Professional Documents
Culture Documents
Fall 2005
Tim Eiler
Why is any business in business?
$ € £ ¥
Why Project Management (PM)?
• Increases profit (margin) by reducing
cost/unit output
• Drives Innovation
Tools
People
Systems
(Lewis, James P. 2000. Project Planning, Scheduling & Control, 3rd ed. McGraw-Hill)
Why Is PM Important To You?
What Employers Want
• Learning to Learn
• Listening and Oral Communication
• Competence in Reading, Writing, and Computation
• Adaptability: Creative Thinking and Problem Solving
• Personal Management: Self-Esteem, Goal Setting/Motivation, and
Personal/Career Development
• Group Effectiveness: Interpersonal Skills, Negotiation, and
Teamwork
• Organizational Effectiveness and Leadership
Workplace basics: The skills employers want. 1988. American Society for Training and Development and U.S. Department of Labor.
Why Is PM Important To You?
Employer’s Checklist C: Boeing Company[1]
❑ A good grasp of these engineering fundamentals:
Mathematics (including statistics), Physical & life sciences, Information
technology
❑ A good understanding of design & manufacturing processes
(i.e. understanding of engineering concepts and practice)
❑ A basic understanding of the context in which engineering is practiced, including:
Economics and business practice, History, The environment, Customer and
societal needs
❑ A multidisciplinary systems perspective
❑ Good communication skills: Written, Verbal, Graphic, Listening
❑ High ethical standards
❑ An ability to think critically, creatively, and independently & cooperatively
❑ Flexibility--an ability and the self-confidence to adapt to rapid/major change
❑ Curiosity and a lifelong desire to learn
❑ A profound understanding of the importance of teamwork
[1]ASEE Prism, December 1996, p. 11 .
Why Is PM Important To You?
Desired Attributes of a Global Engineer
✓A good grasp of these engineering science fundamentals, including:
Mechanics & dynamics, Math (including statistics), Physical & life sciences, Information science/technology
✓A good understanding of the design & manufacturing process
(i.e., understands engineering and industrial perspective)
✓A multidisciplinary, systems perspective, along with a product focus
✓A basic understanding of the context in which engineering is practiced, including:
Customer & societal needs/concerns, Economics & finance, The environment & its protection,
The history of technology & society
✓Awareness of the boundaries of one’s knowledge, along with an appreciation for other areas of
knowledge & their interrelatedness with one’s own expertise
✓Awareness & appreciation of other cultures & their diversity, distinctiveness, & inherent value
✓Commitment to teamwork, including extensive experience/understanding with team dynamics
✓Good communication skills, including written, verbal, graphic, and listening
✓High ethical standards (honesty, sense of personal and social responsibility, fairness, etc)
✓An ability to think both critically and creatively, in both independent and cooperative modes
✓Flexibility: the ability and willingness to adapt to rapid and/or major change
✓Curiosity and the accompanying drive to learn continuously throughout one’s career
✓An ability to impart knowledge to others
[1]A Manifesto for Global Engineering Education, Summary Report of the Engineering Futures Conference,
January 22-23, 1997. The Boeing Company & Rensselaer Polytechnic Institute.
Why Engineering Economics?
• Critical element of project management
– economics used in making decisions
• related to engineering projects
– Even if you aren’t the decision maker, you will be
a participant in some form
– same principles are used for many other types of
decisions
• FE, PE Exam
Engineering Econ - Examples
• Is a 3-year payback on your project sufficient to meet
company objectives?
• If you have competing repeatable projects with different
lives, you can use the lowest common multiple of their
project lives as the period of analysis…True or False?
• You just heard through the grapevine that the company is
changing the way it handles depreciation expense. You
shouldn’t worry about how that will affect how your project
is accepted…True or False?
• (FE exam problem) A bank uses the following formula to
compound interest in a passbook savings account F = P
(1 + i/4)4n. Interest is stated as an annual rate. How are
they compounding? (1) Daily, (2) Weekly, (3) Monthly, (4)
Quarterly, (5) Annually
What Is Project Management?
Earlier, we saw these definitions:
• Unique
• Specific Deliverable
• Specific Spending Limit
• Element of Risk
TRIPLE
CONSTRAINT
Defining a Project – Current
Budget = Cost
Schedule = Time
Performance = Itself
Client Acceptance
a.k.a Customer
Satisfaction
QUADRUPLE
CONSTRAINT
Is PM Art, Science, or Both?
• Science
– Tools-based
– Process-based
• Art
Execution
customer internal
Closure
The PM Process – Detail Level
SOW Project Charter
Requirements Document
Project Plan
Predictors of Lowered Project Success
• Unrealistic project work plans
• Inability to deal early with suspected problem
issues
• Technical complexities not well
communicated to team members
• Conflict between client expectations and the
state of deliverables
• Insufficient involvement on the part of senior
management early in the life cycle
Project Management
Project
Other
Program Management
Program
Other
Other
Project Life Cycle
• Organizing
• Staffing
• Directing
• Controlling
PM Role Over PLC - Planning
Planning
• Establish project objectives and performance
requirements
• Involve key participants in the process
• Establish well-defined milestones with deadlines
• Build in contingencies to allow for unforeseen problems
• Prepare formal agreements to deal with changes
• Clearly define responsibilities, schedules, and budgets
1Oberlender,
G.D. 1993. Project management for engineering and construction.
New York: McGraw-Hill.
PM Role Over PLC – Organizing/Staffing
Organizing
• Develop a WBS that divides project into units of work
• Create a project organization chart
• Clearly define responsibilities, schedules, and budgets
Staffing
• Select team members using work requirements and
input from appropriate managers’ input
• Orient team members to overall project
• Seek each team members’ input to define & agree
upon scope, budget, and schedule
• Set specific performance expectations with each team
member
PM Role Over PLC – Directing/Controlling
Directing
• Coordinate all project components
• Display positive attitude
• Be available to team members
• Investigate potential problems as soon as they arise
• Research and allocate necessary resources
• Recognize good work of team members & guide necessary
improvement
Controlling
• Measure project performance using record of planned &
completed work
• Chart planned and completed milestones chart
• Chart monthly project costs
• Document agreements, meetings, telephone conversations
• Communicate regularly with team members
The PM Process – Planning Detail
SOW Project Charter
Requirements Document
Project Plan
The Process Steps - Overview
• SOW – what the customer wants
• Charter – turns the project “ON”, identifies project rules
• Requirements Doc – Details of the customer “wants”
• WBS – breaks work into manageable “packages”
• Stakeholder Analysis – identifies who can impact project
• Network Diagram – identifies dependencies of tasks
• Duration Estimation – estimates task length
• Critical Path Assessment – finds the longest schedule
• Resource Assignment – assigning the right people to tasks
• Schedule – ND + Duration Estimates + Resources
• Communication Plan – who needs to know what, when, how
• Budget – based on estimates, how many & for project
• Quality Plan – how quality of project output will be ensured
• Admin Plan – how mundane aspects of the project will be handled
• Project Plan – single location of most of the above (and more)
What it takes to be successful PM
• Relentless Planning
• Vision
• Servant Leadership Approach
• Delegation
• Communication
• Support
• Optimism
• Tenacity
• Balance
• Listening
• Accountability
PM: A Different Way of Thinking Required
• PM (indeed, management in general)
requires a different way of thinking that most
engineers are taught to use.
• Documentation Rules
– What documentation is required
• Testing results
• Manufacturers’ literature
• Samples
• Product data
• Color selections
• Etc.
– When documentation is required
– Format required for documentation
Statement of Work (SOW)
• There is no “official standard version” of an
SOW
2. All projects are not created equal. Every project contributes differently. In is
not in the company's best interests to treat projects equally.
3. There are more good projects than there are resources with which to
accomplish them. The corollary is "you can not do them all." Many foolish
companies try to do too much and the result of this is poor quality, missed
dates, cost overruns, and dissatisfied customers.
• SOW
• Homework Instructions
Case Study Used In Course
Statement Of Work
Parts Depot
333 W 78th St
Bloomington, MN
2. Site work
2.1 Excavation
Flat and compacted to support slab foundation and building
2.2 Landscaping
Turf
3. Concrete
3.1 Footing and Slab
• Transmittal
A memo that introduces/outlines/explains the
material being sent (much like a fax cover sheet)
Homework 1
1. Genuinely and sincerely thank at least one person who performs routine
cleaning maintenance on a building in which you work or live.
You must provide the name of this person and the building in which s/he
works. You must also provide me with some way of remotely contacting
this person (phone number or email address preferred).
Project Planning
is Extremely
ITERATIVE
Why? Because projects are progressively elaborated!
CEO
Project control
Organization Types - Functional
• Advantages
– technological depth
– High degree of standardization and control in each silo
• Drawbacks
– lines of communication outside functional department slow
– technological breadth
– project rarely given high priority
Organization Types - Matrix
CEO
Project control
In a Balanced Matrix, one staff is replaced by a PM
In a Composite Matrix, PM has its own functional organization
Organization Types - Matrix
• Advantages
– flexibility in way it can interface with parent organization
– strong focus on the project itself
– contact with functional groups minimizes projectitis
– ability to manage fundamental trade-offs across projects
• Drawbacks
– violation of the Unity of Command principle
– complexity of managing full set of projects
– conflict
Organization Types - Projectized
CEO
PM 1 PM 2 PM 3 PM 4
Project control
There is likely to be a separate network of functional managers
A Mixed Organization is a mix of projectized, matrix/functional
Organization Types - Projectized
• Advantages
– Effective and efficient for large projects
– Resources available as needed
– Broad range of specialists
– short lines of communication
• Drawbacks
– May require high levels of duplication for some specialties
– Expensive for small projects
– Specialists may have limited technological depth
– No “home” for staff at end of project
Organization Types - PMO
• Project Management Office (PMO)
– Not very standard in objective/work
– May be responsible for providing support functions (project
coordination, other admin functions), to providing “process
ownership” and training, to actually being responsible for
project results
• What is a DELIVERABLE?
Work Breakdown Structure
• What a WBS does:
– Break the work down into smaller, more
manageable parts (what does “more manageable”
mean?)
1.1.2.1 Request
Bids
1.1.2.2
Purchase
1.1.2.3 Receive
Carpet
Network Diagrams
• Ok, up to now you’ve learned to:
1. Receive the customer specification
2. Officially start the project
3. Get the requirements right
4. Figure out who the project stakeholders are and what they want
5. Break the work down
• So now what?
• Purpose
– Gives schematic display of the logic relationships of project activities
Note: Sequence order – NOT time order
• AON vs AOA
– AON = Activity on Node
(Precedence Diagramming – PDM)
• YOUR TASK:
A) Individually estimate (write it) how long (seconds) the work will take
(30 seconds)
B) In Groups, estimate (write it) how long the work will take
(3 minutes)
• Critical Path
– Path that, if delayed, will delay completion of project
– The series of activities that determines project duration
– The longest path through the project
– Change in start or finish time of a critical task will affect
project end
• Critical Time
– Time required to complete all activities on the critical path
Network Diagrams - CPM
• Calculate float to determine which activities have the
least scheduling flexibility
• Visual Method:
– Find EVERY path
– Add each path
– Longest path is critical path
CPM Example
Task Predecessor Duration
a -- 4
b -- 6
c a 3
d b 4
e b 5
f c, d 2
g e 7
2 1 1 0
0 0 2
2 1 3 2
Slack
• Since critical path activities cannot be delayed
without causing the project to be delayed, it
follows that activities not on the critical path
CAN be delayed without delaying the project.
End
Star
t
3
Task 3
Slack
• Calculated by:
Displayed by:
LST – EST = LFT – EFT = slack
0 5 5 5 6 11 Forward Pass
Task A Task B
S
0 5 5 11
T
E
A N
R D
0 6 6
T
Task C
5 11 Backward Pass
0 1 2 3 4 5 6 7 10 11 12
Number Convention
1 2 3 4 5 6 7 8 9 10 11
PERT
• PERT = Program Evaluation Review Technique
– Top-down estimation
– Bottom-up estimation
Class start
Exam 1
Exam 2
Exam 3
Grades posted
Exam 1 10/7
Exam 2 11/4
Exam 3 12/9
Task 1
Task 2 10/7
Task 3
Task 4
Task 5
t1 t2 t3
Gantt Schedules
• Project progress is marked by filling in a task bar
Task 1 75%
Task 2 10/7
Task 3
Task 4
Task 5
t1 t2 t3
Modified Gantt Chart
Possible • Show dependencies (this example)
Modifications:
• Show resource assignments
• Task roll-ups (this example)
Modified Gantt Chart
Better way to do task ID notation
Scheduling - Practice
Break into support groups…In 10 minutes:
• Draw two network diagrams (AON, AOA)
• Determine the critical path (CPM)
• Draw a Gantt AND a Modified Gantt chart
Project Management – Resource Leveling
• Resource leveling
• “Any form of network analysis in which scheduling decisions are
driven by resource management concerns (e.g. limited resource
availability or difficult to manage changes in resource levels).”
• Resource Histogram
Scheduling Computer Tools
• Example Schedule in Microsoft Project
– Number of hours/workday
– Number of workdays/week
Physical:
• Machine, people, facilities, tangible sources
• Easier to identify and break
Policy:
• Rules, training, measures (RTM)
• More difficult to identify and break
• Eliminate multi-tasking
• Manage constraints
• Manage Uncertainty
Critical Chain
Rules:
• Aggressive estimates
❑ Planned pad hierarchy
❑ Parkinson’s Law
❑ Student Syndrome
• Include dependencies other than time in management focus
• No multi-tasking on critical chain
• Relay-runner ethic/system
• Report early finishes
• Aggregate safety (buffers) and manage to the buffers
Planned Pad Hierarchy
Feeder Feeder Feeding
Task 1 Task 2 Buffer
End
Communication Planning
• What is Project Communication?
Exchanging project-specific information from sender to
recipient
• Recipient-focused
• How is it done?
– Before “event”
– During “event”
– After “event”
Stakeholder 1 2 3 n
Data/Info Needed?
Main Distrib Method(s)?
When Distrib?
How Distrib?
Methods/Procedures for info collection/storage
Methods for data access between scheduled communications
Methods for updating/refining CMP over time
Who is responsible?
When will it be done?
Typical Project Documents
• Submittal
A specific artifact/item to be reviewed for approval,
archived, etc.
• Transmittal
A memo that outlines/explains submittals included
with the transmittal and the actions required by the
recipient
Typical Project Documents
• There are no world-wide formats for these
documents.
– Company specific
– Recipient specific
– Industry specific
– Project specific
Procurement Planning
• Is it likely that you will be able to do all the
work with internal resources?
• Why is important?
• A well run business or project doesn’t have a great deal of
excess (i.e. unallocated) cash/other resources lying around
• Projects compete with one another for resources
• Goal is to optimize use of limited supply
• Requires making trade-offs
Cost/Benefit Analysis
• Cost Benefit Analysis is a tool to evaluate options
❑ Is it worth spending $5000 to crash a schedule and gain 5 days?
❑ Is it worth dropping a product feature from this software release in
order to be able to achieve the baseline schedule release or would
it be better to keep the feature and slip the scheduled release by
20 days?
A lease “acts like” an amortized purchase – for both lessor and lessee
o Proposal used when other than price (tech skills, etc) paramount
❑ Six Sigma
❑ ISO standards
❑ Quality Circles
– Method:
• Clear, visible leadership from top
• Ensure that the system is ‘known’
• Use statistical measurements to monitor the system
• Use statistical measurements to make changes only when needed and
relatively predictable
• Use statistical measurements to monitor the changes
4. Managers who are highly mobile & hop from company to company
5. Management use of numbers & figures that are visible & available
with no thought of info that may be needed, but unknown or hidden
6. Excessive medical costs
7. Excessive legal liability costs, which can be swelled by lawyers who
work on “contingency” fees
Continuous Quality Improvement
Four Basic Principles
(The Memory Jogger: A Pocket Guide of Tools for Continuous Improvement and
Effective Planning)
Six Sigma
• Six Sigma
– Objective:
• A comprehensive and flexible system for achieving, sustaining, and
maximizing business success. Six Sigma is uniquely driven by close
understanding of customer needs, disciplined use of facts, data, and
statistical analysis, and diligent attention to managing, improving, and
reinventing business processes.
• Encompasses a broad array of business best practices and skills
(some advanced, some common sense) that are essential ingredients
for success and growth.
• Applicable to all types of organizations
• As much about people excellence as technical excellence
– Method:
• There are many “Six Sigma Ways.” – there is no fixed prescription
• Sort of a culmination/combination of various other systems
Six Sigma – Essential Themes
1. A genuine focus on the customer
2. Data- and fact-driven management
3. Process focus, management &
improvement as an engine for growth &
success
4. Proactive management
5. Boundaryless collaboration
6. A drive for perfection, and yet a tolerance
for failure
Six Sigma
– Method:
• “Tell me what you’re going to do. Do it. Show me that you did it.”
• Set requirements for process performance in various operational areas
• Company establishes process to comply with the ISO specifications
• Registrar evaluates company ISO system
• ISO system meets/exceeds ISO standard, company is
“certified”/”registered”
• ISO system does not meet/exceed, company goes back to previous step
• Company uses periodic audits to validate process validity and
adherence
• Internal
• External (registrar)
• Failures found during audits must be dealt with via a process
established as part of the company’s ISO system
Quality Circles
– Objective:
– Method:
• Why is important?
• A well run business or project doesn’t have a great deal of
excess (i.e. unallocated) cash/other resources lying around
• Projects compete with one another for resources
• Goal is to optimize use of limited supply
• Requires making trade-offs
Cost/Benefit Analysis
• Cost Benefit Analysis is a tool to evaluate options
❑ Is it worth spending $5000 to crash a schedule and gain 5 days?
❑ Is it worth dropping a product feature from this software release in
order to be able to achieve the baseline schedule release or would
it be better to keep the feature and slip the scheduled release by
20 days?
A lease “acts like” an amortized purchase – for both lessor and lessee
o Proposal used when other than price (tech skills, etc) paramount
❑ Six Sigma
❑ ISO standards
❑ Quality Circles
Total Quality Management
• TQM (Total Quality Management)
– Method:
• Clear, visible leadership from top
• Ensure that the system is ‘known’
• Use statistical measurements to monitor the system
• Use statistical measurements to make changes only when needed and
relatively predictable
• Use statistical measurements to monitor the changes
4. Managers who are highly mobile & hop from company to company
5. Management use of numbers & figures that are visible & available
with no thought of info that may be needed, but unknown or hidden
6. Excessive medical costs
7. Excessive legal liability costs, which can be swelled by lawyers who
work on “contingency” fees
Continuous Quality Improvement
Four Basic Principles
(The Memory Jogger: A Pocket Guide of Tools for Continuous Improvement and
Effective Planning)
Six Sigma
• Six Sigma
– Objective:
• A comprehensive and flexible system for achieving, sustaining, and
maximizing business success. Six Sigma is uniquely driven by close
understanding of customer needs, disciplined use of facts, data, and
statistical analysis, and diligent attention to managing, improving, and
reinventing business processes.
• Encompasses a broad array of business best practices and skills
(some advanced, some common sense) that are essential ingredients
for success and growth.
• Applicable to all types of organizations
• As much about people excellence as technical excellence
– Method:
• There are many “Six Sigma Ways.” – there is no fixed prescription
• Sort of a culmination/combination of various other systems
Six Sigma – Essential Themes
1. A genuine focus on the customer
2. Data- and fact-driven management
3. Process focus, management &
improvement as an engine for growth &
success
4. Proactive management
5. Boundaryless collaboration
6. A drive for perfection, and yet a tolerance
for failure
Six Sigma
– Method:
• “Tell me what you’re going to do. Do it. Show me that you did it.”
• Set requirements for process performance in various operational areas
• Company establishes process to comply with the ISO specifications
• Registrar evaluates company ISO system
• ISO system meets/exceeds ISO standard, company is
“certified”/”registered”
• ISO system does not meet/exceed, company goes back to previous step
• Company uses periodic audits to validate process validity and
adherence
• Internal
• External (registrar)
• Failures found during audits must be dealt with via a process
established as part of the company’s ISO system
Quality Circles
– Objective:
– Method:
– Method:
• “Tell me what you’re going to do. Do it. Show me that you did it.”
• Set requirements for process performance in various operational areas
• Company establishes process to comply with the ISO specifications
• Registrar evaluates company ISO system
• ISO system meets/exceeds ISO standard, company is
“certified”/”registered”
• ISO system does not meet/exceed, company goes back to previous step
• Company uses periodic audits to validate process validity and
adherence
• Internal
• External (registrar)
• Failures found during audits must be dealt with via a process
established as part of the company’s ISO system
Quality Circles
– Objective:
– Method:
– OLD WAY: Check at the end of a process to see if it meets specified parameters.
Throw away or rework (and check again) output that doesn’t meet specifications.
Step B
– Improvement can come in the form of:
• Whole team working in concert rather than
against each other
• Make changes to the process steps No
– Eliminate Pass?
– Shorten
– Rearrange Yes
Step C
End
Pareto Analysis
– The 80/20 chart
Problem
to solve
• Trend analysis
❑ Histogram
• Trend analysis
❑ Scatter Plot
• Trend analysis
• Should use some statistical
validation as well as visual
Statistical Process Control
❑ Control Charts Upper Control Limit (UCL)
- Everyone dislikes being criticized, but REMEMBER that the audit function is
intended to help the company be better at what it does.
- Being better can mean a competitive advantage (cha-ching) or, as in most cases, it can
simply mean that you are able to remain competitive (like the ante into a poker game).
– QFD matrices are used to show the links between the user’s quality
concepts and technical quality. Successive decompositions of needs-
related quality into quality associated with subsystems allows relation
of every important aspect of project quality to competitive quality
Requirements
Key Processes
Characteristics
Customer
Component
Design
• ZBB:
– Throw out last year’s budget
– Start over with a total replanning effort using more distinct,
factual analysis
Top Down Budgeting
• Based on collective judgements and experiences of
top and middle managers.
• Overall project cost estimated by estimating costs of
work packages/major tasks from WBS
• Advantages
– Accuracy of estimating overall budget
– Errors in funding small tasks need not be individually
identified
• Disadvantages
– May miss a material, though small-appearing, item
Project Budgeting
How Top-Down Budgeting works (a very, very basic example):
WBS Task Cost
2.0 Design $50,000
3.0 Concrete $500,000
4.0 Frame $200,000
5.0 Electrical $ 75,000
Bottom Up Budgeting
• WBS identifies elemental tasks
• Those responsible for executing these tasks
estimate resource requirements
• Technical Estimation
• Time & Cost Estimation
• Advantage
– More accuracy from detailed lower-level analysis
• Disadvantage
– Tedious, long
– Not focused on larger picture; can get lost in details
– GIGO
Project Budgeting
How Bottom-Up Budgeting works (a very, very basic example):
WBS Task Resource Duration (day) Cost
2.0 Design $44,160
2.1 Site Survey 4 3 $ 7,680
2.2 Architectural Design 1 20 $24,000
2.3 Drafting 2 12 $12,480
3.0 Concrete
3.1 Excavation
3.2 Pour Concrete
3.3 Test Concrete
4.0 Frame
4.1 Arrange Materials
4.2 Erect Walls
5.0 Electrical
5.1 Arrange Materials
5.2 Run Circuit Wiring
5.3 Test Electrical Systems
Work Element Costing
• Determine resource requirements, then task costs
– fixed costs (e.g., materials)
– labor time & labor rate
– equipment time & equipment rate
– Overhead/G&A
• Levels of Estimate
– ROM = Rough Order of Magnitude (~20% accurate, 10
minutes)
– System Estimate (~10% accurate, 1 day)
– Unit Estimate (~5% accurate, 1-3 weeks)
Work Element Costing
Engineering News Record, http//:www.enr.com/cost/cost1.asp
ENR publishes both a Construction Cost Index and a Building Costs Index that are widely used in the
Construction Industry. This web site contains an explanation of the indexes methodology and a complete
history of the 20-city national average for the CCI and BCI.
Both indexes have a material and labor component. In the second issue of each month ENR publishes
the CCI and BCI, materials index, skilled labor index and common labor index for 20 cities and the
national average. The first issue also contains an index review of all five national indexes for the latest 14
month period.
ENR also publishes various materials prices in each issue for the 20 US cities and 2 Canadian cities. The
first issue of the month contains prices for paving asphalt, portland cement, ready-mix concrete, concrete
block, brick and aggregates. The second issue for the month has prices for various pipe including
reinforced concrete pipe, corrugated steel pipe, PVC water and sewer pipe, ductile iron pipe and copper
water tubing. The third issue of the month contains prices for lumber, plywood, plyform, particle board
and gypsum board. The fourth issue of the month has prices for structural steel reinforcing bar,
aluminum, and stainless steel sheet and plate. If a month has 5 Mondays, the fifth issue will have union
wage rates for 21 trades in all 20 cities.
The 20 US cities that ENR maintains cost data on are: Atlanta, Baltimore, Birmingham, Boston, Chicago,
Cincinnati, Cleveland, Dallas, Denver, Detroit, Kansas City, Los Angeles, Minneapolis, New Orleans, New
York, Philadelphia, Pittsburgh, St. Louis, San Francisco, Seattle. ENR also tracks cost data for Montreal
and Toronto, Canada.
In addition, ENR publishes four quarterly cost reports in the last issue of March, June, September and
December. These issues analyze cost trends from ENR’s data base and explain the movement in the
indexes. They also contain various other cost data including open-shop wage rates, workers
compensation rates and international prices, wages and cost indexes just to name a few.
Tim Grogan, Senior Editor, Costs, Data & Material Prices.
ENR - Building Cost Index History
How ENR builds the Index: 66.38 hours of skilled labor at the 20-city average of bricklayers, carpenters and structural ironworkers rates,
plus 25 cwt of standard structural steel shapes at the mill price prior to 1996 and the fabricated 20-city price from 1996, plus 1.128 tons of
Portland cement at the 20-city price, plus 1,088 board.ft of 2X4 lumber at the 20-city price (cwt = hundred weight. 45.36 kg, 0.04536 tons).
YEAR JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC AVER
1978 1609 1617 1620 1621 1652 1663 1696 1705 1720 1721 1732 1734 1674
1979 1740 1740 1750 1749 1753 1809 1829 1849 1900 1900 1901 1909 1819
1980 1895 1894 1915 1899 1888 1916 1950 1971 1976 1976 2000 2017 1941
1981 2015 2016 2014 2064 2076 2080 2106 2131 2154 2151 2181 2178 2097
1982 2184 2198 2192 2197 2199 2225 2258 2259 2263 2262 2268 2297 2234
1983 2311 2348 2352 2347 2351 2388 2414 2428 2430 2416 2419 2406 2384
1984 2402 2407 2412 2422 2419 2417 2418 2428 2430 2424 2421 2408 2417
1985 2410 2414 2406 2405 2411 2429 2448 2442 2441 2441 2446 2439 2428
1986 2440 2446 2447 2458 2479 2493 2499 2498 2504 2511 2511 2511 2483
1987 2515 2510 2518 2523 2524 2525 2538 2557 2564 2569 2564 2589 2541
YEAR JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC AVER
1988 2574 2576 2586 2591 2592 2595 2598 2611 2612 2612 2616 2617 2598
1989 2615 2608 2612 2615 2616 2623 2627 2637 2660 2662 2665 2669 2634
1990 2664 2668 2673 2676 2691 2715 2716 2716 2730 2728 2730 2720 2702
1991 2720 2716 2715 2709 2723 2733 2757 2792 2785 2786 2791 2784 2751
1992 2784 2775 2799 2809 2828 2838 2845 2854 2857 2867 2873 2875 2834
1993 2886 2886 2915 2976 3071 3066 3038 3014 3009 3016 3029 3046 2996
1994 3071 3106 3116 3127 3125 3115 3107 3109 3116 3116 3109 3110 3111
1995 3112 3111 3103 3100 3096 3095 3114 3121 3109 3117 3131 3128 3111
1996 3127 3131 3135 3148 3161 3178 3190 3223 3246 3284 3304 3311 3203
1997 3332 3333 3323 3364 3377 3396 3392 3385 3378 3372 3350 3370 3364
YEAR JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC AVER
Estimating Expertise
There is no evidence of mystical inborn talent for cost- estimating.
‘Expertise’ is not a universal phenomenon, but rather very project-specific.
The most crucial attributes of good estimators are knowledge and care.
Good estimators have exactly the same attributes as good gamblers:
• they research selectively and thoroughly.
• they weigh each decision against possible outcomes & behave accordingly
Skitmore, R.M., Stradling, S.G., & Tuohy, A.P. 1994. Human effects in early stage contract price forecasting. IEEE
Transactions on Engineering Management, 41 (1), 29-39.
Hybrid Budgeting
• Best of both Top-down and Bottom-up mixed
• Timeline Method
FV1 = PV1 (1 + i)
0 1 2 3 4 5
i% i% i% i% i%
$PV FV FV2 FV FV FV
1 3 4 5
FV = PV (1 + i)n
Present Value (PV)
• Find PV of $1 today of FV dollars received n years in
the future, assuming i%/year
PV = FV x 1 = FV
(1+i)n (1+i)n
Compounding
• What is it?
• Why is important?
Group Work
• Use Timeline Method: How much money will
be your return at the end of 5 years with 5%
annual interest on a deposit of $500
• How is it calculated?
FVAn = PMT/(1+i) + PMT/(1+i)2 + … + PMT/(1+i)t
n
= PMT Σ 1/(1+i)t
t=1
Annuity
• Example
Promise to pay $1000/year for 3 years. If you were to receive this money and
invest it with a 4% return, how much would you have at the end of 3 years?
0 1 2 3 i=
i% i% i% t=
n=
$1000 $1000 $1000 PMT =
• Why is it important?
• Couldn’t we just do an FV analysis on a $5M payback at the end
of 5 years in the 5 year, $5M project example?
• In the example above, what amount of money would you want
to receive now to be able to turn down the $1000/year for 3 year
deal?
Net Present Value (NPV)
n
NPV = Σ (FVt / (1+i)t) - I
t=1
Unlike paying the staff, depreciation is NOT a cash charge – cash flows are
not decreased… Depreciation actually increases cash flow!!!
• Methods
• Straight Line
• Double declining balance
• Sum of the years’ digits
• Accelerated Cost Recovery System (ACRS)
• Modified Accelerated Cost Recovery System (MACRS)
Depreciation
• Straight Line Method
(Purchase Amount – Salvage Value) / Depreciation life
Purchase
Value
What is the effect
on cash flow of
changing the
salvage value?
Salvage
Value
• MACRS
• Sum of purchase price for any year x the depreciation % for that year
• Depreciation Life determined by Asset Class rules
Ownership year 3 5 7 10
2 45 32 25 18
3 15 19 17 14
4 7 12 13 12
5 11 9 9
6 6 9 7
7 9 7
8 4 7
9 7
10 6
11 3
MACRS Continued
Half-year convention: Assumes property put in service in middle of first
year – extends recovery period by one more year (3 year class property
is depreciated over 4 years)
What is the depreciation for each year and the total depreciation?
Baselines
• What is a baseline?
– Review (cyclical)
The RMP Table
• How you do it? - The Risk Mgmt Plan table
• Risk Identifier
• Risk
• Risk “Rank”
• Risk Owner
• Monitoring Plan
• Response Strategy
• What do you do with the risk ID when the risk “goes away?”
1. Critical person lost time injury 1. Critical person lost time injury
2. Fire damages structure 2. Fire damages structure
3. Rain delay to critical path task 3.
Risk Management
Risk (Identification)
• Something that affects triple constraint objectives
• Negative
• Positive (Examples?)
• Risk identified
• At project start
• Over and over, repeatedly, again and again, until project end
Risk Management
Probability of risk occurrence (P)
– By a little bit?
– By a lot?
– Why/Why not?
Configuration Management
What is it?
Establish revision control and change control methods
Similar to baseline
Why is it done?
Communication – keeping everyone on the same page
Work billing
Configuration Management
How does it work?
Written process (per project, per company, etc)
If CR accepted, evaluate
If outcome is to proceed,
• create/publish ECN
• Update plan information
Configuration Management
Reqmts Gathering
Pre-solicitation Solicitation
Bid
Award
Buildout
• Why is important?
Future Value (FV)
• Find FV of $1 today invested for n years at i%/year
• Timeline Method
FV1 = PV1 (1 + i)
0 1 2 3 4 5
i% i% i% i% i%
$PV FV FV2 FV FV FV
1 3 4 5
FV = PV (1 + i)n
Present Value (PV)
• Find PV of $1 today of FV dollars received n years in
the future, assuming i%/year
PV = FV x 1 = FV
(1+i)n (1+i)n
Group Work
• Use Timeline Method: How much money will
be your return at the end of 5 years with 5%
annual interest on a deposit of $500
• How is it calculated?
FVAn = PMT/(1+i) + PMT/(1+i)2 + … + PMT/(1+i)t
n
= PMT Σ 1/(1+i)t
t=1
Annuity
• Example
Promise to pay $1000/year for 3 years. If you were to receive this money and
invest it with a 4% return, how much would you have at the end of 3 years?
0 1 2 3 i=
i% i% i% t=
n=
$1000 $1000 $1000 PMT =
• Why is it important?
• Couldn’t we just do an FV analysis on a $5M payback at the end
of 5 years in the 5 year, $5M project example?
• In the example above, what amount of money would you want
to receive now to be able to turn down the $1000/year for 3 year
deal?
Net Present Value (NPV)
n
NPV = Σ (FVt / (1+i)t) - I
t=1
Unlike paying the staff, depreciation is NOT a cash charge – cash flows are
not decreased… Depreciation actually increases cash flow!!!
• Methods
• Straight Line
• Double declining balance
• Sum of the years’ digits
• Accelerated Cost Recovery System (ACRS)
• Modified Accelerated Cost Recovery System (MACRS)
Depreciation
• Straight Line Method
(Purchase Amount – Salvage Value) / Depreciation life
Purchase
Value
What is the effect
on cash flow of
changing the
salvage value?
Salvage
Value
• MACRS
• Sum of purchase price for any year x the depreciation % for that year
• Depreciation Life determined by Asset Class rules
Ownership year 3 5 7 10
2 45 32 25 18
3 15 19 17 14
4 7 12 13 12
5 11 9 9
6 6 9 7
7 9 7
8 4 7
9 7
10 6
11 3
MACRS Continued
Half-year convention: Assumes property put in service in middle of first
year – extends recovery period by one more year (3 year class property
is depreciated over 4 years)
What is the depreciation for each year and the total depreciation?
Baselines
• What is a baseline?
Takes work complete, time taken, and costs incurred to complete that
work into account.
Bob,
When a customer-affecting release does not go as planned, you need to call the appropriate Account Manager
to let her know that it failed, even if you don't yet know why that happened. They need to know so that they
can decide what communication is needed with the customer's business contacts to smooth feathers, etc. This
is particularly critical now as we try to assuage hurt customer feelings so that we can keep relationships with
them alive for loan purchases. Depending on the impact scope, of course, you probably don't need to call them
seconds after the failure or anything, but they do need to know fairly soon.
After you've let them know about the initial failure, as you learn more and have updates to status and correction
plans and progress, call them again as judgment dictates.
Even if the failure is corrected fairly quickly, you should let them know it occurred so they can be aware of what
happened. Essentially, after any customer-affecting release, call them to let them know an executive summary
of how it went - success or failure. I'm assuming, given the time of day most releases happen, that they will
each want to be called at their desk phones, with you leaving voice mail, but you need to work that out with
each of them individually, and probably for individual releases, as well.
You also need to call me to let me know of the failure, though I have less need for late night calls about
correction plans and progress. I can generally, depending on the impact of the failure, of course, wait until
morning to know about correction plans and progress. Calls to my cell, with voice mail left if I don't answer, are
what I need.
Overall, the goal is to rationally over communicate this information - while not being passive-aggressive, of
course. :-)
Tim
Storytelling for Communication
• Use of examples – how could I have used an
example to help Bob understand and accept?
• Transmittal
A memo that outlines/explains submittals included
with the transmittal and the actions required by the
recipient
Managing
• Is the plan right?
• Iterate!
Managing
• What do you watch?
• How often?
• How?
Managing Project Teams
“Design team failure is usually due to failed team dynamics.”
(Leifer, Koseff & Lenshow, 1995).
“It’s the soft stuff that’s hard; the hard stuff is easy.”
(Doug Wilde, quoted in Leifer, 1997)
Put First Things First: Manage yourself. Organize & execute around priorities.
• SMALL NUMBER
• COMPLEMENTARY SKILLS
• COMMON PURPOSE & PERFORMANCE GOALS
• COMMON APPROACH
• MUTUAL ACCOUNTABILITY (to project, to team, to each other)
--Katzenbach & Smith (1993) The Wisdom of Teams
Leadership vs Management
• Is there a difference?
• http://www.see.ed.ac.uk/~gerard/MENG/ME96/Documents/Intro/leader.html
• http://www.bus.ualberta.ca/rfield/papers/LeadershipDefined.htm
• http://www.lazarusconsulting.com/company/hot_topics/leadership_vs_management.html
Leadership vs Management
LEADERSHIP FUNCTIONS MANAGEMENT FUNCTIONS
http://www.bus.ualberta.ca/rfield/papers/LeadershipDefined.htm
Managing Project Teams
Six Basic Principles of Team Discipline
1. Have and develop a common purpose
2. Keep team membership small
3. Ensure team members have complementary skills
4. Set common goals
5. Establish agreed-upon ground-rules and approach
6. Integrate team and individual accountability
• Situational!!
Keys For PM Success
•Communicate regularly in person with key team members
•Keep management informed
•Keep informed on all aspects of the project
•Delegate tasks to team members
•Listen to input from team members
•Be able to take criticism
•Respond to and/or act on suggestions for improvement
•Develop contingency plans
•Address problems
•Make decisions
--Lientz and Rea (1996)
•Learn from past experience
•Run an effective meeting
•Set up and manage the project file
•Use project management tools to generate reports
•Understand trade-offs involving schedule and budget
•Have a sense of humor
Meetings and More Meetings
“I used to think, ‘oh no, not another meeting’ until I worked for you.”
- A former employee of mine
DURING
Start: Check-in, Review agenda, Set/review ground rules, Clarify roles
Conduct: Cover one item at a time, Manage discussions,
Maintain focus & pace
Close: Summarize decisions, Review action items, Solicit agenda items
for next meeting, Review time & place for next meeting, Evaluate
the meeting, Thank participants
AFTER
Follow-up: Distribute or post meeting notes promptly, File agendas, notes,
& other documents, Do and/or check up on action items/assignments.
Meetings – The Right Way
Five Meeting Roles
• Chair
• Recorder
• Timekeeper
• Presenter
• Participant
NO ONE SHOULD PLAY MORE THAN 2
ROLES AT ONCE!!!!!
Meetings and More Meetings
• Virtual PM – what’s different?
– Virtual Project Teams
– Use of the Technology to meet
– Use of Software Programs
- Importance of the
Relationship
Managing Conflict
Heuristics for dealing with conflicts:
• Informal Negotiation
• Formal Negotiation
• Mediation
• Third-Party Mediation
• Arbitration
• Binding Arbitration
• Litigation
Managing Conflict
3. Create options
4. Insist on standards
There were 80 fatal work-related injuries recorded in the state in 2004, the Minnesota
Department of Labor & Industry reported Thursday. That is up from 72 in 2003,
and one less than in 2002. The state averaged 74 work-related deaths from 1999
to 2003.
In 2004, the agriculture industry recorded the most worker fatalities, with 18; the
industry had 19 deaths in 2003 and 21 in 2002. Construction had 16 fatalities in
2004, an increase from 10 in 2003 and 15 in 2002. Nine government workers
were fatally injured in 2004, up from three in 2003, but down from 12 in 2002.
Transportation incidents accounted for 29 of the 80 work-related deaths in 2004. That
compares to 30 in 2003 and 44 in 2002.
Contact with objects and equipment led to 18 fatalities in 2004, while assaults and
violent acts killed 11. Falls also led to 11 work-related deaths.
Women accounted for seven of the 80 people fatally injured on the job in 2004.
The Census of Fatal Occupational Injuries is conducted annually by the U.S.
Department of Labor's Bureau of Labor Statistics. There were a total of 5,703
fatal work injuries recorded nationwide in 2004.
Causes of Constr. Deaths
Cause Deaths
Other
Falls 377
Violence
Transportation 283
Harmful
Contact with Objects, 200
Equipment Contact
Violence 32
Falls
Other 29
0 100 200 300 400
80
60
40
20
0
Years 1 6 11 16 21 26 31 36
– Definition
– Fundamentals
– Codes of ethics
• Duties
– show respect for others,
– express moral imperatives, and
– are universal.
Human Rights Theory
• Attributed to Kant.
• Rights are to
– life,
– liberty, and
– property gained by one’s labor.
Virtues Theory
• Attributed to Aristotle
If a builder builds a house for a man and does not make its
construction meet the requirement and a wall falls - that
builder shall strengthen the wall at his own expense.
1. Problem Definition
• Identify ethical issues
• Determine relevant facts
• Identify/Gather required missing data
• Reversibility Test: Would I think the choice was good if I were the one
affected by it?
a) Tell the employees to just do their work & mind their own
business.
b) Tell the employees that you don’t want to risk your job by
becoming involved.
c) Suggest that your fellow employees contact the Ethics Officer
or another company official.
d) Raise the issue directly with your supervisor.
(Ethics Challenge -- Case 24)
In a department meeting, your supervisor takes credit for some
excellent work done by an absent colleague. What do you
do?
a) Put the word out to your fellow workers as to who really did
the work.
d) Inform your colleague as to what took place, and let him take
whatever action he desires.
(Ethics Challenge -- Case 29)
A co-worker is injured on the job. You are a witness and what you
saw reflects poorly on the company. What do you do?
a) Like finding a $20 bill on the street, take the discount. When
you get back to the office on Monday, ask the supervisor if all
employees were eligible for the discount.
b) Say “I work for a different division of the XYZ Company – am I
still eligible for the discount?”
c) Ask for clarification – “Is that special discount available to all
XYZ employees?”
d) If a deal sounds too good to be true, it probably is.
(Ethics Challenge -- Case 44)
A subordinate (direct report) on one of your projects has trouble
getting along with others. What do you do?
a) Without reading the paper, and knowing its contents could affect your
conclusions, you return the manuscript to the journal editor, explaining
your situation. Then you quickly finalize your paper and submit it.
b) Let Christmas holidays “conveniently” delay the review, then provide
negative review comments, knowing that this will delay publication.
c) With the editor’s permission, contact the other author to see if you
might combine efforts and produce an even better paper.
d) Review the paper, provide objective comments and return it promptly.
(Ethics Challenge -- Case 47)
Ethics Summary
• As an engineer, you have a duty to protect
the safety of workers and the public
• As an engineer, you also have a duty to
respect the interests/desires of your employer
or client
• Closure results/outputs?
❑ Project Closure/Formal Acceptance
❑ Lessons Learned Documents
❑ Project Archives
❑ Released Resources
Project Closure
• Verify product/service output
• Best practice:
• Plan for “interim” evaluation along the way
• Have the meetings necessary to evaluate outcome
• Get information via “non meetings” also
Project Closure - Archiving
• Update and Archive records
❑ Project Archives
❑ Released Resources
✓ Final resources need formal leave from the project
✓ The PM can check out but can never leave
Project Management Office
• Project Management Office (PMO)
– Not very standard in objective/work
– May be responsible for providing support functions (project
coordination, other admin functions), to providing “process
ownership” and training, to actually being responsible for
project results
• Benchmarking opportunity
• How you can avoid doing things that will hurt other
parts of the business’ ability to make money
PM Words To Live By
In order to win the game, you must score more than your opponent.
Knowing that even the best athlete only scores a certain percentage of the
times s/he makes an attempt, to increase the number of points s/he
scores, s/he must take more shots and/or improve her/his skills. Those
are the only choices available.
A new player, particularly one without a great deal of natural talent, can
improve his/her percent of shots scored to shots taken through diligent
practice. Practice with the help of an experienced coach can increase the
percentage even further.
There comes a point where the athlete will score fewer and fewer
additional points for every hour spent practicing (the law of diminishing
returns). Her/his gains from learning fall off more and more drastically.
That doesn’t mean the athlete should stop practicing! It only means s/he
needs to find another way of increasing the chances of scoring.
Short of cheating or only playing against drastically inferior opponents, the
sole, honest remaining other way to score more is to make more attempts!
PM Words To Live By
• Be honest, always
• Be straightforward, always
• Don’t be afraid to admit you’re wrong
• Take your work seriously, not yourself
• Don’t let your fears get in the way of progress