Assignment #02

By

Project planning & management

SIR ZAFAR IQBAL
AHMAD FA16-BCE-025
 A) WHAT ARE THE FIVE COST CATEGORIES RELATED TO
PROJECT QUALITY? EXPLAIN EACH CATEGORY IN DETAIL

PREVENTION COSTS:

The costs of activities specifically designed to prevent poor quality in products or

services

APPRAISAL COSTS:

The costs associated with measuring, evaluating, or auditing products or Services

to assure conformance to quality standards abd performance requirements.

FAILURE COSTS:

The costs resulting from products or services not conforming to requirements Or

customer/user needs-that is, the costs resulting from poor quality.

INTERNAL FAILURE COSTS:

Failure costs which occur prior to delivery or shipment of the product, or service
to customer

EXTERNAL FAILURE COSTS:

Failure costs which occur after shipment of the product, or service, to customer.

EXAMPLES OF QUALITY COSTS

PREVENTION COSTS

Applicant screening, capability studies, design reviews, employee education,

equipment maintenance and repair, field testing, market analysis, prototype test,
quality design, safety reviews

APPRAISAL COSTS

Audits, document checking, equipment calibration, final inspection, in-process

inspection, lab testing, prototype inspection

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 INTERNAL FAILURE COSTS

Accounting error correction, design changes, employee turnover, equipment down

time, redesign, repair, rework, scrap sorting

EXTERNAL FAILURE COSTS

Bad debts, customer complaints visits, customer dissatisfaction,liability suit, loss

of market share, penalties, Recalls, redesign, returns, warranty expenses

OPTIMUM QUALITY COST

Some experts say that for every dollar spent on prevention will save approximately
Seven dollars in failure costs. This estimate may not be exact but many companies
do not spend enough on prevention. Here is a table listing typical ratio of quality
costs for American companies.
Cost category -> Percent of Total
Prevention -> 0 -5%
Appraisal -> 10 -50%
Internal Failure -> 20 -40%
External Failure -> 20 -40 %
Increasing prevention will take long time to see the result.
Increasing appraisal usually cause internal failure to increase and external failure
to decrease in the beginning.

ADVANTAGES OF A QUALITY COST SYSTEM

• Provides a manageable entity and a single view of quality

• Aligns quality and company goals
• Provides a problem prioritization system and a means of measuring change
• Provides a way to distribute controllable quality costs for maximum profits
• Improves the effective use of resources
• Provides emphasis for doing job right every time
• Helps to establish new product processes

LIMITATIONS OF A QUALITY COST SYSTEM

• Quality cost measurement does not solve quality problems

• Quality cost report do not suggest specific actions
• Quality costs are susceptible to short-term mismanagement

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 • It is often difficult to match effort and accomplishment
• Important costs may be omitted from quality cost reports
• Inappropriate costs may be included in quality cost report
• Many quality costs are susceptible to measurement errors

B) EXPLAIN IN DETAIL EACH STEP INVOLVED IN TUCHMAN’S

MODEL OF TEAM DEVELOPMENT

INTRODUCTION

Psychologist Bruce Tuckman first came up with the memorable phrase "forming,
storming, norming, and performing" in his 1965 article, "Developmental Sequence
in Small Groups." He used it to describe the path that most teams follow on their
way to high performance. Later, he added a fifth stage, "adjourning" (which is
sometimes known as "mourning").

LET'S LOOK AT EACH STAGE IN MORE DETAIL.

FORMING

In this stage, most team members are positive and polite. Some are anxious, as they
haven't fully understood what work the team will do. Others are simply excited
about the task ahead.
As leader, you play a dominant role at this stage, because team members' roles and
responsibilities aren't clear.

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 This stage can last for some time, as people start to work together, and as they
make an effort to get to know their new colleagues.

STORMING

Next, the team moves into the storming phase, where people start to push against
the boundaries established in the forming stage. This is the stage where many
teams fail.
Storming often starts where there is a conflict between team members' natural
working styles. People may work in different ways for all sorts of reasons but, if
differing working styles cause unforeseen problems, they may become frustrated.
Storming can also happen in other situations. For example, team members may
challenge your authority, or jockey for position as their roles are clarified. Or, if
you haven't defined clearly how the team will work, people may feel overwhelmed
by their workload, or they could be uncomfortable with the approach you're using.
Some may question the worth of the team's goal, and they may resist taking on
tasks.
Team members who stick with the task at hand may experience stress, particularly
as they don't have the support of established processes or strong relationships with
their colleagues.

NORMING

Gradually, the team moves into the norming stage. This is when people start to
resolve their differences, appreciate colleagues' strengths, and respect your
authority as a leader.
Now that your team members know one another better, they may socialize together,
and they are able to ask one another for help and provide constructive feedback.
People develop a stronger commitment to the team goal, and you start to see good
progress towards it
There is often a prolonged overlap between storming and norming, because, as
new tasks come up, the team may lapse back into behavior from the storming stage.

PERFORMING

The team reaches the performing stage, when hard work leads, without friction, to
the achievement of the team's goal. The structures and processes that you have set
up support this well.
As leader, you can delegate much of your work, and you can concentrate on
developing team members.
It feels easy to be part of the team at this stage, and people who join or leave won't
disrupt performance.

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 ADJOURNING

Many teams will reach this stage eventually. For example, project teams exist for
only a fixed period, and even permanent teams may be disbanded through
organizational restructuring.
Team members who like routine, or who have developed close working
relationships with colleagues, may find this stage difficult, particularly if their
future now looks uncertain.

C) WHAT DO YOU MEAN BY “RESERVE”? DIFFERENTIATE

BETWEEN CONTINGENCY RESERVE AND MANAGEMENT
RESERVE.

RESERVE

The amount kept by the insurer in order to be able to cover all his or her debts.
This term can also refer to an amount earmarked by the insurer for a specific
purpose.

CONTINGENCY RESERVE AND MANAGEMENT RESERVE

CONTINGENCY RESERVE
Contingency reserve is allocated for an activity, work package, or a project. It is
applicable to both time and cost estimates, which can lead to individual project
risks. Contingency Reserve is also applicable to the overall project when overall
project risk is concerned (i.e. chances of meeting a project end date or meeting the
cost target). It is sometimes referred to as contingency allowance when you
consider cost estimates, or schedule reserve when you consider time estimates.
The name “contingency reserve” itself tells us that, contingent on certain things, a
reserve will be used. PMI documents it as follows: “Time or money allocated in
the schedule or cost baseline for known risks with active response strategies.”
Breaking it down, you could say, contingency reserve:
• Is allocated for both time and cost
• Can be a percentage of the estimated duration/cost, a fixed number, or
developed by using quantitative analysis techniques
• Is a part of the schedule baseline or cost baseline
• Addresses known risks, but with an unknown amount of rework (the
known-unknowns)
• Is used with active response strategies, or more specifically when you use
“Accept” risk response strategy
• Can be used for both positive and negative risks

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 Now, you might be wondering when you would use such a reserve.
A project is always executed in an uncertain environment, leading to many risks.
It is unlikely that you can address all possible risks and have risk responses for all
of them. In fact, for some risks, you just cannot do anything. You have to accept
them.
Let’s consider an example. You know some deliverables in your project may
require rework because of defects, issues, or bugs, but do you know the amount of
rework needed? This is a known-unknown. Another example is this: resource
churns will happen in any project. New resources will join the project, and/or old
resources may leave. Do you know when a team member might decide to leave, or
what impact it will have on the project? Here again, we have a known-unknown.
For such risks, there is nothing to do but actively accept the possibility of the
occurrence. What you CAN do is assign a buffer or reserve—a contingency reserve.

MANAGEMENT RESERVE
Unlike contingency reserve, which is for known-unknown risks (or simply known
risks), the management reserve is for unknown-unknown risks (or simply unknown
risks). PMI documents management reserve as follows: “An amount of the project
budget or project schedule held outside of the performance measurement baseline
(PMB) for management control purposes, that is reserved for unforeseen work that
is within scope of the project.”
Breaking it down, you could say, management reserve:
• Is allocated for either overall project schedule or budget
• Can be a percentage of the estimated duration/cost or a fixed number
• Is outside the schedule baseline or cost baseline
• Addresses the unknown risks with unknown or unforeseen work (the
unknown-unknowns)
• Is kept for management control purposes
• Can be used for both positive and negative risks
Let’s consider another scenario to understand this type of reserve. In your project,
there will be some risks which will be unknown (or unidentified) when you begin.
For example, a sudden increase in material prices due to economic turbulence. Do
you know about that risks in advance of the project? Of course not. You also do
not know what the impact will be. These types of risks are hard to predict, so
impact is also unknown. For such unknown-unknown risks, we have management
reserve.
A significant point to note is that contingency reserve is within the baseline,
whereas management reserve is not. Contingency reserve is known to the project
manager and visible to all (It can be cut down, as well!), but management reserve
is outside of the approved baseline. To use management reserve, as the manager
of your project, you will likely be needing approval. Approval follows the change

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 control process. If you use the reserve, then, of course, the baseline also has to be
updated.
You may be wondering about the protocols of using these reserves? Such
procedure should be documented as part of your “Risk Management Plan.” It can
be created by you or dedicated by risk managers, who will be a part of larger, more
complex, and/or strategically important projects.