STUDENT STUDY GUIDE

PROJECT MANANGEMENT

BY: BSBA 3HR-3

PROFESSOR: SIR BASILIO BENITEZ

0
 STUDENT STUDY GUIDE

CHAPTER OUTLINE
I. CHAPTER 1: PROJECTS IN CONTEMPORARY ORGANIZATIONS

A. PROJECTS IN CONTEMPORARY ORGANIZATIONS …………………… 1

a. Project management has emerged because the characteristics of our contemporary
society demand the development of new methods of management.

1. Forces Fostering Project Management ………………………………… 2

a. The exponential expansion of human knowledge.
b. The growing demand for a broad range of complex, sophisticated, customized
goods and services.
c. The evolution of worldwide competitive markets for the production and
consumption of goods and services.

2. Three Project Objectives ……………………………………………….. 3

a. Performance
b. Time
c. Cost

3. The Project Manager …………………………………………………… 5

a. Integrate all aspects of the project, ensure that the proper knowledge and
resources are available when and where needed, and above all, ensure that the
expected results are produced in a timely, cost-effective manner.

4. Trends in Project Management ………………………………………... 6

a. Achieving Strategic Goals (Chapter 2, especially Section 2.7)
b. Achieving Routine Goals (Section 1.1)
c. Improving Project Effectiveness (Sections 2.1, 2.7, 4.6, 5.1, 5.5, 11.2, 11.3)
d. Virtual Projects (Sections 4.3, 10.2)
e. Quasi-Projects (Section 1.1)

5. Recent Changes in Managing Organizations …………………………. 7

a. Accelerating replacement of traditional hierarchical management by consensual
management.
b. The adoption of the “systems approach” (sometimes called “systems
engineering”).
c. Organizations establishing projects.
d.

1
B. THE DEFINITION OF A “PROJECT”…………………………………….. 9
a. The PMI has defined a project as “A temporary endeavor undertaken to create a
unique product or service” (Project Management Institute, 2004, p. 5).

1. Importance
a. The most crucial attribute of a project is that it must be important enough in the
eyes of senior management to justify setting up a special organizational unit
outside the routine structure of the organization.

2. Performance …………………………………………………………… 10
a. It is a continuous measurement of project performance which is a one-time
activity with a well-defined set of the desired result.

3. Life Cycle with a Finite Due Date

a. It is from the slow beginning they progress to a buildup size, then peak, begin a
decline, and finally must be terminated by some due date, there are several
different ways in which to view the project life cycle.

4. Interdependencies
a. A project often interact with other project being carried out simultaneously by
their parent organization and the PM must keep all the interaction clear and
maintain the appropriate interrelationships with all external group.

5. Uniqueness
a. The desired result may have been achieved elsewhere because every project has
some unique elements.

6. Resources
a. This is required to carry out the project task but because of the limited budget it
often is implied rather than detailed, particularly concerning personnel but it is
strictly limited.

7. Conflict …………………………………………………………………. 11
a. Conflict and problems are everywhere like resources, project vs project with a
multi-project organization but project manager must be expert in conflict
resolution there are helpful types of conflict that must PM recognize the
difference.

8. Non-projects and quasi-projects

a. The use of a manufacturing line to produce a flow of standard products is a non-
project while quasi-projects do not have a specific task identified, no specific
budget, and no specific deadline.

2
 C. WHY PROJECT MANAGEMENT? ………………………………………… 12
a. Project management is now being recognized as a "career path" in a growing
number of firms, particularly those conducting projects with lives extending more
than a year or two.

D. PROJECT LIFE CYCLE…………………………………………………….. 14

a. The project initiation stage
b. The project planning stage
c. The project execution stage
d. The project closure stage

1. Risk During The Life Cycle ……………………………………………. 17

a. Operational &maintenance risks
b. Technology risks
c. Financial risks
d. Legal &regulatory risks
e. Market risks
f. Delays in project development
g. Political and social risks
h. Commercial risks

E. THE STRUCTURE OF THIS TEXT………………………………………… 18

a. This text is organized along the project life cycle concept, starting with project
initiation in Chapters 2 to 5, where selection of the project and project manager
occurs and project organization begins. Project planning, Chapters 6 to 9, is
concerned with activity planning, budgeting, scheduling, and resource allocation.
Project execution, covered in Chapters 10 to 13, relates to actually running the
project and includes activity monitoring and control, auditing and evaluation, and
finally project termination.

SUMMARY

This chapter introduced the subject of project management and discussed its importance in our society.
It defined what we mean by a “project,” discussed the need for project management, and described the
project life cycle. The final section explained the structure of this text and gave an overview of the
material to be described in coming chapters

VOCABULARY AND DEFINITIONS

Word Book Definition Own Definition

Project Management The means, techniques, and Use by organizations to
concepts used to run a project achieve their objectives
and achieve its objectives.
Life Cycle A standard concept of a A series of phases that needed

3
 product or project wherein it
goes through a start-up phase,
a building phase, a maturing
phase, and a termination
phase.
Risk The chance that project
processes or outcomes will not
occur as planned.
Interdependencies Relations between
organizational functions where
one function or task is
dependent on others.
Deliverables The desired elements of value,
outcomes, or results that must
be delivered for a project to be
considered complete.
Program Often not distinguished from a
project, but frequently meant
to encompass a group of
similar projects oriented
toward a specific goal.
to consider to achieve
successful projects
Certain circumstances that
occur in the life cycle of
projects
Two parties are mutually
reliant on each other
The quantifiable goods or
services that must be provided
upon the completion of a
project and can either be
tangible and intangible.
Activities with a particular
long-term aim.

SUMMARY CHAPTER 1: PROJECTS IN CONTEMPORARY ORGANIZATIONS

This chapter explained project management and its importance in the business industry. In this chapter,
it also introduced the forces, life cycle, and risk of project management.
PMI defined the project as “a temporary endeavor undertaken to create a unique product or service.”
• Project, in its broadest sense, is a specific, finite task to be accomplished.
• Tower of Babel, Egyptian Pyramids, construction of Boulder Dam, and the invention of the light bulb
by Edison are some of the firsts few projects.
Military made distinctions on the following terms:
Programs – this refers to an exceptionally large or long-range objective that is broken down into a set of
projects.
Tasks – is a set of activities compromising a project.
Work Packages – the division of tasks
Work Units – the division of work packages
• Projects are characterized according to its importance, performance, a life cycle with a finite due
date, interdependency, uniqueness, resources, conflict, and non-projects, and quasi-projects.

4
Project Manager
They are responsible for the full scope of the project, the project team, the resources, and the success or
failure of the project.

Project management plays an important role that allows managers to be responsive to the following:
1. Client and environment
2. Identifying and correcting problems
3. Timely decisions and trade-offs
4. Ensure managers of the separate task will not optimize the performance of their individual tasks
at the expense of the project.

•Its main objective is to initiate projects and ensure that the team achieves its specific objectives.
•Project management helps the company to have better control and better customer relations.
•Project management also encourages teamwork at the workplace and a high level of worker morale.
•Despite the advantages of using this approach, most organizations report that project management
results in greater organizational complexity and that a breach of organizational policy is more likely to
occur.
•After all, project management has been recognized as a "career path" that brings excitement,
fulfillment, and frustration that tends to be central to most organizations.

The following terms are the forces of fostering project management: the expansion of knowledge,
satisfying the demand, and the worldwide market.
• Intense competition among institution is another important societal force that makes time to market
critical in which put extreme pressure on the organization to make their unique, complex, and customize
outputs available as quickly as possible.
• The rapid growth in technology and communication made the society assumes that technology can do
anything but with careless implementation will create a drastic effect in both economic and non-
economic cost.
• Projects increase in size, complexity, and multidisciplinary aspects of the project that requires
putting together enable to meet primary objectives such as performance, time, and cost.

Objectives of project management

•There is a tendency to think of a project solely in terms of its outcome and everyone’s performance.
•The completion of a building on time and on a budget is a quite different outcome from the completion
of the same physical structure a year late or 20 percent over budget, or both.
•Also, to separate clients' desires from project specifications creates conflict because clients and teams
rarely act in concert.
•The client specifies the desired outcome.
•The expectations of the client and project team should be aligned and integrated throughout the entire
project. But rarely are.
•In a more basic sense, those with a stake in the project have an interest in making the project a success.
•Ancillary goals include improving the organization’s project management competency and methods.
Individuals increased managerial experience gained through project management and similar goals.

5
•The PM cannot burn out the team to achieve the direct objectives, nor destroy the organization’s
functional departments to meet the project’s direct goal.

The life cycle of the project shows the process of completion of the project.
•There are four phases of the Project Life Cycle: Initiation, Planning, Execution, and Termination.
• When the project starts, staffing and cost are low. On the other hand, when the project begins to
approach its peak, the project is also approaching risk and uncertainty.
• Typical costs and staffing do not apply to all projects because, depending on certain factors, they have
been subject to change. However, the project manager must present an estimated cost of materials at the
beginning of the project to foresee possible expenses for the completion of the project.
• The cost of making new changes and rectifying errors increases as the project approaches completion.
• The time distribution of project effort is characterized as “low-rapid-slow” – this is common for the
reason of changing levels of resources during the execution of the project.
• The S-shape Cycle shows that project completion is closely correlated with cost or the use of
resources. In fact, this is the basis for the use of “earned value,” a technique for monitoring project
progress. In the Exponential progress curve, the expenditure of resources has little correlation with
progress, at least in terms of final benefit.

There two types of risk that may be observed during the life cycle of the project, certainty and
uncertainly. Dealing with the uncertainty surrounding this relationship is the major responsibility of the
Project manager.
•At the beginning of the project, it would be an advantage if one of the officials will predict with
certainty, like how the performance, time, and cost goal would be met.
•The risk may vary in any form in the process of the project. For instance, the price, cost, and time of the
project.
•According to the book, uncertainty is observed at the beginning of the project. This uncertainty
decreases as the project moves toward the completion
•As the project develops, the degree of uncertainty about the outcome is reduced.
•We can generate reasonably accurate predictions, but often we cannot.
•The more progress made of the project, the less uncertainty

Learning objectives:
At the end of the chapter, the student is expected to:
• Analyze and evaluate project life cycle when doing project.
• Have a better understanding about project management
• Identify the forces of management.
• Determine the three objectives of a project and learn more about the project implementation
• Learn what textbook structure is
• Understand risk during project life cycle
• Achieve all the goals considering the time, budget and quality in a project

6
• Execute a project according to its procedure and planning
• Accomplish a desire desired result of one's project
• To be familiar with the planning execution phases of a project
• Understand the importance of project management as it affects strategy and business success
• Familiarized the planning execution phases of a project
• Know the importance of professionalism in project management
• Know the changes in managing organization

ACTIVITY 1
1. Many new developments and interests in project management are being driven by quickly changing
global markets, ____________, and education.

2. We are currently witnessing the adoption of the ___________

3. Expectations of clients are not an additional target, but an inherent part of the _____________.

4. A standard concept of a product or project wherein it goes through a start-up phase, a building phase,
a maturing phase, and a termination phase.

5. In 1998, how many members of the Project Management Institute had?

6. Project management is now being recognized as a valuable ________ in many organizations, as well
as a way to gain valuable experience within the organization.

7. Project Management Institute had 7,500 members in what year?

8. The means, techniques, and concepts used to run q project and achievement its objectives.

9-11. What are the three primary forces behind project management.

12-14. What are the three prime objectives of project management.

7
15-17. Give the 3 Project Objectives in any order.
18-20. Give at least 3 Characteristics of a project.

ACTIVITY 2: ANSWER THE FOLLOWING BY YES OR NO

1. Is termination part of stages of a conventional project?

•YES. • NO

2. Project Manager's conflict is one of the negatives that companies have experience.
•YES •NO

3. Peak is the third stage of a conventional project.

•YES. •NO

4. There are four prime objectives on project management.

•YES. •NO

5. The terminology may be follow in this order: program, project, task, work unit, package.
•YES. •NO

6. Projects have characterized by environment of conflict and singleness of purpose.

•YES •NO

7. There are 3 project objectives is it performance, time and cost.

•YES. •NO

8. Do work unit refers to division of work task.

•YES. •NO

9. Having a purpose and having a life cycle are included in the characteristics of project?
•YES. •NO

10. The process of managing organization has exactly five impacted revolutionary changes?
•YES. •NO

11. Is program an exceptionally large, long-range objective that is broken down into a set of project?
•YES. •NO

12. Do project in contemporary organizations fostered the disappearance and loss of project
management?
•YES. •NO

8
13. The characteristic of a project is Have a purpose , Have a Cycle , Interdependencies, Uniqueness
, Conflict?
•YES. •NO

14. Are there new forces that fostered through emergence and expansion of Project Management?
•YES. •NO

15. Are 3 objectives performance, time and consideration?

•YES. •NO

16. Expectations of the clients are addition to the target?

•YES. •NO

17. Do the problems faced by the project manager are complex?

•YES. •NO

18. Are there any distinction between work packages and work units?
•YES. •NO

19. Do the project is specific and infinite task to be accomplished?

•YES. •NO

20. Do the company experienced high worker morale?

•YES. •NO

9
CHAPTER OUTLINE
II. CHAPTER 2: STRATEGIC MANAGEMENT AND PROJECT SELECTION

F. STRATEGIC MANAGEMENT AND PROJECT SELECTION …………….. 38

a. Project Portfolio Process is the process of selecting for implementation the set of
projects that best meets the strategic goals of the organization.

G. PROJECT MANAGEMENT MATURITY …………………………………… 39

a. Project management maturity is the development of project and multi-project
management expertise.

H. PROJECT SELECTION AND CRITERIA OF CHOICE …………………… 40

b. Project selection is the process of evaluating proposed projects or groups of
projects, and then choosing to implement some set of them so that the objectives of
the parent organization will be achieved.
c. When a firm chooses a project selection model, the following criteria, based on
Souder (1973), are most important.
1. Realism
2. Capability
3. Flexibility
4. Ease of use
5. Cost
6. Easy computerization

I. THE NATURE OF PROJECT SELECTION MODELS ……………………. 42

a. Nonnumeric models, as the name implies, do not use numbers as inputs while
numeric models do, but the criteria being measured may be either objective or
subjective.

J. TYPES OF PROJECT SELECTION MODELS …………………………….. 44

1. Nonnumeric Models ……………………………………………………. 45
a. The Sacred Cow
b. The Operating Necessity
c. The Competitive Necessity
d. The Product Line Extension
e. Comparative Benefit Model

2. Numeric Models ………………………………………………………… 47

A. Profit/Profitability
a. Payback Period
b. Discounted Cash Flow
c. Internal Rate of Return
d. Profitability Index
e. Other Profitability Models
f. Real Options
g.

10
 B. Scoring ………………………………………………………….. 51
a. Unweighted 0-1 Factor Model
b. Unweighted Factor Scoring Model
c. Weighted Factor Scoring Model
d. Window-of-Opportunity Analysis

3. Choosing a Project Selection Model …………………………………... 58

a. Selecting the type of model to aid the evaluation/selection process depends
on the philosophy and wishes of management.

K. ANALYSIS UNDER UNCERTAINTY – THE MANAGEMENT OF RISK… 58

a. Risk has been interpreted as being unsure about project task durations and/or costs,
but uncertainty plagues all aspects of the work on projects and is present in all
stages of project life cycles.

1. Risk Analysis and Simulation ………………………………………….. 60

a. Monte Carlo simulation, an easy-to-use technique that is well-adapted to
evaluating the risk in certain situations.

2. General Simulation Analysis …………………………………………… 61

a. The analysis gives a picture of the proposed change in terms of the costs and
times that will be affected.

3. Psycho Ceramic Sciences Revisited ……………………………………. 62

a. There is great value in performing risk analysis in order to confront the
uncertainties in project selection.

L. COMMENTS ON THE INFORMATION BASE FOR SELECTION…......... 70

a. The use of any project selection model assumes that the decision-making procedure
takes place in a reasonably rational organizational environment.

1. Accounting Data
a. The accounting system is the richest source of information in the
organization, and it should be used—but with great care and understanding.

2. Measurements
a. Subjective versus Objective
b. Quantitative versus Qualitative
c. Reliable versus Unreliable
d. Valid versus Invalid

3. Uncertain Information ………………………………………………….. 71

a. No matter what method is used for project evaluation and selection, as time
goes by the selection model’s inputs must be constantly updated.

11
 M. PROJECT PORTFOLIO PROCESS …………………………………………. 72
a. The PPP attempts to link the organization’s projects directly to the goals and
strategy of the organization and also it is a means for monitoring and controlling the
organization’s strategic projects.
b. The steps in this process generally follow those described in Longman et al. (1999)
and England et al. (1999).
1. Establish a Project Council …………………………………….. 73
2. Identify Project Categories and Criteria ……………………… 74
a. Derivative projects
b. Platform projects
c. Breakthrough projects
d. R&D projects
3. Collect Project Data …………………………………………….. 76
4. Assess Resource Availability
5. Reduce the Project and Criteria Set …………………………… 77
6. Prioritize the Projects within Categories
7. Select the Projects to Be Funded and Held in Reserve ……….. 78
8. Implement the Process

N. PROJECT PROPOSALS ……………………………………………………… 80

a. The set of documents submitted for evaluation is called the project proposal.

1. The Technical Approach ……………………………………………….. 81

a. The proposal begins with a general description of the problem to be
addressed or project to be undertaken.

2. The Implementation Plan

a. The implementation plan for the project contains estimates of the time
required, the cost, and the materials used.

3. The Plan for Logistic Support and Administration

a. The proposal includes a description of the ability of the proposer to supply
the routine facilities, equipment, and skills needed during any project.

4. Past Experience ………………………………………………………… 82

a. All proposals are strengthened by including a section that describes the past
experience of the proposing group.

Learning objectives:
At the end of the chapter, the student is expected to:
• Analyze Project Selection
• Identify the criteria for project selection models
• Understand project management maturity

12
 • Identify the importance of project selection
• Master the analytical tools of strategic management and describe the influences of funding,
timing, and unofficial considerations of project selection.
• Define economic terms used for choosing projects.
• Distinguish the difference between risk and uncertainty and have a deeper understanding about
what is risk.
• Know the contents in making project proposal.
• Analyze and know your competitors
• Craft new strategies to achieve the company's goals.
• Evaluate and select every project into its highest priority.
• Identify the different models of project selection
• Create a project proposal

SUMMARY

The chapter described the types of models in use and their advantages and disadvantages. Considering
the degree of uncertainty associated with many projects, a section was devoted to evaluating the impact
of risk and uncertainty. Concluding the discussion, some general comments were made about data
requirements and the use of these models. The final section discussed the documentation of the
evaluation/selection process via project proposals.

VOCABULARY AND DEFINITIONS

Word Book Definition Own Definition

Maturity The sophistication and
experience of an organization
in managing multiple projects.
Model A way of looking at reality,
usually for the purpose of
abstracting and simplifying it,
to make it understandable in a
particular context.
Portfolio A group or set of projects with
varying characteristics.
Project Portfolio Process Eight-step procedures for
selecting, implementing, and
reviewing projects that will
help an organization achieve
its strategic goals.
Risk Analysis A procedure that uses a
distribution of input factors
and probabilities and returns a
range of outcomes and their
probabilities.
Simulation A technique for emulating a
A state at which maximum
development has been
reached.
A schematic description or
representation of something,
especially a system or
phenomenon, that accounts for
its properties and is used to
study its characteristics.
A set of individual projects.
A method which can
maximize the output potential
of all projects undertaken by
organizations at a given time.
A process that helps in
identifying and managing
potential problems that could
undermine key business
initiatives or projects.
An approximate imitation of

13
 process, usually conducted a the operation of a process or
considerable number of times system; that represents its
to understand the process operation over time.
better and measure its
outcomes under different
policies.
CHAPTER II: Strategic Management and Project Selection
Project Selection and Criteria of choice
• Project selection is the process of
evaluating proposed projects or groups
• The proper choice of investment projects
of projects, and then choosing to
implement some set of them so that the is crucial to the long-run survival of
objectives of the parent organization will every firm.
be achieved. • There are 3 criteria based on Souder,
• In the face of such differences, the Realism, Capability, and Flexibility.
selection of one project out of a set is a • To survive, firms should develop
difficult task. strategies for assessing and reassessing
the use of their resources.
Nature of Project Models
• A model of some sort is implied by any • The manager, not the model, bears
conscious decision, including the responsibility for the decision.
selection of projects. • The manager may "delegate" the task of
• The choice between two or more deciding on a model, but the
alternative projects requires reference to responsibility cannot be abdicated. • All
some objective(s), and the choice is thus models, however sophisticated, are only
made in accord with some, possibly partial representations of the reality they
subjective, "model." are meant to reflect.
• Many of these models use financial • Reality is far too complex for us to
metrics such as profits and/or cash flow capture more than a small fraction of it
to measure the "correctness" of a in any model.
managerial decision • Models do not
make decisions—people do.

Non-numeric Model
• Non-numeric selection project is initiated with a simple
methods include techniques that comment such as “If you have a chance,
are not based on quantitative techniques. why don’t you look into”, the immediate
Example are: result of this bland statement is the
creation of a “project” to investigate
• The Sacred Cow, the project is whatever the boss has suggested.
suggested by a senior and powerful
official in the organization. Often the

14
 • The operating Necessity, the project is
required to keep the system running “if
the flood is threatening the plant, a
project to build a protection dike does
not require much formal elevation”
• The competitive Necessity, a project
needs to sustain a competitive position.
Numeric Model
•Unweighted 0–1 Factor Model is a set of
relevant factors is selected by management and
then usually listed in a preprinted form. One or
more raters score the project on each factor,
depending on whether or not it qualifies for an
individual criterion.
•Unweighted Factor Scoring Model can be used
to evaluate projects. Linear measure of the
degree to which the project being evaluated
meets each of the criteria. Often a five -point
scale is used, where 5 is very good, 4 is good, 3
is fair, 2 is poor, 1 is very poor.
.
Analysis under uncertainty
• During the past several years, increasing
attention has been paid to the subject of
managing some of the risks inherent in
most projects.
• For the most part, risk has been
interpreted as being unsure about project
task durations and/or costs, but
uncertainty plagues all aspects of the
work on projects and is present in all
stages of project life cycles.
• If the decision maker's information is not
so complete and she does not know and
cannot collect sufficient data to
determine the probability of occurrence
for some states of nature, she cannot find
the expected value for each of her
alternative actions.
• If the decision maker elects to ignore all
states of nature except the one, she
• Product line extension, projects are
judge on how they fit the current product
line, fill a gap, strengthen the weak link,
or extend the line in a new desirable way.
• Comparative benefit model, several
projects are considered and the one with
the most benefit to the firm is selected.
•Weighted Factor Scoring Model. When
numeric weights reflecting the relative
importance of each individual factor are added,
we have a weighted factor scoring model.
•Window-of-Opportunity Analysis. Given some
idea for a new product or process, we can invert
this traditional approach by attempting to
determine the cost, timing, and performance
specifications that must be met by this new
technology before any R & D is undertaken
thinks most likely, she then assumes
there is one and only one possible
outcome—which is decision making
under conditions of certainty.
• In the real world of project management,
it has been common to deal with
estimates of task durations, costs, etc. as
if the information were known with
certainty.
• Such estimates are called "subjective
probabilities," and are dealt with in most
elementary courses on probability and
statistics.
• As we noted earlier, there is actually not
much uncertainty about whether a
product, process, or service can be
developed, but there can be considerable
uncertainty about when it will be
developed and at what cost.
15
Risk Analysis and Simulation
• Research and development (R&D)
include activities that companies
undertake to innovate and introduce new
products and services.
• General simulation analysis is a useful
way of evaluating R&D projects if it is
still in the conceptual stage.
• Risk analysis is a technique used to
identify and assess factors that may
jeopardize the success of a project or
achieving a goal.
• There is great value in performing risk
analysis to confront the uncertainties in
project selection

Project proposal
• Project proposal is a set of documents
submitted for evaluation.
• All proposals should begin with a short
summary statement (an “Executive
Summary”) covering the fundamental
nature of the proposal in minimally
technical language, as well as the general
benefits that are expected.
• All proposals should be accompanied by
a cover letter - a key marketing
document and is worthy of careful
attention.
• Aside from Executive Summary and the
cover letter, every proposal should deal
with four distinct issues: (1) the nature of
the technical problem and how it is to be
approached; (2) the plan for
implementing the project once it has
been accepted; (3) the plan for logistic
support and administration of the project;
and (4) a description of the group
proposing to do the work, plus its past
experience in similar work

16
ACTIVITY 1

1. What is the process of evaluating individual projects or groups of projects, and then choosing to
implement some set of them so that the objectives of the parent organization will be achieved?

2. They are the one who often used decision-aiding models to extract the relevant issues of a
problem from the details in which the problem is embedded.

3. It is one of the criteria for Project Selection models, that provide valid results within the range of
conditions.

4. When the decision maker knows the probability of each and every state of nature and thus each
and every outcome.

5. What models that can be subdivided into profitability and scoring models?

6. It is a Non - numeric models, in which the project is required to keep the stem running.

7. ____________________ should be given to data in project selection models.

8. Probability distributions are determined or subjectively estimated for each of the ____________
variables.

9. The history of project selection models has shown an _____________ in the use of formal
models, particularly profitability models.

10. Models represent the problem’s structure and can be useful in _____________________.

11- 16. What are the 6 (six) criteria for Project Selection Models?

17 – 18. Give the two basic types of models.

19 – 20. What are the Two Critical Facts of the Nature of Project Selection Models?

17
ACTIVITY 2: ANSWER THE FOLLOWING BY YES OR NO
1.) Strategic plan is usually developed on the executive level; does implementation by middle
management level has no problem in understanding of organization's capabilities and top Management's
expectations?

o Yes
o No

2.) It is not critically important to the success of the PM that he or she fully understands the parent
organizations objective in undertaking the project that PM is expected to lead?

o Yes
o No
3.) Project Selection is only one of many decisions associated with Project Management?
o Yes
o No
4.)"Modeling the problem" is a process of carrying away the wanted reality from the bones of a problem?
o Yes
o No
5.) The proper choice of investment projects is crucial for short-term survival of every firm?
o Yes
o No

6.) Does every allocation of resources is investment for the future?

o Yes
o No
7.) When a firm chooses a project selection model are there 7 important criteria that are based from
Socider founded on 1973?
o Yes
o No

18
8.) Ease of computerization should be easy and convenient to gather and store the information in
computer?
o Yes
o No

9.) Are model supposed to be sophisticated enough to deal with the relevant factors?
o Yes
o No
10.) In mid-1940's, the use of formal numeric models to assist the decision making has expanded?
o Yes
o No
11.) There are two basic types of project selection models: numeric and non-numeric?
o Yes
o No
12.) Do models make decisions and people don't? o Yes
o No
13.) A project can be predicted in certain outcomes therefore, it can be selected or rejected.
o Yes
o No
14.) Recently a project selection model was developed based on a notion well known in financial
markets? (Answer: Yes).
o Yes
o No
15.) The criteria weights and measures the performance must be numeric in form. Does the mean that
they must be either "objective" or "quantitative"?
o Yes
o No
16.) Scoring and Profitability models have their own characteristic advantages and disadvantages.
o Yes
o No

19
17.) One of the advantages of Scoring and Profitability models is that they are direct and reflection of
managerial policy?
o Yes
o No
18.) The last stages of development of a new product known a fact that the potential product seems
technically feasible?
o Yes
o No
19.) By using formal analytic method such as SWOT Analysis (Strength, Weaknesses, Objectives and
Threats) are well known throughout the organization?
o Yes
o No
20.) Does proposal begin on general description of a problem to be addressed or project to be undertaken?
o Yes
o No

20
CHAPTER OUTLINE
III. CHAPTER 3: THE PROJECT MANAGER

O. THE PROJECT MANAGER ……………………………………………….. 107

b. The PM’s job relative to some assumptions about the nature of projects and the
organization within which the project must function.

P. PROJECT MANAGEMENT AND THE PROJECT MANAGER …………. 109

9. The Functional Manager versus the Project Manager
a. The project manager must be generalists and should be more skilled at
synthesis, they use the systems approach, whereas the functional manager
should be more skilled at analysis, must be specialists and uses the analytic
approach.

10. Project Responsibilities ……………………………………………….. 111

a. The PM’s responsibilities are broad and fall primarily into three separate areas:
responsibility to the parent organization, responsibility to the project and the
client, and responsibility to the members of the project team.

11. PM Career Paths ……………………………………………………… 112

a. The career path of a PM often starts with participation in small projects, and
later in larger projects, until the person is given command over small and then
larger projects.

Q. SPECIAL DEMANDS ON THE PROJECT MANAGER …………………. 115

1. Acquiring Adequate Resources
a. The good PM knows there are resource trade-offs that need to be taken into
consideration.

2. Acquiring and Motivating Personnel ………………………………… 117

a. The PM must negotiate with the functional department managers for the desired
personnel, and then, if successful, negotiate with the people themselves to
convince them to take on these challenging temporary project assignments.
b. The most important characteristics that team members must possessed:
1. High-quality technical skills
2. Political sensitivity
3. Strong problem orientation
4. Strong goal orientation
5. High self-esteem

3. Dealing with Obstacles ……………………………………………….. 119

a. The crises, such as changes in the required project performance (better known
as “scope creep”), affect not only the project but the PM as well, and his or her
ability to make trade-offs to keep the project on track.

21
 4. Making Project Goal Trade-offs ……………………………………. 120
a. The PM must make trade-offs between the project goals of cost, time, and
performance and, of course, the ancillary goals. The PM must also make trade-
offs between project progress and process—that is, between the technical and
managerial functions. Finally, the PM must make trade-off decisions between
the project, the firm, and his or her own career goals.

5. Failure and the Risk and Fear of Failure …………………………... 122

a. The PM must cope with these alternating periods of elation and despair, and the
task is not simple because what appears to be a failure at one point in the life of
a project may look like success at another.

6. Breadth of Communication ………………………………………….. 123

a. Inadequate information can blind the PM to an incipient crisis just as excessive
information can desensitize the PM to early warnings of trouble.

7. Negotiation ……………………………………………………………. 126

a. In order to meet the demands of the job of project manager—acquiring adequate
resources, acquiring and motivating personnel, dealing with obstacles, making
project goal trade-offs, handling failure and the fear of failure, and maintaining
the appropriate patterns of communication—the project manager must be a
highly skilled negotiator.

R. SELECTING THE PROJECT MANAGER ……………………………….. 127

a. There are four major categories of skills that are required of the PM and serve as the
key criteria for selection.

1. Credibility
a. The PM needs two kinds of credibility, the technical credibility and
administratively credible.

2. Sensitivity ……………………………………………………………… 128

a. The PM needs to possess political sensitivity and in addition to a good, working
set of political antennae, the PM needs to sense interpersonal conflict on the
project team or between team members and outsiders.

3. Leadership, Ethics, and Management Style

a. Leadership has been defined (Tannenbaum et. al., 1957) as “interpersonal
influence, exercised in situations and directed through the communication
process, toward the attainment of a specified goal or goals.”

b. A project manager, particularly in the public sector, may easily become

embroiled in the ethics concerning such issues as pollution, public safety,
industrial plant locations, the use of public lands, and so on.
c. Shenhar (1998) classifies projects across two dimensions (the level of
technological uncertainty and the level of system complexity) and concludes

22
 that management style should be adapted to certain differences in the type of
project.

4. Ability to Handle Stress ……………………………………………….. 130

a. There are numerous factors in life that cause stress and project managers are as
subject to them as other humans.

S. PROBLEMS OF CULTURAL DIFFERENCES…………………………… 130

a. If a project manager must cope with multiple cultures and different environments, it
follows that more than one organization is involved in the project and this fact alone
complicates matters.

1. Culture and the Project ……………………………………………….. 131

a. A nation’s culture affects projects in many ways and one of the most obvious
ways is in how people of different cultures regard time.

2. Micro culture and the Project ………………………………………... 132

a. “Corporate culture” or “micro cultures” varies from industry to industry and
from firm to firm just as cultures do from nation to nation.

T. IMPACT OF INSTITUTIONAL ENVIRONMENTS……………………… 134

a. A culture’s institutions are a part of the environment for every project.

1. Socioeconomic Environment
a. The job description of any PM should include responsibility for acquiring a
working knowledge of the culture of any country in which he or she is to
conduct a project.

2. Legal Environment ……………………………………………………. 135

a. Business laws, and laws that affect businesses, vary widely from nation to
nation and for the project manager, there is no substitute for qualified legal
assistance.

3. The Business Cycle as an Environment ……………………………… 136

a. The project manager should be aware of the general level of business conditions
in the nation hosting the project.

4. Technological Environment …………………………………………... 137

a. The ability to complete a project with success is often dependent on the PM’s
ability to plan the project in such a way as to be compatible with the technology
available in the host nation.
U. MULTICULTURAL COMMUNICATIONS AND MANAGERIAL BEHAVIOR
(p. 140)
a. Because the communication cannot be separated from the communicator, the
managerial and personal behaviors of the project manager are discussed along with
the more commonly mentioned aspects of the communication process.

23
 1. Structure and Style of Communications …………………………….. 141
2. Managerial and Personal Behavior
3. Final Comments on Multicultural Projects ………………………… 143

Learning objectives:
At the end of the chapter, the student is expected to:
• Differentiate Project Manager and Functional Manager
• Identify the roles of a Project Manager
• Know the importance of project responsibilities.
• Determine the life cycle stage.
• Identify the phases of the project cycle
• Know the various types of feasibilities that a project should be appraised for
• Acquire knowledge about the failure and the risk of fear and failure
• Learn the importance of project management experience
• Understand the value of communication and cooperation
• Acquire new strategies and broaden the strategic understanding of the company or project’s
goals
• Know the importance of project management experience
• Know the qualities in selecting project manager

SUMMARY

This chapter addressed the subject of the PM. The PM’s role in the organization and responsibilities to
both the organization and the project team were discussed first. Common PM Career paths were also
described. Next, the unique demands typically placed on project managers were detailed and the task of
selecting the PM was addressed. Last, the issue of culture and its effect on project communication and
success was discussed.

VOCABULARY AND DEFINITIONS

Word Book Definition Own Definition

Analytic Approach Breaking problems into their
constituent parts to understand
the parts better and thereby
solve the problem.
Culture The way of life of any group
of people.
Systems Approach A wide-ranging, synthesizing
method for addressing
The use of analysis to break a
problem down into the
elements necessary to solve it.
The patterns of learned and
shared behavior and beliefs of
a particular social, ethnic, or
age group.
The generalization that
everything is inter-related and

24
 problems that considers
multiple and interacting
relationships. Commonly
contrasted with the analytic
approach.
Microculture The “corporate culture” within
the organization, or even
project.
Trade-Off Allowing one aspect to get
worse in return for another
aspect getting better.
inter-dependent.
A distinctive culture shared by
a small group that is often
based on location or within an
organization.
A situation in which you
balance two opposing
situations or qualities.

CHAPTER III: The Project Manager

Functional Manager vs. Project Manager
• The best way to explain the unique role
of the PM is to contrast it with that of a
functional manager in charge of one of
the firm’s functional departments such as
marketing, engineering, or finance.
• As a functional manager, they are
administratively responsible for deciding
how something will be done, who will
do it, and what resources will be devoted
to accomplishing the task.
• The comparison between the PM and the
functional manager reveals another
crucial difference between the two, the
functional manager is a direct, technical
supervisor while the project manager is
the facilitator and generalist.
• When it comes to authority the
functional manager has authority over
which projects the team pursues and is
higher in the chain of command than the
project manager.
• Functional managers have the
responsibility of reporting to executives
in charge of the team that they manage
while the project manager when it comes
to hiring (or firing), the project manager
will consult with the functional manager
as to what is the best decision based on
the project's needs, but the ultimate
decision lies with the functional manager.
• While the effectiveness of the entire
team falls under the responsibility of the
functional manager, the success of the
project lies on the shoulders of the
project manager.
• The project manager is the team expert
for delivering successful projects. This
involves knowing all of the project
inputs necessary to achieve a goal such
as staff time, costs, and equipment.
• The functional manager is responsible
for measuring the overall effectiveness
of the staff, performing evaluations,
professional development, and resolving
conflicts. Alternatively, the project
manager is responsible for ensuring that
each staff member understands her role
in the project and is adequately meeting
the outlined goals

Project Responsibilities

25
• The best way to explain the unique role
of the PM is to contrast it with that of a
functional manager in charge of one of
the firm’s functional departments such as
marketing, engineering, or finance.
• As a functional manager, they are
administratively responsible for deciding
how something will be done, who will
do it, and what resources will be devoted
to accomplishing the task.
• The comparison between the PM and the
functional manager reveals another
crucial difference between the two, the
functional manager is a direct, technical
supervisor while the project manager is
the facilitator and generalist.
• When it comes to authority the
functional manager has authority over
which projects the team pursues and is
higher in the chain of command than the
project manager.
• Functional managers have the
responsibility of reporting to executives
in charge of the team that they manage
while the project manager when it comes
Project Career Paths
• We referred to the professionalization
and rapid growth of project
management, to PMBOK (the project
management body of knowledge), as
well as to the development of college
and university-level courses and degree
programs available in the field.
• Although the percentage of PMs who are
academically trained is increasing
rapidly, many current project managers
have no college-level training in the
field.
to hiring (or firing), the project manager
will consult with the functional manager
as to what is the best decision based on
the project's needs, but the ultimate
decision lies with the functional
manager.
• While the effectiveness of the entire
team falls under the responsibility of the
functional manager, the success of the
project lies on the shoulders of the
project manager.
• The project manager is the team expert
for delivering successful projects. This
involves knowing all of the project
inputs necessary to achieve a goal such
as staff time, costs, and equipment.
• The functional manager is responsible
for measuring the overall effectiveness
of the staff, performing evaluations,
professional development, and resolving
conflicts. Alternatively, the project
manager is responsible for ensuring that
each staff member understands her role
in the project and is adequately meeting
the outlined goals.
• In an excellent article that should be read
by anyone interested in understanding
the reality of management, Kotter (1982)
has shown that general managers are less
organized, less formal, and less
structured than college students are led
to believe.
• The same is undoubtedly true of project
managers.
• The career path of a PM often starts with
participation in small projects, and later
in larger projects, until the person is
given command over small and then
larger project
26
 Special demands on the project manager
Acquiring resources is the process of securing
team members, equipment, materials, or other
resources required to deliver the project. The
project manager should know that there are
resources trade-offs that need to be taken into
consideration. Projects are associated with great
uncertainty in which crises such as
subcontracting and under or overestimation of
resources occur that hinder PM to require
resources and create delays and which is also
costly. Resource Management Plan is an
essential part of this process to ensure that
resources are planned, procured, and assigned at
the optimum time in the project schedule.
• A major problem for the PM is the fact that
most of the people needed for a project must be
"borrowed". It is not easy to gather competent
people, especially outsiders with proven ability
unless they are motivated to work. Motivation
problems can be influenced by salary and
promotion. The most effective team members
have some common characteristics and those are
high-quality technical skills, political sensitivity,
strong problem orientation, and high self-esteem.
• Project manager should be able to deal with
different obstacles from the beginning of the
project until its termination. The better the
planning results in fewer crises and that includes
project inception, budgeting, scheduling, and
communication with all parties.
• The PM must make trade-offs between the
project goals of cost, time, and performance and
of course and also make trade-offs between
project progress and process that is, between the
.
Selecting the project manager
• The project manager needs two kinds of
credibility; the first is technical
credibility.
• The project manager must be perceived
by the client, senior executives, the
technical and managerial functions. The build-
up stage is composed of a schedule while the
final stage is more on its performance.
• Late failure in the life cycle of a project is
more difficult to keep the project on time and
cost schedule. Failures in the early life of the
project are commonly planning problems such
as failure to define the mission carefully that
leads to subsequent and at times from failure to
get the client’s acceptance on the project
mission. Technical problems tend to cause
waves of pessimism and optimism to
sweep over the project staff.
• Efficient system of communication enables the
management to motivate, influence, and satisfy
the subordinates which in turn boosts their
morale and keeps them motivated. Fundamental
issues that the manager must understand and
deal with; PM must know why the project exists
and intent so that when making trade-offs, it is
easy to get off the track and strive to meet goals;
PM with extensive experience has managed
projects that failed; to have the support of top
management; PM should build and maintain a
solid information network.
• To meet the demands of the job of the project
manager; acquiring adequate resources,
acquiring and motivating personnel, dealing
with obstacles, making project goal trade-offs,
handling failure and the fear of failure, and
maintaining the appropriate patterns of
communication the project manager must be a
highly skilled negotiator
functional departments, and the project
team as possessing sufficient technical
knowledge to direct the project.
• Second, project manager must be
administratively credible.
27
 • The project manager has several key
administrative responsibilities that must
be performed with apparently effortless
skill.
Problems of Cultural difference
• Culture refers to the entire way of life
for a group of people. It encompasses
every aspect of living and has four
elements that are common to all cultures:
technology, institutions, language, and
arts
• Technology of a culture includes such
things as the tools used by people, the
material things they produce and use, the
way they prepare food, their skills, and
their attitudes toward work. It embraces
all aspects of their material lives.
• Institutions of a culture make up the
structure of the society. This category
contains the organization of the
government, the nature of the family, the
way in which religion is organized as
well as the content of religious doctrine,
the division of labor, the kind of
economic system adopted, the system of
Culture and project and multi-culture and the project
Culture and Project
•The fundamental philosophy of staffing
projects varies greatly in different cultures.
•The pace of life differs from one culture to
another, just as do the values that people place
on family or success.
Micro cultures and the Project
We call these "micro cultures" to differentiate
them from the broader national or regional
cultures about which we have been writing.
• The project manager must persuade
people to cooperate irrespective of
personal feelings, to set aside personal
likes and dislikes, and focus on
achieving project goals.
education, and the way in which
voluntary associations are formed and
maintained.
• The language of a culture is always
unique because it is developed in ways
that meet the express needs of the culture
of which it is a part. The translation of
one culture’s language into another’s is
rarely precise. Words carry connotative
meanings as well as denotative meanings.
• The arts or aesthetic values of a culture
are as important to communication as the
culture’s language. If communication is
the glue that binds a culture together, art
is the most efficient means of
communicating. Aesthetic values dictate
what is found beautiful and satisfying. If
a society can be said to have “style,” it is
from the culture’s aesthetic values that
style has its source.
•In many cultures, the manager is expected to
take a personal interest in his or her
subordinates' lives, to pay calls on them, to take
an interest in the successes of family members,
and to hold a caring attitude.
•In some cultures, the quality of the work is seen
to be considerably more important than on time
delivery.
•It is just as true, though less obvious, to
observe that micro cultures vary from industry
28
to industry and from firm to firm just as cultures project, have little cause for loyalty to the PM,
do from nation to nation. and over whom the PM has little or no de jure
authority
•Perhaps more than any other type of manager,
the PM is dependent on commitments made by
people, both inside and outside the parent
organization, who owe little allegiance to the

ACTIVITY 1
1. A major problem for the PM is the fact that most of the people needed for a project must be
_______.
ANSWER: borrowed

2. The phrase __________ requires a short digression describing briefly what is meant by those
words.
ANSWER: Systems approach

3. We
know of no _________career paths that can take project managers to CEO positions.
ANSWER: Specific

4. Some individuals thrive on dealing with crises. They have been referred to as _________.
ANSWER: Adrenalin Junkies

5. The notion of “open communications” requires that emotions, feelings, worries, and
_________ be communicated, as well as factual
messages.
ANSWER: Anxieties

6. The PM must have a clear definition of how success

or _________ is to be determined.
ANSWER: Failure

7.A PM with reasonable technical competence seems to be associated with project success and is
seen by project team members to be
a ________ leadership characteristic.
ANSWER: Positive

8.The PM must persuade people to cooperate irrespective of ____________, to set aside personal
likes and dislikes, and to focus on achieving project goals.
ANSWER: Personal feelings

9.A nation’s ________ affects projects in many ways.

ANSWER: Culture

29
10-11. For some years, management theorists have been writing about ____________. We call
these ______________to differentiate them from the broader national or regional cultures about
which we have been writing.

12.We would not for a moment argue with the notion of _________ but that economic concept
assumes reasonable freedom for goods and services to cross national boundaries in both
directions.

13. Though the state of a nation’s technology is not really an _________ environment, it is
appropriate to mention the issue at this juncture.

14. Breaking problems into their constituent parts to understand the parts better and thereby
solve the problem.

15. A ratio to evaluate a proposed course of

action.

16. A person who helps people overcome problems, either with technical issues or with other
people.

17. One of the standard organization disciplines

such as finance, marketing, accounting, or operations.

18-20. Give at least 3 of Acquiring and Motivating Personnel.

ACTIVITY 2: ANSWER THE FOLLOWING BY YES OR NO

1.) The functional manager uses systems approach and analytic approach for PM?
o Yes
o No
2.) The Functional manager is direct and facilitator whole Project manager is technical
supervisor and generalist?
o Yes
o No
3.) PM is responsible for the project and how the project is organized?
o Yes
o No
4.) PM holds the meetings and briefings to ensure that all those who will affect by the project are
prepared in advance and for the demands they will have to meet a project and is implemented?
o Yes
o No

30
5.) Project Managers have reasonable normal skills, and operating under reasonably normal
circumstances
o Yes
o No
6.) Department heads are usually specialist on the areas they manage?
o Yes
o No
7.) PM does not require political skills even in lower order? (Answer: No, they do require
o Yes
o No

8.) Projects provide comfortable work environment for individuals whose faces is on activity
rather than the results?
o Yes
o No

9.) One of the characteristics of any project is uniqueness and two characteristics means that the
Functional Manager will have to face and overcome service of crisis?
o Yes
o No
10.) PM allows senior management to be surprised?
o Yes
o No
11.) A number of demands are unique to the managers of projects and the services of PM
depends to a small extent in how capable they handled.
o Yes
o No
12.) A major problem for the PM is the fact that most of people needed for project must be
"borrowed" with a few exceptions. They are borrowed from product development department.
o Yes
o No
13.) There is no discomfort between the PM and Functional Manager when there is a successful
completion of a project.
o Yes
o No

31
14.) The PM's responsibilities fall on two separate responsibilities: The responsibility to the
parent organization and the responsibility to the project and client
o Yes
o No
15.) PM does not take notes to the chances of running the event.
o Yes
o No
16.) Project Managers learn in experiences. Wise PM learns from the experiences of the others.
o Yes
o No
17.) The way to deal with last minute schedule and technical changes are the "the best you can"
o Yes
o No
18.) The PM must take trade-offs between project goals, cost and time performance and of
course the ancillary goals.
o Yes
o No
19.) It is critical to avoid the appearance of favoritism in many cases.
o Yes
o No
20.) According to Mintzberg (1973) most of the Project Manager spend time communicating
with many groups interested in the project?
o Yes
o No

32
CHAPTER OUTLINE

IV. CHAPTER 4: NEGOTIATION AND THE MANAGEMENT OF CONFLICT

V. NEGOTIATION AND THE MANAGEMENT OF CONFLICT ................... 161

a. Most conflicts have their roots in uncertainty, and negotiation is a way of
managing the resultant risk and therefore risk management is about dealing
with conflicts that often arise from uncertainty.

W. THE NATURE OF NEGOTIATION ………………………………….…….. 164

a. Wall (1985, preface) define negotiation as “the process through which two
or more parties seek an acceptable rate of exchange for items they own or
control.”
b. The key to understanding the nature of negotiation as it applies to project
management is the realization that few of the conflicts arising in projects
have to do with whether or not a task will be undertaken or a deliverable
produced.

X. PARTNERING, CHARTERING, AND SCOPE CHANGE ………………... 165

a. Partnering
a. Project partnering is a method of transforming contractual
relationships into a cohesive, cooperative project team with a single
set of goals and established procedures for resolving disputes in a
timely and effective manner.

b. Chartering ………………………………………………………….….. 166

a. A project (program, etc.) charter is simply a written agreement
between the PM, senior management, and the functional managers
who are committing resources and/or people to a specific project
(program, etc.)

c. Scope Change ……………………………………………………….…. 167

a. No matter how carefully defined at the start, the scope of most
projects is subject to considerable uncertainty and the problem of
changing the scope, or performance, expected of a project is a major
issue in project management.

Y. CONFLICT AND THE PROJECT LIFE CYCLE ………………..………… 169

a. Relation of the project life cycle with the fundamental conflict categories
and discover certain patterns of conflict are associated with the different
periods in the life of a project.

33
 2. More on the Project Life Cycle
a. Two of the most commonly cited definitions are those of Thamhain
et al. (1975a) and Adams et al. (1983) which is the former use a
four-stage model with project formation, buildup, the main program,
and phase-out identified as the stages of the life cycle. Adams et al.
also break the project life cycle into four, but slightly different,
stages: conceptualization, planning, execution, and termination.

3. Categories of Conflict
a. On examination of collected data of Thamhain et al. (1975a), it
appears that the conflicts fall into three fundamentally different
categories:
1. Groups working on the project may have different goals and
expectations.
2. There is considerable uncertainty about who has the authority
to make decisions.
3. There are interpersonal conflicts between people who are
parties-at-interest in the project.

4. Project Formation ……………………………………………..………. 172

a. In the initial stage of the project life cycle, most of the conflict
centers on the inherent confusion of setting up a project in the
environment of matrix management.

5. Project Buildup …………………………………………………….….. 173

a. Thamhain et al. (1975a, p. 39) note that conflict occurring in the
buildup stage “over project priorities, schedules, and administrative
procedures . . . appears as an extension from the previous program
phase.”

6. Main Program
a. Schedules are still a major source of conflict in the main program
phase of the project life cycle, though the proximate cause of
schedule-related conflict is usually different than in the earlier
stages.

7. Project Phase-out ………………………………………………….…... 174

a. During phase-out, projects with firm deadlines develop an
environment best described as hectic.

Z. SOME REQUIREMENTS AND PRINCIPLES OF NEGOTIATION ….…. 176

b. One requirement for the conflict reduction/resolution methods used by the
PM is that they must allow the conflict to be settled without irreparable
harm to the project’s objectives.

34
 c. A second requirement for the conflict resolution/reduction methods used by
the PM is that they allow (and foster) honesty between the negotiators.
d. It is a requirement of all conflicting parties to seek solutions to the conflict
that not only satisfy their own individual needs, but also satisfy the needs of
other parties to the conflict, as well as the needs of the parent organization
and in the language of negotiation, this is called a “win-win” solution.
Negotiating to a win-win solution is the key to conflict resolution in project
management.

SUMMARY

This chapter addressed the need for negotiation as a tool to resolve project conflicts. It discussed
the nature of negotiation and its purpose in the organization and also described various categories
of conflict and related them to the project life cycle. The authors followed this by identifying
several requirements and principles of negotiation and finally presented a short vignette
illustrating an actual negotiation situation.

VOCABULARY AND DEFINITIONS

Word Book Definition Own Definition

Interfaces
Lateral Relations
Pareto-Optimal Solution
Positional Negotiation
Principled Negotiation
Parties-at-interest
The boundaries between
departments or functions.
Communications across lines
of equivalent authority.
A solution such that no party
can be made better off without
making another party worse
off by the same amount or
more.
Stating immediate wants on
the assumption that the
environment is static.
A process of negotiation that
aims to achieve a win-win
result.
Those who have a vested
interest in the outcome of the
negotiations.
A surface regarded as the
common boundary of two
bodies, spaces, or phases.
The connection of two
individuals, or their situation
with respect to each other.
One way to find good
solutions to multi objective
problems.
For one person to get what
they have stated as their
position, the other person has
to give up something.
Finding a deal that will benefit
all parties involved.
Parties involved that are
interested in the outcome of
the negotiations.

35
Learning objectives:
At the end of the chapter, the student is expected to:

• Know the importance on how we handle conflict during project formation

• Determine the three levels of priority
• Solve any different kinds of problems and disputes.
• Persuade other parties for your point of view to work with you.
• Understand the process of building partnered projects.
• Know how to settle conflicts.
• Demonstrate knowledge of the negotiation process and the key approaches to negotiation
• Analyze various sources of conflict
• Apply the appropriate methods to
• Practice negotiating
• Have a further understanding about chartering

Nature of the negotiation

•Negotiation is the favored technique in resolving conflicts.

•Negotiation is the process through which two or more parties seek an acceptable rate of
exchange for items they own or control. (Wall 1985, Preface)
•Negotiation is a field of knowledge and endeavor that focuses on gaining the favor of people
from whom we want things (Cohen 1980, p.15)
•Conflicts arising within the organization should be viewed as conflict between allies, not
opponents.

Partnering, Chartering, and Change

Three situations commonly arise during projects that call for the highest level of negotiating
skills.The former is likely to be more contentious than all other aspects of the project combined.
The latter two are by far the most common and most problematic issues facing project managers.
Partnering

• The parent organization's objective is to get the deliverable at the lowest possible cost, as
soon as possible.
• The subcontractor's objective is to produce the deliverable at the highest possible profi t
with the least effort.

36
• These conflicting interests tend to lead both parties to work in an atmosphere of mutual
suspicion and antagonism.
• The concept of "partnering" has been developed to replace this atmosphere with one of
cooperation and mutual helpfulness, but the basically adversarial relationship makes cooperation
diffi cult in the best of cases (Larson et al., 1997).

Chartering

• The agreements between groups partnering on large endeavors are often referred to as
charters.
• A project (program, etc.) charter is simply a written agreement between the PM, senior
management, and the functional managers who are committing resources and/or people to a
specific c project (program, etc.).
• Typically, it details the expected deliverables, often including schedules, budgets, and
resource commitments.
• It attests to the fact that senior management of all relevant organizations, functional
managers, and the PM are "on the same page," agreeing about what is to be done, when, plan or
set of action plans can constitute a project charter, particularly if senior management has signed-
off on the overall mission statement, and if it is recognized as a charter by all parties to the plan.
• Most projects do not have charters, which is one reason for observing that most projects
are not completed on specification, on time, and on budget.

Change

• No matter how carefully a project is planned, it is almost certain to be changed before

completion.
• No matter how carefully defined at the start, the scope of most projects is subject to
considerable uncertainty.
• There are three basic causes for change in projects.
• Some changes result because planners erred in their initial assessment about how to achieve a
given end or erred in their choice of the proper goal for the project.
• Technological uncertainty is the fundamental causal factor for either error.
• The foundation for a building must be changed because a preliminary geological study did not
reveal a weakness in the structure of the ground on which the building will stand.

37
CONFLICT AND THE PROJECT LIFE CYCLE
Conflict appears in all phases of the project life cycle. These depends on schedules, priorities,
staff and labor requirements, technical factors, administrative procedures, cost estimate and
personality conflicts. Conflict tends to fall in three groups:
1. Groups working on the project may have different goals and expectations
•Conflicts about schedules, intra- and interproject priorities, cost estimates, and staff time. They
arise because the project manager and the functional managers have very different goals. The
PM’s concern is the project. The primary interest of the functional manager is the daily operation
of the functional department.
2. There is considerable uncertainty about who has the authority to make decisions
•Resource allocation, on administrative procedures, on communication, on technological choices,
and on all the other matters affecting the project produces conflict between the PM and the other
parties. in a matrix organization, the functional manager controls who works on the project and
makes technical decisions, while the project manager controls the schedule and flow of work.
3. There are interpersonal conflicts between people who are parties-at-interest in the project
•Conflicts reflect the fact that human beings are an integral part of all projects. In an environment
that depends on the cooperation of many persons, it seems inevitable that some personalities will
clash. in conflicts between the project and the client, or between senior management and the
project, it is the project manager who personifies the project and thus is generally a party to the
conflict. The different goals and objectives of the project manager, senior management, and
functional managers are a major and constant source of conflict.
Methods for settling conflicts about priorities between Projects
1. Project selection model
•used to approve projects for funding will generate a set of projects ranked by some measure of
value. too often irrelevant, because there is a powerful tendency for both project and functional
managers to optimize their individual interests, with little regard for the total organization.
2. Conflict-resolution potential of partnering and project charters
•they will sharply lower the intensity of the conflicts as well as provide a framework for
resolving conflict. They will even allow an environment in which the PM and functional
managers can take positions that support the total organization rather than sub optimizing the
project or the function
PROJECT FORMATION
Matrix management technical objectives, not clearly defined or established that shifting from
chaotic environment to ordered world is difficult during initial stage.
There are four fundamental issues must address:
1. Technical objectives of the project must be specified to a degree that will allow the detailed
planning of the buildup stage to be accomplished

38
2. Commitment of resources to the project must be forthcoming from senior management and
from functional managers
3. The priority of the project, relative to the priorities of the parent organization’s other projects,
must be set and communicated
4. Organizational structure of the project must be established

The organizational structure selected will have a major impact on the ways in which the
conflicts are handled.
Lack of clarity about the relative power, influence, authority of the PM and the functional
managers is a major component of all conflicts involving technical decisions, resource allocation,
and scheduling

PROJECT BUILDUP
This is the period during which the project moves from a general concept to a highly detailed
set of plans
Strong matrix, pm seeks commitment of people from functional department, weak matrix seeks
commitment of work.
Discussions between the functional manager and the project manager about the best technical
approach often result in conflict. The total level of conflict is at its highest in this transition
period
MAIN PROGRAM
Schedules are still a major source of conflict in the main program phase of the project life
cycle
Late completion of task can lead to delay to avoid project manager need to schedule properly.
Catching up to late tasks requires extra resources
The more complex the project, the more difficult it is to trace and estimate the impact of all the
delays, and the more resources that must be consumed to get things back on schedule
Technical conflicts are frequent and serious during the main program stage. Interfaces or the
linkages of different parts of the project. As the number of interfaces increases, so does the
probability that problems will arise at the interfaces

PROJECT PHASE OUT

If schedule slippage has occurred in the main program stage, the consequences will surely be
felt in this final stage.

39
 projects with firm deadlines develop an environment best described as hectic. The PM, project
team, and functional groups often band together to do what is necessary to complete the project
on time and to specification
personality conflicts are the second-ranked source of conflict during phase-out stress caused by
the pressure to complete the project

Requirements and principles of negotiation

• Separate the people from the problem. The conflicting parties are often highly emotional.
They perceive things differently and feel strongly about the differences. Emotions and objective
fact get confused to the point where it is not clear which is which.
• Focus on interests, not positions. In positional negotiation, the “positions” are statements
of immediate wants and assume that the environment is static.
• When negotiation focuses on interests, the negotiator must determine the underlying
concern of the other party. The real concerns or interests of the individuals
• stating the positions quoted above might be to earn a certain return on the investment in a
• property, or to not commit to delivery of work if delivery on the due date cannot be
guaranteed.
• Knowledge of the other party’s interests allows a negotiator to suggest solutions that
satisfy the other party’s interests without agreeing with the other’s position

ACTIVITY 1
1. What is the process through which two or more parties seek an acceptable rate of exchange for
items they own or control?
2. It is a written agreement between the project manager, senior management, and the functional
managers who are committing resources to the project.
3. What is the process which begins when one party perceives that the other has frustrated, or is
about to frustrate, some concern of his?
4. A major source of conflict in the main program, though the proximate cause of schedule-
related conflict is usually different than in earlier stages.
5. It is a conflict that tends to lead both parties to work in an atmosphere of mutual suspicion and
antagonism?
6. The____________should remembers that he will be negotiating with project stakeholders
many times in the future.
7. One promising approach to meeting the requirements of project negotiation is
called_______________.

40
8.______________allow decisions to be made horizontally across lines of authority.
9.The number of_____________increases rapidly as the project gets larger, which is to say that
the system gets more complex.
10. In the initial stage of the________________, most of the conflict centers around the inherent
confusion of setting up a project in the environment of matrix management.
11-13. what are the three levels of priority?

14-16. Give the three traditional categories of conflict.

17-20 What are the four points define principled negotiation that tends to maintain these
requirements of negotiation?

ACTIVITY 2: ANSWER THE FOLLOWING BY TRUE OR FALSE

1. It is uncommon for senior management to determine inter-project priorities.

2. Commitment of resources to the project must be forthcoming from the senor management
only.
3. The project manager must employ only unethical tactics during negotiation.

4. Avoidance of capital investment and Pooling of complimentary knowledge are included

in the reason of partnering trends?

5.
6. Both parties commit to a joint review of “project execution” when the project is
incomplete

7. Functional areas can claim more technical expertise than the project manager who is a
"generalist"

8. "Catching up" does not require only extra resources that functional groups will demand
but the project manager may not have.

9. Negotiation is “the process through which one party seek an acceptable rate of exchange
for items they own or control”

10. Firms should not view conflicts within the organizations.

11. Mid priority project is one of the three levels of priorities in most firm.

41
12. Technique stops conflict from arising

13. The priority of the project relative to the priorities of the parent organization’s other
projects must be set and communicated.

14. Negotiation the primary tool to resolve conflict

15. Conflicting interests tend to lead one party to work in an atmosphere of mutual suspicion
and antagonism

16. Parent firm must make a commitment to partnering, select subcontractors who will do the
same, and develop a “charter”

17. In transition from project information to build up, there are five fundamental issues that
must be addressed.

18. As the planning became difficult, conflict build

19. Conflict can play a creative role in the planning process

20. The project manager should remember that he will be negotiating with project
stakeholders many times in the future.

21. In Scope change, a mandate is a change in the environment in which the project is being
conducted.

42
CHAPTER OUTLINE
V. CHAPTER 5: THE PROJECT IN THE ORGANIZATIONAL STRUCTURE

A. THE PROJECT IN THE ORGANIZATIONAL STRUCTURE ..................... 189

a. PM do not have much influence over the interface between the organization and the
project, the choice of interface usually being made by senior management and PM’s work,
however, is strongly affected by the project’s structure, and the PM should understand its
workings.

B.THE PROJECT AS PART OF THE FUNCTIONAL ORGANIZATION …. 191

a. As one alternative for giving the project a “home,” we can make it a part of one of the
functional divisions of the firm and for functionally organized projects, the project is assigned to
the functional unit that has the most interest in ensuring its success or can be most helpful in
implementing it.

C. PURE PROJECT ORGANIZATION ……………………………………….. 194

a. The project is separated from the rest of the parent system; it becomes a self-contained
unit with its own technical staff, its own administration, tied to the parent firm by the tenuous
strands of periodic progress reports and oversight.

D. THE MATRIX ORGANIZATION …………………………………….…..… 196

a. The matrix organization is a combination of the functional and pure project organization
whereas pure project organization overlaid on the functional divisions of the parent firm.

1. Virtual Projects …………………………………………………….….. 200

a. Virtual projects are those in which work on the project team crosses time, space,
organizational, or cultural boundaries.

E. MIXED ORGANIZATIONAL SYSTEMS ………………………….…….…. 201

a. Divisionalization is a means of dividing a large and monolithic organization into smaller, more
flexible units and enables parent organization to capture some of the advantages of small,
specialized organizational units while retaining some of the advantages that come with larger
size.

43
b. Pure functional and pure project organizations may coexist in a firm that results in the mixed
form; the hybridization of the mixed form leads to flexibility and it enables the firm to meet
special problems by appropriate adaptation of its organizational structure.

F. CHOOSING AN ORGANIZATIONAL FORM …………………………….. 202

a. The choice of an organizational form for projects is not addressed to PMs or aspiring PMs
rather it is addressed to senior management.
b. The functional form is apt to be the organizational form of choice for projects where the major
focus must be on the in-depth application of a technology rather than, for example, on
minimizing cost, meeting a specific schedule, or achieving speedy response to change.

G. TWO SPECIAL CASES – RISK MANAGEMENT AND THE PROJECT

OFFICE ……………………………………………………………………… 205
a. Dealing with uncertainties has come to be known as risk management and in order to deal with
the managerial and administrative issues in a way that meets the parent organization’s rules for
management and administration; many firms have created the project management office.

1. Risk Management
a. The Project Management Institute’s (PMI) publication A Guide to the Project Management
Body of Knowledge (PMBOK® Guide) 3rd Edition, 2004, states that risk management is “the
systematic process of identifying, analyzing, and responding to project risk”* and consists of six
sub processes, and, as we shall see below, a seventh sub process needs to be added.
1. Risk Management Planning
2. Risk Identification
3. Qualitative Risk Analysis
4. Quantitative Risk Analysis
5. Risk Response Planning
6. Risk Monitoring and Control
7. Create and Maintain a Risk Management Data Bank

b. The identification of potentially serious risks can be done in a number of ways, but the
following method is straightforward and extensively used, particularly in engineering analysis.
1. Risk Identification through Failure Mode and Effect Analysis
(FMEA) ………………………………………… 208

44
2. An Added Note on Risk Identification
3. Organizing for Risk Management
4. Dealing with Disaster ……………………………………. 209

2. The Project Management Office ……………………………………… 210

a. The role of the Project Management Office a.k.a. the Project Office, the Program Management
Office, the Project Support Office, and so on is to help manage the fast-multiplying forms of
getting work done like the increasing role of projects in today’s organizations and the move
toward “management by projects".
1. Purpose of Project Management Office ……………...… 211
2. Tasks of the Project Management Office
3. Forms of Project Management Office ………………….. 212
4. Implementing the Project Management Office ………... 213

H. THE PROJECT TEAM ……………………………………………………… 213

a. Project success depends on the political skill of the PM as much as on the technical skill
of the team.

I. HUMAN FACTORS AND THE PROJECT TEAM ………………………... 217

a. Conflict on project teams is the result of individuals focusing on the project through the
eyes of their individual discipline or department (de Laat, 1994; Hughes, 1998; and Pelled et al.,
1994).

SUMMARY

This chapter described the various organizational structures that can be used for projects, and
detailed their advantages. An appropriate procedure for choosing the best form was described
and two examples were given. The chapter then moved into a discussion of risk management and
the role of the Project Management Office. Following this, discussion turned to the project team
itself, describing the organization of the project office staff and the human issues, such as
motivation and conflict, the project manager will face.

45
VOCABULARY AND DEFINITIONS
Word Book Definition Own Definition
Functional Management The standard departments of the organization that represent
individual disciplines such as engineering, marketing, purchasing, and so on. Most common
type of organizational management that grouped according to areas of specialty within different
functional areas.
Matrix Organization A method of organizing that maintains both functional supervisors as well
as project supervisors. A strong matrix operates closer to a pure project organization while a
weak matrix operates more like a functional organization. Organizational structure where
employees report to two or more managers rather than one manager overseeing every aspect of a
project.
Mixed Organization This approach includes both functions (disciplines) and projects in its
hierarchy. This organizational structure includes functional groups, pure project groups, and
perhaps a matrix group, in its hierarchy.
Project Management Office An office to deal with multiple projects and charged with
improving the project management maturity and expertise of the organization, as well as
increasing the success rate of projects. A group — internal or external to a company —
that sets, maintains and ensures standards for project management across that organization.

Learning Objectives
• Know and identify the advantages and disadvantages of Pure project organization
• Value the importance of Mixed Organizational Systems
• Provide a conducive environment in which a project manager can influence his/her team
member to perform better.
• Help people within the project team to understand their scope and role.
• Understand Matrix Organization and its functions
• Learn about the Human Factors and the Project Team
• Know the importance if project team
• Define authority, reliability, responsibility and accountability in projects.
• Assess the importance of aligning project objectives with organizational strategy.
• Determine the different ways of organizing project within the parent organization

CHAPTER 5 SUMMARY: The project organization

Project as Part of The Functional Organization
• We examine the advantages and
disadvantages of each form and discuss
some of the critical factors that might
lead us to choose one form over the
others.
• We then turn to the formation and
operation of two groups that may

46
• provide critically important services for
all projects, the risk management group,
and the project management office.
• To our knowledge, it is rare for a PM to
have much influence over the interface
between the organization and the project,
choice of interface usually being made
by senior management.
• Individual experts can be utilized by
many different projects. With the broad
Pure Project Organization
• The project is separated from the rest of the parent system.
• It becomes a self-contained unit with its own technical staff, its own administration, tied to
the parent firm by the tenuous strands of periodic progress reports and oversight.
Advantages of Pure Project
• The project manager has full line
authority over the project.
• The PM is like the CEO of a fi rm that is
dedicated to carrying out the project.
• All members of the project work force
are directly responsible to the PM.
• There are no functional division heads
whose permission must be sought or
whose advice must be heeded before
making technological decisions.
• The PM is truly the project director.
Disadvantages of Pure Project
• Though individuals engaged with
projects develop considerable depth in
the technology of the project, they tend
to fall behind in other areas of their
technical expertise.
• The functional division is a repository of
technical lore, but it is not readily
accessible to members of the pure
project team.
Matrix organization
base of technical personnel available in
the functional divisions, people can be
switched back and forth between the
different projects with relative ease.
• The functional division tends to be
oriented toward the activities particular
to its function. It is not usually problem-
oriented in the sense that a project
should be to be successful
• When the project is removed from the
functional division, the lines of
communication are shortened.
• The entire functional structure is
bypassed, and the PM communicates
directly with senior corporate
management.
• The dangers of focusing on and
optimizing the project's subsystems
rather than the total project are often a
major cause of technical failure in
projects.
• Pure project groups seem to foster
inconsistency in the way in which
policies and procedures are carried out.
• In pure project organizations, the project
takes on a life of its own.
• A disease known as projectitis develops.
• Friendly rivalry may become bitter
competition, and political infighting
between projects is common
47
Matrix organization can take a wide variety of specific forms because it is a combination of
functional organization structure and pure project.
• There are three classification of matrix:
(1)“project” or “strong” matrix most
resembles the pure project organization; (2)
“functional” or “weak” matrix most
resembles the functional form of
organization; (3) “balanced” matrix that lies
in between the other two. The primary
difference between these forms has to do
with the relative power/decision
authority of the project manager and the
functional manager.
• Project or strong matrix is where the PM
controls when and what workers will do,
while the functional managers control who
will be assigned to the project and what
technology will be used.
Mixed Organizational System
•Divisionalization is a means of dividing a
large and monolithic organization into
smaller, more flexible units. It enables the
parent organization to capture some of the
advantages of small, specialized
organizational units while retaining some of
the advantages that come with larger size.
•Mixed management is not distinguishable
from matrix management, but it is typically
used for small, short-run projects where the
formation of a full-fledged matrix system is
not justified.
Choosing an
• The choice of an organizational form for
projects is not addressed to PMs or
aspiring PMs.
• It is addressed to senior management.
• Major focus must be on the in-depth
application of a technology rather than,
for example, on minimizing cost,
• Functional or weak matrix is a kind of
project that might have only full time person
which is tye PM. Rather than having an
individual functional worker actually
assigned to the project, the functional
departments devote capacity to the project,
and the primary task of the PM is to
coordinate the project activities carried out
by the functional departments.
• There are advantages of matrix structure
that are potent, but the disadvantages are
also serious that involve conflict—between
the functional and project managers for the
most part.
•The advantages of mixed organizational
systems it that the hybridization of the
mixed form leads to flexibility. It enables
the firm to meet special problems by
appropriate adaptation of its organizational
structure and the firm sets up what appears
to be a standard form of functional
organization
•Its disadvantage is that dissimilar groupings
within the same accountability center tend to
encourage overlap, duplication, and friction
because of incompatibility of interests
Organizational Form
meeting a specific schedule, or achieving
speedy response to change.
• If choice of project structure exists, the
first problem is to determine the kind of
work that must be accomplished.
• Additional matters to be considered are
the individuals (or small groups) who
will do the work, their personalities, the
48
 technology to be employed, the client(s) the functional units involved, and the
to be served, the political relationships of culture of the parent organization

The Project Team

• A project team is a team whose members usually belong to different groups, have different
functions, and are assigned by the project manager to activities for the same project. A team can be
divided into sub-teams according to need. Usually project teams are only used for a defined period.
• The titles of individuals could change, but the roles played would be the same.
Example of team member under project team.
1. System architect, charge in basic product design and development and is responsiblefor functional
analysis, specification, drawings, cost estimate, and documentation.
2. Development Engineer, task is efficient production of the product or process theproject engineer has
design.
3. Test Engineer, responsible for installation, testing, and support of the product process since
engineering is finished.
4. Contract Administrator, in charge of all official paper works, keeping track onstandards compliance.
5. Project Controller, keeps daily account of budget, cost variances, labor charge, projectsupply, capital
equipment status etc.
6. Support services manager, in charge of product support, subtractors, data process,purchasing, contract
negotiations.
● Senior project team members who will be having a long-term relationship with theproject.
● Those with whom the PM will require continues or close communication.
● Those with rare skills necessary to the project success

Human Factors and The Project Team

• Meeting schedule and cost goals without compromising performance is a technical problem:
1.Project professionals tend to be perfectionists
•Pride of workmanship of professionals might cause delays since they want to continuously improve the
product until it became impossible to do. That is why it is important to set due dates, control of
incidence and frequency of change.
2.Motivating project team members to accomplish the work of the project
•Recognition, achievement, the work itself, responsibility, advancement, and the chance to learn new
skills are said to be the factors of motivating team members. It is one of the responsibilities of project
manager, to make sure that project work in a structured in such a way.
•Use of participative management is also a way of motivating people. The concept suggest that an
individual worker should played an important role in decision making and finding better ways to
accomplished things.

49
•Management By Objectives (MBO), Six Sigma, Employee Involvement (EI), and Total Quality
Management (TQM), Self-directed teams (SDT), Self-managed teams (SMT) are the programs designed
to develop participative management.
Advantages of empowerment for project teams
1. Harness ability to manipulate task to met project objectives and find better ways
2. Participative management allows them to design their own methods
3. Team members are responsible and accountable
4. Synergistic solutions will result from team interaction
5. Timely feedback on team member’s performance
6. PM is provided a tool for evaluating the team’s performance

• Action plan - is a detailed planning and scheduling technique directed toward achievement of the
objectives of the project. This also serves as control mechanism.
• Organizing the team’s work in such a way that team members are mutually dependent and recognize
is called teamwork.
• Team members working together will defined the success of a project and lack of teamwork means
the company is doing a poor job in motivating them. This might because of lack of effective
rewards, inadequate individual and team performance feedback mechanisms.
• Interpersonal conflict between the project team members and outsiders is normal in a project and as
a project manager he is the one assigned to manage this using negotiation.

ACTIVITY 1
1. In the past decade or so, a new kind of organization structure has appeared in growing numbers—the
project organization, a.k.a.

2. Lockheed’s famous _____________was such a team of experts who took great pride in their ability to
solve difficult engineering problems.

3. This process not only produced designs that have been widely rated as __________ it also shortened
the design-to-street process by about 18 months.

4. Software projects are a common type of project organized by _____________.

5. The division’s sole purpose is to administer projects. Much has been written about the use of a
_______________which is an equivalent structure.

6. Determine the key tasks associated with each objective and locate the units in the parent organization
that serve as functional__________ for these types of tasks.

50
7. Dealing with uncertainties has come to be known as ___________.

8. Deciding how to approach and plan the risk management

activities for a project.

9. Determining which risks might affect the project and documenting

their characteristics.

10. Performing a qualitative analysis of risks and conditions to

prioritize their impacts on project objectives.

11. Estimating the probability and consequences of risks and

estimating the implications for project objectives.

12. Developing procedures and techniques to enhance opportunities

and reduce threats to the project’s objectives.

13. Monitoring residual risks, identifying new risks, executing risk reduction plans, and evaluating their
effectiveness throughout the project life cycle. Before proceeding, we must add a seventh sub process,

14 A permanent record of identified risks, methods used to mitigate or resolve them, and the results of
all risk management activities

15. This person is responsible for the installation, testing, and support of
the product (process) once its engineering is complete.

16. The systems architect is in charge of the basic product design and
development and is responsible for functional analysis, specifications, drawings, cost estimates, and

17.This person is in charge of product support, subcontractors, data processing, purchasing, contract
negotiation, and general management
support functions.

18-20. Give the meaning of FMEA.

51
ACTIVITY 2: ANSWER BY YES OR NO/ TRUE OR FALSE
1. Divisionalization is a means of dividing a large organization into smaller ore flexible units.
2. The hybridization of the mixed form leads to rigidity.
3. As the project finish, meeting the schedule is a critical issue.)
4. There tends to be concern among team members about “life before the project ends”
5. Pure project organizations are structurally simple and flexible, which makes them relatively easy
to understand and implement
6. WBS stands for Work Breakdown Structure.
7. Matrix Organization is a hybrid of the two main types
8. to housing the project in a functional are. The client is the focus of activity and concern?
9. Should we consider the cultural preferences of the parent organization in selecting an
organization interface?
10. Selecting the organizational interface between the project and the firm is an easy task.
11. Do conflict avoiders make successful project managers?
12. Is functional division being a repository of technical lore, but it is not readily accessible to team
members of the pure project team?
13. Are "coordination" and "functional" refers to matrix organization most resembles the pure
project organization?
14. Do project manager needs to forecast personal needs over the life cycle of the project?
15. Rare skills are not necessary to project's success.
16. Is it true that there are many reasons for the rapid growth?
17. Is it true that the majority of senior managers rarely feel much confidence in their understanding
and control of the activities in their areas?
18. The balance of power between the project and functional areas is very delicate.
19. One of the disadvantages of matrix is division of authority and responsibility in a matrix
organization is complex.
20. Is “There is a great deal of flexibility in precisely how the project is organized” One of the
advantages of matrix?

52
CHAPTER OUTLINE
VI. CHAPTER 6: PROJECT ACTIVITY PLANNING

A. PROJECT ACTIVITY PLANNING …………………………………………. 239

a. The plan must be designed in such a way that the project outcome also meets the
objectives of the parent organization. Therefore, the plan must include allowances for risk and
features that allow it to be adaptive, to be responsive to things that might disrupt it while it is
being carried out.

B. INITIAL PROJECT COORDINATION AND THE PROJECT PLAN ……. 242

a. It is crucial that the project’s objectives be clearly tied to the overall mission, goals, and
strategy of the organization, such as might be reflected in the project portfolio process.
b. Because senior managers are almost certain to exercise their prerogative to change the
plan, the PM should always return to the contributing units for consideration and re-approval of
the plan as modified. The final, approved result of this procedure is the project plan, also
sometimes known as the baseline plan.

1. Outside Clients ………………………………………………………… 245

a. When the project is to deliver a product/service to an outside client, the fundamental
planning process is unchanged except for the fact that the project’s scope cannot be altered
without the client’s permission.

2. Project Plan Elements ……….………………………………………… 247

a. The process of developing the project plan varies from organization to organization, but
any project plan must contain the following elements: (1) Overview, (2) Objectives or Scope, (3)
General Approach, (4) Contractual Aspects, (5) Schedules, (6) Resources, (7) Personnel, (8) Risk
Management Plans, and (9) Evaluation Methods.

3. Project Planning in Action ……………………………………………. 249

a. Project plans are usually constructed by listing the sequence of activities required to carry
the project from start to completion. This is not only a natural way to think about a project; it
also helps the planner decide the necessary sequence of things—a necessary consideration for
determining the project schedule and duration

53
C. SYSTEMS INTEGRATION ……………………………….………………… 251
a. Systems integration is sometimes called systems engineering or concurrent engineering
and it is one part of integration management, and plays a crucial role in the performance aspect
of the project.
b. Systems integration is concerned with three major objectives: (1) Performance, (2)
Effectiveness, and (3) Cost.

D. THE ACTION PLAN ………………………………………………………… 252

a. It is a hierarchical planning system—a method of constructing an action plan and also
known as “level planning process" and its objectives are taken from the project plan.
b. The importance of careful planning can scarcely be overemphasized. Pinto et al. (1987,
1988) developed a list of ten factors that should be associated with success in implementation
and strategic factors: (1) Project mission, (2) Top management support, and (3) Project’s action
plan.

E. THE WORK BREAKDOWN STRUCTURE AND LINEAR RESPONSIBILITY

CHART ……………………….………………………………………………. 261
a. Work Breakdown Structure (WBS) is not one thing because it can take a wide variety of
forms that, in turn, serve a wide variety of purposes such as the WBS often appears as an outline
with the Level 1 tasks on the left and successive levels appropriately indented and that WBS may
also picture a project subdivided into hierarchical units of tasks, subtasks, work packages, etc. as
a type of Gozinto chart or tree constructed directly from the project’s action plan.
b. Linear responsibility chart (sometimes called a responsibility matrix) is needed to
construct because it can show who is responsible for what and this chart also shows critical
interfaces between units that may require special managerial coordination.

F. INTERFACE COORDINATION THROUGH INTEGRATION

MANAGEMENT …………………….……………………………………….. 267
a. The most difficult aspect of implementing the plan for a complex project is the
coordination and integration of the various elements of the project so that they meet their joint
goals of performance, schedule, and budget in such a way that the total project meets its goals.
The intricate process of coordinating the work and timing of the different groups is called
integration management while the term interface coordination is used to denote the process of
managing this work across multiple groups.
1. Managing Projects by Phases and Phase-Gates …………….……….. 270

54
a. Aaron et al., 1993 created 10 phase-gates associated with milestones for a software
project and the underlying phases where the project had to pass a review to move between phases.

2. The Design Structure Matrix …………………………………………. 271

a. To address the issue of information flows, Steven Eppinger (2001), a professor at MIT’s
Sloan School of Management, proposes the development and use of a Design Structure Matrix
(DSM).

SUMMARY
In this chapter, planning was initiated for the project in terms of identifying and addressing the
tasks required for project completion. The importance of initial coordination of all parties
involved and the smooth integration of the various systems required to achieve the project
objectives were emphasized. Last, some tools such as the Work Breakdown Structure (WBS), the
linear responsibility chart, the action plan and the Gozinto chart to aid in the planning process
were described. Also several methods for controlling and reducing conflict in complex projects
that use multidisciplinary teams were briefly investigated.

VOCABULARY AND DEFINITIONS

Word Book Definition Own Definition
Action Plan The set of activities, their schedules, and the resources needed to complete the
project. The lists of all the tasks that needs to finish in meeting an organizational objective.
Interface Management Managing the problems that tend to occur between departments
and disciplines, rather than within individual departments. The activities of defining, controlling,
and communicating the information needed to enable unrelated objects (including systems,
services, equipment, software, and data) to co-function.
Project Plan The nominal plan to which deviations will be compared. Defines project goals
and objectives, specifies tasks and how goals will be achieved, and identifies what resources will
be needed and associated budgets and timelines for completion.
Gozinto Chart A pictorial representation of a product that shows how the elements required
building a product fit together. A vertical tree diagram that displays hierarchical levels of
detail of a complete product assembly to ship process.
Hierarchical Planning A planning approach that breaks the planning task down into the activities
that must be done at each managerial level. Typically, the upper level sets the objectives for the

55
next lower level. Planning formed and executed by several subsystems organized according
to a layered structure for the system goal.

Learning objectives:
At the end of the chapter, the student is expected to:
• Understand and learn more about the Project planning
• Actualize project planning
• Know and understand system integration
• Identify initial project coordination
• Determine Project plan elements
• Ensure the success of the project
• Know and prepare for the risk and opportunities ahead
• Identify project deliverables
• Provide targets that can be seen to monitor achievement against targets
• Enumerate planning process around the life cycle
• Learn about the Hierarchical Planning System
• Understand composite plans

Summary
This chapter initiates our discussions of Time and Quality Management, PMBOK knowledge
areas 3 and 5, respectively. Time management is an extensive topic that is further discussed in
Chapters 8, 10, and 11. Quality management will also be discussed further in Chapter 12.

Project Planning
• Inadequate planning is a cliché in project management. PMs say, or are told, that
planning "takes too much time,"
• Planning is a good way to begin the work of a project. It tells the project team exactly
what must be done when it must be done, and when each resource will be needed. The primary
purpose of planning is to establish a set of directions in sufficient detail.
• Planning is a good way to begin the work of a project. The primary purpose of planning
is to establish a set of directions in sufficient detail.
• The plan must be designed in such a way that the project outcome also meets the
objectives of the parent organization.
• The plan is only an estimate of what and when things must be done to achieve the scope
or objectives of the project.
56
• The plan must include allowances for risk and features that allow it to be adaptive to
things that might disrupt it. Scope creep is particularly common in software projects.

Project Launch Meeting

• Should not allow plans, schedules, and budgets to go beyond the most aggregated level at
the launch meeting. Technical Scope is established, and basic areas of performance responsibility
accepted
Composite plan

•Each individual/unit assuming responsibility for a portion of the project should agree to
include a preliminary plan on how to accomplish that responsibility.
•These plans should include details of the activities required and budget projections and
timetables.
•Each participating party, the project manager and then the senior organizational management
are still not fully approved by the company.
•The group who evaluates these proposals and incorporates them into a composite project plan.
•Every subsequent approval hardens the plan and any further adjustments in the nature of the
projects must be made by processing a formal change order until approved by senior
management.

Project Plan
• The project's objectives must be clearly tied to the overall mission, goals, and strategy of
the organization, such as might be reflected in the project portfolio process.
• Senior management should delineate the firm's intent in undertaking the project, outline
the scope of the project, and describe how the project's desired results reinforce the
organization's goals.
• Without a clear beginning, project planning (and later progress) can easily go astray.
• It is also vital that a senior manager call and be present at the project launch meeting, an
initial coordinating meeting, as a visible symbol of top management's commitment to the project.
• The individual leading the launch meeting is first to define the scope of the project.
• The success of the project launch meeting is dependent on the existence of a well-defined
set of objectives.

57
• The various parts of the project plan, including the risk management plan, are then
scrutinized by the group and combined into a composite project plan.
• The composite plan, still not completely firm, is approved by each participating group, by
the project manager, and then by senior organizational management.
• Each subsequent approval hardens the plan somewhat, and when senior management has
endorsed it, any further changes in the project's scope must be made by processing a formal
change order.
• If the project is not large or complex, informal written memoranda can substitute for the
change order.
• The main point is that no significant changes in the project are made, without written
notice, following top management's approval.

Project Plan Elements

The PM is authorized to direct activities, spend monies, and request resources and personnel.
Senior management's approval signals its willingness to fund and support the project.

Overview- This is a short summary of the objectives and scope of the project. It is directed to top
management and contains a statement of the goals.
Objectives or scope A more detailed statement of the general objectives is provided in the
Overview section. The statement should include profit and competitive objectives as well as
technical objectives.
General Approach- This section describes both the managerial and the technical aspects of the
approach to work. The technical discussion describes the relationship between the project and the
available technologies.
Schedules- This section outlines the various schedules and lists all milestone events. Each task is
listed, and the estimated time for each task should be obtained from those who will do the work.
Resources- There are two primary aspects of this section. The budget includes capital and
expense requirements for the project. One-time costs are separated from recurring project costs.
Cost monitoring and control procedures must be designed to cover special resource requirements.
Personnel- This section lists the expected personnel requirements of the project. Special skills,
types of training needed, possible recruiting problems, legal or policy restrictions on workforce
composition should be noted. It is helpful to time-phased personnel needs to the project schedule.
These projections are an important element of the budget.
Risk Management- This covers potential problems as well as potential lucky breaks that could
affect the project.

58
Evaluation Method- Every project should be evaluated against standards and by methods
established at the project's inception. This section contains a brief description of the procedure to
be followed.

Project planning in Action

• Project planning are usually constructed by listing the sequences of the activity required
to carry the project from start to completion. This is not only natural way to think about a project;
it also help the planner decide the necessary sequence of things.
• Sequencing is a necessary consideration for determining the project schedule and
duration.
Using the planning process oriented around the life cycle events common for software and
hardware, product developer they divided the project into nine segments:
1. Concept evaluation
2. Requirements identification
3. Design
4. Implementation
5. Test
6. Integration
7. Validation
8. Customer test and evaluation
9. Operations and maintenance
• Each segment is made up of activities and milestones (significant events).
• As the project passes through each segments, it is subjected to a series of “quality gates”
also known as (phases gates) (toll gates) etc. that must be successfully passed before proceeding
to the next segment.
System Integration
• System integration sometimes called system engineering or concurrent engineering is one
part of integration management, it plays a crucial role in the performance aspect of the project.
• We use this phrase to include any technical specialist in the science or art of the project
who can integrate the technical discipline to achieve the customer’s objectives.
System integration is concerned with three major objectives:

59
1. Performance – what the system does, it includes system design, reliability, quality,
maintainability, and reparability.
2. Effectiveness – Achieve desired performance in an optimal manner, this can be
accomplished through the following guidelines:
Require no component performance specifications unless necessary to meet one more
system requirement.
Every component requirement should to traceable to one or more systems requirement.
Design component for effective system performance, not the performance of subsystem.
Cost system – consider as a design parameter, and cost can be accumulated in several areas.

Hierarchical Planning in action

In a project sorting out and detailed planning for all the resources involved in very
important.
Hierarchical planning system (level planning process) is a method of constructing an
action plan in a project

Level 1: Make a list of these activities in the general order in which they would occur
Level 2: break each of these Level l items into 2 to 20 tasks
Level 3: In the same way, break each Level 2 task into 2 to 20 subtask
Proceed in this way until the detailed tasks at a level are so well understood that there is
no reason to continue with the work breakdown
Write down what the perceive to be the first activity in a sequence of activities, begin to
break it down into components, take the first of these, break it further, until it reached a level of
sufficient detail. Take the second step and proceed similarly
Good understanding of a basic activity, the breakdown into detail is handled well if not
the it lacks det
ails and tends to be inadequate
Maintaining the “level planning” discipline will help keep the plan focused on the
project’s deliverables rather than on the work at a subsystem level
Rolling wave planning - planning process that must be reactive to information or
demands that change over time
Strategic factors that are associated with the implementation of project:

60
1. Project mission. It is important to spell out clearly defined and agreed-upon objectives in
the project plan
2. Top management support. It is necessary for top managers to get behind the project at the
outset and make clear to all personnel involved that they support successful completion.
3. Project’s action plan. A detailed, scheduled plan of the required steps in the
implementation process needs to be developed, including all resource requirements (money, raw
materials, staff, etc.)

The work breakdown structure

• The WBS often appears as an outline with the Level 1 tasks on the left and successive
levels appropriately indented.
• It may also picture a project subdivided into hierarchical units of tasks, subtasks, work
packages, etc. as a type of Gozinto chart or tree constructed directly from the project’s action
plan.
• Some writers recommend using the WBS as the fundamental tool for planning (Hubbard,
1993, for instance).
• WBS is an important document and can be tailored for use in a number of different ways.
1. It may illustrate how each piece of the project contributes to the whole in terms of
performance, responsibility, budget, and schedule
2. If the PM wishes, list the vendors or subcontractors associated with specific tasks.
3. It may be used to document that all parties have signed off on their various commitments
to the project.
4. It may note detailed specifications for any work package, establish account numbers,
specify hardware/software to be used, and identify resource needs.
5. It may serve as the basis for making cost estimates or estimates of task duration
• Procedure for using and designing WBS:
1. Using information from the action plan, list the task breakdown in successively finer
levels of detail.
2. For each such work package, identify the data relevant to the WBS (e.g., vendors,
durations, equipment, materials, and special specifications). List the personnel and organizations
responsible for each task.

61
3. All work package information should be reviewed with the individuals or organizations
who have responsibility for doing or supporting the work in order to verify the WBS’s accuracy
4. For the purpose of pricing a proposal, or determining profit and loss, the total project
budget should consist of four elements: direct budgets from each task as just described; an
indirect cost budget for the project; a project “contingency” reserve for unexpected emergencies;
and any residual, which includes the profit derived from the project, which may, on occasion, be
intentionally negative.
5. Similarly, schedule information and milestone (significant) events can be aggregated into
a projected baseline schedule. The projected baseline schedule integrates the many different
schedules relevant to the various parts of the project.
6. As the project is carried out, step by step, the PM can continually examine actual
resource use, by work element, work package, task, and so on up to the full project level.
7. Finally, the project schedule may be subjected to the same comparisons as the project
budget. Actual progress is compared to scheduled progress by work element, package, task, and
complete project, to identify problems and take corrective action.
Through integration Management
•As the project proceeds from its initiation through the planning and into the actual process of
trying to generate the project’s deliverables, still more problems arise.
•The term interface coordination is used to denote the process of managing this work across
multiple groups.
•The aim was to alert the PM to potential problems associated with cross-functional interfaces
and to aid in the design of effective ways to avoid or deal with potential interface problems.
•With these parts, the design/planning process is conceptually straightforward. Team members
with different technical backgrounds will view the product design task differently. Therefore,
initial design ideas will be in conflict.
•The most common structure is simply to define the task of the group as having the responsibility
to generate a plan to accomplish whatever is defined as the project scope.

62
ACTIVITY 1

1. This is a short summary of the objectives and scope of the project.

2. This contains a more detailed statement of the general goals

noted in the overview section. The statement should include profit and competitive
aims as well as technical goals.

3. The subsection on the managerial approach takes note of any deviation from routine procedure
for instance, the use of subcontractors for some parts of the work.

4. This critical section of the plan includes a complete list and description of all reporting
requirements, customer-supplied resources, liaison arrangements, advisory committees, project
review and cancellation procedures, proprietary requirements, any specific management
agreements.

5. This section outlines the various schedules and lists all milestone events.
Each task is listed, and the estimated time for each task should be obtained from those who will
do the work.

6. A description of a task that defines all the work required to accomplish it, including inputs and
desired outputs.

7. This covers potential problems as well as potential lucky breaks that could affect the project.
Sometimes it is difficult to convince planners to make a serious attempt to anticipate potential
difficulties or benefits.

8. A planning approach that breaks the planning task down into the activities that must be done at
each managerial level. Typically, the upper level sets the objectives for the next lower level.

9. The objective is to design the individual components of a system to achieve the desired
performance.

63
10. The physical items to be delivered from a project. This typically includes reports and plans as
well as physical objects.

11. It is important to spell out clearly defined and agreed-upon objectives in

the project plan.

12. It is necessary for top managers to get behind the project at the
outset and make clear to all personnel involved that they support successful completion.

13. A detailed, scheduled plan of the required steps in the implementation process needs to be
developed, including all resource requirements (money, raw materials, staff, etc.).

14. A pictorial representation of a product that shows how the elements required to build a
product fit together.

15. A graph showing how a statistic is changing over time compared to its average and selected

16. A measure of project progress, frequently related to the planned cost of tasks accomplished.
ANSWER: Earned Value

17. The set of physical elements required to build a product.

18. Maintaining the ____________ discipline will help keep the plan
focused on the project’s deliverables rather than on the work at a subsystem level.

19. _____________ is what a system does. It includes system design, reliability,

quality, maintainability, and reparability.

20. Both capital and expense requirements are detailed by task, which makes this a
_____________

64
ACTIVITY: ANSWER THE FOLLOWING BY YES OR NO/TRUE OR FALSE

1. One of the several reasons to use considerable care when planning projects is the purpose
of planning is to facilitate later accomplishment.

2. In Composite plans, it should not contain descriptions of the required tasks, and estimates
of the budgets and schedules?

3. Systems Integration is one part of integration management and plays an easy role in the
performance aspect of the project.

4. Hierarchical planning system is also known as the “even planning process”.

5. The final approved result of this procedure is the project plan, also known as a Master or
Baseline plan

6. General Approach describe only the technical approaches to the work

7. Risk Management Plans covers potential problems as well as potential lucky breaks that
could affect the project.

8. Every project should be evaluated against standards and by methods established at the
project’s inception, allowing for both the direct and ancillary goals of the project

9. Project plans are usually constructed by listing the sequence of activities required to carry
the project from start to completion (

10. Systems integration considers performance to be a design parameter, and costs can be
accumulated in several areas.

11. On project mission. It is necessary for top managers to get behind the project at the outset
and make clear to all personnel involved that they support successful completion.

12. Are resources include a complete list and description of all reporting requirements,
customer supplied resources, liaison arrangements, advisory committees, project review
and cancellation procedures, etc.

13. In a project launch meeting, they should allow plans, schedules, and budgets?

65
14. In project launch meeting the Technical scope it should be established?

15. Is sequencing necessary consideration for determining the project schedule and duration

16. Systems Integration is concerned with two major objectives.

17. In project planning in action we have four software and hardware development process.

18. The WBS is an irrelevant document.

19. The Work Breakdown Structure (WBS) can take a variety of forms that serve a variety of
purposes.

20. WBS serves as a basis for making cost estimates or estimates of task duration

66
CHAPTER OUTLINE
VII. CHAPTER 7: BUDGETING AND COST ESTIMATION

A. BUDGETING AND COST ESTIMATION……...………………………….. 293

a. A budget is a plan for allocating resources and thus, the act of budgeting is
the allocation of scarce resources to the various endeavors of an
organization.
b. Budgets play an important role in the entire process of management and if
budgets are not tied to achievement, management may ignore situations
where funds are being spent far in advance of accomplishment but are
within budget when viewed by time period.

B. ESTIMATING PROJECT BUDGETS…………..………………………….. 294

a. In order to develop a budget, we must forecast what resources the project
will require, the required quantity of each, when they will be needed, and
how much they will cost, including the effects of potential price inflation.

12. Top-Down Budgeting ………………………………………………….. 297

a. This strategy is based on collecting the judgments and experiences of
top and middle managers, and available past data concerning similar
activities. These managers estimate overall project cost as well as the
costs of the major subprojects that comprise it. These cost estimates
are then given to lower-level managers, who are expected to continue
the breakdown into budget estimates for the specific tasks and work
packages that comprise the subprojects. This process continues to the
lowest level.

13. Bottom-Up Budgeting …………………………………………………. 298

a. Bottom-up budgets should be, and usually are, more accurate in the
detailed tasks, but it is critical that all elements be included and the
advantages of the bottom-up process are those generally associated
with participative management.

14. Work Element Costing ………………...……………………………… 299

a. Each work element in the action plan or WBS is evaluated for its
resource requirements, and the cost of each resource is estimated.

15. An Iterative Budgeting Process—Negotiation-in-Action ……...……. 300

a. Iterative planning process with subordinates -- developing action plans
for the tasks for which they were responsible and the strength of this
planning technique is that primary responsibility for the design of a
task is delegated to the individual accountable for its completion, and
thus it utilizes participative management (or “employee involvement”).

67
 16. Comments on the Budget Request Process ……….………………….. 302
a. The budget process often begins with an invitation from top
management for each division to submit a budget request for the
coming year. Division heads pass the invitation along to departments,
sections, and subsections, each of which presumably collect requests
from below, aggregate them, and pass the results back up the
organizational ladder.

17. Cost Category Budgeting vs. Program/Activity Budgeting ………… 303

a. The traditional organizational budget is category-oriented and under
traditional budgeting methods, the budget for a project could be split
up among many different organizational units, which diffused control
so widely that it was frequently nonexistent. It was often almost
impossible to determine the actual size of major expenditure activities
in a project’s budget. In light of this problem, ways were sought to
alter the budgeting process so that budgets could be associated directly
with the projects that used them. This need gave rise to program
budgeting.

C. IMPROVING THE PROCESS OF COST ESTIMATION ………………..... 305

a. If the firm is in a business that routinely requires bids to be submitted to its
customers, it will have “professional” (experienced) cost estimators on its
staff and the major responsibility of the professional estimators is to reduce
the level of uncertainty in cost estimations so that the firm’s bids can be
made in the light of expert information about its potential costs.

8. Learning Curves ……………………………………………………….. 308

a. If the project being costs is one of many similar projects, the
estimation of each cost element is fairly systematic and if the project
involves work in which the firm has little experience, cost estimation
is more difficult, particularly for direct labor costs.

9. A Special Case of Learning – Technological Shock …………………. 310

a. It is interesting to observe that an almost certain, immediate result of
installing a new, cost-saving technology is that costs rise and
sometimes we blame the cost increases on resistance to change, but a
more sensible explanation is that when we alter a system, we disturb it
and it reacts in unpredictable ways.

10. Other Factors

a. Possibly the problem is that Dilbert’s pointy-haired boss sets arbitrary
and impossible goals or possibly scope-creep impacts all projects and
possibly PMs use wildly optimistic estimates to influence the project

68
 selection process or maybe they are simply unaware of good cost (or
time) estimating practices.
11. On Making Better Estimates ………….………………………………. 314
a. There are two generic types of estimation error, the random error in
which overestimates and underestimates are equally likely and the
bias, which is systematic error. Budget estimation errors are not the
result of deliberate dishonesty, but derive from honest errors on the
part of the PM, project cost estimators, or anyone else involved.

SUMMARY

This chapter introduced the subject of project management and discussed its importance in our
society. It defined what we mean by a “project,” discussed the need for project management, and
described the project life cycle. The final section explained the structure of this text and gave an
overview of the material to be described in coming chapters.

VOCABULARY AND DEFINITIONS

Word Book Definition Own Definition

Top-Down Budgeting
Bottom-up Budgeting
Program Budgeting
Variances
A budgeting method that
begins with top managers’
estimates of the resources
needed for a project. Its
primary advantage is that the
aggregate budget is typically
quite accurate because no
element has been left out.
Individual elements, however,
may be quite inaccurate.
A budgeting method that
begins with those who will be
doing the tasks estimating the
resources needed. The
advantage is more accurate
estimates.
Budgeting by project
task/activity and then
aggregating income and
expenditures by project or
program, often in addition to
aggregation by organizational
unit or category.
The pattern of deviations in
costs and usage used for
exception reporting to
In corporate budgeting, a top-
down approach involves the
senior management team
developing a high-level
budget for the entire
organization.
In a bottom-up approach, the
process starts in the individual
departments where managers
create a budget and then send
it upwards for approval.
Provides the basis for resource
allocation procedures that
incorporate the basic
objectives of accountability,
efficiency, and effectiveness.
The difference between what
is expected and what is
actually accomplished.

69
 management.

Learning objectives:
At the end of the chapter, the student is expected to:
• Know budget and cost estimation and its importance to project planning
• Further analyze top down budgeting and bottom up budgeting.
• know the importance of work element costing.
• Create a budget for project management
• Provide details and actual reports or progress.
• Set goals for future actions.
• Predict the price of the resources that is needed in the project.
• Provide a means of controlling project costs.
• Monitor progress against that budget by comparing planned with estimated costs.
• Be familiar with Learning Curves
• Know how to improve the process of Cost Estimation
• Compare Activity Budgeting and Program Budgeting

CHAPTER 7 SUMMARY BUDGETING AND COST AND ESTIMATION

Budgeting and cost estimation
• A budget is a plan for allocating resources. Thus, the act of budgeting is the allocation of
scarce resources to the various endeavors of an organization
• The budget also serves as a control mechanism and a standard for comparison which
measures the difference between the actual and planned uses of resources.
• If budgets are not tied to achievement, management may ignore situations where funds
are being spent far in advance of accomplishment. Management may misinterpret the true state
of affairs when the budget is overspent for a given time period but outlays are appropriate for the
level of task completion.
• Data must be collected and reported in a timely manner, or the value of the budget in
identifying and reporting current problems or anticipating upcoming problems will be lost.

Estimating project
To develop a budget, it must:
1. Forecast what resources the project will require
• List down all materials including laborers needed in doing the project

70
2. Determine the required quantity of each
• How many of these you needed to avoid shortage and surplus
3. Determine when it will be needed
• Provide a Gantt chart to know when you will need a certain resource, by this you can
save time, money and effort.
4. Know how much it will cost including the effects of potential price inflation
• Canvass where you can find quality and affordable materials and how much it will cost in
total. This to inform the client of the company of how much budget they will need to release.

Uncertainty is involved in any forecast, though some forecasts have less uncertainty than
others
Scaling – cost estimation in construction fields
Parametric estimating - statistical correlations between various factors such as the total
cost of a house relative to the square feet of living area

Top Down Budgeting

• This strategy is based on collecting the judgments and experiences of top and middle
managers and available past data concerning similar activities.
• These managers estimate overall project cost as well as the costs of the major subprojects
that comprise it.
• These cost estimates are then given to lower-level managers, who are expected to
continue the breakdown into budget estimates for the specific tasks and work packages that
comprise the subprojects.
• This process continues to the lowest level.
• It is presumed that lower-level managers will argue for more funds if the budget
allocation they have been granted is, in their judgment, insufficient for the tasks assigned.
• The advantage of this top-down process is that aggregate budgets can often be developed
quite accurately, though a few individual elements may be significantly in error
• Another advantage of the top-down process is that small, yet costly tasks need not be
individually identified, nor need it be feared that some small but important aspect has been
overlooked.
• The experience and judgment of the executive is presumed automatically to factor all
such elements into the overall estimate.

71
• Questions put to subordinates, however, indicate that senior management has a strong
bias toward underestimating costs.
Bottom up Budgeting

• In bottom-up budgeting, elemental tasks, their schedules, and their individual budgets
are constructed, again following the WBS.
• Estimates are made in terms of resources, such as labor hours and materials.
• The people doing the work are consulted regarding times and budgets for the tasks to
ensure the best level of accuracy.
• Bottom-up budgets should be, and usually are, more accurate in the detailed tasks, but it
is critical that all elements be included
• The advantages of the bottom-up process are those generally associated with participative
management. Individuals closer to the work are apt to have a more accurate idea of resource
requirements than their superiors or others not personally involved.

Budgeting

• Project budgeting is determining the total amount of money that is allocated for the
project to use
• The project budget has been estimated by the project manager/ or the project
management team. The budget is an estimate of all the cost that should be required to complete
the project.
• Top-down budgeting is very common
• Three bottom-up are rare
Senior managers see the bottom-up process as risky
They tend not to be particularly trusting of ambitious subordinates who they fear may
overstate resources requirements.
They are reluctant to hand over control to subordinates.
Estimating project budgets

72
In order to develop a budget, we must forecast what resources the project will require.
Uncertainty is involved in any forecast, though some forecast have less uncertainty than others.
An experienced cost estimator can forecast the number of bricks within 1 to 2 percent.
•There are two fundamental different strategies for data gathering: top-down and bottom-up.
•Cost can often by estimated by scaling the various cost element appropriately.
•Building one mile of a four-lane road can be estimated from the individual cost elements
previously constructed two-lane roads.
•Parametric estimating relies on well-known statistical correlations between various factors.
•While the project budgeter cannot always depend on tradition as a basis for estimating the
current project budget, it is not uncommon for the budgeter to have budgets and audit reports for
similar past project to serve as guides.

Work Element Costing

•The actual process of building a project budget either top-down or bottom-up or, as we suggest,
a combination of both tend to be straight forward but tedious process.
•Each work element in the action plan or WBS is evaluated for its resource requirements, and
cost of each resource is estimated.
•Suppose a work element is estimated to require 25 hours of labor by a technician.
•The specific technician assigned to this job is paid $17.50/hr.
•The appropriate cost appears to be 25 he $17.50 1.84 $805.00
•But the accuracy of this calculation depends on the precise assumptions behind the 25hr
estimate.
•Industrial engineers have noted that during a normal eight-hour day, no one actually works for
all eight hours.
•Even on assembly line, workers need breaks called “personal time”
•This covers such as activities as visiting the water cooler, the toilet, having a cigarette, blowing
one’s nose, and all the other time-consuming activities engaged in by normal people in a normal
workplace.
•There is also the General and Administrative (G&A) charge

73
An Iterative Budgeting Process
• Superiors review these plans, perhaps suggesting amendments.
• If done correctly, estimated resource usage and schedules are a normal part of the
planning process at all planning levels.
• Therefore, the superior constructing an action plan at the highest level would estimate
resource requirements and durations for each of the steps in the action plan.
• This multilevel process is messy and not particularly efficient, but it allows a free-flow of
ideas up and down the system at all levels.
• This iterative process tends to reduce the uncertainty in budget estimations.
• The debate over processes and their associated costs means that the uncertainty in budget
estimates is very likely to be reduced.
• It is worth emphasizing that ethics is just as important in negotiations within an
organization as in negotiations between an organization and an outside party.
• In this case, the superior and subordinate have the responsibility to be honest with each
other.
• For one thing, they must continue to work together in the future under the conditions of
mutual trust.

Category Activity Budgeting vs Program Budgeting

• Another facet of budgeting has to do with the degree to which a budget is category-
oriented or program/activity-oriented, a distinction we have mentioned before.
• The traditional organizational budget is category-oriented often based upon historical
data accumulated through a traditional, category-based, cost accounting system (Coburn, 1997;
Vandament et al., 1993).
• Individual expenses are classified and assigned to basic budget lines such as phone,
materials, personnel- clerical, utilities, direct labor, etc., or to production centers or processes
(Brimson, 1993).
• These expense lines are gathered into more inclusive categories and are reported by
organizational units—for example, by section, department, and division.
• Under traditional budgeting methods, the budget for a project could be split up among
many different organizational units, which diffused control so widely that it was frequently
nonexistent.

74
Improving The Process Of Cost Estimation
• The cooperation of several people is required to prepare cost estimates for a project.
• The major responsibility of the professional estimators is to reduce the level of
uncertainty in cost estimations so that the firm's bids can be made in the light of expert
information about its potential costs.
• In these cases, it is the job of the PM to generate a description of the work to be done on
the project in sufficient detail that the estimator can know what cost data must be collected.
• Frequently, the project will be too complex for the PM to generate such a description
without considerable help from experts in the functional areas.

Funding Non-Profitable Projects

At times, firms support projects that show a significant incremental profit over direct costs but
are not profitable when fully coasted. Such decisions can be justified for a number of reasons,
such as:
• To develop knowledge of a technology
• To get the organization’s “foot in the door”
• To obtain the parts or service portion of the work
• To be in a good position for a follow-on contract
• To improve a competitive position
• To broaden a product line or a line of business
All of these are adequate reasons to fund projects that, in the short term, may lose money but
provide the organization with the impetus for future growth and profitability. It is up to senior
management to decide if such reasons are worth it.

Learning Curves
• If the project being costed is one of many similar projects, the estimation of each cost
element is routine.
• If the project involves work in which the firm has little experience, cost estimation is
more difficult, particularly for direct labor costs.
• Remember that we are attempting to reduce the risk inherent in estimating costs.
• Therefore, for any task where labor is a significant cost factor and the production run is
reasonably short, the PM should take the learning curve into account when estimating costs.

75
• The implications of this conclusion should not be overlooked.
• We do not often think of projects as "production," but they are.
• While the construction, electronics, and aircraft assembly industries have used learning
curves for many years, other industrial areas have been slow to follow.

Other Factors

• Further improvements can be made by considering and fact that the prices of different
inputs often change at very different rates and sometimes in different directions.
• The proper level of breakdown in estimating the impact of price changes simply depends
on the organization’s willingness to tolerate error.
• Assume that management is willing to accept a 5% difference between actual and
estimated cost for each major cost category.
• Other elements that need to be factored into the estimated project cost include an
allowance for waste and spoilage.
• Personnel cost can be significantly increased by the loss and subsequent replacement of
project professionals.

Estimation errors

• They are not the result of deliberate dishonesty but derive from honest errors on the part
of the PM, project cost estimators, or anyone else involved.
• Ambrose Bierce, in The Devil's Dictionary, defined "experience" as "The wisdom that
enables us to recognize as an undesirable old acquaintance the folly that we have already
embraced."
• It is axiomatic that we should learn through experience. It is a truism that we do not.
• Nowhere this is more evident than in project management, and yet it is not difficult to
improve one's estimation/forecasting skills.
Two generic types of estimation error.
• First, there is a random error in which overestimates, and underestimates are equally
likely.
• These are errors that tend to cancel each other.

76
• If we sum these errors over many estimates, their sum will approach zero.
• Second, there is bias, which is a systematic error

ACTIVITY 1
1. Third, the subordinate is led to build-in some level of protection against failure
by adding an allowance for _________ onto a budget that already may have a healthy
contingency allowance.
2. Encouraged by the boss’s positive response to reason, the subordinate surrenders
Some of the protection provided for by the budgetary _________ and the subordinate’s estimate
falls.
3. The __________ often begins with an invitation from top management for each division
to submit a budget request for the coming year.
4. Even the most ____________ however, will not long
tolerate lower-level managers who are not sensitive to messages relating to budget limitations.
5. The best estimators seem to employ an eclectic approach that uses, as one said,
_______________.
6. The ___________ of past projects are studied as models for the way costs accrue over the life
cycles of similar projects.
7. _________________ relies on well-known statistical correlations between various factors
such as the total cost of a house relative to the square feet of living area.
8. In fields such as construction, costs can often by estimated by ________ the various cost
elements appropriately.
9. One aspect of cost estimation and budgeting that is not often discussed has to do with the
______ use of resources as opposed to the accounting department’s assumptions about how and
10. Even on an assembly line, workers need breaks called __________
11. Project cost seems to be a relatively simple expression, but
_____ is more than a four-letter word.
12. If the firm is in a business that routinely requires bids to be submitted to its customers, it will
have _________ (experience) cost estimators on its staff.

77
13. The budget process often begins with an invitation from top management for each division to
submit a ___________ for the coming year.
14. Costs incurred by the firm, but not associated with any specific product or class of products;
e.g., cost of building and ground maintenance, utilities, cost of plant security, cost of health
insurance and pension plans.
15. A budgeting method that begins with those who will be doing the tasks estimating the
resources needed.
16. Budgeting by project task/activity and then aggregating income and expenditures by project
or program, often in addition to aggregation by organizational unit or category.
17. The pattern of deviations in costs and usage
used for exception reporting to management.
18. The percentage of the previous worker hours per unit required for doubling the output.
19. This strategy is based on collecting the judgments and experiences of top and middle
managers, and available past data concerning similar activities.
20. In this method, elemental tasks, their schedules, and their individual budgets are constructed,
again following the WBS.

ACTIVITY 2: ANSWER THE FOLLOWING BY TRUE OR FALSE/ YES OR NO

1. In estimating project budgets There are five fundamentally different strategies for data?
2. One of the advantages of Top-down budgeting is the experience and judgment of the
executive accounts for small but important tasks to be factored into the overall estimate.
3. Under traditional budgeting methods, the budget could be split up among many different
organizational units.
4. The traditional organization budget is either category oriented or activity oriented.
5. One of the advantages of bottom up budgeting is involvement of a good managerial
training technique, giving junior managers valuable experience
6. Project managers see the bottom-up process as risky
7. Cost is not necessary element of the project management process which the project
manager must comprehend despite the apparent mysteries of the accounting systems employed to
report cost.
8. Indirect (or Fixed) Cost are costs are associated with output, but do not vary with each
unit of output; e.g., the cost of capital equipment not charged per piece of output, advertising,
distribution, or sales.

78
9. Learning Rate is the percentage of the previous worker hours per unit required for
doubling the output.
10. The learning curve is based on the observation that the amount of time required to
produce one unit decreases a constant percentage every time the cumulative output doubles.
11. During periods of inflation, the project manager must not effectively deal with the
influence of the economy on the project budget.
12. In top-down Budgeting, the strategy is based on collecting the judgment and experiences
of top and middle managers.
13. In iterative budgeting process, farther one moves up the organizational chart, the harder,
faster and cheaper the job looks.
14. The initial step toward reducing the difference between the superior’s and the
subordinate’s estimates is made by the functional manager.
15. Are direct costs for resources and machinery are charged directly to the project and labor
is usually subject to overhead charges.
16. Are the subordinates led to build-in some level of protection against failure by adding an
allowance for “Murphy’s Law?”
17. In Budget and cost estimation the budget it serves as a standard for comparison?
18. There are three fundamentally different ways to manage risks.
19. Program budgeting aggregates income and expenditures across programs.
20. These budgets usually take form of a spreadsheet with standard categories.

79
CHAPTER OUTLINE
VIII. CHAPTER 8: SCHEDULING

D. SCHEDULING……...……………………………………………………….. 333
a. In scheduling, it covers the Program Evaluation and Review Technique
(PERT), the Critical Path Method (CPM), Gantt charts, and briefly
discussed Precedence Diagramming, Critical Resource Diagramming, and
report-based methods.

E. BACKGROUND
a. The schedule is defined as the conversion of a project action plan into an
operating timetable.

F. NETWORK TECHNIQUES: PERT (ADM) AND CPM (PDM)……............ 337

a. The two network techniques are: Program Evaluation and Review
Technique (PERT) as ADM (Arrow Diagram Method) was developed by
the U.S. Navy in cooperation with Booz Allen Hamilton and the Lockheed
Corporation and; the Critical Path Method (CPM) as PDM (Precedence
Diagram Method) was developed by DuPont, Inc.

12. Terminology ………………………………………...………………….. 338

a. The following terms used in discussion of networks are: (1) Activity,
(2) Events, (3) Network, (4) Path and (5) Critical.

13. Constructing the Network, AON Version ……………………………. 340

a. (Activity on Network) We begin with the node called “START”,
wherein the arrowheads show the direction of precedence upon
reaching the node "END" of a particular plan.

14. Constructing the Network, AOA Version ……………………………. 341

a. AOA networks are slightly harder to draw because they sometimes
require the use of dummy activities to aid in indicating a particular
precedence, via a dashed arc.

15. Gantt (Bar) Charts and Microsoft Project (MSP) ……………..……. 342
a. The Gantt chart shows planned and actual progress for a number of
tasks displayed as bars against a horizontal time scale.

16. Solving the Network …………………………………………………… 344

a. Actual activity time is expectedly rarely to be less than the optimistic
time or more than the pessimistic time from node "START" to node
"END" of the network.

17. Calculating Activity Times ……………………………………………. 345

80
 a. This process of estimating activity times occasionally comes under
criticism. In general, critics argue that when activity times are set,
these come to be considered as targets, leading to a comparison with
Management by Objectives (MBO).

18. Critical Path and Time ……………………………………………...… 347

a. Each of these activities has an expected duration and originates in an
earlier node and to calculate the ES and EF of each node, beginning at
the start, we are actually finding the critical path and time to each of
the nodes in the network.

19. Slack (aka, Float) ……………………………………………………… 349

a. Free slack is defined as the time an activity can be delayed without
affecting the start time of any successor activity.

20. Precedence Diagramming …………………………………………….. 350

a. Precedence diagramming is an AON network method that easily
allows for these leads and lags within the network.

21. Once Again, Microsoft Project ……………………………………….. 352

a. MSP’s “expected duration” column shows what we, and most other
writers, call the “most likely” or “normal” time estimates.

22. Exhibits Available from Software, a Bit More MSP ………………... 354
a. AON network diagram showing the critical path, path connections,
task durations, milestones, start and finish dates, and WBS ID
numbers.

23. Uncertainty of Project Completion Time

a. The Project Management will determine the probability that a project
will be completed by the suggested deadline--or find the completion
time associated with a predetermined level of risk.

24. Toward Realistic Time Estimates ………….…………………………. 361

a. The calculations of expected network times, and the uncertainty
associated with those time estimates performed in the preceding
sections are based on estimating optimistic and pessimistic times at the
.99 level.

G. RISK ANALYSIS USING SIMULATION WITH CRYSTAL BALL…...….. 365

a. In Chapter 2, the authors used Crystal Ball® (CB) to simulate a decision
process that measured whether or not a project was above an organization’s
hurdle rate of return. They also have noted several times that the same kind
of simulation might be used to manage the uncertainty involved in deciding
at what level to budget a project.

81
 1. Traditional Statistics or Simulation ………………………………….. 370
a. Following the section on traditional methods, the authors demonstrated
and discussed simulation as a way of accomplishing essentially the
same analysis but for a number of reasons, they suggest that simulation
is the preferred method—but only after the analyst has a good
understanding of the traditional statistical approach.

H. USING THESE TOOLS……………………………………………………... 371

a. The development of user-friendly software such as Microsoft Project®,
Crystal Ball®, and Excel® that do similar jobs has made the use of tools
that described thus far available to anyone with a project to manage.

SUMMARY

In this chapter the scheduling aspect of project implementation was addressed. Following a
description of the benefits of using a network for planning and controlling a project, the AOA
and AON approaches were described, as were Gantt charts.

VOCABULARY AND DEFINITIONS

Word Book Definition Own Definition

Critical An activity or event that, if
delayed, will delay project
completion.
Gantt Chart A manner of illustrating
multiple, time-based activities
on a horizontal time scale.
Network A combination of interrelated
activities and events depicted
with arcs and nodes.
Path A sequence of lines and nodes
in a network.
Activity-On-Arrow The two ways of illustrating a
(Activity-on-Node) network: placing the activities
on the arcs or on the nodes.
Arc The line connecting two
nodes.
Activities that must be
prioritized for the project to
not be compromised.
A chart in which a series of
horizontal lines shows the
amount of work done or
production completed in
certain periods of time in
relation to the amount planned
for those periods.
A group or system of
interconnected people or
things.
The course or direction in
which a person or thing is
moving.
Activities are represented by a
line between two circles.
The arrow indicating the
connection between each
node.

82
Learning Objectives:
At the end of the session, students are expected to:
• Avoid postponement of projects and plans.
• Set priorities and maximize the workloads.
• Offer good quality, fair and balance service.
• Define scheduling and know its importance in project management
• Differentiate the advantage and disadvantage of scheduling
• Learn more about the important terminologies in scheduling
• Identify the importance of network techniques.
• Have minimum total time of production by having better resources utilization.
• In order to meet the delivery dates the sequence of operations is properly planned.
• Plan the sequence of operations in order to meet delivery dates.
• Properly monitor the project activities.
• Determine the use of PERT and CPM in project management.
• Be familiar with how networks work.
• Know and to understand how to use Gantt Chart.

CHAPTER 8 SUMMARY: SCHEDULLING

Scheduling
• Schedule is the conversion of a project
plan into an operating timetable.
• As such, it serves as the basis for
monitoring and controlling project
activity and taken together with the plan
and budget, is probably the major tool
for the management of projects.
• In a project environment, the scheduling
function is more important than it would
be an ongoing operation because projects
lack the continuity of day-to-day
operation and often present much more
complex problems of coordination.
• Indeed, project scheduling is so
important that a detailed schedule is
sometimes customer-specific and
requirements.
• Not all project activities need to be
schedule at the same level of detail.

Such network is powerful tool for planning and controlling a project and has THE
FOLLOWING BENEFITS:
• It is consistent framework for planning, scheduling, monitoring, and controlling the
projects.
• It illustrates the interdependencies of all tasks, work package, and work elements.
• It denotes the times when specific individuals must be available for work on a given task.
• It aids in ensuring that the proper communication take place between departments and
function
• It determines an expected project completion date

83
• It identifies so-called critical activities that, if delayed, will delay the project completion
time
• It identifies activities with slack that can be delayed for specific periods without penalty
• It determines the dates on which tasks may be started - or must be started if the project is
to stay on schedule
• It illustrates which tasks must be coordinated to avoid resource timing conflicts
• It illustrates which tasks may run, or must be run, in parallel to achieve the predetermined
project completion date
• It relieves some interpersonal conflict by clearly showing task dependencies

Scheduling Technique

➢ Scheduling techniques is about forming 1. It is a consistent framework for

a network of activity and event planning, scheduling, monitoring,
relationship that display the task and controlling the project.
relationship to others. o When there is a clearly defined
➢ These tasks must follow and clearly schedule it will be easier for
defined Project Manager to handle the
➢ Benefits of scheduling: entire project.
2. It illustrates the interdependence of all tasks, work packages, and work elements.
o Schedule compose of different tasks or activities and by following the right schedule
it will achieve accordingly.
3. It denotes the times when specific individuals and resources must be available for work
on a given task
o This will be helpful since it prevents delays in operation

Approach of Scheduling Strategies

• The basic approach of all scheduling strategies is to form a network of operation and
event relationships that graphically represents the sequential relationship between the
tasks in the project.
• The tasks that must precede or follow other tasks are then clearly defined, both in time
and in operation.
These networks are an important tool for project planning and control and have the following
benefits:
➢ It is a consistent structure for the ➢ Signifies the occasions that unique
planning, scheduling, tracking and people and services must be made
control of the project. available for work on a specified
➢ It reveals the interdependence of all mission.
tasks, job packages and work ➢ Helps to ensure good coordination
components. between departments and functions.

84
➢ Determines the estimated date of
completion of the project.
➢ It defines the so-called essential tasks
that if postponed, will prolong the
completion period of the project.
➢ It also defines events that can be
postponed for specified periods without
penalty or from which resources may be
borrowed on a temporary basis without
damage.
➢ Specifies the dates from which projects
should be started- or must be started if
the project is to remain on track
➢ It demonstrates which activities need to
be organized in order to prevent resource
or timing conflicts.
➢ It indicates which projects may be run or
must be run parallel to the predetermined
date of completion of the project.
➢ Relieves any interpersonal tension by
explicitly demonstrating the dependency
of tasks.
➢ Depending on the information used, it
may be possible to estimate the
likelihood of completion of a project by
different dates or the date corresponding
to a given probability

Network Techniques PERT and CPM

• The most common approach to project scheduling is the use of network techniques such
as PERT and CPM. The Program Evaluation and Review Technique (PERT) was
developed by the U.S. Navy in cooperation with Booz Allen Hamilton and Lockheed
Corporation, while the Critical Path Method (CPM) was developed by DuPont Inc in
1958.
• PERT is primarily used for the "development" side of R&D projects. Also, PERT was
strictly oriented to the time element of projects and used probabilistic activity time
estimates to aid in determining the probability that a project could be completed by some
given date.
• CPM was designed for construction projects. CPM used deterministic activity time
estimates and was designed to control both the time and cost aspects of a project, in
particular, time/cost trade-offs.
• •PERT and CPM networks have been used in project management for almost a century.
However, in 2005, the Project Management Institute (PMI) renamed PERT as ADM
(Arrow Diagram Method) and CPM as PDM (Precedence Diagram Method).

Terminology
• Activity – A specific task or set of tasks that are required by the project, use up
resources, and take time to complete.
• Event – The result of completing one or more activities. An identifiable end state that
occurs at a particular time. Events no resources.
• Network – The arrangement of all activities in a project arrayed in their logical sequence
and represented by arcs and nodes,
• Path- The series connected activities between any two events in a network.
85
• Critical – Activities, events, or paths which, if delayed, will delay the completion of the
project. A project’s critical path is understood to mean that sequence of critical activities
that connects the project’s start event to its finish event and which cannot be delayed
without delaying the project

Activity-on-node and Activity-on-arrow network

• Activity-on-node is a project management term that refers to a precedence diagramming
method which uses boxes to denote scheduled activities.
• These various boxes or "nodes" are connected from beginning to end with arrows to
depict a logical progression of the dependencies between the scheduled activities.
• Each node is coded with a letter or number that correlates to activity on the project
schedule.
• Circles and arrows are used in an AoA network or operation diagram on the Arrow
network diagram.
• Arrows represent activities and the circles are the points at which the activities begin and
end.
• These diagrams are used to improve project efficiency of CPM (Critical Path Method)
and PERT (Program Assessment & Analysis Technique).

Gantt Chart

• One of the oldest but still one of the most useful methods of presenting project schedule
information is the Gantt chart, developed around 1917 by Henry L. Gantt, a pioneer in the
field of scientific management.
• The Gantt chart shows planned and actual progress for a number of tasks displayed as
bars against a horizontal time scale There are several advantages to the use of Gantt
charts.
• Gantt charts provide a picture of the current state of a project.
• Gantt charts are powerful devices for communicating to senior management, but
networks are usually more helpful in the hands-on task of managing the project.
• Another significant feature of Gantt chart is that they are as easy to construct as a
network.

86
ACTIVITY 1
1. A______________is the conversion of a project action plan into an operating timetable.
2. With the exception of_____________, the most common approach to scheduling is the use of
3.The basic approach of all scheduling__________is to form a network of activity and event
relationships
4. The interconnections depend on the technological relationships described in the____________.
5. Gantt charts are closely related to______________, but are more easily understood and
provide a clearer picture of the current state of the project
6. The combination of all activities and events define the project and the activity precedence
relationships.
7. It is a typically constitute fewer than 10 percent of all the project tasks.
8. Whatis the network technique that has been primarily used for research and development
projects?
9. This was designed for construction projects and has been generally embraced by the
construction industry.
10. A specific task or set of tasks that are required by the project, use up resources, and take time
to complete.

11-14. what are the several advantages of using Gantt charts?

15-18 Give at least 4 network benefits.
19-20. what are the two network techniques?
.
ACTIVITY 2: ANSWER THE FOLLOWING BY YES OR NO /TRUE OR FALSE
1. The Critical Path Method was developed by DuPont, Inc during the same time period
2. The Program Evaluation and Review Technique was developed by the U.S. Navy in
1968
3. Scheduling is a taken together with the plan and budget.
4. In a project environment, the scheduling function is not important.
5. Path is the series of connected activities (or intermediate events) between any two events
in a network.

87
6. 4. The interconnections depend on the technological relationships described in the action
plan.
7. Network is a combination of all the activities and events define the project and the
activity precedence relationship
8. Path is a series of connected activities between any three events in a network.
9. Gantt chart shows the planned and actual progress for a number of tasks.
10. Gantt chart is hard to read and an effective method of indicating the actual current status
for each task.
11. Is CPM was designed for construction projects and has been generally embraced by the
construction industry
12. Is PERT has been primarily used for research and development projects
13. The basic approach of all scheduling techniques is to form a network of activity and
event relationships.
14. Network should not graphically portray the sequential relations between the tasks in a
project.
15. Event is a specific task or set of tasks that are required by the project, use up resources,
and take time to complete.
16. Network is a combination of all activities and events define the project and the activity
precedence relationships.
17. The interconnections depend on the technological relationships described in an action
plan.
18. AON stands for Activity on Mode
19. Does Gantt chart provide a clear picture of the current state of a project?
20. Gantt chart are hard to construct

21. Network is a combination of all activities and events define the project and the activity
precedence relationships.
22. The interconnections depend on the technological relationships described in an action
plan.
23. AON stands for Activity on Mode

88
24. Does Gantt chart provide a clear picture of the current state of a project?
25. Gantt Chart are hard to construct.

89
CHAPTER OUTLINE
IX. CHAPTER 9: RESOURCE ALLOCATION

I. RESOURCE ALLOCATION……...……………………………………...….. 383

a. Altering schedules can alter the need for resources and—just as important—
alter the timing of resource needs.

J. CRITICAL PATH METHOD – CRASHING A PROJECT………….…….. 385

a. In CPM, two activity times and two costs were often specified for each
activity, the first time/cost combination was called normal, and the second
set was referred to as crash.

K. THE RESOURCE ALLOCATION PROBLEM……………………….…..... 392

a. Schedules should be evaluated not merely in terms of meeting project
milestones, but also in terms of the timing and use of scarce resources.

L. RESOURCE LOADING…………………...………………………………… 394

a. Resource loading describes the amounts of individual resources an existing
schedule requires during specific time periods.

M. RESOURCE LEVELING ……………………………………………………. 397

a. Resource leveling aims to minimize the period-by-period variations in
resource loading by shifting tasks within their slack allowances and the
purpose is to create a smoother distribution of resource usage.

1. Resource Loading/Leveling and Uncertainty

a. Thirty-four-week resource loading chart for a software engineering
group have two problems presented where the demand for engineering
labor is not evenly distributed throughout the period, hitting a major
peak in the late March–early April time frame and then a few more
times later in the period.

N. CONSTTRAINED RESOURCE SCHEDULING…………………………... 402

a. The lack of a resource where and when it is needed can have many causes,
but the most common causes are not difficult to identify and mitigate:
failure of a supplier to produce and/or deliver the assignment of the resource
to another activity, and loss or theft of a resource.

1. Heuristic Methods ……………………………………………………... 403

a. Heuristic approaches use for a number of reasons, (1) they are the only
feasible methods of attacking the large, non-linear, complex problems
that tend to occur in the real world of project management and (2)
while the schedules that heuristics generate may not be optimal, they
are usually quite good—certainly good enough for most purposes.

90
 2. Optimizing Methods …………………………………………………... 406
a. The methods to find an optimal solution to the constrained resource
scheduling problem fall primarily into two categories: mathematical
programming (linear programming, LP, for the most part) and
enumeration.

O. MULTIPROJECT SCHEDULING AND RESOURCE ALLOCATION …... 408

a. Scheduling and allocating resources to multiple projects are much more
complicated than for the single-project case and the most common approach
is to treat the several projects as if they were each elements of a single large
project while another way of attacking the problem is to consider all projects
as completely independent.

1. Manufacturing Process Models ………………………………………. 409

a. The criteria for measuring schedule effectiveness are those applied to
job-shops and several approaches to resource-constrained multiple
project scheduling use the job-shop model.

2. Heuristic Techniques ………………………………………………….. 410

a. Resource Scheduling Method
i. In calculating activity priority, give precedence to that activity
with the minimum value of increase in project duration
resulting when activity j follows activity i.
b. Minimum Late Finish Time
i. This rule assigns priorities to activities on the basis of activity
finish times as determined by AOA or AON. The earliest late
finishers are scheduled first.
c. Greatest Resource Demand
i. This method assigns priorities on the basis of total resource
requirements, with higher priorities given for greater demands
on resources.
d. Greatest Resource Utilization
i. This rule gives priority to that combination of activities that
result in maximum resource utilization (or minimum idle
resources) during each scheduling period.
e. Most Possible Jobs
i. Priority is given to the set of activities that result in the greatest
number of activities being scheduled in any period.

3. A Multi-project Scheduling Heuristic …………………………………

411
a. A project plan is a nested set of plans, composed of a set of
generalized tasks, each of which is decomposed into a more detailed
set of work packages that are, in turn, decomposed further.

P. GOLDRATT’S CRITICAL CHAIN …………………………………………. 415

91
 a. The best-known attack on the resource-constrained scheduling problem is
Goldratt’s Critical Chain (1997).

1. Do Early Finishes and Late Finishes Cancel Out? So What? ………. 418
a. Others point out that when the activity schedule is set it is presumed
that the activity will start immediately after the most likely finish date
of its (latest) predecessor.

2. An Easy Simulation
a. An easy simulation involves the specification that when a predecessor
finishes early, the successor activity will not begin until its pre-
determined ES (the predecessor’s EF) has arrived.

3. The Critical Chain ……………………..……………………………… 421

a. Using Goldratt’s meaning of the word “dependent,” the activities of a
project can be ordered into paths based on their resource dependencies
as well as on their technological precedence requirements and the
longest of these paths of sequentially time-dependent activities is
known as the “critical chain.”

SUMMARY

In this chapter, the authors looked at the problem of allocating physical resources, both among
the multiple activities of a project and among multiple projects. The continuous problem to the
PM is finding the best trade-offs among resources, particularly time. They also considered
resource loading, allocation, and leveling, and presented methods and concepts to aid in all these
tasks.

VOCABULARY AND DEFINITIONS

Word Book Definition Own Definition

Heuristic
Resource Leveling
Resource Loading
A formal process for solving a
problem, like a rule of thumb,
that results in an acceptable
solution.
Approaches to even out the
peaks and valleys of resource
requirements so that a fixed
amount of resources can be
employed over time.
The amount of resources of
each kind that are to be devoted
to a specific activity in a certain
time period.
A problem-solving method that
uses shortcuts to produce good
enough solutions given a limited
time frame or deadline.
A technique in which start and
finish dates are adjusted based
on resource limitation with the
goal of balancing demand for
resources with the available
supply.
A technique for plugging time,
material, and workforce needs
into the schedule to see what is
needed where, when, and for
how long.

92
 Predecessors The tasks that logically precede An activity that precedes another
a particular task in time. activity.
Learning Objectives:
At the end of the session, students are expected to:
• Formulate strategies and set goals.
• Allocate the right and exact amount of time to be spend in work.
• Understand the importance of resource allocation especially to the project management.
• Differentiate different methods in scheduling and know how to use them.
Understand the two fundamental approaches to constrained allocation problems.
• Define multi project scheduling.
• Improve time management.
• Manage team workload in project management
• Define resource loading
• Identify the use of the fundamental approaches constrained allocation problems
(Heuristic Methods and Optimization Models)
• Understand the relevance of mathematical programming models to multi project
scheduling.
• Learn the three important measures of effectiveness for multi project scheduling.

CHAPTER 9 SUMMARY: RESOURCE ALLOCATION

CRITICAL PATH METHOD

• CPM includes a way of relating the project schedule to the level of physical resources
allocated to the project
• Enable PM to trade time- cost or vice versa
• Two activity times and two cost are specified
• The first is first time/cost combination is called normal
• And the second is referred to Crash

CRASHING
• Way to expedite a project
• Is a method to shorten the duration of time in the task in project by putting more
resources?
FAST TRACKING MARVIN

93
• Another way to expedite a project
• It refers to overlapping the design and to the task parallel way
• Because design is usually completed before construction start, overlapping the two
activities will result to shortening the project duration.
THE RESOURCE ALLOCATION PROBLEM
• Time is not the only reason for the shortcoming of scheduling procedures, it also has issues
about resource utilization and availability. Schedules should be evaluated not merely in terms of
meeting project milestones, but also in terms of the timing and use of scarce resources. The
extreme points of the relationship between time use and resource use are these:
• Time Limited: The project must be finished by a certain time, using as few resources as
possible. But it is time, not resource usage, that is critical.
• Resource Limited: The project must be finished as soon as possible, but without exceeding
some specific level of resource usage or some general resource constraint.
• System-constrained task requires a fixed amount of time and known quantities of resources and
when dealing with the project, no trade-offs are possible. The only matter of interest in these
cases is to make sure that the required resources are available when needed.

RESOURCE LOADING
• Resource loading defines the number of individual resources needed by the current plan
over particular time periods.
• Resource loading provides a general understanding of the demands that a project or a
series of projects can make on the resources of an organization.
• Resource loading is an excellent guide to early, rough project planning.
• It is also a first step in the effort to reduce the unnecessary demands on certain resources,
regardless of the specific technique used to reduce the demands.
• The PM must be mindful of the ebbs and flows of use of each input resource over the life
of the project.
• It is the PM’s duty to ensure that the resources necessary, in the amounts required, are
available whenever and wherever they are needed.

94
RESOURCE LEVELING

• When resources are leveled, the associated costs also tend to be leveled.
• If resource use increases as time go by, and if resources are shifted closer to the present
by leveling, costs will be shifted in the same way.
• Resource leveling is a procedure that can be used for almost all projects, whether
resources are constrained.
• For larger networks and multiple resources, resource leveling becomes extremely
complex, far beyond the power of manual solutions.

HEURISTIC METHODS

• Since there are constrained resources due failure of a supplier to produce and/or deliver
the materials, assignment of the resource to another activity and loss or theft of a resource,
Project manager decide what to do to manage this problem and to avoid delays using Heuristic
method and Optimizing method
• Heuristics are a problem-solving method that uses mental shortcuts to produce good-
enough solutions given a limited time frame or deadline.
• Heuristic approaches employ rules of thumb that have been found to work reasonably
well in similar situations. They seek better solutions. Use for the reason:
• This approach is feasible in a real situation. Project manager used this to addresses
problems arising in present time.
• This approach may not be optimal but it can provide good enough solution most of the
time.
• Heuristic usually starts with Program Evaluation and Review Technique (PERT) it
determines the minimum time to complete a project and in Critical Path Method (CPM) or the
sequence of project network

Project manager is deciding what to do with the constrained resources using the priority rules
that follows.
1. As Soon as Possible - The default rule for scheduling. This provides the general solution
for critical path and time.

95
2. As Late as Possible - All activities are scheduled as late as possible without delaying the
project. The usual purpose of this heuristic is to defer cash outflows as long as possible.
3. Shortest Task First - Tasks are ordered in terms of duration, with the shortest first. In
general, maximize the number of tasks that can be completed. The shorter it is the fast it will
accomplish.
4. Most Resources First - Activities are ordered by use of a specific resource, with the
largest user heading the list. The assumption behind this rule is that more important tasks usually
place a higher demand on scarce resources that when there are some resources left it will transfer
to those with scarce
5. Minimum Slack First - It orders activity by the amount of slack, least slack going first.
6. Most Critical Followers - Tasks are arranged by number of critical activities following
them. The ones with the greatest number of critical followers go first.
7. Most Successors - This is the same as the previous rule, except that all followers, not
merely critical ones, are counted.
8. Arbitrary - Priorities are not focused on task length, slack, or resource requirements. It is
more on outside force such as client’s preference or parent organization decisions.
• It is required to use a primary and secondary priority rules to break tie and prevent future
problems.
OPTIMIZING METHODS
• Optimization approaches seek the best solutions but are far more limited in their ability to
handle complex situations and large problems
• The goal of optimization methods is to find an optimal or near-optimal solution with low
computational effort
There are two categories of optimizing method follows:
1. MATHEMATICAL PROGRAMMING
• Theory and methods for solving problems
• The term "mathematical programming" is connected with the fact that the goal of solving
various problems is choosing programs of action
2. ENUMERATION
• Used to solve combinatorial optimization problems
• Problems where decision variables are binary, expressing that an object (e.g. graph, edge,
node) is chosen or is not chosen

96
• This leads to a lot of possible solutions with the difficulty of selecting and finding
solutions that are more optimal than others
• Optimizing differs from the Heuristic because its categories used a certain equation to
arrive in a solution.
• In reality, Project Manager used Heuristic methods that Optimizing methods since this is
more convenient.
MULTI PROJECT SCHEDULING
• Scheduling and allocating resources to multiple projects are much more complicated than
for the single-project case.
• The most common approach is to treat the several projects as if they were each elements
of a single large project.
• There are several projects, each with its own set of activities, due dates, and resource
requirements.
• Usually, the multi-project problem involves determining how to allocate resources to and
set a completion time for, a new project that is added to an existing set of ongoing projects.
MATHEMATICAL PROGRAMMING
• Mathematical programming, a theoretical management science and economics technique
in which management operations are represented as mathematical equations that can be
manipulated for a variety of purposes.
• The technique is defined as linear programming if the basic descriptions involved take
the form of linear algebraic equations.
• The term non-linear programming applies if more complex forms are needed.
• The mathematical programming is used by adding expected values for the variables in the
equations and solving for the unknown in planning production schedules, in transport and in
military logistics and in estimation of economic development.
• In the series of solutions computers are commonly used.
HEURISTIC TECHNIQUE
• The logical basis for these rules predates AOA and AON.
• Some additional heuristics for resource allocation have been developed that draw directly
on AOA and AON.
• Resource requirements must be stated in common terms, usually dollars.
• This heuristic is based on an attempt to give priority to potential resource bottleneck
activities.

97
• If we use up the resources before all critical activities are scheduled, we can adopt one of
two sub heuristics.

ACTIVITY 1

1. The first time/cost combination was called ___________.

2. The wise PM adopts the Scout’s motto: ______________.
3. Another way to expedite a project is known as __________.
4. ________________, such as linear programming, find the best allocation of resources to tasks
but are limited in the size of problems they can efficiently solve.
5. The evaluation of a number of alternatives that logically branch from each other like a tree
with limbs. ANSWER:
6. This is possibly the most common cause of late projects. It is certainly a major cause of
frustration for anyone involved in a project.
7. Priority is given to the set of activities those results in the greatest number of activities being
scheduled in any period.
8. Priorities are assigned to activities according to some rule not associated with task length,
slack, or resource requirements.
9. This is the same as the previous rule, except that all followers, not merely critical ones, are
counted.
10. Tasks are arranged by number of critical activities following them. The ones with the greatest
number of critical followers go first.
11. This heuristic order activity by the amount of slack, least slack going first. (It is common,
when using this rule, to break ties by using the shortest task-first rule.)
12. Activities are ordered by use of a specific resource, with the largest user heading the list. The
assumption behind this rule is that more important tasks usually place a higher demand on scarce
resources.
13. Tasks are ordered in terms of duration, with the shortest first. In general, this rule will
maximize the number of tasks that can be completed by a system during some time period.
14. All activities are scheduled as late as possible without delaying the project. The usual
purpose of this heuristic is to defer cash outflows as long as possible.
15. The default rule for scheduling. This provides the general solution for critical path and time.

98
16.Heuristic approaches to constrained resource scheduling problems are in wide, general use for
a number of reasons.
17. Describes the amounts of individual resources an existing schedule requires during specific
time periods.
18. The project must be finished as soon as possible, but without exceeding some specific level
of resource usage or some general resource constraint.
19. The project must be finished by a certain time, using as few resources as possible. But it is
time, not resource usage, that is critical.
20. This term has been applied mostly to construction projects, but the technique can be used in
many other types of projects.

ACTIVITY 2: ANSWER THE FOLLOWING BY YES OR NO/ TRUE OR FALSE

1. Schedules should be evaluated not merely in terms of meeting project milestones, but
also in terms of the timing and use of scarce resources
2. Time Limited: The project must be finished as soon as possible, but without exceeding
some specific level of resource usage or some general resource constraint.
3. Careful planning is critical when attempting to expedite (crash) a project.
4. In the Resource Application Process Time itself is always a critical resource in project
management.
5. Resource loading is a procedure that can be used for almost all projects, whether or not
resources are constrained.
6. There are three fundamental approaches to constrained allocation problems.
7. When resources are leveled the associated costs also tend to be leveled.
8. Linear programming is feasible for reasonably large projects
9. Resource Utilization is often considered the most important of the criteria.
10. There are two fundamental approaches to constrained allocation problems: Heuristic
Methods, Optimization Models.
11. Is system-constrained task requires a fixed amount of time and known quantities of
resources
12. Is resource loading gives a general understanding of the demands a project or set of
projects will make on a firm’s resources

99
13. Resource leveling aims to maximize the period-by-period variations in resource loading
by shifting tasks within their slack allowances
14. In resource loading, the project manager must be aware of the ebbs and flows of usage
for each input resource throughout the life of the project.
15. In Critical Path Method, it has two activity times and two costs are specified.
16. Some organizations have one level of crashing.
17. One of the Heuristic Method that common priority rules are the shortest task first.
18. Do technological necessities always take precedence?
19. Can all criteria be optimized at the same time?
20. Mathematical programming can be used to obtain solutions to certain types of
multiproject scheduling problems.

100
CHAPTER OUTLINE
X. CHAPTER 10: MONITORING AND INFORMATION SYTEMS

Q. MONITORING AND INFORMATION SYSTEMS…..………………...….. 435

a. All of the project’s objectives as delineated in the project selection process
must be examined and measures for each included in the monitoring system
then create an information system that gives project managers the
information they need to make informed timely decisions that will keep
project performance as close as possible to the project plan.

R. THE PLANNING-MONITORING-CONTROLLING CYCLE…………….. 436

a. It is stressed the need to plan, check on progress, compare progress to the
plan, and take corrective action if progress does not match the plan because
the key things to be planned, monitored, and controlled are time (schedule),
cost (budget), and performance (specifications) and that is because the
planning-monitoring-controlling cycle is continuously in process until the
project is completed.

1. Designing the Monitoring System ……….……………………………. 438

a. The first step in setting up any monitoring system is to identify the key
factors to be controlled.

2. How to Collect Data …………………………………………………… 441

a. A large proportion of all data collected takes one of the following
forms, each of which is suitable for some types of measures: (1)
Frequency counts, (2) Raw numbers, (3) Subjective numeric ratings,
(4) Indicators, and (5) Verbal measures.

S. INFORMATION NEEDS AND REPORTING…………………….….…..... 444

a. The monitoring system ought to be constructed so that it addresses every
level of management, but reports need not be of the same depth or at the
same frequency for each level.

1. The Reporting Process ……………………...…………………………. 446

a. Reports must contain data relevant to the control of specific tasks that
are being carried out according to a specific schedule.

2. Report Types ……………………………………………………...…… 447

a. For the purposes of project management, there are three consider
distinct types of reports: routine, exception, and special analysis.

3. Meetings ………………………………………………………………... 448

101
 a. For a large majority of project managers and workers, meetings are as
welcome as bad checks or unmentionable diseases but there are
widespread rumors that meetings were invented by Torquemada to the
contrary that there is no doubt that meetings of project teams are
necessary and often helpful.

4. Common Reporting Problems ………………………...……………… 449

a. There are three common difficulties in the design of project reports,
(1) there is usually too much detail, both in the reports themselves and
in the input being solicited from workers, (2) a second major problem
is the poor interface between the project information system and the
parent firm’s information system and (3) a poor correspondence
between the planning and the monitoring systems.

T. EARNED VALUE ANALYSIS…………………...………………..………… 450

a. One way of measuring overall performance is by using an aggregate
performance measure called earned value.

1. The Earned Value Chart and Calculations

a. There are several variances on the earned value chart following two
primary guidelines: (1) A negative variance is “bad,” and (2) the cost
and schedule variances are calculated as the earned value minus some
other measure.

2. Example: Updating a Project’s Earned Value ………………………. 456

a. The earned value up to now has been trailing the baseline and has only
caught up because the 50–50 rule doesn’t have any activity beginning
or ending at day 6; however, with expediting activity c, we may be
back on schedule by day 8.

3. MSP Variance and Earned Value Reports …………………………... 458

a. For all activities that have been completed, BAC = EV and FAC = AC,
and note that no variances are calculated for incomplete tasks.

4. Milestone Reporting …………………………………………………… 459

a. They serve to keep all parties up to date on what has been
accomplished and if accomplishments are inadequate or late, these
reports serve as starting points for remedial planning.

U. COMPUTERIZED PMISs (PROJECT MANAGEMENT INFORMATION

SYSTEMS)………………………………………………………………...…. 462
a. Diagramming, scheduling, and tracking hundreds of tasks is clearly a job for
the computer, and computerized PMISs were one of the earlier business
applications for computers.

102
 2. Choosing Software …………………………………………………….. 464
a. The following characteristics of generally desirable attributes in
project management software are based on several user surveys and
the comments of experienced PMs: (1) Friendliness, (2) Schedules, (3)
Calendars, (4) Budgets, (5) Reports, (6) Graphics, (7) Charts, (8)
Migration, and (9) Consolidation.

SUMMARY

In this chapter, the authors reviewed the monitoring function, relating it to project planning and
control, and described its role in the project implementation process. The requirements for
monitoring were also discussed, in addition to data needs and reporting considerations. Last,
some techniques for monitoring progress were illustrated and some computerized PMIS's were
described.

VOCABULARY AND DEFINITIONS

Word Book Definition Own Definition

Monitor To keep watch in order to take
action when progress fails to
match plans.
Earned Value An approach for monitoring
project progress that relies on
the budgeted cost of activities
completed to ascribe value.
Variance A deviation from plan or
expectation.
Cost (or spending) Variance The budgeted cost of the work
performed less the actual cost
of the work performed.
Friendliness When applied to computer
use, this term refers to how
easy it is to learn and/or use a used and operated.
computer or software package.
Software The instructions for running a The programs and other
computer.
Migration The ability to move files and
data between software
packages.
Keeping track on what the
current status of the project
and change plans if necessary.
An approach where you
monitor the project plan,
actual work, and work
completed value to see if a
project is on track.
It is a schedule, technical, or
cost deviation from the project
plan.
The difference between the
actual cost and the budgeted
cost, or what you expected to
spend versus what you spent.
In terms of computer use, it is
user-friendly that can be easily
operating information used by
a computer.
Easy transfer of files and data
in computer software.

103
Learning Objectives:
At the end of the session, students are expected to:

• Identify monitoring and information system

• Know the importance of monitoring and information system in project management
• Know the differences of planning, controlling and monitoring
• Define precisely which specific characteristics of performance, cost and time.
• Process and disseminate information in a systematic way.
• Keep track all the projects-related metrics.
• Develop time-phased budgets as a basis for performance monitoring and control.
• Estimate the time and resources needed to carry out the activities in the specified
sequence.
• Understand information flow for the planning of a project
• Learn the process of collecting data
• Be familiarized with the report process

SUMMARY CHAPTER 10: MONITORING AND INFORMATION SYSTEM

This chapter discussed the Planning monitoring cycle, Information needs and Reporting,
Earned value analysis, and Computerized PMIS. This chapter aims to set up an information
system to provide project managers with the information they need to make informed and timely
decisions. Other monitoring uses (e.g., auditing, learning from past mistakes) are important but
should be secondary to the control feature.
THE PLANNING-MONITORING-CONTROLLING CYCLE
Designing the Monitoring System DULAY
• The first step in setting up any package, and work element in the
monitoring system is to identify the key project.
factors to be controlled. • Monitoring the risks found in the risk
• There may also be other factors of management plan keeps the PM and
importance worth noting, at least at project team alert to specific risks and
milestones or review points in the life of thus lowers the probability of surprises.
the project. • The monitoring system is a direct
• But the best sources of items to be connection between planning and
monitored are the project action plan and control.
the risk management plan. • If it does not collect and report
• The action plan describes what is being information on some significant element
done, when, and the planned level of of the plan, control can be faulty or
resource usage for each task, work missing.

104
• The action plan furnishes the key items the control system, but it is not
that must be measured and reported to sufficient.
HOW TO COLLECT DATA
Necessary to define precisely what pieces of information should be gathered and when
1.Frequency counts - this type of measure is 3.Subjective numeric ratings - subjective
often used for “complaints,” “number of estimates, usually of a quality, made by
times a project report is late,” “days without knowledgeable individuals or groups and
an accident”, “bugs in a computer program,” make sure that the numbers are not
and similar items. Usually easy to collect manipulated.
and are often reported as events per unit
4. Indicators - cannot measure some aspect
time or events as a percent of a standard
of system performance directly, it may be
number.
possible to find an indirect measure or
2.Raw numbers - commonly reported either indicator. Speed with change orders and
as the difference between actual and response to change are example of indicators
standard or as the ratio of actual to standard. in terms of communications in project team.
Differences or ratios show changes in
5.Verbal measures - measures for such
system performance. While collecting data
performance characteristics such as team
make sure that the sources are in same time
member cooperation, morale, and interaction
intervals and rules for data collection.
with client
•After data collection, project progress report comes next that includes project status reports,
time/cost reports, and variance reports cause and effect as well. Plans, charts, and tables should
be updated on a timely basis.
•The purpose of the monitoring system is to gather and report data. The purpose of the control
system is to act on the data. To aid the project controller, it is helpful for the monitor to carry out
some data analysis.

INFORMATION NEEDS AND REPORTING

•Lower-level personnel have a need for
detailed information about individual tasks
•Electronic mechanisms and software have
and the factors affecting such tasks. Report
made the process of collecting and
frequency is usually high
disseminating information much faster and
•Senior management levels, overview less arduous
reports describe progress in more aggregated
•In addition, internet is a rich source of
terms with less individual task detail unless
information that contains codes, databases
senior management has a special interest in a
etc.
specific activity or task. Reports are issued
less often.

105
 THE REPORTING PROCESS
•Reports must contain data relevant to the
control of specific tasks that are being
carried out according to a specific schedule.
•The frequency of reporting should be great
enough to allow control to be exerted during
or before the period in which the task is
scheduled for completion.
•The timing of reports should generally
correspond to the timing of project
milestones, meaning that project reports may
not be issued periodically excepting progress
reports for senior management.
•The nature of the monitoring reports should
be consistent with the logic of the planning,
budgeting, and scheduling systems for the
primary purpose of ensuring achievement of
the project plan through control.

Benefits of detailed, timely reports delivered to the proper people includes:

• Mutual understanding of the goals of the project
• Awareness of the progress of parallel activities and of the problems associated with
coordination among activities
• More realistic planning for the needs of all groups and individuals working on the project
• Understanding the relationships of individual tasks to one another and to the overall project
Early warning signals of potential problems and delays in the project
• Minimizing the confusion associated with change by reducing delays in communicating the
change
• Faster management action in response to unacceptable or inappropriate work
• Higher visibility to top management, including attention directed to the immediate needs of
the project
• Keeping the client and other interested outside parties up to date on project status,
particularly regarding project costs, milestones, and deliverables.

REPORT TYPES
•For the purposes of project management, members who will have prime
there are three distinct types of reports: responsibility for decisions or who
routine, exception, and special analysis. have a clear “need to know.”
✓ Second, they may be issued when a
•Routine reports are those issued on a
decision is made on an exception
regular basis; but regular does not
basis and it is desirable to inform
necessarily refer to the calendar.
other managers as well as to
•Exception reports are useful in two cases. document the decision—in other
words, as part of a sensible
✓ First, they are directly oriented to procedure for protecting oneself.
project management decision making
and should be distributed to the team

106
•Special analysis reports are used to processes, availability of external
disseminate the results of special studies consultants, capabilities of new software,
conducted as part of the project or as a and descriptions of new governmental
response to special problems that arise regulations are all typical of the kinds of
during the project subjects covered in special analysis reports
•Studies on the use of substitute materials,
evaluation of alternative manufacturing

MEETINGS
•For a large majority of project managers important problems. Avoid “show-
and workers, meetings are as welcome as and-tell” meetings, sometimes called
bad checks or unmentionable diseases “status and review meetings.
✓ Have preset starting and stopping
•Meetings of project teams are necessary
times as well as a written agenda.
and often helpful.
✓ Make sure that you (and others) do
•Senior Managers usually insist on face-to- your homework prior to the meeting.
face meetings for staying informed about ✓ If you chair the meeting, take your
project progress, and these meetings may own minutes. Distribute the minutes
touch on almost any subject relevant to the as soon as possible after the meeting,
project. no later than the next workday
✓ Avoid attributing remarks or
•Project review meetings can be either viewpoints to individuals in the
highly structured or deceptively casual, but minutes. Also, do not report votes on
they are always important. controversial matters.
Few rules that can remove most of the pain ✓ Avoid overly formal rules of
that is associated with project meetings: procedure.
✓ If a serious problem or crisis arises,
✓ Use meetings for making group call a meeting for the purpose of
decisions or getting input for dealing with that issue only.
COMMON REPORTING PROBLEMS
There are three common difficulties in the design of project reports.
• First, there is usually too much detail, both in the reports themselves and in the input
being solicited from workers.
✓ Unnecessary detail (or too frequent reporting) usually results in the reports not being
read.
✓ Also, it prevents project team members from finding the information they need.
✓ Furthermore, the demand for large quantities of highly detailed input information
often results in careless preparation of the data, thereby casting doubt on the validity
of reports based on such data.

107
 ✓ Finally, the preparation and inclusion of unnecessary detail are costly, at the very
least.
• A second major problem is the poor interface between the project information system and the
parent firm's information system.
• The third problem concerns poor correspondence between the planning and the monitoring
systems.
EARNED VALUE ANALYSIS
• one way of measuring overall perforce is by using an aggregate performance measure called
earned value.
• the monitoring of performance for the entire project is also crucial because performance is
the raison d’^etre of the project.
• but overall project performance is the crux of the matter and must not be overlooked.
THE EARNED VALUE CHART AND CALCULATIONS MARVIN
•The history of earned value from its origin •The earned value of work performed (value
in PERT/cost together with its technique, completed) for those tasks in progress is
advantages, and disadvantages is reported in found by multiplying the estimated percent
a series in PM network starting with physical completion of work for each task
Fleming et al. (1994). by the planned cost for those tasks.
•A serious difficulty with comparing actual •The result is the amount that should have
expenditures against budgeted or baseline been spent on the task thus far.
expenditures for any given time period is
•This can then be compared with the actual
that the comparison fail to take into account
amount spent.
the amount of work accomplished relative to
the cost incurred.
There are several conventions used to aid in estimating percent completion:
The 50-50 rule fifty percent completion is the earned value line will always lag the
assumed when the task is begun, the planned value line on the graph.
remaining 50 percent when the works is
•Critical input use rule. This rule assigns
complete. This seems to be the most popular
task progress according to the amount of a
rule, probably because it is relatively fair
Critical input that has been used. Obviously,
and doesn’t require the effort of attempting
the rule is more accurate if the task uses This
to estimate task progress.
input in direct proportion to the true progress
•The 0–100 percent rule. This rule allows being made.
no credit for work until the task is complete.
• The proportionality rules. This
With this highly conservative rule, the
commonly used rule is also based on
project always seems to be running late,
proportionalities but uses time (or cost) as
Until the very end of the project when it
the critical input. It thus divides actual task
appears to suddenly catch up. Consequently,
time-to-date by the scheduled time for the

108
task [or actual task cost-to-date by total subdivided according to the sub activities
budgeted task cost] to calculate percent within the task.
complete. If desirable, this rule can be

MSP VARIANCE AND EARNED VALUE REPORTS

•The budget was generated as a standard report from MSP.
•Note that the project is reported on at the work package level.
•The first four work packages under Publicity and Promotion have been completed but the fifth
and seventh are only partially finished.
•The three columns of data on the right, BAC, FAC and Variance, are “Budget at Completion”,
“Forecast at Completion,” and the Variance or difference between BAC and FAC.
•The work packages that have not been completed, however, tell a different story.

MILESTONE REPORTING
• A model top management project for manufacturer.
• The design of this product requires a sculpture that is formed on an armature.
• The armature must be constructed, and the sculpture of the product completed and signed off.
• Note that the sculpture is used as a form for making models that are, used to make the
prototype product.
• The completion of the sculpture is signed off in the next – to last box in the lower line of the
boxes at the top of the page.
COMPUTERIZED PMIS (PROJECT MANAGEMENT INFORMATION SYSTEMS)
• These server or desktop computer based • The PMIS trend has been to integrate the
PMISs are considerably more project management software with
sophisticated than earlier systems and spreadsheets, databases, word
use the computer's graphics, color, and processors, communication, graphics,
other features more extensively. and the other capabilities of Windows-
• Many systems can handle almost any based software packages.
size project, being limited only by the • The current trend is to facilitate the
memory available on the computer. global sharing of project information,
• Many will handle multiple projects and including complete status reporting,
link them together to detect resource through local networks or the Internet
over-allocation, e.g., Microsoft Project® rather than using standalone systems
can consolidate more than 1,000
projects.

109
 CHOOSING SOFTWARE
• When choosing project management software, the potential user should read several software
surveys conducted with project managers, for example, Fox et al., 1998 and Libratore et al.,
2003.
• Such surveys are now last year's news and thus, obsolete, but they clearly indicate the sorts
of capabilities that are important to most users.
The following characteristics of generally desirable attributes in project management software
are based on a number of user surveys and the comments of experienced PMs.

• Friendliness. For firms implementing project management, this means the existence of an
organized training program on the use of the software conducted by trainers who have some
understanding of project management.
• Schedules. The time units for schedule display (and resource usage) should vary from minutes
to months. The ability to handle three-time schedule inputs is desirable.
• Calendars. Either a job shop and/or calendar dates are necessary, plus the ability to indicate
working days, nonworking days, and holidays for each resource used.
• Budgets. The ability to include a budget for planning, monitoring, and control. Especially
desirable is the ability to interface this with a spreadsheet program.
• Reports. Individualizing report formats is most desirable. Again, having the ability to interface
the reports with a word processing package is highly desirable.
• Graphics. The ability to see the schedule and interactions is especially important. For Gantt
charts, the software should be able to show the technical dependencies between work units or
tasks.
• Charts. Charts for responsibility and histograms for resources were deemed particularly useful.
• Migration. The ability to transfer data to and from spreadsheets, word processors, database
programs, graphics programs, and desired add-on programs. The ability to interface with
telecommunication systems and the Internet is required for most applications.
• Consolidation. The ability to aggregate multiple projects into a single database for
determination of total resource usage and detection of resource conflicts. The software must have
the ability to recalculate all schedules and resource records when updated information is added.

110
ACTIVITY 1
1. These are the opposite sides of project selection and planning.

2. It is the collecting, recording, and reporting information concerning and all aspects of
projects performance

3. These methods require a significantly greater investment of time and energy early in the
life cycle of the project.

4. In how to collect data, it should be updated on a timely basis.

5. It should be identified and trends noted on how to collect data.

6. The _________________ should be perceived as a closed loop system.

7. ____________________ can serve to maintain high morale on the project team.

8 - 10. __________________, ___________________and ___________________ must be

established for each of the factors to be measured.

11 - 12. The first step in setting up any monitoring system is to identify the
________________ to be ________________.

13- 15. What are the three key things to be planned, monitored, and controlled?

16 – 20. Enumerate the five forms of a large proportion of all data collected take one.

ACTIVITY 2: ANSWER THE FOLLOWING BY YES OR NO/ TRUE OR FALSE

1. Performance criteria, standards, and data collection procedures must be established for
each of the factors to be measured.
2. Information system is the collecting, recording, and reporting information concerning any
and all aspects of project performance
3. Routine reports are those issued on a irregular basis.

111
4. Most often, reports are delivered in face-to-face meetings, and in telephone conference
calls.
5. Plans, charts and tables should be updated on a timely basis
6. Percent of specified performance met before repeated trials
7. Earned Value is one way of measuring overall performance.
8. It is not relevant to emphasize the need to relate realities of time, cost, and performance.
9. Milestones Reports serve to keep all parties up to date on what has been accomplished.
10. The most common error is managing the project rather than the PMIS itself.
11. Details of the planning expose the elements are need to be controlled?
12. The planning, monitoring, and controlling cycle can significantly reduce the extent and
cost of poor performance and time/cost overruns?
13. One of the benefits of detailed report understands the relationships of individual tasks to
one another and the overall project.
14. One of the three distinct types report is Routine.
15. In the purpose of the control system is to act on the data
16. Is senior manager often dependent on team members to call attention to problems \
17. C/SCSC or Cost/Schedule Control System Criteria was developed by the Russian
Department of Defense.
18. C/SCSC is usually not required on government projects
19. Does PMIS are more sophisticated than earlier systems
20. Systems can be easily misused or inappropriate applied – as can any tools.

112
CHAPTER OUTLINE
XI. CHAPTER 11: PROJECT CONTROL

V. PROJECT CONTROL……...……………………………………..……...….. 475

a. Using the information gained from monitoring the project, as well as
information concerning changes in the organizational goals, resources, and
strategy, PMO, the council, or the group in charge may need to take some
form of action (control) regarding the project, such as redirecting it, getting
it back on track, or perhaps even terminating it.

W. THE FUNDAMENTAL PURPOSES OF CONTROL………………..…….. 477

a. The two fundamental objectives of control are: the regulation of results
through the alteration of activities and the stewardship of organizational
assets.

1. Physical Asset Control ………………………………...………………. 478

a. Physical asset control requires control of the use of physical assets.

2. Human Resource Control

a. Human Resource control requires controlling and maintaining the
growth and development of people. Projects provide particularly fertile
ground for cultivating people.

3. Financial Resource Control

a. The techniques of financial control, both conservation and regulation
include current asset controls, and project budgets as well as capital
investment controls.

X. THREE TYPES OF CONTROL PROCESSES………………….…….…..... 479

a. No matter what our purpose in controlling a project, there are three basic
types of control mechanisms we can use: cybernetic control, go/no-go
control, and post control.

1. Cybernetic Control ………………………...………………………….. 480

a. Cybernetic, or steering, control is by far the most common type of
control system and the key feature of cybernetic control is its
automatic operation.
b. Information Requirements for Cybernetic Controllers

2. Go/No-go Controls …………………………………………………….. 483

a. Go/no-go controls take the form of testing to see if some specific
precondition has been met.
b. Phase-Gated Process

113
 c. Discovery-Driven Planning
d. Information Requirements for Go/No-go Controls

3. Post control …………………………………………………………….. 487

a. Post control is directed toward improving the chances for future
projects to meet their goals.
b. The Project Objectives
c. Milestones, Checkpoints, and Budgets
d. The Final Report on Project Results
e. Recommendations for Performance and Process Improvement

Y. THE DESIGN OF CONTROL SYSTEMS………..………………………… 488

a. All control systems being described will be use feedback as a control
process.

1. Critical Ratio Control Charts ………………………………………… 490

a. The critical ratio is made up of two parts; the ratio of actual progress to
scheduled progress, and the ratio of budgeted cost to actual cost.

2. Benchmarking …………………………………………………………. 492

a. Benchmarking controls the project management process rather than the
project itself.

Z. CONTROL: A PRIMARY FUNCTION OF MANAGEMENT….…………. 496

a. The purpose is always the same—to bring the actual schedule, budget, and
deliverables of the project into reasonably close congruence with the
planned schedule, budget, and deliverables.

3. Balance in a Control System ………………………………………….. 498

a. A balanced control system is cost effective, well geared for the end
results sought, and not overdone.

4. Controlling Creative Activities ……………………………………….. 500

a. In order to control creative projects, the PM must adopt one or some
combination of three general approaches to the problem: (1) process
review, (2) personnel reassignment, and (3) control of input resources.

AA. CONTROL OF CHANGE AND SCOPE CREEP…………………………... 402

a. Causes like uncertainty about the technology, increase in the knowledge
base and modification of the rules are especially common in software
projects, where scope creep is legendary and when either the process or
output of a project is changed, there is almost always a concomitant change
in the budget and/or schedule.
b. Crises do occur from time to time, but everyone on the team works to
prevent them by applying control in an effective and timely manner.

114
SUMMARY
As the final subject in the project implementation part, this chapter described the project control
process in the planning-monitoring-controlling cycle. The need for control was discussed and the
three types available were described and then the design of control systems was addressed,
including management’s role, achieving the proper balance, and attaining control of creative
activity as well as handling changes.
VOCABULARY AND DEFINITIONS
Word Book Definition
Control Assuring that reality meets
expectations or plans. Usually
involves the process of
keeping actions within limits
to assure that certain outcomes
will in fact happen.
Critical Ratio A ratio of progress
(actual/scheduled) times a cost
ratio (budgeted/actual).
Cybernetic An automatic control system
containing a negative
feedback loop.
Go/No-Go Initially, a type of gauge that
quickly tells an inspector if an
object’s dimension is within
certain limits. In the case of
project management, this can
be any measure that allows a
manager to decide whether to
continue, change, or terminate
an activity or a project.
Control Chart A chart of a measure of
performance—commonly a
quality characteristic—over
time, showing how it changes
compared to a desired mean
and upper and lower limits.
Own Definition
Means of measurement and
initiating adjustments in the
course of the project to
address unwanted changes to
cost, schedule, quality, or risk
elements that have influenced
the project.
This indicator takes care of
cost and schedule trade-offs.
A control system that involves
a self-correcting feedback
loop.
This type of control processes
indicates when it is necessary
for the project manager to
continue the project
considering the impact of the
needed materials and
resources. This will help
project manager in preventing
the project to fail by
controlling it using go/no-go
control process.
It is used to determine whether
or not a process is stable or
has predictable performance
and it typically identify upper
and lower control limits to
determine the acceptable
range of test results.
115
Learning Objectives:
At the end of the session, students are expected to:

• Define project control

• Use project control in actual projects
• Learn more about the control Tools
• Understand the Benchmarking
• Maintain the safety of project management.
• Gather the data, management, and analytical, to understand and/or predicts the time and
cost outcome of a project.
• Fill a central data base with the data related to the implementation of assistance.
• Know the Types of Control Processes
• Know the characteristics of a control system
• Learn about the sections of post control report
• Know the effective change control procedure

CHAPTER 11 PROJECT CONTROL

Control is the last element in the implementation cycle of planning–monitoring–
controlling. This chapter aims to explain the fundamental purpose of control, control processes,
design of control systems, and control of change and scope creep.
THE FUNDAMENTAL PURPOSES OF CONTROL
PHYSICAL ASSET CONTROL
• It is concerned with asset is imperative to business as well as
maintenance, whether preventive or project success these days.
corrective. • The same precautions applied to
• If the project uses considerable goods from external suppliers must
amounts of physical equipment or also be applied to suppliers from
material, must also be controlled. inside the organization.
• Records of all incoming shipments • Even such details as the project
must be carefully validated so that library, project coffeemaker, project
payment to suppliers can be office furniture, and all the other
authorized the proper design of minor gates and pieces must be
operation of supply chains, known as counted, maintained and conserved.
supply chain management, or SCM

116
HUMAN RESOURCE CONTROL
• Projects provide particularly fertile
ground for cultivating people.
• Because projects are unique,
differing one from another in many
ways, it is possible for people
working on projects to gain a wide
range of experience in a reasonably
short time.
• Measurement of physical resource
conservation is accomplished
through the familiar procedures.
FINANCIAL RESOURCE CONTROL
• It is difficult to separate the control
mechanism aimed at conservation of
financial resources from those focus
on regulating resource use.
• The techniques of financial control,
both conservation and regulation, are
well known.
• The importance of proper
conformance to both organizational
and client control standard in
financial practice and record keeping
cannot be overemphasized.
THREE TYPES OF CONTROL PROCESSES
• The process of controlling a project (or
any system) is far more complex than
simply waitingfor something to go
wrong and then, if possible, fixing it.
• We must decide at what points in the
project we will try to exert control, what
is to be controlled, how it will be
measured, how much deviation from
plan will be tolerated before we act,
what kinds of interventions should be
• The measurement of human resource
conservation is far more difficult.
• The accounting profession has
worked for some years on the
development of human resource
accounting and while the effort has
produced some interesting ideas,
human resource accounting is not
well accepted by the accounting
profession.
• The parent organization, through its
agent, the project manager, is
responsible or the conservation and
proper used of resources owned by
the client or owned by the parent and
charged to the client.
• One final note on the conservationist
role of the controller – the mindset of
the conservationist is often
antithetical to the mindset of the PM,
whose attention is focused on the use
of the resources rather than their
conservation.
used, and how to spot and correct
potential deviations before they occur.
• In order to keep these and other such
issues sorted out, it is helpful to begin a
consideration of control with a brief
exposition on the theory of control.
• No matter what our purpose in
controlling a project, there are three
basic types of control mechanisms we
can use: cybernetic control, go/no-go
control, and postcontrol.
117
• In this section we will describe these
three types and briefly discuss the
information requirements of each.
• While few cybernetic control systems
are used for project control, we will
describe them here because they clearly
delineate the elements that must be
present in any control system, as well as
the information requirements of control
systems

CYBERNETIC CONTROL MARVIN

• Cybernetic control is a third, but less
common control mechanism that is
rarely directly applicable to project.
• Cybernetic, or steering, control is by far
the most common type of control
system.
• (Cyber is the Greek word for
"helmsman.")
• The key feature of cybernetic control is
its automatic operation.

GO/NO-GO CONTROLS (P483-488) DULAY

• Go/no-go controls operate only when and if the controller uses them.
• In many cases, go/no-go controls function periodically, at regular, preset intervals.

Phase-Gated Processes
• One form of go/no-go control that has gained popularity (Cooper, 1994) is that of phase-
gated processes (also known as stage gates, toll gates, quality gates, and so on, as
mentioned in Chapter 6).
• The phase-gate process controls the project at various points throughout its life cycle to
make sure it remains on course and of value to the organization.
• This process is most commonly used for new product/service development projects
where it is important to constantly evaluate the match between the changing, dynamic
market and the changing nature of the new product/service under development.
Discovery-Driven Planning
• Another more recent type of go/no-go control has been proposed by McGrath et al. (1995)
which reverses the evaluation process.
• Instead of trying to determine whether the project is achieving the numbers it needs to at this
stage of the project, it looks at how valid the initial assumptions now appear to be regarding
the project: the market, the customer's needs, the progress that has been made, performance
expected in the future, costs to date and expected at completion, schedule to date and
expected at completion, and so on.
• An assumptions checklist for each stage is prepared with the most critical assumptions fi rst
and when the project reaches that stage, the assumptions are checked for validity.

118
• If a critical assumption is not met, the project must be replanned, or the assumptions revised
as appropriate.
• If no plan can satisfy all the revised assumptions, the project is terminated
Information Requirements for Go/No-Go Controls
• Most of the input information needed to operate go/no-go project control has already been
referenced directly or implied by the previous discussion.
• The project proposal, plans, specifications, schedules, and budgets (complete with approved
change orders) contain all the information needed to apply go/no-go controls to the project.
• Milestones are the key events that serve as a focus for ongoing control activity.
• These milestones are the project's deliverables in the form of in-process output or final
output.

POST-CONTROL
• Post controls (also known as post performance controls or reviews, or post project controls or
reviews) are applied after the fact.
• Cybernetic and go/no-go controls are directed toward accomplishing the goals of an ongoing
project.
• Post control is directed toward improving the chances for future projects to meet their goals.
Post control is applied through a relatively formal document that is usually constructed with
four distinct sections.
The Project Objectives The post control • This can be prepared by combining and
report will contain a description of the editing the various project status reports
objectives of the project. made during the project's life.
• Significant deviations of actual schedule
• Usually, this description is taken from
and budget from planned schedule and
the project proposal, and the entire
budget should be highlighted.
proposal often appears as an appendix to
• Explanations of why these deviations
the post control report.
occurred will be offered in the next
• As reported here, project objectives
section of the post control report.
include the effects of all change orders
issued and approved during the project. The Final Report on Project Results
politically, he or she should do so in When significant variations of actual from
moderation to be effective. planned project performance are indicated,
no distinction is made between favorable
Milestones, Checkpoints, and Budgets
and unfavorable variations.
This section of the post control document
starts with a full report of project • Like the tongue that invariably goes to
performance against the planned schedule the sore tooth, project managers focus
and budget. their attention on trouble.

119
• While this is quite natural, it leads to
complete documentation on why some
things went wrong and little or no
documentation on why some things went
particularly well.
Recommendations for Performance and
Process Improvement The culmination of
the post control report is a set of
recommendations covering the ways that
future projects can be improved.
THE DESIGN OF CONTROL SYSTEMS
•Control system must be sensible and sets
with standards, must be appropriate to the
needs of the client.
•Flexible in a way that it was able to react to accurate and precise to control the project
and report unforeseen changes in system
performance
•Cost effective and never exceed the value
of control
•Truly useful in needs of the project and
operate in ethical manner
•Operate timely by reporting problems by
there is still time to do something about
CRITICAL RATIO CONTROL CHARTS KIM
•The critical ratio is made up of two parts—
the ratio of actual progress to scheduled
progress, and the ratio of budgeted cost to
actual cost(actual progress/scheduled
progress) (budgeted cost/actual cost)
•Combining the two underlying ratios
weights them equally, allowing a “bad” ratio
for one part to be offset by an equally “good”
ratio in the other
• Many of the explanations appearing in
the previous section are related to one-
time happenings—sickness, weather,
strikes, or the appearance of a new
technology—that of themselves are not
apt to affect future projects, although
other, different one-time events may
affect them.
them, and before they become large enough
to destroy the project
•Sensors and monitors should be sufficiently
within limits
•Simple as possible to operate and should be
easy to maintain
•Control systems should be fully
documented when installed, and the
documentation should include a complete
training program in system operation
•When a task is behind the scheduled
progress but seems fine with the result of
critical ratio then this is not a problem for
the project manager same case with different
kinds of task
•Critical ratio serves as standards or control
point that help the project manager to make
decision on what task need to be solve to
prevent damage in the future

BENCHMARKING (P492-497) CJ
Benchmarking comparisons to “best in class” practices across organizations and controls the
project management process rather than the project itself.

120
• Benchmarked study of Toney in 1997 conclude that there are of four major areas and are
typically the responsibility of the Project Management Office: promoting the management of
project management, personnel, methodology and result of project management. Adding another
“best practice” to be handled by the PMO: On-course improvement in project management
practices.
CONTROL: A PRIMARY FUNCTION OF MANAGEMENT
• PM/controller is to set controls that will undertake those activities that will result in
encourage those behaviors/results that are goal achievement.
deemed desirable and discourage those that
• Cybernetic Controls response to steering
are not.
controls tends to be positive.
• People respond to the goal-directedness of
• Go/No-Go Controls Response tends to be
control systems in one of three general ways:
neutral or negative. The reason appears to be
by active and positive participation and goal
related to the inherent nature of this type of
seeking; by passive participation in order to
control system.
avoid loss; and by active but negative
participation and resistance usually not • Post controls serve as a basis for reward or
active resistance to the goal, but failure to punishment, but they are received too late to
change current performance.

BALANCE IN A CONTROL SYSTEM

• When developing a control system, it is
important that the system be well
balanced.
• Unfortunately, the concept of balance is
fuzzy—difficult to explain, difficult to
achieve, and difficult to recognize.
• A balanced control system is built with
cognizance of the fact that investment in
control is subject to sharply diminishing
returns.
• Costs increase exponentially as the
degree of control increases linearly and
the optimal level of control varies with
project size (Heywood et al., 1996).
• A balanced control system recognizes
that as control increases past some point,
innovative activity is more and more
damped, and then fi nally shut off
completely.
• A balanced control system is directed
toward the correction of error rather than
toward punishment.
• This requires a clear understanding of
the fact that the past cannot be changed,
no matter how loudly the manager yells.
• A balanced system exerts control only to
the degree required to achieve its
objectives.
• The controller should avoid annoying
those people whose cooperation is
required to reach system objectives.

121
 CONTROLLING CREATIVE ACTIVITIES
In order to control creative projects, the PM must adopt one or some combination of three
general approaches to the problem: (1) process review, (2) personnel reassignment, and (3)
control of input resources.
Process Review
• The process review focuses on the
process of reaching outcomes rather
than on the outcomes per se.
• Because the outcomes are partially
dependent on the process used to
achieve them, uncertain though they
may be, the process is subjected to
control.
• For example, in research projects the
researcher cannot be held responsible
for the outcome of the research but
can most certainly be held
responsible for adherence to the
research proposal, the budget, and
the schedule.
• The process is controllable even if
the precise results are not.
• Control should be instituted at each
project milestone, an obvious
opportunity for phase-gate controls.
• Unilateral judgments from the
superior are not apt to be accepted or
effective.
Personnel Reassignment
• This type of control is
straightforward—individuals who
are productive are kept; those who
are not being moved to other jobs or
to other organizations
• Problems with this technique can
arise because it is easy to create an
elite group.
• While the favored few are highly
motivated to further achievement,
everyone else tends to be
demotivated.
• It is also important not to apply
control with too fine an edge.
• While it is not particularly difficult
to identify those, who fall in the top
and bottom quartiles of productivity,
it is usually quite hard to make clear
distinctions between people in the
middle quartiles.
Control of Input Resources
• In this case, the focus is on
efficiency.
• The ability to manipulate input
resources carries with it considerable
control over output.
• Obviously, efficiency is not
synonymous with creativity, but the
converse is equally untrue.
• Creativity is not synonymous with
extravagant use of resources.
• The results flowing from creative
activity tend to arrive in batches.

CONTROL OF CHANGE AND SCOPE CREEP

• Coping with changes and changing priorities is perceived as the most important single
problem facing the PM – if not the most important, it is certainly the most irritating.

122
•The most common changes, however, are due to the natural tendency of the client and project
team members to try to improve the product or service.
•Control of change is one of the primary concerns of risk management.
•Formal change control system is a part of configuration management system responsible for
integrating and coordinating changes throughout the systems development cycle. Its purpose is to:
Review all requested changes to the project (both content and procedures)
Identify all task impacts
Translate these impacts into project performance, cost and schedule
Evaluate the cost and benefits of the requested changes
Identify alternative changes that might accomplish the same ends
Accept or reject the requested changes
Communicate the changes to all concerned parties
Ensure that the changes are properly implemented
Prepare monthly reports that summarizes all changes to date and their project impacts.

The following simple guidelines can be used to establish an effective change control procedure:
All project contracts or agreements must The project manager must be consulted on
include a description of how requests for a all desired changes prior to the preparation
change in the project’s plan, budget, and approval of the change order.
schedule, and/or deliverables will be
Changes must be approved, in writing, by
introduced and processed.
the client’s agent as well as by an
Once a project is approved, any change in appropriate representative of senior
the project will be in the form of a change management of the fi rm responsible for
order that will include a description of the carrying out the project.
agreed-upon change together with any
Once the change order has been completed
changes in the plan, budget, schedule, and/or
and approved, the project master plan should
deliverables that result from the change. For
be amended to reflect the change, and the
any but minor changes, a risk identification
change order becomes a part of the master
and analysis study should be performed. In
plan.
order to study the potential impact of change,
it is often possible to conduct a simulation
study.

123
QUESTIONSWITH SHORT ANSWER
1. Standardize the organization’s project management methods. Integrate the project
management processes.

2. A ratio of progress (actual/scheduled) times a cost ratio (budgeted/actual).

3. A monitoring system that forewarns the project manager if trouble arises.

4. Assuring that reality meets expectations or plans. Usually involves the process of keeping
actions within limits to assure that certain outcomes will in fact happen.

5. A chart of a measure of performance— commonly a quality characteristic—over time,

showing how it changes compared to a desired mean and upper and lower limits.

6. An automatic control system containing a negative feedback loop.

7. Another more recent type of go/no-go control has been proposed by McGrath et al.
(1995) which reverses the evaluation process.

8. The process review focuses on the process of reaching outcomes rather than on the
outcomes per se.

9. This type of control is straightforward—individuals who are productive are kept; those
who are not are moved to other jobs or to other organizations.

10. Response to go/no-go controls tends to be neutral or negative. The reason appears to be
related to the inherent nature of this type of control system.

11. Representation of the accounting/controlling function on the project team is mandatory.

12. The specific requirement of ___________ in a control system is also covered, as are two
special control problems: control of creative activities, and control of change.

13. The accounting profession has worked for some years on the development
of________________, and while the effort has produced some interesting ideas, human
resource accounting is not well accepted by the accounting profession.

14. ________________are seen as much the same as a report card. They may serve as a basis
for reward or punishment, but they are received too late to change current performance.

124
 15. Control of ___________In this case, the focus is on efficiency. The ability to manipulate
input resources carries with it considerable control over output.

16. For each deliverable, the individual(s) and/or groups responsible are noted. This was
among the earliest examples of what later came to be known as a ___________ system.

17-20. Post control which is applied through a relatively formal document that contains four
distinct sections:

ACTIVITY 2: ANSWER THE FOLLOWING BY YES OR NO/TRUE OR FALSE

1. Control is the first element in the implementation cycle of planning-monitoring-

controlling.
2. Control is focused on three elements of a project they are performance, cost and time.
3. The critical ratio is made up of two parts:
The ratio of actual progress to scheduled progress
The ratio of budgeted cost to actual cost.
4. Cost are budgets to actual cash flows, purchase orders, absenteeism, income reports,
labor hour charges, accounting variance reports.
5. Representation of the accounting/controlling function on the project team is not
mandatory
6. Cybernetic control is a third, but less common control mechanism that is rarely directly
applicable to projects
7. Benchmarking makes comparison to “best in class” practices across organizations.
8. Human response to steering controls tends to be negative.
9. There are four general approaches to control creative projects.
10. Progress review focuses on the process rather than the outcome per se.
11. The project manager needs to be equally attentive to both regulation and conservation?
12. It is possible for people working on projects to gain a wide range of experience in a
reasonably short period of time. Because projects are unique?
13. A good control system is it should be flexible.
14. Some control systems use feedback as a control process.
15. In Go/no-go controls operate only when and if the controller uses them

125
16. Is Post controls are applied after the fact
17. Does response to go/no-go controls tend to be positive?
18. Does setting controls to encourage the employees are part of the job of the project
manager?
19. Too much control tends to inhibit creativity.
20. Control of Input resources focuses on the effectiveness rather than the efficiency.

126
CHAPTER OUTLINE
XII. CHAPTER 12: PROJECT AUDITING

BB. PROJECT AUDITING……...…………………………………….……...….. 521

a. A more or less formal inquiry into any aspect of the project.

CC. PURPOSES OF EVALUATION – GOALS OF THE SYSTEM……..…….. 522

a. Beyond the straightforward considerations of project success, another
primary purpose of evaluation is to help translate the achievement of the
project’s goals into a contribution to the parent organization’s goals.

DD. THE PROJECT AUDIT………………….…………………………….…..... 524

d. The project audit is a thorough examination of the management of a project,
its methodology and procedures, its records, its properties, its budgets and
expenditures, and its degree of completion.

4. Depth of the Audit ………………………...…………………..……….. 527

a. Time and money are two of the most common (and obvious) limits on
the depth of investigation and level of detail presented in the audit
report.

5. Timing of the Audit

a. Given that all projects of significant size or importance should be
audited, the first audits are usually done early in the project’s life.

EE. CONSTRUCTION AND USE OF THE AUDIT REPORT………………… 528

a. The type of project being audited and the uses for which the audit is
intended dictate some specifics of the audit report format.

3. Responsibilities of the Project Auditor/Evaluator …...……………… 530

a. The auditor should “tell the truth”, must approach the audit in an
objective and ethical manner and assume responsibility for what is
included and excluded from consideration in the report, must maintain
political and technical independence during the audit and treat all
materials gathered as confidential until the audit is formally released,
and should engage in a continuing evaluation of the auditing process in
a search for ways to improve the effectiveness, efficiency, and value of
the process.

FF. THE PROJECT AUDIT LIFE CYCLE….…………………………….……. 530

a. The audit has a life cycle composed of an orderly progression of well-
defined events and these are the Project Audit Initiation, Project Baseline
Definition, Establishing an Audit Database, Preliminary Analysis of the
Project, Audit Report Preparation, and Project Audit Termination.

127
 GG. SOME ESSENTIALS OF AN AUDIT/EVALUATION………………...…... 533
a. For an audit/evaluation (hereinafter, simply a/e) to be conducted with skill
and precision, for it to be credible and generally acceptable to senior
management, to the project team, and to the client, several essential
conditions must be met.

1. The A/E Team

a. The choice of the A/E team is critical to the success of the entire
process and its main role is to conduct a thorough and complete
examination of the project or some pre-specified aspect of the project.

2. Access to Records ……………………………………………………… 535

a. In order for the A/E team to be effective, it must have free access to all
information relevant to the project.

3. Access to Project Personnel and Others

a. Contact between a/e team members and project team members, or
between the A/E team and other members of the organization who
have knowledge of the project, should be free.

HH. MEASUREMENT ……………………………………………………………. 536

a. Measurement is an integral part of the A/E process and measuring the actual
expenditures against the planned budget is a bit trickier and depends on an
in-depth understanding of the procedures used by the accounting
department.

1. A Note to the Auditor/Evaluator

a. Above all else, the A/E needs “permission to enter the system.” It is
difficult to describe precisely what is meant by that phrase, but every
experienced auditor or evaluator will know.

SUMMARY

This chapter initiated the discussion of the final part of the text, project termination. A major
concluding step in the termination process is the evaluation of the project process and results,
otherwise known as an audit. In this chapter, the authors looked at the purposes of evaluation and
what it should encompass: the audit process and measurement considerations, the demands
placed on the auditor, and the construction and design of the final report.

VOCABULARY AND DEFINITIONS

Word Book Definition Own Definition

Audit A formal inquiry into some An official inspection of an
issue or aspect of a system. individual’s or organization’s
account.
Baseline A standard for performance, The value or condition against

128
 commonly established early
on for later comparisons.
Evaluate To set a value for or appraise.
Risk Analysis An evaluation of the likely
outcomes of a policy and their
probability of occurrence,
usually conducted to compare
two or more scenarios or
policies.
which all future measurements
will be compared.
Assess something with intent
of following standard
procedure.
Examining how project
outcomes and objectives
might change due to the
impact of the risk event.

Learning Objectives:
At the end of the lesson, students are expected to:

• Understand and analyze project auditing

• Identify the purposes of evaluation
• Evaluate the quality of project management
• Know the responsibilities of the project Auditor/Evaluator
• Identify the construction and the use of Audit Report
• Understand the Essentials of an Audit/ Evaluation
• Differentiate parts of the Project Audit
• Identify what is a Project audit life cycle
• Improve the project performance
• Uncover problems and to be avoided
• Assure that project management is meeting the standards by evaluating if it follows the
organization’s policies, processes and procedures
• Help identify business risks that may involve budget, time, scope and quality

CHAPTER 12 SUMMARY: PROJECT AUDITING

PURPOSES OF EVALUATION—GOALS OF THE SYSTEM
• Certainly, the major element in the meeting both the budget and the
evaluation of a project is its "success." schedule.
• The first and most straightforward • This has been the primary focus of our
dimension is the project's efficiency in discussion of project management and
control thus far, meeting the time, cost,

129
 and performance objectives of the
project.
• This dimension includes meeting the
project's technical and operational
specifications but also includes factors
relating to loyalty and repurchase
fulfilling the customer's needs, actual use
by the customer, solving a major
operational problem of the customer, and
the perennial challenge of customer
satisfaction.
• The third dimension is business/direct
success, measured here primarily in
terms of the level of commercial success
and market share.
• For internal projects, however, the
factors might include such measures as
yields, cycle times, processing steps,
quality, and so on.
• The last dimension, somewhat more
difficult and nebulous to ascertain, is
future potential.
• Beyond the straightforward
considerations of project success,
another primary purpose of evaluation is
to help translate the achievement of the
project's goals into a contribution to the
parent organization's goals.

The result is a set of recommendations for improvements that can help both ongoing and
future projects to:
• Identify problems earlier • Improve the process of risk identification
• Clarify performance, cost, and time and management
relationships • Speed up the achievement of results
• Improve project performance • Identify mistakes, remedy them, and
• Locate opportunities for future avoid them in the future
technological advances • Provide information to the client
• Evaluate the quality of project • Reconfirm the organization’s interest in
management and commitment to the project
• Reduce costs

THE PROJECT AUDIT

• The project audit is a thorough examination of the management of a project, its methodology
and procedures, its records, its properties, its budgets and expenditures, and its degree of
completion.
• It may deal with the project as a whole, or only with a part of the project.

The formal report may be presented in various formats, but should, at a minimum, contain
comments on the following points:
1. Current status of the project. Does the 2. Future status. Are significant schedule
work actually completed match the planned changes likely? If so, indicate the nature of
level of completion? the

130
Changes.
3. Status of crucial tasks. What progress
has been made on tasks that could decide the
success?
or failure of the project?
4. Risk assessment. What is the potential
for project failure or monetary loss?
DEPTH OF THE AUDIT
• There are several practical constraints
that may limit the depth of the project
auditor's investigation.
• Time and money are two of the most
common (and obvious) limits on the
depth of investigation and level of detail
presented in the audit report.
• The general audit is normally most
constrained by time and resources and is
usually a brief review of the project,
touching lightly on the six concerns
noted earlier.
TIMING OF THE AUDIT
• Given that all projects of significant size
or importance should be audited, the first
audits are usually done early in the
project's life.
• The sooner a problem is discovered, the
easier it is to deal with.
• Early audits are often focused on the
technical issues in order to make sure
that key technical problems have been
solved or are under competent attack.
• Ordinarily, audits done later in the life
cycle of a project are of less immediate
CONSTRUCTION AND USE OF THE AUDIT REPORT
• The type of project being audited and the
uses for which the audit is intended
5. Information pertinent to other projects.
What lessons learned from the project being
audited
can be applied to other projects being
undertaken by the organization?
6. Limitations of the audit. What
assumptions or limitations affect the data in
the audit?
• At times, the detailed audit cannot
investigate problems at a satisfactory
technical level because the auditor does
not possess the technical knowledge
needed.
• In such cases, a technical audit is
required.
• Although not a hard and fast rule, the
technical audit is usually the most
detailed.
value to the project but are of more value
to the parent organization.
• As the project develops, technical issues
are less likely to be matters of concern.
• Conformity to the schedule and budget
becomes the primary interest.
• Management issues are major matters of
interest for audits made late in the
project's life (e.g., disposal of equipment
or reallocation of project personnel).
• Post project audits are conducted with
several basic objectives in mind.
dictate some specifics of the audit report
format.
131
• If the audit report is to serve as a
communication device, there must also
be a predetermined distribution list for
such documents.
• When a distribution is highly restricted,
the report is almost certain to become the
focus for interpersonal and intergroup
conflict and tension.
• Significant deviations of actual from
predicted results should be highlighted
and explained in a set of comments.
• This eases the reader's work and tends to
keep questions focused on important
issues rather than trivia.
1. Introduction. This section contains a
description of the project to provide a
framework of understanding for the reader.
2. Current Status. Status should be
reported as of the time of the audit and,
among other things, should include the
following measures of performance:
Cost: This section compares actual costs to
budgeted costs. The time periods for which
the comparisons are made should be clearly
defined.
Schedule: Performance in terms of planned
events or milestones should be reported.
Completed portions of the project should be
clearly identified, and the percent
completion should be reported on all
unfinished tasks for which estimates are
possible
Progress: This section compares work
completed with resources expended. The
requirement here is for information that will
help to pinpoint problems with specific tasks
or sets of tasks. Based on this information,
projections regarding the timing and
amounts of remaining planned expenditures
are made.
• This arrangement also reduces the
likelihood that senior managers will
engage in "fishing expeditions,"
searching for something "wrong" in
every piece of data and sentence of the
report.
• Negative comments about individuals or
groups associated with the project should
be avoided.
• Write the report in a clear, professional,
unemotional style and restrict its content
to information and issues that are
relevant to the project.
Quality: Whether or not this is a critical
issue depends on the type of project being
audited. Quality is a measure of the degree
to which the output of a system conforms to
prespecified characteristics.
3. Future Project Status This section
contains the auditor’s conclusions regarding
progress together with recommendations for
any changes in technical approach, schedule,
or budget that should be made in the
remaining tasks.
4. Critical Management Issues All issues
that the auditor feels require close
monitoring by senior management should be
included in this section, along with brief
explanation ofthe relationships between
these issues and the objectives of the project.
5. Risk Management This section should
contain a review of major risks associated
with the project and their projected impact
on project time/cost/performance. If
alternative decisions exist that may
significantly alter future risks, they can be
noted at this point in the report.
6. Caveats, Limitations, and Assumptions
This section of the report may be placed at
the ender may be included as a part of the
132
introduction. The auditor is responsible for the accuracy

RESPONSIBILITIES OF THE PROJECT AUDITOR/EVALUATOR KIM

• First and foremost, the auditor should
"tell the truth."
• It is a recognition of the fact that there
are various levels of truth associated
with any project.
• The auditor must approach the audit in
an objective and ethical manner and
assume responsibility for what is
included and excluded from
consideration in the report.
• Awareness of the biases of the several
parties interested in the project—
including the auditor's own biases—is
They also list the following steps for carrying out an audit:
• Assemble a small team of experienced
experts
• Familiarize the team with the requirements
of the project
• Audit the project on site
• After completion, debrief the project’s
management
essential, but extreme care is required if
the auditor wishes to compensate for
such biases.
• Areas of investigation outside the
auditor's area of technical expertise
should be acknowledged and assistance
sought when necessary.
• The auditor/evaluator must maintain
political and technical independence
during the audit and treat all materials
gathered as confidential until the audit is
formally released.
• Produce a written report according to a
prespecified format
• Distribute the report to the PM and project
team for their response
• Follow up to see if the recommendations
have been implemented

THE PROJECT AUDIT LIFE CYCLE

• Thus far, we have considered the project audit and project evaluation as if they were one and
the same.
• The audit contains an evaluation, and an evaluator must conduct some sort of audit.
• Like the project itself, the audit has a life cycle composed of an orderly progression of well-
defined events.

1. Project Audit Initiation This step 2. Project Baseline Definition This phase
involves starting the audit process, defining of the cycle normally consists of identifying
the purpose and scope of the audit, and the performance areas to be evaluated,
gathering sufficient information to determining standards for each area through
determine the proper audit methodology. benchmarking or some other process,
ascertaining management performance
expectations for each area, and developing a

133
program to measure and assemble the of the audit report, organized by whatever
requisiteinformation. format has been selected for use. A set of
recommendations, together with a plan for
3. Establishing an Audit Database Once
implementing them, is also a part of the
the baseline standards are established,
audit report. If the recommendations go
execution ofthe audit begins. The next step
beyond normal practices of the organization,
is to create a database for use by the audit
they will need support from the policy-
team
making level of management.
4. Preliminary Analysis of the Project
6. Project Audit Termination As with the
After standards are set and data collected,
project itself, after the audit has
judgments are made. Some auditors eschew
accomplished its designated task, the audit
judgment on the grounds that such a delicate
process should be terminated. When the
but weighty responsibility must be reserved
final report and recommendations are
to senior management.
released, there will be a review of the audit
5. Audit Report Preparation This part of process
the audit life cycle includes the preparation

SOME ESSENTIALS OF AN AUDIT/EVALUATION

• For an audit/evaluation (hereinafter, simply a/e) to be conducted with skill and precision, for
it to be credible and generally acceptable to senior management, to the project team, and to
the client, several essential conditions must be met.
• The a/e team must be properly selected, all records and files must be accessible, and free
contact with project members must be preserved.
The A/E Team
• The choice of the a/e team is critical to • The main role of the a/e team is to
the success of the entire process. conduct a thorough and complete
• It may seem unnecessary to note that examination of the project or some
team members should be selected prespecified aspect of the project.
because of their ability to contribute to • The team must determine which items
the a/e procedure, but sometimes should be brought to management's
members are selected merely because attention.
they are available. • It should report information and make
• The size of the team will generally be a recommendations in such a way as to
function of the size and complexity of maximize the utility of its work.
the project. • The team is responsible for constructive
• For a small project, one person can often observations and advice based on the
handle all the tasks of an a/e audit, but training and experience of its members.
for a large project, the team may require • Members must be aloof from personal
representatives from several different involvement with conflicts among
constituencies.

134
 project team staff and from rivalries
between projects.
• The a/e is a highly disciplined process,
and all team members must willingly
Typical areas that might furnish a/e team members are:
• The project itself
• The accounting/controller department
• Technical specialty areas
• The customer
• The marketing department
• Senior management
• Purchasing/asset management
• The personnel department
• The legal/contract administration department
Access to Records
• In order for the a/e team to be effective,
it must have free access to all
information relevant to the project.
• This may present some problems on
government projects that may be
classified for reasons of national
security.
• In such cases, a subgroup of the a/e team
may be formed from qualified
("cleared") individuals.
• Most of the information needed for an
a/e will come from the project team's
records and those of the Project Office,
and/or from various departments such as
accounting, personnel, and purchasing.
• Obviously, gathering the data is the
responsibility of the a/e team, and this
burden should not be passed on to the
project management team, though the
project team is responsible for collecting
the usual data on the project and keeping
project records up to date during the
project's life.
• Clearly, project status reports, relevant
technical memoranda, change orders,
and sincerely subject themselves to that
discipline.
information about project organization
and management methods, and fi nancial
and resource usage information are also
important.
• The a/e team may have to extract much
of these data from other documents
because the required information is often
not in the form needed.
• Data collection is time-consuming, but
careful work is absolutely necessary for
an effective, credible a/e.
• As information is collected, it must be
organized and fi led in a systematic way.
• Systematic methods need to be
developed for separating out useful
information.
• Most important, stopping rules are
needed to prevent data collection and
processing from continuing far past the
point of diminishing returns.
• Priorities must be set to ensure that
important analyses are undertaken before
those of lesser import.
• Also, safeguards are needed against
duplication of efforts.
135
Access to Project Personnel and Other
• Contact between a/e team members and project team members, or between the a/e team and
other members of the organization who have knowledge of the project, should be free.
• One exception is contact between the a/e team and the customer; such contacts are not made
without clearance from senior management.
• This restriction would hold even when the customer is represented on the audit team, and
should also hold for in-house clients.

MEASUREMENT
• Measurement is an integral part of the a/e process.
• Several aspects of a project that should be measured are obvious and, fortunately, rather easy
to measure.
• Measuring the actual expenditures against the planned budget is a bit trickier and depends on
an in-depth understanding of the procedures used by the accounting department.
• It is common to imbue cost data with higher levels of reality and precision than is warranted.
• When the objectives of a project have been stated in terms of profits, rates of return, or
discounted cash flows, as in the financial selection models discussed in Chapter 2,
measurement problems may be more obstinate.
• The problem does not often revolve around the accounting conventions used, though if those
conventions have not been clearly established in advance, there may be bitter arguments
about what costs are appropriately assigned to the individual project being evaluated.
•

ACTIVITY 1
1. Note that there are also other types of audits such as ________________ Which can be helpful
when employing project management in an organization.
2. The term _____________ means to set the value of or appraise.
3. The first and most straightforward dimension is the project’s _____________ in meeting both
the budget and the schedule.
4. The second and most complex dimension is that of __________________
5. The third dimension is _____________________, measured here primarily in terms of level of
Commercial success and market share.
6. The last dimension, somewhat more difficult and nebulous to ascertain, is
_________________________.

136
7. For brevity, we will refer to the stated project objectives, including customer satisfaction, as
the project’s _____________.
8. Although the adjective ___________ is not a sufficient descriptor, it is the best single word we
could find.
9. But for the most part, they are __________ by accident, not by purpose.
10. The result is that goals appearing in the project proposal must be recognized and are a source
of some anxiety in members of the project team. But ________ goals can often be ignored.
11. In the previous chapter, we argued that software projects were not ______________ different
from other types of projects.
12. A formal inquiry into some issue or aspect of a system.
13. A standard for performance, commonly established early on for later comparisons.
14. To set a value for or appraise.
15. An evaluation of the likely outcomes of a policy and their probability of occurrence, usually
conducted to compare two or more scenarios or policies.
16. This step involves starting the audit process, defining the purpose and scope of the audit, and
gathering sufficient information to determine the proper audit Methodology.
17. This section should contain a review of major risks associated with the project and their
projected impact on project time/cost/performance.
18. All issues that the auditor feels require close monitoring by senior management should be
included in this section, along with a brief explanation of the relationships between these issues
and the objectives of the project.

19. This section contains the auditor’s conclusions regarding progress together with
recommendations for any changes in technical approach, schedule, or budget that should be
made in the remaining tasks.
20. This part of the audit life cycle includes the preparation of the audit report, organized by
whatever format has been selected for use.

137
ACTIVITY 2: ANSWER THE FOLLOWING BY YES ORNO/ TRUE OR FALSE
1. Primary purpose of evaluation is to help translate the achievement of the project’s goals
into a contribution to the parent organization’s goals.
2. In purposes of Evaluation, there are 5 successful project evaluation that can help an
organization.
3. Risk Analysis is in the 4th information that should be contained in the audit report.
4. One of the responsibilities of a project auditor is the auditor must approach the audit in an
objective and ethical manner.
5. The auditor must approach an audit in an subjective and ethical manner
6. The project audit is a thorough examination of the management of a project, its
methodology and procedures, its records, its properties, its budgets and expenditures and
its degree of completion.
7. Time is only the most common limits on depth of investigation and level of detail
presented in the audit report
8. Measurement is an integral part of the audit or evaluation process.
9. Trust-building is a fast and rough process that is easily thwarted.
10. The audit has life cycle just like the project cycle
11. There are 4 independent dimensions of success?
12. The choice of the audit/evaluation team is critical to the success of the entire process.
13. Project audit termination is part of The Project Audit life cycle
14. In Timing of the audit, conformity to the schedule and budget become the primary
interests.
15. Negative comments about individuals or groups associated with the project should be
maintained. (

138
CHAPTER OUTLLINE
XIII. CHAPTER 13: PROJECT TERMINATION

II. PROJECT TERMINATION……...……………………………………...….. 551

c. A termination stage of the project rarely has much impact on technical success
or failure, but it has a great deal to do with residual attitudes toward the
project.

JJ. THE VARIETIES OF PROJECT TERMINATION………………..………. 552

a. A project can be said to be terminated when work on the substance of the
project has ceased or slowed to the point that further progress on the project
is no longer possible.

4. Termination by Extinction
a. Two important characteristics of termination by murder premeditated
or not, are the suddenness of project demise and the lack of obvious
signals that death is imminent.

5. Termination by Addition ……………………………………………… 553

a. When project success results in termination by addition, the transition
is strikingly different from termination by extinction.

6. Termination by Integration
a. This method of terminating a project is the most common way of
dealing with successful projects, and the most complex.

7. Termination by Starvation ……………………………………………. 555

a. There is a fourth type of project termination, although strictly
speaking, it is not a “termination” at all but it is “slow starvation by
budget decrement.”

KK. WHEN TO TERMINATE A PROJECT………………………...…….…..... 555

e. There is a fourth type of project termination, although strictly speaking, it is
not a “termination” at all. It is “slow starvation by budget decrement.”

LL. THE TERMINATION PROCESS………..…………….…………………… 561

a. The termination process has two distinct parts, (1) the decision whether or
not to terminate and (2) if the decision is to terminate the project, the
decision must be carried out.

4. The Decision Process

139
 a. Decision-aiding models for the termination decision fall into two
generic categories, (1) there are models that base the decision on the
degree to which the project qualifies against a set of factors generally
held to be associated with successful (or failed) projects and (2) there
are models that base the decision on the degree to which the project
meets the goals and objectives set for it.

5. The Implementation Process

a. Once it has been decided to terminate a project, the process by which it
will be terminated must be implemented.

MM. THE FINAL REPORT – A PROJECT HISTORY….……………...………. 566

a. The final report is not another evaluation; rather, it is the history of the
project.
b. It is a chronicle of the life and times of the project, a compendium of what
went right and what went wrong, of who served the project in what capacity,
of what was done to create the substance of the project, of how it was
managed.

NN. A FINAL NOTE……………………………………………………………... 568

a. Some unsolved problems that have a major effect on project management:
Problem 1 “On the Need for a Universal Information System” is now
doable, at least in individual organizations, Problem 2 “On the Need for
Conflict Resolution in Matrix Management” is the subject of many articles
in the past few years and Problem 3 “On the Need for New Methods of
Rewarding Excellence” is unsolved, but is not amenable to a solution within
the area of project management considered apart from the economy as a
whole.

SUMMARY

At last, come the completion of this project—termination. In this chapter, the authors looked at
the ways in which projects can be terminated, how to decide if a project should be terminated,
the termination process, and the preparation of the Project Final Report.

VOCABULARY AND DEFINITIONS

Word Book Definition Own Definition

Termination by Addition
Termination by Extinction
Bringing the project into the
organization as a separate,
ongoing entity.
The end of all activity on a
project without extending it in
some form, such as by
inclusion or integration.
This is where a project is
made more or less an external,
but full-fledged addition to the
parent organization.
The project may be stopped
because it has been either
successful, or unsuccessful.

140
Termination by Integration
Termination by Starvation
Bringing the project activities
into the organization and
distributing them among
existing functions.
Cutting a project’s budget
sufficiently to stop progress
without actually killing the
project.
The output of the project
becomes part-and-parcel of
the operating systems of the
parent or client, becoming
embedded in day-to-day
operations.
Cutting a project's budget
sufficiently to stop progress
without actually killing the
project (budget decrement).

Learning Objectives:
At the end of the lesson, students are expected to:
• Identify project termination and know why it happens in a project management
• Identify the different types of termination
• Know the duties of the termination manager
• Ensure completion of the work
• Understand what is The Implementation Process
• Know what incorporates the project’s Final Report
• Know when to Terminate a Project
• Learn the procedures in the Decision Process
• Manage respective procedures that are needed and requires in the management.
• Evaluate projects and check the status
• Differentiate the types of termination
• Know how and why projects terminate

CHAPTER 13 PROJECT TERMINATION

THE VARIETIES OF PROJECT TERMINATION

• For our purposes, a project can be said to
be terminated when work on the
substance of the project has ceased or
slowed to the point that further progress
on the project is no longer possible when
the project has been indefinitely delayed,
when its resources have been deployed
to other projects, or when project
personnel (especially the PM) become
personae non-grate with senior
management and in the company
lunchroom.
• There may seem to be a spark of life left,
but resuscitation to a healthy state is
most unlikely.
• At this point, it is appropriate to consider
the ways in which a project can be
terminated.

141
• There are four fundamentally different
ways to close out a project: extinction,
TERMINATION BY EXTINCTION
• The project is stopped.
• It may end because it has been
successful and achieved its goals: The
new product has been developed and
handed over to the client, or the software
has been installed and is running.
• The project may also be stopped because
it is unsuccessful or has been
superseded: The new drug failed its
efficacy tests; there are
better/faster/cheaper/prettier alternatives
available; or it will cost too much and
take too long to get the desired
performance.
• Changes in the external environment can
kill projects, too.
• The explosion of the Challenger stopped
a number of space shuttle projects
overnight.
• More recently, extraordinary cost
escalation in the technology and
materials associated with automotive
racing caused the ruling bodies of both
Formula 1 and Indy-car racing to stop
TERMINATION BY ADDITION
• The project becomes a formal part of the
parent organization.
-People, material, facilities transition.
-New functionality
-transfer of assets, people and equipment.
addition, integration, and starvation.
(and even repeal) technological change
in their respective venues.
• A special case of termination by
extinction is "termination by murder."*
There are all sorts of murders.
• They range from political assassination
to accidental projecticide.
• When senior executives vie for
promotion, projects for which the loser is
champion are apt to suffer.
• Corporate mergers often make certain
projects redundant or irrelevant.
• NCR was forced to cancel several
projects following its merger into
AT&T, and probably several more when
NCR was more recently unmerged.
• Two important characteristics of
termination by murder, premeditated or
not, are the suddenness of project demise
and the lack of obvious signals that death
is imminent.
• When a decision is made to terminate a
project by extinction, the most
noticeable event is that all activity on the
substance of the project ceases.
• Addition of responsibility
-budgets
-practices and procedure.
142
 TERMINATION BY INTEGRATION
• This method of terminating a project is
the most common way of dealing with
successful projects, and the most
complex.
• The output of the project becomes a
standard part of the operating systems of
the parent, or client In some cases, the
problems of integration are relatively
minor.
• The project team that installed a new
piece of software, instructed the client in
its operation and maintenance, and then
departed, probably left only minor
problems behind it, problems familiar to
experienced managers.
• If the installation was a server complete
with multiple terminals and many
different pieces of software, then the
complexities of integration are apt to be
more severe.
• In general, the problems of integration
are inversely related to the level of
experience that the parent organization
(or client) has had with: (1) the
technology being integrated and (2) the
successful integration of other projects,
regardless of technology.
• Most problems of termination by
addition are also present when the
project is integrated.
• In the case of integration, the project
may not be viewed as a competitive
interloper, but the project personnel
being moved into established units of the
parent organization will be so viewed.
• The individuals who nurtured the project
may have returned to their respective
organizational divisions, and may have
new responsibilities.

TERMINATION BY STARVATION
• Withdrawal of “life support”
• Can save “Face”, avoid embarrassment, evade admission of defeat.
• project decrement
• Reallocation of resources away from project
business condition
“political” considerations
- Active without activity.

WHEN TO TERMINATE A PROJECT (p555-560) ASHLEY

1. A Project Organization Is Not Required The use of the project form of organization
was inappropriate for this particular task or in this particular environment. The parent
organization must understand the conditions that require instituting a project.
2. Insufficient Support from Senior Management Projects invariably develop needs for
resources that were not originally allocated. Arguments between functional departments
over the command of such resources are very common. Without the direct support of
champion in senior management, the project is almost certain to lose the resource battle.

143
 3. Naming the Wrong Person as Project Manager This book is testimony to the
importance of the PM. A common mistake is to appoint as PM an individual with
excellent technical skills but weak managerial skills or training.
4. Poor Planning This is a very common cause of project failure. In the rush to get the
substance of the project under way, competent planning is neglected. In such cases, crisis
management becomes a way of life, difficulties and errors are compounded, and the
project slowly gets farther behind schedule and over budget. Indeed, careful planning is
associated with success in almost all empirical research on project success—Tom Peter’s
“Ready, Fire, Aim” to the contrary notwithstanding. Not only is proper planning often
cited as success factor, lack of planning is cited as a cause of failure (Black, 1996).
• All these causes of failure underline the need for careful evaluation at all stages of the
project.
• But at the same time, it is most important to note that the lion's share of the attention
given to the termination issue is focused on the failing project.
• It is equally or more important to terminate successful projects at the right time and by
proper methods.
• One rarely mentioned problem affecting many organizations is the inability or
unwillingness of successful project managers working on successful projects to "let their
projects go."
• This is a particularly difficult problem for in-house projects.
• The PM (and team) simply will not release the project to the tender care of the client
department.

THE DECISION PROCESS

Decision-aiding models for the termination decision fall into two generic categories.
• First, there are models that base the decision on the degree to which the project qualifies
against a set of factors generally held to be associated with successful (or failed) projects.
• Second, there are models that base the decision on the degree to which the project meets the
goals and objectives set for it.
• Evaluation of factors in project selection models may change as projects are evaluated at
different stages in their life cycles.
• They note that the probability of technical success of a project is usually estimated to be
close to 1.0 early in the life cycle, but lower during later stages when the technical problems
are known.
THE IMPLEMENTATION PROCESS
• Once it has been decided to terminate a project, the process by which it will be
terminated must be implemented.
• The actual termination can be planned and orderly, or a simple hatchet job.

144
• The former is apt to have significantly better results, and so we suggest that the
termination process was;
• planned, budgeted, and scheduled
• As is done for any other phase of the project of life cycle.

THE FINAL REPORT—A PROJECT HISTORY

• Good project management systems have a memory.

• The embodiment of this memory is the Project Final Report.
• The final report is not another evaluation; rather, it is the history of the project.
• It is a chronicle of the life and times of the project, a compendium of what went right and
what went wrong, of who served the project in what capacity, of what was done to create
the substance of the project, of how it was managed.
• The third edition of PMBOK (Project Management Institute, 2004) emphasizes the
importance of keeping and reviewing past experience as prelude to new experience.
• • Project Final Report is the history of the
• project. It is a chronicle of the life and times of the project, a compendium of what went
right and what went wrong, of who served the project in what capacity, of what was done
to create the substance of the project, of how it was managed.
• • The elements that should be covered in the fi nal report are: Project Performance,
Administrative Performance, Organizational Structure, Project and Administrative Teams
and Techniques of Project Management.
• • The fundamental purpose of the final report is to improve future projects. It is
ultimately focused on the project itself and on the process by which the project was
conducted.
• • To ensure that significant issues are included, the PM should keep a diary. The
• PM’s diary is not an official project document, but rather an informal collection of
thoughts, reflections, and commentaries on project happenings.

ACTIVITY 1
1. Bringing the project into the organization as a separate, ongoing entity.
2. A reduction in the amount of funds for an activity.
3. The end of all activity on a project without extending it in some form, such as by inclusion or
integration.
4. Bringing the project activities into the organization and distributing them among existing
functions.
5. An administrator responsible for wrapping up the administrative details of a project.

145
6. Cutting a project’s budget sufficiently to stop progress without actually killing the project.
7. Terminating a project suddenly and without warning, usually for a cause not related to the
project’s purpose.
8. A key element of the report is a comparison of what the project achieved (the terminal
evaluation) with what the project tried to achieve (the project proposal).
9. Each of the organizational forms used for projects has its own unique set of advantages and
disadvantages.
10. The substantive side of the project usually gets a great deal of attention, while the
administrative side is often ignored until administrative problems occur.
11. We mentioned this type of project demise when discussing termination by murder.
12. This is a very common cause of project failure.
13- 20. Give the 8 important aspects of the transition from project to integrated operation that
must be considered when the project functions are distributed.

ACTIVITY 2: ANSWER THE FOLLOWING BY YES OR NO/ TRUE OR FALSE

1. In varieties of project termination, there are four fundamentally different ways to
close out a project: extinction, addition, integration, and starvation.
2. There are two important characteristics of termination by murder are the suddenness
of project demise and the lack of obvious signals that death is imminent.
3. Second in termination process, if the decision is to terminate the project, the decision
must be carried out.
4. The final report is the history of the project
5. The duty of a termination manager is to determine what records to keep
6. Clearing project with legal consultant is not part of the duties of a termination
manager
7. In the decision process, as the decision criteria, constraints, weights, and
environmental data are common to each organization.
8. The property, equipment, material, personnel, and functions of the project are
distributed among the existing elements of the parent organization.
9. This method of terminating projects is the most common way of dealing with
successful projects, and the most complex.
10. The fundamental purpose of the final report is to improve future projects.
11. The final report is the project evaluation.
12. If a project is a major success, it may be terminated by institutionalizing?
13. The project may not end because it has been successful and achieved its goals?
14. Some questions to ask when considering termination: Has the project been obviated
by technical advances?
15. The termination process has two distinct parts

146
16. One of the duties of termination manager is to notify the client of project completion
and ensure the delivery is accomplished
17. Is the type of project termination being a “fast starvation by budget decrement”?
18. In terminating a project that has not accomplished its goals is an admission of
success.
19. Does all required information is contained in the master plan and also project audits
and recommendation?
20. Most project managers delay the personnel reassignment/release issue as long as
possible

147
CHAPTER 1
ACTIVITY 1

1. TECHNOLOGY
2. SYSTEMS APPROACH
3. PROJECT SPECIFICATIONS
4. LIFE CYCLE
5. 44,000 MEMBERS
6. CAREER PATH
7. 1990
8. PROJECT MANAGEMENT
9-11
• The growing demand for complex, customized goods and services
• The exponential expansion of human knowledge
• The global production-consumption environment
12-14
• To meet specified performance
• To do it within specified costs
• Complete on schedule

15-17
• Performance
• Time
• Cost
18-20
• HAVE A PURPOSE
• HAVE A LIFE CYCLE
• INTERDEPENDENCIES

ACTIVITY 2
1. YES 11. YES
2. NO 12. NO
3. YES 13. YES
4. YES 14. YES
5. NO 15. NO
6. NO 16. NO
7. YES 17. YES
8. NO 18. YES
9. YES 19. NO
10. NO 20. YES

148
CHAPTER 2
ACTIVITY 1
1. PROJECT SELECTION
2. MANAGERS
3. FLEXIBILITY
4. RISK
5. NUMERIC MODELS
6. OPERATING NECESSITY
7. SPECIAL CARE
8. UNCERTAIN
9. INCREASE
10. SELECTING AND EVALUATING PROJECTS
11-16
• REALISM
• CAPABILITY
• FLEXIBILTY
• EASE OF USE
• COST
• EASY COMPUTERIZATION
17-18
• NUMERIC
• NON- NUMERIC
19-20
• Models do not make decisions - People do!
• All models, however sophisticated, are only partial representations of the reality
they are meant to reflect

ACTIVITY 2
1. NO 12. NO
2. NO 13. YES
3. YES 14. YES
4. NO 15. NO
5. NO 16. YES
6. YES 17. YES
7. NO 18. NO
8. YES 19. NO
9. YES 20. YES
10. NO
11. YES

149
CHAPTER 3
ACTIVITY 1
1. BORROWED
2. SYSTEMS APPROACH
3. SPECIFC
4. ADRENALIN JUNKIES
5. ANXIETIES
6. FAILURE
7. POSITIVE
8. PERSONAL FEELINGS
9. CULTURE
10. CORPORATE CULTURE
11. MICRO CULTURE
12. COMPARATIVE ADVANTAGE
13. INSTITUTIONAL
14. ANALYTIC APPROACH
15. BENEFITS APPROACH
16. FACILITATOR
17. FUNCTIONAL
18-20
• High-quality technical skills
• Political Sensitive
• Strong problem orientation

ACTIVITY 2
1. NO 9. NO
2. NO 10. NO
3. YES 11. NO
4. YES 12. NO
5. YES 13. NO
6. YES 14. NO
7. NO 15. NO
8. NO 16. YES
17. YES
18. YES
19. YES
20. YES

150
CHAPTER 4
ACTIVITY 1
1. NEGOTIATION
2. PROJECT CHARTER
3. CONFLICT
4. SCHEDULES
5. INTERESTS
6. PROJECT MANAGEMENT
7. PRINCIPLED NEGOTIATION
8. LATERAL RELATIONS
9. INTERFACE
10. PROJECT L.IFE CYCLE
11-13
• High priority projects
• Low priority projects
• Urgent projects or Mandates
14-16
• Goal-oriented
• Authority-based
• Interpersonal
17-20
• Separate the people from the problem
• Focus on interests, not positions
• Before trying to reach an agreement, invent options for mutual gain
• Insist on using objective criteria

ACTIVITY 2
1. FALSE 12. TRUE
2. FALSE 13. TRUE
3. FALSE 14. FALSE
4. TRUE 15. TRUE
5. FALSE 16. FALSE
6. TRUE 17. TRUE
7. FALSE 18. TRUE
8. FALSE 19. TRUE
9. FALSE 20. TRUE
10. FALSE
11. FALSE

151
CHAPTER 5
ACTIVITY 1
1. ENTERPRISE MANAGEMENT
2. SKUNK WORKS
3. OUTSTANDING
4. PRODUCT
5. PROJECT OFFICE
6. HOMES
7. RISK MANAGEMENT
8. RISK MANAGEMNT PLANNING
9. RISK IDENTITY
10. QUALITATIVE RISK ANALYSIS
11. QUALITATIVE RISK ANALYSIS
12. RISK RESPONSE PLANNING
13. RISK MONITORING NAD CONTROL
14. CREATE AND MAINTAIN A RSIK MANAGEMENT DATA BANK
15. TEST ENGINEER
16. SYSTEM ARCHITECT
17. SUPPORT SERVICE MANAGER
18-20
• Risk Identification through Failure Mode
• Effect Analysis

ACTIVITY 2
1. TRUE 18. YES
2. FALSE 19. YES
3. TRUE 20. YES
4. FALSE
5. TRUE
6. TRUE
7. TRUE
8. FALSE
9. YES
10. NO
11. NO
12. YES
13. NO
14. YES
15. NO
16. YES
17. YES

152
CHAPTER 6
ACTIVITY 1
1. OVERVIEW
2. OBJECTIVES OR SCOPE
3. GENERAL APPROACH
4. CONTRACTUAL ASPECTS
5. SCHEDULES
6. WORK STATEMENT
7. RISK MANAGEMENT PLANS
8. HIERARCHICAL PLANNING
9. EFFECTIVENESS
10. DELIVERABLES
11. PROJECT MISSION
12. TOP MANAGEMENT SUPPORT
13. PROJECT ACTION PLAN
14. GAZINTO CHART
15. CONTROL CHART
16. EARNED VALUE
17. BILL OF MATERIALS
18. LEVEL PLANNING
19. PERFORMANCE
20. PROJECT BUDGET

ACTIVITY 2
1. TRUE 12. NO
2. FALSE 13. NO
3. FALSE 14. YES
4. TRUE 15. YES
5. TRUE 16. NO
6. FALSE 17. YES
7. TRUE 18. NO
8. TRUE 19. YES
9. TRUE 20. NO
10. FALSE

11. FALSE

153
CHAPTER 7
ACTIVITY 1
1. MURPHYS LAW
2. SLOP
3. BUDGET PROCESS
4. PARTICIPATIVE FIRM
5. ANYTHING THAT WORKS
6. LIFE CYCLE
7. PARAMETRIC ESTIMATING
8. SCALING
9. ACTUAL
10. COST
11. PERSONAL TIME
12. PROFESSIONAL
13. BUDGET REQUEST
14. OVERHEAD COST
15. BOTTOM UP BUDGETING
16. PROGRAM BUDGETING
17. VARIANCES
18. LEARNING RATE
19. TOP-DOWN BUDGETING
20. BOTTOM UP BUDGETING

ACTIVITY 2
1. FALSE 11. FALSE
2. TRUE 12. YES
3. TRUE 13. NO
4. TRUE 14. NO
5. TRUE 15. YES
6. FALSE 16. YES
7. FALSE 17. YES
8. TRUE 18. NO
9. TRUE 19. YES
10. TRUE 20. YES

154
CHAPTER 8 19-20
ACTIVITY 1
• PERT
1. SCHEDULE • CPM
2. GANNT CHARTS
3. TECHNIQUES
4. ACTION PLAN
5. NETWROK DIAGRAM ACTIVITY 2
6. NETWORK
7. CRITICAL PROJECT TASK 1. TRUE
8. PERT 2. FALSE
9. CPM 3. TRUE
10. ACTIVITY 4. FALSE
5. TRUE
11-14 6. TRUE
7. TRUE
• Even though they may contain a 8. TRUE
great deal of information, they are 9. TRUE
easily understood 10. FALSE
• While they may require frequent 11. YES
updating, they are easy to 12. YES
13. NO
maintain
14. YES
• Gantt charts provide a clear 15. YES
picture of the current state of a 16. YES
project 17. YES
• They are easy to construct 18. YES
19. YES
15-18 20. NO
• It determines the dates on which
tasks may be started - or must be
started if the project is to stay on
schedule
• It illustrates which tasks must be
coordinated to avoid resource
timing conflicts
• It illustrates which tasks may run,
or must be run, in parallel to
achieve the predetermined project
completion date
• It relieves some interpersonal
conflict by clearly showing task
dependencies

155
CHAPTER 9
ACTIVITY 1
1. NORMAL
2. BE PREFFERED
3. FAST TRACKING
4. OPTIMIZING METHODS
5. TREE SEARCH
6. GAME PLANNING
7. MOST POSSIBLE JOBS
8. ARBITRARY
9. MOST SUCESSORS \
10. MOST CRITICAL FOLLOWERS
11. MINIMUM SLACKS FIRST
12. MOST RESOURCES FIRST
13. SHORTEST TASKL FIRST
14. AS LATE AS POSSIBLE
15. AS SOON AS POSSIBLE
16. HEUSTIC METHODS
17. RESOURCE LOADING
18. RESOURCE LIMITED
19. TIME LIMITED
20. FAST TRACKING
ACTIVITY 2
1. TRUE
2. FALSE
3. TRUE
4. TRUE
5. FALSE
6. FALSE
7. TRUE
8. FALSE
9. FALSE
10. YES
11. YES
12. YES
13. NO
14. YES
15. YES
16. NO
17. YES
18. YES
19. NO
20. YES

156
CHAPTER 10
ACTIVITY 1
1. EVALUATION AND CONTROL OF PROJECTS
2. MONITORING
3. PLANNING
4. PLAN, CHARTS AND TABLES
5. CAUSE AND EFFECTS
6. CONTROL PROCESS
7. MONITORING
8-10
• PERFORMANCE CRITERIA, STANDARDS, DATA COLLECTION
PROCEDURES

11-12
• KEY FACTORS to be CONTROLLED

13-15
• TIME (schedule)
• COST (budget)
• SPECIFICATIONS

16-20
• FREQUENCY COUNTS,
• RAW NUMBERS
• SUBJECTIVE NUMERIC RATINGS INDICATORS
• VERBAL MEASURES

ACTIVITY 2
1. TRUE 8. TRUE 15. YES
2. FALSE 9. TRUE 16. NO
3. FALSE 10. FALSE 17. NO
4. TRUE 11. YES 18. YES
5. TRUE 12. YES 19. YES
6. FALSE 13. YES 20. YES
7. TRUE 14. YES

157
CHAPTER 11
ACTIVITY 1
1. METHODOLOGY
2. CRITICAL RATIO
3. EARLY WARNING SYSTEM
4. CONTROL
5. CONTROL CHART
6. CTBERNETIC
7. DISCOVERY DRIVING PLANNING
8. PROCESS REVIEW
9. PERSONNEL REASSIGNMENT
10. GO/ NO GO CONTROLS
11. FINANCIAL RESOURCES CONTROL
12. BALANCE
13. HUMAN RESOUCES ACCOUNTING
14. POST CONTROLS
15. INPUT RESOURCES
16. PHASE GATE
17-20
• The project objectives
• Milestones, checkpoints, and budgets
• The final report on project
• Recommendations for performance and process improvement

ACTIVITY 2
1. FALSE 14. NO
2. TRUE 15. YES
3. TRUE 16. YES
4. TRUE 17. NO
5. FALSE 18. YES
6. TRUE 19. YES
7. TRUE 20. NO
8. FALSE
9. FALSE
10. TRUE
11. YES
12. YES
13. YES

158
CHAPTER 12
ACTIVITY 1
1. ETHICS AUDITS
2. EVALUATE
3. EFFICIENCY
4. CUSTOMER IMPACT/SATISFACTION
5. BUSINESS/DIRECT SUCCESS
6. FUTURE PONTENTIALS
7. DIRECT GOALS
8. ANCILLARY
9. HIDDEN
10. UNWRITTEN
11. SIGNIFICANTLY
12. AUDIT
13. BASELINE
14. EVALUATE
15. RISK ANALYSIS
16. PROJECT AUDIT INITIATION
17. RISK MANAGEMENT
18. CRITICAL MANAGEMENT ISSUES
19. FUTURE PROJECT STATUS
20. AUDIT REPORT PREPARATORY

ACTIVITY 2
1. TRUE 8. TRUE
2. TRUE 9. FALSE
3. FALSE 10. YES
4. TRUE 11. YES
5. FALSE 12. YES
6. TRUE 13. YES
7. FALSE 14. YES
15. NO

159
CHAPTER 13
ACTIVITY 1
1. TERMINATION BY ADDITION
2. BUDGET DECREMENT
3. TERMINATION BY EXTINCTTION
4. TERMINATION BY INTEGRATION
5. TERMINATION MANAGER
6. TERMINATION
7. TERMINATION BY MURDER
8. PROJECT PERFORMANCE
9. ORGANIZATIATIONAL STRUCTURE
10. ADMINISTRATIVE PERFORMANCE
11. POLITICAL TERMINATION
12. POOR PLANNING

13-20
• Personnel
• Manufacturing
• Accounting/finance
• Engineering
• Information systems/software
• Marketing
• Purchasing
• Risk Identification and Management

ACTIVITY 2
1. TRUE 11. FALSE
2. TRUE 12. YES
3. TRUE 13. NO
4. TRUE 14. YES
5. TRUE 15. YES
6. FALSE 16. YES
7. FALSE 17. NO
8. TRUE 18. NO
9. TRUE 19. YES
10. TRUE 20. YES

160
 Introduction

This narrative report contains the learning’s, experiences and insights gained by the

students under BSBA 3HR-3 and some problem arose and how they should have been handled,

also the tasks to be accomplished and attitude of Project Manager, sub teams, Instructor and the

culture of environment of the project in working with Student Study Guide.

Student Study Guide is made to assist students with regards to the topic they will

encounter, it contains of objectives, summary and questions that will help them better understand

the lesson. As part of the curriculum this Student Study Guide is composed to help us know what

the objectives, knowledge are and how the professionalism and growth of Project Management

are being foster.

Project management has its own life cycle which is divided into 3 main sections, Project

Initiation, Project Implementation and Project Termination. This life cycle helped the Project

Manager and sub teams to properly execute the creation of the Student Study Guide, how every

team members did their part and how Project Manager oversees, organized, direct and manage

all the sub teams. This Student Study Guide also gives you some information that will help you

better understand not only the different terminologies in the textbook but also prepared you

whenever you want to be the Project Manager of a certain project.

161
PROJECT INITIATION

At the beginning of this Project the whole class decided who will be the Project Manager,

majority of the class voted Mr. Cedric Bautista. The Project Manager (Cedric Bautista) discuss to

the class what kind of project needs to be accomplished, he explained very carefully the contents

of Student Study Guide and how they will do it. After explaining it to the whole class he divided

them into 5 sub teams with 6-7 members and assigned their leaders, and then he distributed the

parts of Student Study Guide to every sub teams equally and properly. The leaders are the one

who will communicate to their members regarding their assigned task and report or submit their

output to the Project Manager. The Project Manager also discuss about the schedule on when and

where they can submit their output regarding each chapters

The problem arose in this phase are not yet very serious and can be solved immediately.

Those problems are about the numbers of members that a sub teams will have, and what will be

the strategies they need to execute this project properly since they are only allowed to meet

online because of the pandemic we are experiencing now. Regarding with this problem the

Project Manager decide that there will be 6 members for the first 3 groups and 7 for the last 2

groups so it will be equally divided, furthermore, the PM decided to create a group chat that

includes all the sub team’s leaders to disseminate the information and submit the output easier

also we use our time with Sir Benitez our Professor for Project Management to meet and discuss

the development with our project.

In this Phase the students learned the importance of planning a project and that Project

Initiation involves assigning the project teams and setting concrete goals for the project, because

without this it’s difficult to perform the required tasks throughout the project life cycle. Also this

162
phase is the overview of the whole project and how the Project Manager and the sub team’s

access the provided resources needed for the successful completion of the project. The students

also learned that this phase contains all the steps you must take before the project begin and

answer the questions why we are doing this project and what are the outcomes we expected at

the end of this Student Study Guide.

PROJECT IMPLEMENTATION

After planning, evaluating, deciding and assigning the task to sub teams this is now the

phase where they carrying out the activities describe in the Continuing integrative class project.

The sub teams start to work on their assigned task in every chapter and Project Manager makes

sure that the finished tasks are properly done and leaders sent their outputs on time. Our

textbooks are composed 13 chapter and in every chapter the class gained knowledge of what

project management are all about and also how they will execute their project well. Chapter 1 is

about the introduction of what is project management are all about, and its objective is to

monitor and manage the performance, time and cost of a certain project and with project

management every organizations and companies experienced better control, increase in worker

morale and lower cost. In this chapter we learned how to begin our Study Guide by applying the

life cycle that a project have, it is beginning with project initiation then project implementation

and last project termination.

In chapters 2-6 this is where the project initiation begins, strategies, selection and

planning are being discuss. This chapters talked about the steps how to start a project, what are

the roles and attitude a project manager must have during the project, how they can resolved
163
conflicts while doing the tasks and how to establish a set of directions and enough detail to tell

the project team exactly what must be done. The class applied all the learning’s they gain in

these chapters with this Student Study Guide, they planned they project well and the elected

Project Manager learned and knew how he can handled his sub teams and this project well.

In chapters 7-10 talked about how the project manager control his members, how to

budgets resources, making time tables, and monitoring the outputs of a project. Unfortunately,

the class conducted this project amidst pandemic and they are only allowed to do it online

because of quarantine protocols. This students study guide doesn’t need so much resources than

the actual project but this study guide will help the students to prepare themselves for the real

project they are going to encounter. The class applied all the acquired learning’s to this project

with the lead of project manager that created meetings with the leaders to asked for updates

regarding their tasks and always message them on group chat on when and where they can

submit their finished tasks every chapters, also the PM assigned dates on when they can already

do every chapters like for example from Oct 19 -25 they can submit chapters 1and 2 and same

with other chapters. The project manager also make sure that all the members of sub teams are

cooperating, and if there is any problems such as the typhoon Ulysses happened last October that

caused black out at some areas here in metro manila and cause tragic events in Cagayan many

students are affected by this so the project manager made a critical decision to know how he will

manage the remaining chapters because some of his members have no internet connections and

can’t do their work. Since there are only 6 chapters left and their done with this student study

guide he decided to told his sub teams to do their task when their electricity are back also it’s the

week before the continuation of our midterm exam. Because of the being focused on the topic

and understand it well the result of our final exam are good and almost all the class are passed

164
the exams based on what are professor said Sir Basilio Benitez said, also Sir Benitez are very

hands on to remind and guide while doing this project he make sure that we are doing are task

correctly and accurate.

Lastly in chapters 12-13, this is where the sub teams make their evaluation and meetings

of what are the problems arose during the project execution and how they will handle it in the

next project they will encounter. All the learning’s in this chapter are also being applied in the

making of this narrative report and documentation properly and what are the knowledge being

acquired by the project managers and his sub teams.

PROJECT TERMINATION

In this phase the sub teams were now done with their task. After taking the midterm’s

exams and enjoying the long weekend because of university week project decided to continue the

execution of the project before the Christmas break. Now that they are finished the study guide

they meet thru online and discuss the problem arose during the execution of this project and also

the recommendation to the improvements for the next project they will take.

For the final steps the Historian ( Michaella Miranda) is the one who is assigned to write

a narrative report based on what they learned and understands in every chapters while doing this

study guide. Michaella always make sure to attend every class to collect all the information

needed for the narrative report and also she also attend every meetings project manager

scheduled. Historian also asked the sub teams of what they understand with this course and how

they can apply it in the next project also project they will encounter in the future.

165
 After making sure that all parts of study guide are done they find a computer shop where

they can print and hardbound it. The project manager total all the cost they will spend and divide

in to the numbers of class and gets how much they will contribute individually.

166
167
168