Chapter 2

Factors for Project Success or Failure

 Contents
• The Three Parameters of Project Success/Failure.
– Cost Objective.
– Quality/performance/specifications Objective.
– Time Objective.
– Triangle of objectives and trade-off between Cost,
Performance, and time.
• Quality, Cost relationship.
• Time, Cost Relationship.
• Perceptions of Project Success Failure beyond the
Primary Objectives.
 The Three Parameters of Project Success/Failure.

• Manager of a typical project would consider

the task well done if the project finished:
– on time.
– according to its specified performance.
– within its budgeted cost.
– These three objectives (time, performance and
cost) are traditionally the basic parameters for
measuring project success or failure
 The Three Parameters of Project
Success/Failure.
• The primary objectives of cost, performance
and time are clear benchmarks against which
to judge success or failure when (or soon
after) a project is finished and handed over to
the customer.
• The project manager needs to understand
what each of these objectives implies and how
the three can interrelate with each other.
The Three Parameters of Project Success/Failure.
1. Cost Objective:
• Every project should be controlled against detailed cost budgets
to ensure that the expenditure authorized in its contract is not
exceeded.
• Failure to complete work within the authorized budget will
reduce profits and the return on the capital invested.
• Most projects are undertaken with the expectation of benefits,
either on completion or later in their life history.
• There are many projects where there is no initial profit motive
such as pure scientific research programs, some national projects,
and projects undertaken by the charitable organizations.
However, even with no profit motive, strict attention to cost
budgets and financial management is usually vital.
The Three Parameters of Project Success/Failure.
2. Performance (or quality) objective:
• Quality has often been used as an alternative name for the performance
project objective.
• Perceived quality characteristics will depend on the nature of the project or
product, but here are a few general examples:
– performance at least equal to the specification;
– reliability and freedom from malfunction;
– long useful and economic life.
– low operating and maintenance costs;
– comfort and a pleasant impact on the human senses (sight, smell, taste, touch,
hearing).
– environmentally friendly.
• In more recent years organizations, in all market sectors, have embraced
the concept of total quality management (TQM). In TQM a ‘quality culture’
is created throughout the organization, with quality built in to all design
and work processes, and with responsibility for quality shared by all the
staff and workforce from top management downwards.
 The Three Parameters of Project
Success/Failure.
• Time Objective:
• Actual progress has to match or beat planned progress.
• All significant stages of the project must take place no later than
their specified dates, to result in total completion on or before the
planned finish date.
• Late completion of a project will not please the project purchaser or
sponsor, to say the least.
• Consistently failing to keep delivery promises cannot enhance the
contractor’s market reputation.
• A common risk to projects is failure to start work on time. Very long
delays can be caused by procrastination, legal or planning difficulties,
shortage of information, lack of funds or other resources.
 Triangle of objectives and trade- between cost,
performance/quality and specifications and time.
• In the mid 1980s Dr Martin Barnes introduced the first version of
his triangle of objectives
• The purpose of this triangle was to illustrate that the three
primary objectives of cost, time and quality are interrelated.
• Shortly after his triangle’s initial introduction Dr Barnes changed
‘quality’ to ‘performance’ because Quality must not be
compromised where as the project performance after delivered is
measured based to the level of specifications that already
provided by the client.
A management decision to place greater emphasis on achieving
one or two of these objectives must sometimes be made at the
expense of the remaining objectives. Thus project sponsors or
managers sometimes have to decide on giving priority to one or
more of the three objectives in a trade-off decision.
Triangle of objectives and trade- between
cost, performance and time.
 Triangle of objectives and trade- between
cost, performance and time.
• The outcome of a trade-off decision can be indicated by placing a spot within the
triangle boundaries.
• For example, if cost is the greatest consideration, the blob will be placed in the
cost corner. If all the objectives are regarded as equal (balanced), the blob will be
put in the middle of the triangle.
• A project for a charitable organization with very limited funds would have to be
controlled very much with budgets in mind, so that costs must be the project
manager’s chief concern.
• Industries such as aerospace and nuclear power generation have to place high
emphasis on safety and reliability, so performance becomes their most important
objective.
• A project to set up a stand at a trade exhibition, for which the date has been
announced and the venue booked, is so dependent on meeting the time objective
that it might be necessary to accept overspent budgets if that is the only way to
avoid missing the date.
 Triangle of objectives and trade- between
cost, performance and time.
Quality Cost relationship:
• It is a mistake to believe that there can be a simple and
acceptable trade-off between quality and cost.
• Quality must not be compromised or downgraded
because it means “fit for purpose” and “can be achieved
without extra cost”. Therefore, No contractor or project
manager should contemplate a result that is not ‘fit for
purpose’. So, quality is not negotiable.
• For this purpose ‘performance’ or ‘level of specification’
are more appropriate names for this objective because,
in many cases, they are negotiable.
 Triangle of objectives and trade- between cost,
performance and time.
Time/Cost relationship:
• There is usually a direct and very important relationship between time and
money. If the planned timescale is exceeded, the original cost estimates are
almost certain to be overspent. Therefore project delay will result in:
1. Direct cost: Direct labour, and material cost will increase as a result of wages,
and prices increase through the time.
2. Overhead cost: The fixed or overhead costs of management, administration,
accommodation, services and general facilities will be incurred day by day, every
day, regardless of work done, until the project is finished. If the project runs late,
these costs will have to be borne for a longer period than planned. They will then
exceed their budget.
3. Cost of Financing: if the contractor have taken a bank loan, then he has to pay
the interest of this loan. And if he fund the project from his internal resources he
will the opportunity of having an interest if alternatively invested this money as a
bank deposit.
4. Cost Penalties: Some contracts contain a penalty clause which provides the
customer with the sanction of a cost penalty against the contractor for each day
or week by which the contractor fails to meet the contracted delivery obligation.
 Perceptions of Project Success/Failure
beyond the Primary Objectives
• Project stake holders are all those have stake in the project and the
project success or failure shall have impact on them.
• Project success or failure depends on how the project outcome is
perceived by all the stakeholders.
• Stakeholders can be indentified into two categories:
– Primary stakeholders are the Project Owner (Client/Customer), and the
Contractor who executes the Project.
– Secondary stake holders such as (banks, employees, local residents,
government authorities, suppliers, environment groups).
• Fulfilling of the Project Primary Objectives of cost, performance, and
time will lead satisfaction of the Primary stake holders which means:
satisfying the customer (Client), while creating a commercial success
of the contractor.
 Perceptions of Project Success/Failure
beyond the Primary Objectives
• The other categories of Project stakeholders need
to be identified and ranked based on:
1. Their Power and influence on the project (some
stakeholders may have a direct power on the projects,
while others will able only to voice their opinions.
2. The impact of the Project on them.
• Once all the stakeholders have been identified, the
means of communicating and dealing with them
will have to be considered. Consultation will always
be better than confrontation.
 Perceptions of Project Success/Failure
beyond the Primary Objectives
• When the preliminary investigation of
stakeholders’ interests is finished, the triangle
of objectives could, in theory at least, be
supplemented by a more complex matrix of
stakeholders’ perceptions. Figure 2.3 below
shows a theoretical format. This allows the
perceived priorities of all project stakeholders
to be considered.
Perceptions of Project Success/Failure
beyond the Primary Objectives
 Project success/failure regarding benefit
realization
• In most industrial and manufacturing projects the project owner should start
to realize the expected benefits immediately or shortly after the project is
successfully finished and handed over. Shown as Phase 13 Example, A
chemical plant, once successfully commissioned, will be capable of
producing saleable product.
• However, business change and IT projects can be quite different because
their most significant benefits tend to be realized later in the project life
history, during the first months (or even years) of the period shown as Phase
14. This because in IT and management change projects the implementation
may take longer time due to some reasons such as: Change resistance by
employees, employees need long training in the new IT systems.
• It is now recognized that the benefits realization process should start during
early project definition by establishing benchmarks that can be put in place
in the business plan.