related to
Project Time Management
Reports Views and Table Views Filters
• Overview reports: critical • Gantt chart, PERT • All tasks,
tasks and milestones chart, Tracking Gantt, completed tasks,
• Current activities reports: schedule, tracking, critical tasks,
unstarted tasks, tasks starting variance, constraint incomplete tasks,
soon, tasks in progress, dates, and delay and milestone
completed tasks, should have tasks
started tasks, and slipping
tasks
• Assignment reports: who
does what when

113
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 good
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 vs actual
progress
114
Project Cost Management

115
The Importance of Project Cost
Management
• IT projects have a poor track record for
meeting cost goals
• Average cost overrun was 189% of the
original estimates
• In 1995, cancelled IT projects cost the U.S.
over $81 billion

116
What is Cost and Project Cost
Management?
• Cost is a resource expended to achieve a
specific objective, or something given up
in exchange
• Costs are usually measured in dollars
• Project cost management includes the
processes required to ensure that the
project is completed within an approved
budget

117
Project
Cost Management Processes
• Resource planning: determining what resources
and quantities of them should be used
• Cost estimating: developing an estimate of the
costs and resources needed to complete a
project
• Cost budgeting: allocating the overall cost
estimate to individual work items to establish a
baseline for measuring performance
• Cost control: controlling changes to the project
budget
118
Basic Principles of Cost
Management
• Most CEOs and boards know a lot more
about finance than IT
• IT project managers must speak their
language:
• Profits are revenues minus expenses
• Life cycle costing is estimating the cost of a project over
its entire life
• Cash flow analysis is determining the estimated annual
costs and benefits for a project
• Benefits and costs can be tangible or intangible, direct or
indirect
• Sunk cost should not be a criteria in project selection

119
Cost of Software Defects

Software Development
Lifecycle Phase
1 Requirements
5 Design
10 Coding
20 Unit Test
50 Acceptance test
200 Maintenance
Relative Cost to Repair
10

120
Resource Planning
• The nature of the project (and the
organization) will affect resource planning:
• How difficult will it be to do specific tasks on the
project?
• Is there anything unique in this project’s scope
statement that will affect resources?
• What is the organization’s history in doing
similar tasks?
• Does the organization have or can they acquire
the people, equipment, and materials that are
capable and available for performing the work?

121
Cost Estimating
• The key output of project cost
management is a detailed cost estimate
• There are several types of cost estimates
and tools and techniques to help create
them
• Develop a cost management plan,
describing how cost variances will be
managed on the project

122
Types of Cost Estimates

Type of Estimate When Done Why Done How Accurate


Rough Order of Very early in the Provides rough –25%, +75%
Magnitude (ROM) project life cycle, ballpark of cost for
often 3–5 years selection decisions
before project
completion
Budgetary Early, 1–2 years out Puts dollars in the –10%, +25%
budget plans
Definitive Later in the project, < Provides details for –5%, +10%
1 year out purchases, estimate
actual costs

123
Cost Estimation Tools and
Techniques
• Analogous or top-down: use the actual cost
of a previous, similar project as the basis for
the new estimate
• Bottom-up: estimate individual work items
and sum them to get a total estimate
• Parametric: use project characteristics in a
mathematical model to estimate costs
• Computerized tools: use spreadsheets,
project management software, or other
software to help estimate costs
124
Typical Problems with IT Cost
Estimates
• Developing an estimate for a large software
project is a complex task requiring a
significant amount of effort
• Remember that estimates are done at various
stages of the project
• Many people doing estimates have little
experience doing them
• Provide training and mentoring

125
Typical Problems with IT Cost
Estimates

• People almost always underestimate


• Review estimates and ask questions to make
sure estimates are not biased
• Management often wants a number for a bid,
not a real estimate
• Project managers must negotiate with project
sponsors to create realistic cost estimates

126
Cost Budgeting

• Allocating the project cost estimate to


individual work items
• Results in a cost baseline
• Difficult and time consuming task that many
PMs are unprepared for
• Critical on larger and more complex projects

127
Cost Control

• Project cost control includes:


• Monitoring cost performance
• Ensuring that only appropriate project
changes are included in a revised cost
baseline
• Informing project stakeholders of authorized
changes to the project that will affect costs
• Earned Value Analysis is an important
tool for cost control

128
Earned Value Analysis (EVA)
• EVA is a project performance measurement
technique that integrates scope, time, and
cost data
• Given a baseline (original plan plus
approved changes), you can determine how
well the project is meeting its goals
• You must periodically enter actual
information to use EVA.

129
Earned Value Analysis Terms
• Budgeted cost of work scheduled (BCWS), also
called the budget, is that portion of the approved
total cost estimate planned to be spent on an
activity during a given period
• Actual cost of work performed (ACWP), also called
actual cost, are the total direct and indirect costs
incurred in accomplishing work on an activity
during a given period
• Budgeted cost of work performed (BCWP), also
called Earned Value, is the percentage of work
actually completed multiplied by the planned cost
(or BCWS)
130
Earned Value Formulas

Term Formula
Earned Value Budgeted Cost of Work Performed (BCWP) =
budgeted cost to date X % complete
Cost Variance CV=BCWP-ACWP (actual cost of work performed)
Schedule Variance SV=BCWP-BCWS (budgeted cost of work scheduled)
Cost Performance Index CPI=BCWP/ACWP
Schedule Performance Index SPI = BCWP/BCWS

131
Rules of Thumb for EVA
Numbers
• Negative numbers for cost and schedule
variance indicate problems in those areas.
The project is costing more than planned
or taking longer than planned
• CPI and SPI less than 100% indicate
problems

132
Using Software to Assist in Cost
Management
• Spreadsheets are a common tool for
resource planning, cost estimating, cost
budgeting, and cost control
• Many companies use more sophisticated
and centralized financial applications
software for cost information
• Project management software has many
cost-related features

133
Project Quality Management

134
Quality of Information
Technology Projects
• Many people joke about the poor quality of
IT products
• People seem to accept systems being
down occasionally or needing to reboot
their PCs
• There are many examples in the news
about quality problems related to IT
• Do we and should we accept lower quality
for more innovation?
135
What Is Project
Quality Management?
• The International Organization for
Standardization (ISO) defines quality as
the totality of characteristics of an entity
that bear on its ability to satisfy stated or
implied needs
• Other experts define quality based on:
• Conformance to requirements: meeting written
specifications
• Fitness for use: ensuring a product can be
used as it was intended
136
Project Quality Management
Processes
• Quality planning: identifying which quality
standards are relevant to the project and
how to satisfy them
• Quality assurance: evaluating overall
project performance to ensure the project
will satisfy the relevant quality standards
• Quality control: monitoring specific project
results to ensure that they comply with the
relevant quality standards, while identifying
ways to improve overall quality
137
Modern Quality Management
• Modern quality management
• Requires customer satisfaction
• Stresses prevention to inspection
• Recognizes management responsibility for
quality

• Noteworthy quality experts include


Deming, Juran, Crosby, Ishikawa,
Taguchi, and Feigenbaum

138
Quality Experts
• Deming was famous for his work in rebuilding Japan
and his 14 points
• Juran wrote the Quality Control Handbook and 10
steps to quality improvement
• Crosby wrote Quality is Free and suggested that
organizations strive for zero defects
• Ishikawa developed the concept of quality circles
and using fishbone diagrams
• Taguchi developed methods for optimizing the
process of engineering experimentation
• Feigenbaum developed the concept of total quality
control
139
Quality Planning
• Quality must be designed in to the product
of the project in order to meet the
customer’s requirements
• Design of experiments helps identify which
variable have the most influence on the
overall outcome of a process
• Many scope aspects of IT projects affect
quality: functionality, features, system
outputs, performance, reliability, and
maintainability

140
Quality Assurance
• Quality assurance includes all the activities
related to satisfying the relevant quality
standards for a project
• Another goal of quality assurance is
continuous quality improvement
• Benchmarking can be used to generate ideas
for quality improvements
• Quality audits help identify lessons learned
that can improve performance on current or
future projects
141
Quality Control
• The main outputs of quality control are
• Acceptance decisions
• Rework
• Process adjustments

• Some tools and techniques include


• Pareto analysis
• Statistical sampling
• Quality control charts
• Testing

142
Pareto Analysis
• Pareto analysis involves identifying the
vital few contributors that account for the
most quality problems in a system
• Also called the 80-20 rule, meaning that
80% of problems are often due to 20% of
the causes
• Pareto diagrams are histograms that help
identify and prioritize problem areas

143
Sample Pareto Diagram

144
Statistical Sampling and
Standard Deviation
• Statistical sampling involves choosing part
of a population of interest for inspection
• The size of a sample depends on how
representative you want the sample to be

145
Standard Deviation
• Standard deviation measures how much
variation exists in a distribution of data
• A small standard deviation means that data
cluster closely around the middle of a
distribution, and there is little variability
among the data
• A normal distribution is a bell-shaped curve
that is symmetrical about the mean or
average value of a population

146
Normal Distribution and
Standard Deviation

147
Sigma and Defective Units

Specification Range Percent of Defective Units


(in +/- Sigmas) Population Per Billion
Within Range
1 68.27 317,300,000
2 95.45 45,400,000
3 99.73 2,700,000
4 99.9937 63,000
5 99.999943 57
6 99.9999998 2

148
Quality Control Charts, Six
Sigma, and the Seven Run Rule
• A control chart is a graphic display of data that
illustrates the results of a process over time. It
helps prevent defects, and allows you to determine
whether a process is in control or out of control
• Operating at a higher sigma value, like 6 sigma,
means the product tolerance or control limits have
less variability
• The Rule of Seven states that if seven data points in
a row are all below the mean, above,the mean, or
increasing or decreasing, then the process needs to
be examined for non-random problems
149
Sample Quality Control Chart

150
Testing

• Many IT professionals think of testing as a


stage that comes near the end of IT
product development
• Testing should be done during almost
every phase of the IT product
development life cycle

151
Testing Tasks in the Software
Development Life Cycle

152
Types of Tests
• Unit testing is done by developers to test each
individual component (often a program) to ensure it
is as defect free as possible
• Integration testing occurs between unit and system
testing to test functionally grouped components
• System testing tests the entire system as one entity
• User acceptance testing is an independent test
performed by the end user prior to accepting the
delivered system
• Parallel processing is often done in migration
projects, comparing results of old and new systems
153
Improving IT Project Quality

• Several suggestions for improving quality


for IT projects include:
• Leadership that promotes quality
• Understanding the cost of quality
• Focusing on organizational influences and
workplace factors that affect quality
• Following maturity models to improve quality

154
Leadership
• “It is most important that top management
be quality-minded. In the absence of
sincere manifestation of interest at the
top, little will happen below.” (Juran, 1945)
• A large percentage of quality problems
are associated with management, not
technical issues
• Unrealistic schedule
• Unrealistic budget
• Limited resources

155
The Cost of Conformance
• The cost of delivering products that meet
requirements and fitness for use
• Prevention cost: the cost of planning and executing a
project so errors are within an acceptable range
• Appraisal cost: the cost of evaluating processes and
their outputs to ensure quality
• Measurement and test equipment costs: capital cost of
equipment used to perform prevention and appraisal
activities

156
The Cost of Non-conformance
• The cost of taking responsibility for
failures or not meeting quality
expectations
• Internal failure cost: cost to correct an identified defect
before the customer gets the product
• External failure cost: cost that relates to all errors not
detected and corrected before delivery to the customer

157
Organization Influences,
Workplace Factors, and Quality
• Study by DeMarco and Lister showed that
organizational issues had a much greater influence
on programmer productivity than the technical
environment or programming languages
• Programmer productivity varied by a factor of 1:10
across organizations, but only by 21% within the
same organization
• No correlation between productivity and
programming language, years of experience, salary
• A dedicated workspace and a quiet work environment
are key factors in improving programmer productivity

158
Project Human
Resource Management

159
What is Project
Human Resource Management?
• The processes required to make the most
effective use of the people involved with a
project.
• Processes include:
• Organizational planning
• Staff acquisition
• Team development

160
Keys to Managing People

• Important areas related to project


management include:
• Motivation
• Influence and power
• Effectiveness

161
Motivation
• Abraham Maslow developed a hierarchy
of needs to illustrate his theory that
people’s behaviors are guided by a
sequence of needs
• Maslow argued that humans possess
unique qualities that enable them to make
independent choices, thus giving them
control of their destiny

162
Maslow’s Hierarchy of Needs

163
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, which produce job satisfaction
• Hygiene factors: cause dissatisfaction if not
present, but do not motivate workers to do
more, including larger salaries, more
supervision, and a more attractive work
environment
164
Thamhain and Wilemon’s Ways to
Have Influence on Projects
• Authority: the legitimate hierarchical right to issue orders
• Assignment: the project manager's perceived ability to influence a
worker's later work assignments
• Budget: the project manager's perceived ability to authorize others'
use of discretionary funds
• Promotion: the ability to improve a worker's position
• Money: the ability to increase a worker's pay and benefits
• Penalty: the project manager's perceived ability to dispense or cause
punishment
• Work challenge: the ability to assign work that capitalizes on a
worker's enjoyment of doing a particular task
• Expertise: the project manager's perceived special knowledge that
others deem important
• Friendship: the ability to establish friendly personal relationships
between the project manager and others
165
Ways to Influence that
Help and Hurt Projects
• Projects are more likely to succeed when
project managers influence with:
• Expertise
• Work challenge

• Projects are more likely to fail when project


managers rely too heavily on:
• Authority
• Money
• Penalty

166
Power

• Power is the potential ability to influence


behavior to get people to do things they
would not otherwise do
• Types of power include:
• Expert
• Reward
• Referent
• Legitimate
• Coercive

167
Improving Effectiveness
Covey’s 7 Habits
• Project managers can apply Covey’s 7
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

168
Empathic Listening and Rapport
• Good project managers are empathic
listeners; they listen with the intent to
understand
• Before you can communicate with others,
you must have rapport
• IT professionals often need to develop
empathic listening and other people skills to
improve relationships with users and other
stakeholders

169
Improving Relationships
Between Users and Developers
• CIOs push their staff to recognize that the
needs of the business must drive all
technology decisions
• Some organizations require business
people, not IT people, to take the lead in
determining and justifying investments in
new computer systems
• Some companies reshape their IT units to
look and perform like consulting firms

170
Organizational Planning

• Organizational planning involves identifying,


documenting, and assigning project roles,
responsibilities, and reporting relationships
• Outputs and processes include:
• Project organizational charts
• Work definition and assignment process
• Responsibility assignment matrixes
• Resource histograms

171
Sample Organizational Chart for a
Large IT Project

172
Work Definition and Assignment
Process

173
Sample Responsibility
Assignment Matrix (RAM)

174
RAM Showing Stakeholder Roles

175
Sample Resource Histogram for a
Large IT Project

176
Resource Loading and Leveling
• Resource loading refers to the amount of
individual resources an existing project
schedule requires during specific time
periods
• Resource histograms show resource
loading
• Over-allocation means more resources
than are available are assigned to perform
work at a given time

177
Resource Leveling

• Resource leveling is a technique for


resolving resource conflicts by delaying
tasks
• The main purpose of resource leveling is
to create a smoother distribution of
resource usage and reduce over-
allocation

178
Resource Leveling Example

179
Team Development
• It takes teamwork to successfully complete any
complex project
• Training can help people understand themselves,
each other, and how to work better in teams
• 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
180
General Advice on Teams
• Establish regular, effective meetings
• Fix the problem instead of blaming people
• Focus on meeting project objectives and
producing positive results
• Nurture team members, and encourage
them to help each other
• Acknowledge individual and group
accomplishments

181
Project
Communications
Management

182
Importance of Good
Communications
• The greatest threat to many projects is a
failure to communicate
• IT professionals have a reputation for being
bad communicators
• Research shows that IT professionals must
be able to communicate effectively to
succeed in their positions
• Strong communication skills are a key factor
in career advancement for IT professionals
183
Project Communications
Management Processes
• Communications planning: determining
the information and communications
needs of the stakeholders
• Information distribution: communicating
information available in a timely manner
• Performance reporting: collecting and
disseminating performance information
• Administrative closure: generating,
gathering, and disseminating information
to formalize phase or project completion
184
Communications Planning
• Every project should include a document
that guides project communications, a
Communications Management Plan
• Creating a stakeholder analysis for
project communications also aids in
communications planning

185
Communications Management
Plan Contents
• A method of gathering and storing communications
• A method of distributing key project information: to
whom, when, and how
• A schedule for producing the information
• Access methods for obtaining the information
• A stakeholder communications analysis
• Includes both internal and external stakeholders

186
Sample Stakeholder Analysis for
Project Communications

187
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

188
The Impact of the Number of People on
Communications Channels

2 people, 3 people, 4 people,


1 line of communication 3 lines of communication 6 lines of communication

Lines of communication = n(n-1)/2

10 people = 10(10-1)/2 = 45 lines

189
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
• Project forecasting predicts future project status
and progress based on past trends
• Status review meetings often include
performance reporting

190
Administrative Closure

• A project or phase of a project requires


closure
• Closure of a phase allows the project to
learn from experience, and move to the
next phase
• Project closure produces:
• Project archives
• Formal acceptance
• Lessons learned

191
Suggestions for Improving
Project Communications
• Resolve conflicts quickly and effectively
• Run effective meetings
• Use templates for project deliverables
• Develop better communication skills

192
Conflict Handling Modes, in
Preference Order
• Problem-solving (confrontation) : directly
face a conflict
• Compromise: use a give-and-take approach
• Smoothing: de-emphasize areas of
differences and emphasize areas of
agreement
• Forcing: the win-lose approach
• Withdrawal: retreat or withdraw from an
actual or potential disagreement
193
Developing a Communications
Infrastructure
• A communications infrastructure is a set of tools,
techniques, and principles that provide a foundation
for the effective transfer of information
• Tools include e-mail, project management software,
groupware, fax machines, telephones, teleconferencing
systems, document management systems, and word
processors
• Techniques include reporting guidelines and templates,
meeting ground rules and procedures, decision-making
processes, problem-solving approaches, and conflict
resolution and negotiation techniques
• Principles include using open dialog and an agreed upon
work ethic
194
Using Software to Assist in
Project Communications
• There are many software tools to aid in
project communications
• Microsoft Project 98 includes several
features to enhance communications
• Open Issues database
• E-mail is a powerful software tool

195
Project Risk Management

196
The Importance of Project Risk
Management
• Project risk management is the art and
science of identifying, assigning, and
responding to risk throughout the life of a
project and in the best interests of
meeting project objectives
• Risk management is often overlooked on
projects, but it can help improve project
success by helping select good projects,
determining project scope, and
developing realistic estimates
197
Information Technology Success
Potential Scoring Sheet

198
What is Risk?

• A dictionary definition of risk is “the


possibility of loss or injury”
• Project risk involves understanding
potential problems that might occur on
the project and how they might impede
project success
• Risk management is like a form of
insurance; it is an investment
• Risks are both threats and opportunities

199
Common Sources of Risk on IT
Projects
• Scope creep
• Inadequate executive sponsorship
• Insufficient time committed by business
users
• Loss of key team members
• Vendor inability to perform
• Decreasing hardware cost
• New capabilities added to vendor product
200
What is Project Risk Management?
• The goal of project risk management is to
minimize potential risks while maximizing
potential opportunities:
• Risk identification: determining which risks are
likely to affect a project
• Risk quantification: evaluating risks to assess the
range of possible project outcomes
• Risk response development: taking steps to
enhance opportunities and developing responses
to threats
• Risk response control: responding to risks over
the course of the project

201
Risk Identification

• Risk identification is the process of


understanding what potential
unsatisfactory outcomes are associated
with a particular project
• Risk identification tools:
• Checklists
• Lists of common risks
• Flowcharts
• Interviews

202
Potential Risk Conditions

203
Risk Quantification

• Risk quantification or risk analysis is the process


of evaluating risks to asses the range of possible
project outcomes
• Determine the risk’s probability of occurrence
• Determine the risk’s impact to the project if the
risk does occur
• Risk quantification techniques include expected
monetary value analysis, calculation of risk
factors, PERT estimations, simulations, and expert
judgment

204
Expected Monetary Value
(EMV) Example

205
Risk Response Development
• Risk mitigation: reducing the impact of a
risk event by reducing the probability of
its occurrence
• Risk avoidance: eliminating a specific
threat or risk, usually by eliminating its
cause
• Risk acceptance: accepting the
consequences should a risk occur

206
General Risk Mitigation
Strategies for Technical, Cost,
and Schedule Risks

207
Risk Management Plans,
Contingency Plans, and
Contingency Reserves
• A risk management plan documents the
procedures for managing risk throughout
the project
• Contingency plans are predefined actions
that the project team will take if an
identified risk event occurs
• Contingency reserves are provisions held
by the project sponsor for possible
changes in project scope or quality
208
Risk Response Control

• Risk response control involves executing the


risk management processes and the risk
management plan to respond to risk events
• Risks must be monitored throughout the life
of the project
• Sometimes workarounds or unplanned
responses to risk events are needed when
there are no contingency plans

209
Top 10 Risk Item Tracking
• Top 10 risk item tracking is a tool for
maintaining an awareness of risk throughout
the life of a project
• Establish a periodic review of the top 10
project risk items
• List the current ranking, previous ranking,
number of times the risk appears on the list
over a period of time, and a summary of
progress made in resolving the risk item

210
Example of Top 10 Risk Item
Tracking

211
Using Software to Assist in
Project Risk Management
• Databases can keep track of risks
• Spreadsheets can aid in tracking and
quantifying risks
• More sophisticated risk management
software helps develop models and uses
simulation to analyze and respond to
various project risks

212
Project Procurement
Management

213
Importance of Project
Procurement Management
• Procurement means acquiring goods
and/or services from an outside source
• Other terms include purchasing and
outsourcing
• The worldwide information technology
outsourcing market is well over $100
billion

214
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

215
Project Procurement
Management Processes
• Procurement planning: determining what to procure
and when
• Solicitation planning: documenting product
requirements and identifying potential sources
• Solicitation: obtaining quotations, bids, offers, or
proposals as appropriate
• Source selection: choosing from among potential
vendors
• Contract administration: managing the relationship
with the vendor
• Contract close-out: completion and settlement of the
contract
216
Project Procurement Processes
Key Events

217
Procurement Planning
• Procurement planning involves identifying
which project needs can be best met by
using products or services outside the
organization. It includes deciding:
• Whether to procure
• What to procure
• How much to procure
• When to procure
• How to procure

218
Procurement Planning
Tools and Techniques
• Make-or-buy analysis: determining
whether a particular product or service
should be made or performed inside the
organization, or purchased from someone
else - often involves financial analysis
• Experts, both internal and external, can
provide valuable inputs in procurement
decisions

219
Types of Contracts
• Fixed price or lump sum: involve a fixed
total price for a well-defined product or
service
• Cost reimbursable: involve payment to the
seller for direct and indirect costs
• Unit price contracts: require the buyer to
pay the seller a predetermined amount per
unit of service

220
Statement of Work (SOW)
• A statement of work is a description of the
work required for the procurement
• Many contracts, mutually binding
agreements, include SOWs
• A good SOW gives bidders a better
understanding of the buyer’s expectations

221
Statement of Work (SOW)
Template

222
Solicitation Planning

• Solicitation planning involves preparing


documents soliciting information from
vendors or suppliers:
• Request for Proposal: used to solicit proposals
from prospective sellers where there are several
ways to meet the sellers’ needs
• Request for Quotes (Information): used to solicit
quotes for well-defined procurements
• Invitations for bid or negotiation and initial
contractor responses are also part of solicitation
planning

223
Outline for a Request for
Proposal (RFP)

224
Solicitation

• Solicitation involves obtaining proposals or


bids from prospective sellers
• 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

225
Source Selection
• Source selection involves:
• Evaluating bidders’ proposals
• Choosing the best one
• Negotiating the contract
• Awarding the contract

• It is helpful to prepare formal evaluation


procedures for selecting vendors
• Buyers often create a “short list”, and
invite finalist vendors to make a
presentation
226
Sample Proposal Evaluation
Sheet

227
Contract Administration
• Contract administration 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

228
Suggestions on Change Control
for 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
229
Contract Close-out
• Contract close-out includes:
• Product verification to determine if all work
was completed correctly and satisfactorily
• Formal acceptance
• Administrative activities to update records to
reflect final results
• Archiving information for future use

• Procurement audits identify lessons


learned in the procurement process

230
Project Success Factors
• Dedicated Project Manager
• The project team’s commitment to project
• Accurate initial cost estimates
• Project team's capabilities
• Funding availability throughout project
• Effective and flexible planning and control techniques
• Absence of bureaucratic organization and controls
• Minimal amount of start-up difficulties
• Task (vs. social) orientation of project team
• Clearly established criteria for project success
• Constant monitoring of activity against plan
• Effective change control

231
Conclusion
• Clarity, openness, and communication are
key to project success
• Project Management is a team and not an
individual effort
• Effective Project Management guarantees
that all team members are accountable to
perform their agreed upon task
• Effective Project Management orchestrates
all aspects of a project to implement the
plan on time and on budget
232

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