Chapter 1

The World of Project Management

EUT444 – Engineering Management

WHAT IS A PROJECT?

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Why the emphasis on project
management?
• Many tasks do not fit neatly into business-
as-usual.
• Need to assign responsibility and authority
for achievement of organizational goals.

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Management
Characteristics of Projects
• Unique
• Specific Deliverable
• Specific Due Date

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Management
Other Common Characteristics of
Projects
• Multidisciplinary
• Complex
• Conflict
• Part of Programs

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Management
PMI Definition
“A temporary endeavor undertaken to create
a unique product or service”

Project Management Institute, 2000

EUT444 – Engineering
Management
PROJECT MANAGEMENT VS.
GENERAL MANAGEMENT

EUT444 – Engineering Management

Skill Requirements for Effective
Project Management
• Conflict Resolution
• Creativity and Flexibility
• Ability to Adjust to Change
• Good Planning
• Negotiation
– win-win versus win-lose

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Management
 WHAT IS MANAGED? THE
THREE GOALS OF A PROJECT

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Figure 1-1: Performance, Cost,
and Time Project Targets

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Management
THE LIFE CYCLES OF
PROJECTS

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Figure 1-2 The Project Life Cycle

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Management
Figure 1-3 An Alternate Project
Life Cycle

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Management
SELECTING PROJECTS

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Nonnumeric Selection Methods
• The Sacred Cow
• The Operating/Competitive Necessity
• Comparative Benefits

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Management
Figure 1-4 The Q-Sort Method

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Management
Numeric Selection Methods
• Financial Assessment Methods
– payback period
– discounted cash flow
• Scoring Methods
– unweighted 0-1 factor method
– weighted factor scoring method

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Management
Payback Period

Initial Fixed Investment

Annual Net Cash Inflows

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Management
Discounted Cash Flow

n
Ft
NPV (project)  - I 0  
t 1 (1  k )
t

where
I0 = the initial investment
Ft = the net cash flow in period t
k = the required rate of return or hurdle rate
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Management
The Weighted Scoring Model

n
Si   sij w j
j 1

where
Si = the total score of the ith project
sij = the score of the ith project on the jth criterion
wj = the weight or importance of the jth criterion

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Management
Confronting Uncertainty – The
Management of Risk

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What uncertainties are encountered
in project management?
• Time required to complete a project
• Availability of key resources
• Cost of resources
• Timing of solutions to technological
problems
• Actions taken by competitors

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Management
Can uncertainty surrounding
projects ever be eliminated?
• No, but it can be managed

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Management
Risk Analysis
• Estimate probabilities or distributions
associated with key parameters
• Develop analytic or simulation model
• Analyze distribution of outcomes
generated by model

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Management
Risk Analysis with Crystal Ball
• Assumption Cells
• Distribution Gallery
• Forecast Cells

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Management
THE PROJECT PORTFOLIO
PROCESS

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The Project Portfolio Process
• Step 1: Establish a Project Council
• Step 2: Identify Project Categories and Criteria
• Step 3: Collect Project Data
• Step 4: Assess Resource Availability
• Step 5: Reduce the Project and Criteria Set
• Step 6: Prioritize the Projects within Categories
• Step 7: Select the Projects to be Funded and
Held in Reserve
• Step 8: Implement the Process

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Management
The Aggregate Project Plan

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Management
Figure 1-12 An Example
Aggregate Project Plan

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Management
Copyright
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EUT444 – Engineering
Management