Project Management Toolbox UP1 Case studies

Capital Industries (Estimating)

In the summer of 2006, Capital Industries undertook a material development program to see if a hard
plastic bumper could be developed for medium-size cars. By January 2007, Project Bumper (as it was
called by management) had developed a material that endured all preliminary laboratory testing. One
more step was required before full-scale laboratory testing: a three- dimensional stress analysis on
bumper impact collisions. The decision to perform the stress analysis was the result of a concern on
the part of the technical community that the bumper might not perform correctly under certain
conditions. The cost of the analysis would require corporate funding over and above the original
estimates. Since the current costs were identical to what was budgeted, the additional funding was a
necessity. Frank Allen, the project engineer in the Bumper Project Office, was assigned control of the
stress analysis. Frank met with the functional manager of the engineering analysis section to discuss
the assignment of personnel to the task. Functional manager: “I’m going to assign Paul Troy to this
project. He’s a new man with a Ph.D. in structural analysis. I’m sure he’ll do well.” Frank Allen: “This is
a priority project. We need seasoned veterans, not new people, regardless of whether or not they have
Ph.D.’s. Why not use some other project as a testing ground for your new employee?” Functional
manager: “You project people must accept part of the responsibility for on-the-job training. I might
agree with you if we were talking about blue-collar workers on an assembly line. But this is a college
graduate, coming to us with a good technical background.” Frank Allen: “He may have a good
background, but he has no experience. He needs supervision. This is a one-man task. The responsibility
will be yours if he fouls up.” Functional manager: “I’ve already given him our book for cost estimates.
I’m sure he’ll do fine. I’ll keep in close communication with him during the project.” Frank Allen met
with Paul Troy to get an estimate for the job.

Paul Troy: “I estimate that 800 hours will be required.” Frank Allen: “Your estimate seems low. Most
three-dimensional analyses require at least 1,000 hours. Why is your number so low?” Paul Troy:
“Three-dimensional analysis? I thought that it would be a two-dimensional analysis. But no difference;
the procedures are the same. I can handle it.” Frank Allen: “Okay, I’ll give you 1,100 hours. But if you
overrun it, we’ll both be sorry.” Frank Allen followed the project closely. By the time the costs were 50
percent completed, performance was only 40 percent. A cost overrun seemed inevitable. The
functional manager still asserted that he was tracking the job and that the difficulties were a result of
the new material properties. His section had never worked with materials like these before. Six months
later, Troy announced that the work would be completed in one week, two months later than planned.
The two-month delay caused major problems in facility and equipment utilization. Project Bumper was
still paying for employees who were waiting to begin full-scale testing. On Monday mornings, the
project office would receive the weekly labor monitor report for the previous week. This week the
report indicated that the publications and graphics art department had spent over 200 man-hours last
week in preparation of the final report. Frank Allen was furious. He called a meeting with Paul Troy
and the functional manager.

Frank Allen: “Who told you to prepare a formal report? All we wanted was a go or no-go decision as to
structural failure.” Paul Troy: “I don’t turn in any work unless it’s professional. This report will be
documented as a masterpiece.” Frank Allen: “Your 50 percent cost overrun will also be a masterpiece.
I guess your estimating was a little off!” Paul Troy: “Well, this was the first time that I had performed
a three-dimensional stress analysis. And what’s the big deal? I got the job done, didn’t I?”

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Project Management Toolbox UP1 Case studies

Questions

 Who is the best person qualified to make functional estimates?

 Can this task be delegated? Should the estimating of this task have been delegated?
 Should Paul Troy have been delegated the responsibility for the estimate?
 Should Frank Allen have sensed a communication problem between Paul Troy and the
functional manager?
 Should Frank Allen have tracked the project more closely because of the above-mentioned
problems?
 Does Paul Troy appear to realize that there are also time and cost constraints on a project?

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Project Management Toolbox UP1 Case studies

Project Overrun (Execution)

The Green Company production project was completed three months behind schedule and at a cost
overrun of approximately 60 percent. Following submittal of the final report, Phil Graham, the director
of project management, called a meeting to discuss the problems encountered on the project.

Phil Graham: “We’re not here to point the finger at anyone. We’re here to analyze what went wrong
and to see if we can develop any policies and/or procedures that will prevent this from happening in
the future. What went wrong?”

Project manager: “When we accepted the contract, Green did not have a fixed delivery schedule for
us to go by because they weren’t sure when their new production plant would be ready to begin
production activities. So, we estimated 3,000 units per month for months 5 through 12 of the project.
When Green found that the production plant would be available two months ahead of schedule, they
asked us to accelerate our production activities. So, we put all of our production people on overtime
in order to satisfy their schedule. This was our mistake, because we accepted a fixed delivery date and
budget before we understood everything.”

Functional manager: “Our problem was that the customer could not provide us with a fixed set of
specifications, because the final set of specifications depended on OSHA and EPA requirements, which
could not be confirmed until initial testing of the new plant. Our people, therefore, were asked to
commit to man-hours before specifications could be reviewed.

“Six months after project go-ahead, Green Company issued the final specifications. We had to remake
6,000 production units because they did not live up to the new specifications.”

Project manager: “The customer was willing to pay for the remake units. This was established in the
contract. Unfortunately, our contract people didn’t tell me that we were still liable for the penalty
payments if we didn’t adhere to the original schedule.”

Phil Graham: “Don’t you feel that misinterpretation of the terms and conditions is your responsibility?”

Project manager: “I guess I’ll have to take some of the blame.”

Functional manager: “We need specific documentation on what to do in case of specification changes.
I don’t think that our people realize that user approval of specification is not a contract agreed to in
blood. Specifications can change, even in the middle of a project. Our people must understand that, as
well as the necessary procedures for implementing change.”

Phil Graham: “I’ve heard that the functional employees on the assembly line are grumbling about the
Green Project. What’s their gripe?”

Functional manager: “We were directed to cut out all overtime on all projects. But when the Green
Project got into trouble, overtime became a way of life. For nine months, the functional employees on
the Green Project had as much overtime as they wanted. This made the functional employees on other
projects very unhappy.

“To make matters worse, the functional employees got used to a big take-home paycheck and started
living beyond their means. When the project ended, so did their overtime. Now they claim that we
should give them the opportunity for more overtime. Everybody hates us.”

Phil Graham: “Well, now we know the causes of the problem. Any recommendations for cures and
future prevention activities?”

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Project Management Toolbox UP1 Case studies

Questions

 What are the critical issues in the case?

 How should they be resolved?

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Project Management Toolbox UP1 Case studies

Packer Telecom (Risk management)

Background

The rapid growth of the telecom industry made it apparent to Packer’s executives that risk
management must be performed on all development projects. If Packer was late in the introduction of
a new product, then market share would be lost. Furthermore, Packer could lose valuable
opportunities to partner with other companies if Packer was regarded as being behind the learning
curve with regard to new product development. Another problem facing Packer was the amount of
money being committed to R&D. Typical companies spend 8 to 10 percent of earnings on R&D,
whereas in the telecom industry, the number may be as high as 15 to 18 percent. Packer was spending
20 percent on R&D, and only a small percentage of the projects that started out in the conceptual
phase ever reached the commercialization phase, where Packer could expect to recover its R&D costs.
Management attributed the problem to a lack of effective risk management.

The meeting

PM: “I have spent a great deal of time trying to benchmark best practices in risk management. I was
amazed to find that most companies are in the same boat as us, with very little knowledge in risk
management. From the limited results I have found from other companies, I have been able to develop
a risk management template for us to use.”

Sponsor: “I’ve read over your report and looked at your templates. You have words and expressions in
the templates that we don’t use here at Packer. This concerns me greatly. Do we have to change the
way we manage projects to use these templates? Are we expected to make major changes to our
existing project management methodology?”

PM: “I was hoping we could use these templates in their existing format. If the other companies are
using these templates, then we should also. These templates also have the same probability
distributions that other companies are using. I consider these facts equivalent to a validation of the
templates.”

Sponsor: “Shouldn’t the templates be tailored to our methodology for managing projects and our life-
cycle phases? These templates may have undergone validation, but not at Packer. The probability
distributions are also based on someone else’s history, not our history. I cannot see anything in your
report that talks about the justification of the probabilities.

“The final problem I have is that the templates are based on history. It is my understanding that risk
management should be forward looking, with an attempt at predicting the possible future outcomes.
I cannot see any of this in your templates.”

PM: “I understand your concerns, but I don’t believe they are a problem. I would prefer to use the next
project as a ‘breakthrough project’ using these templates. This will give us a good basis to validate the
templates.”

Sponsor: “I will need to think about your request. I am not sure that we can use these templates
without some type of risk management training for our employees.”

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Project Management Toolbox UP1 Case studies

Questions

 Can templates be transferred from one company to another, or should tailoring be

mandatory?
 Can probability distributions be transferred from one company to another?
 If not, then how do we develop a probability distribution?
 How do you validate a risk management template?
 Should a risk management template be forward looking?
 Can employees begin using a risk management template without some form of specialized
training?

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