The British University in Egypt

Project Management
21ARCH16I
Dr. Ayman Ahmed Ezzat Othman
Ph.D., M.Sc., B.Sc., PMI, SAVE, ASCAAD
Professor of Construction and Project Management
Head of Architectural Engineering Department
The British University In Egypt
5 Project Management Processes (IPECC)
Initiating Process
Planning Process
Executing Process
Controlling Process
Closing Process
2
10 Knowledgeable Areas of Expertise
Scope Management HR Management

Communication
Time Management Management

Procurement
Cost Management
Management

Quality Integration
Management Management

Stakeholder
Risk Management
Management
3
10 Knowledgeable Areas of Expertise
5 Project Management Processes
Defining Your Project
(Scope Management)
 This Lecture
• Project Scope

• Scope Management

• Steps for Project Scope Management

1. Fully Understand the Problem or Opportunity
2. Identify the Optimum Solution
3. Fully Develop the Solution and a Preliminary
Plan
4. Formally launch the project

• Scope Creep 6
7
 Definition
Project scope
The work that must be done in
order to deliver a product, services
or result with the specified feature
and function.
8
 Definition
Scope Management
It is the processes required to
ensure that the project includes
all the work required, and only
the work required, to
complete the project successfully.
9
 As a Project Manager..

You should give the customer

what he/she asked for, no more
and no less.

WHY?
10
 By properly managing the scope of your
project, you help to:
(1) ensure that only the essential work
required for project completion is
included in planning and scheduling,
so you save time and money.

(2) ensure that the final project

delivers the required product, so you
satisfy your customer needs.
11
 Steps for Project
Scope
Management

A solid approach for getting your project off

the ground consists of faithfully following
four basic steps.
12
4 Steps for Project
Scope Management

13
 STEP 1

Fully Understand
the Problem or
Opportunity

14
 (1) Fully Understand the Problem
or Opportunity
• Problems and opportunities
• Identifying true need and its importance.
• Preparing the Project Requirements Document
• Description of the problem or opportunity.
• Impact or effects of the problem.
• Identification of who or what is affected by the problem.
• Impact of ignoring the problem or opportunity.
• Desired outcome.
• Value or benefit associated with achieving desired outcome.
• Strategic fit.
• Interface integration and compatibility issues.
• Uncertainties and unknowns.
• Key assumptions.
• Constraints.
• Environmental considerations.
• Background or supporting information.
15
STEP 2

Identify the
Optimum
Solution

16
 (2) Identify the Optimum Solution
• Why Optimum Solution?
• The process of Generating optimum solutions:
• Do it in a team environment.
• Include subject matter experts and stakeholders as
appropriate.
• Use brainstorming techniques.
• Limit further development to only reasonable alternatives.

• Using Financial Criteria for Project Selection

• Net present value,
• Internal rate of returns
• payback period
• Cash hole

• Using Non-Financial Criteria for Project Selection

• SMART
17
 Financial
Project
Selection
Methods
Non-Financial

18
(3) Using Financial Criteria for Project Selection
Companies that use project selection
and justification methods often
rely on financial calculations as a
comparative tool and as a basic
hurdle for management approval.

19
(3) Using Financial Criteria for Project Selection
Basic financial evaluation models—variously
known as financial analysis, business case,
project financials, or cost/benefit analysis—
often include some combination of these four
basic metrics:
Net Present Value,
Internal Rate Of Return,
Payback Period, and
Cash Hole.
Let’s take a look at each of these metrics in
more detail. 20
(3) Using Financial Criteria for Project Selection
Net present value (NPV)
Calculating a project’s NPV answers
the question: How much money will this
project make (or save)? It’s a
calculation in dollars of the present
value of all future cash flows expected
from a project. It’s roughly equivalent to
the concept of profit. 21
Formula

C Cash Flow (+ve)

T the time of the cash flow
r the discount rate (the rate of return that
could be earned on an investment in the
financial markets with similar risk.)
C0 Initial Cash Outflow (-ve)
 If... It means... Then...

NPV > 0 the investment would the project may be accepted

add value to the firm

NPV < 0 the investment would the project should be rejected

subtract value from
the firm

NPV = 0 the investment would We should be indifferent in the decision

neither gain nor lose whether to accept or reject the project.
value for the firm This project adds no monetary value.
Decision should be based on other
criteria, e.g. strategic positioning or
other factors not explicitly included in
the calculation.
24
https://financeformulas.net/Net_Present_Value.html#calcHeader

25
Example
An investment with an initial cash out flow of $100,000 pays back
$34,432 in the first year, $39,530 in the second year, $39,359 in the
third year, and $32,219 in the fourth year. If the rate of return is 12%,
find the Net Present Value
(3) Using Financial Criteria for Project Selection
Internal rate of return (IRR).

Internal rate of return (IRR) is the

interest rate at which the net 
present value of all the cash flows (both
positive and negative) from a project or
investment equal zero.
27
How to Calculate IRR?

It is just simple calculate “r” in the

NPV formula when NPV = 0

0 = -C  + C /(1+r) + C /(1+r)  + C /(1+r)  + . . . +C /(1+r)

0 1 2 2 3 3 n n
(3) Using Financial Criteria for Project Selection
Payback period
Calculating this metric (also known as
time to money or breakeven point) answers
the question:
When will the original investment (the
amount spent on the project) be recovered
through benefits? It’s typically expressed in
months or years.
29
(3) Using Financial Criteria for Project Selection
Example
Assume a project costs L.E. 1,000,000 to implement
and has annual net cash inflows of L.E. 250,000.
Calculate the payback period?

Payback period= 1,000,000 / 250,000

= 4 years

30
(3) Using Financial Criteria for Project Selection

Cash hole
Calculating the cash hole (also
known as the maximum exposure)
answers the question: What’s the
most we’ll have invested at any
given point in time? It’s expressed
in terms of dollars. 31
 Project Period / Years
1 2 3 4 5
Cash outflow (-ve)
Initial Cost -100 -50
R & D cost -20
Operating Cost -50 -50 -50
Cash Inflow (+ve)
+80 +80 +80
+20 +20 +20
+20 +20 +20
Cash Flow/year -100 -70 +70 +70 +70
Cumulative
Cash Flow
-100
-170 -100 -30 +40

32
 (5) Using Non-Financial Criteria for Project
Selection
• Sacred Cow:
CEO suggestion of a potential project or product.

• The Operating / Competitive necessity

Select projects that is necessary for continued
operation of a group, facility or the firm.

• Comparative Benefits
A selection committee based on their experience to
rank projects as “good”, “fair” and “poor”.
Then “good-plus”, “good-minus”, etc.
33
 (5) Using Non-Financial Criteria for Project
Selection

• Financial models express costs and benefits in

dollars and cents. As mentioned earlier, estimating
certain kinds of benefits in financial terms can be
quite difficult or uncomfortable. Such as

1. Increased output due to enhanced employee satisfaction

2. Improvement in vendor delivery reliability
3. Improvement in workforce safety
4. Increase in user comfort or convenience
5. Reduction in potential legal action against your
organization
34
(5) Using Non-Financial Criteria for Project
Selection

In other situations, accurate data may be

obtainable, but only by conducting expensive
tests, studies, or surveys.
Whenever the process of getting good
financial data is difficult, expensive, or time-
consuming, using a weighted factor scoring
model (decision matrix) may be a reasonable
option for selecting the best alternative
solution. 35
(5) Using Non-Financial Criteria for Project
Selection

The following figure shows a

decision matrix constructed to
determine the preferred model of
automobile. We’ve identified six
attributes that are meaningful to us:
durability, comfort, style, handling,
reliability, and resale.
36
Durability

(.15)
 Problem solving??
As a project manager, you have to make a choice between using the IT department at
your company to develop the website for the project or seek the expertise of external
web developer. Table (1) shows the importance and evaluation criteria developed by
the project team and IT specialists in your company. The importance of each criterion
ranges from 10 to 50 (where 10 = least important and 50 = highest important).
Furthermore, the weight given to each package ranges from 1 to 5 (where 1=least
weight and 5=highest weight). Which alternative is the most appropriate to your
project? Justify your answer.

Table (1) Criteria, Importance and Weights of Selecting Website Developer

Criteria Importance Internal Alternative External
Alternative
Weight Weight
Data Security 45 5 3
Innovative Ideas 50 4 5
Resources availability 40 3 2
Understanding work 35 4 3
environment
Compatibility 20 3 3
Technical Support 30 4 3 38
Options
Importance

Resources availability

Understanding work

Technical Support
Innovative Ideas
Data Security

Compatibility
environment
0.20 0.23 0.18 0.16 0.09 0.14

Internal 5 4 3 4 3 4 3.93
Alternative

1.00 0.92 0.54 0.64 0.27 0.56

39
External 3 5 2 3 3 3 3.28
 STEP 3

Fully Develop the

Solution and a
Preliminary Plan

40
(3) Fully Develop the Solution
Fully
and Develop the Solution and a Preliminary
a Preliminary Plan Plan
A comprehensive Project Definition
Document should include these elements:
• Problem need or opportunity.
• Statement of work and strategy for execution
• Major deliverables.
• Completion criteria.
• Risks, uncertainties, and unknowns.
• Assumptions.
• Preliminary execution plan.
• Project stakeholders.
• Success criteria.
41
 Fully Develop the Solution and a Preliminary Plan

Preliminary Planning: How Much Is Enough?

You’ll find this to be one of the most difficult

points in the life of the project.
You’re about to make a specific project
proposal to management, who will crave
precise estimates. You won’t be able to
provide precise estimates, because you
simply don’t know enough
at this point. 42
 Fully Develop the Solution and a Preliminary Plan

You’ve done a limited amount of analysis, so you can’t

predict an outcome with much confidence.

The schedule you produce in your preliminary planning

should be relatively very simple and not very detailed.
In fact, the level of detail in all of your documentation
should reflect your level of knowledge and certainty.

In most cases, you may wish only to indicate the major

phases of the program and to identify some high-level
milestones. Again, you should try to indicate a
completion date and a cost estimate in terms of ranges,
43
not specifics.
44
 Fully Develop the Solution and a Preliminary Plan

Figuring Out Who Can and Will Do the

Work Problem need or opportunity.
Before presenting your project proposal to
management, you should try to gain some
assurance that the labor and materials
required for the project will be available,
should you get approval. Nothing is worse
than managing a project without the proper
resources.
45
 Fully Develop the Solution and a Preliminary Plan

You should normally begin the process by

searching within your organization and asking a few
key questions:
1. Do we have people with the necessary expertise to do
the work?
2. Are they willing to commit to doing the work, barring
any scheduling problems?
3. Would we achieve a better result by going outside the
company, such as a lower cost, higher quality, or faster
delivery?
4. Are there concerns associated with going outside the
organization, such as confidentiality and safety? 46
 Fully Develop the Solution and a Preliminary Plan

You can also conduct a preliminary make-or-buy analysis,

which helps to determine whether it’s better to obtain a
deliverable or group of deliverables from within the company
or from an outside source. A make-or-buy analysis should
examine this issue from three perspectives:

• By performing direct cost comparisons.

• By considering critical factors.

• By applying appropriate filters or constraints.

47
 Fully Develop the Solution and a Preliminary Plan

1. By performing direct cost comparisons.

Normally cost is the primary consideration in a make-or-
buy analysis. Comparing costs should be fairly
straightforward and the calculations should be relatively
routine.

2. By considering critical factors. There are many factors

beyond simple dollars and cents, such as attributes of the
group providing deliverables, delivery, quality, reliability,
and so forth. These factors can be included in a weighted
factor scoring matrix. This approach may include any
number of different factors
48
 Fully Develop the Solution and a Preliminary Plan

3. By applying appropriate filters or constraints.

Certain conditions might exist that would eliminate a given

choice—make or buy—even if that choice is feasible and/or
cost effective.
Here are some examples of filters or constraints
• Specific legal concerns
• A need for confidentiality
• The need or desire to maintain direct control
• Significant excess capacity currently in your organization
• Outsourcing the function generally unadvisable
49
 Problem solving??
Determining to Make or Buy

The decision to make or buy a product is a

fundamental aspect of management.

In some conditions it is more cost effective to buy—while in

others it makes more sense to create an in-house
solution.
The make-or-buy-analysis should be made in the initial
scope definition to determine if the entire project should
be completed in-house or procured. As the project
evolves, additional make-or-buy decisions are needed.
50
 The initial costs of the solution for the in-
house or procured product must be
considered, but so too must the ongoing
expenses of the solutions.

For example, a company may elect to lease a

piece of equipment. The ongoing expenses
of leasing the piece of equipment should be
weighed against the expected ongoing
expenses of purchasing the equipment and
the monthly costs to maintain, insure, and
manage the equipment.
51
 For example,

Determine whether it is better to create a software

program in-house or buy one from a software
company.

The in-house solution will cost your company $25,000 to

create your own software package with $2,500 per
month to maintain the software.

The development company has a solution that will cost

your company $17,000 to purchase, but the
development company requires a maintenance plan
for each software program installed, which will cost
your company $2,700 per month.
52
The difference between making the software and buying the
software is $8,000.
The difference between supporting the software the
organization has made and allowing the external
company to support their software is only $200 per month.

The $200 per month is divided into the difference between

creating the software internal and buying the software—
which is $8,000 divided by $200—40 months.

If the software is to be replaced within 40

months, the company should buy the
software.

If the software will not be replaced within forty

months, it should build the software. 53
Make the software if the Buy the software if the
project duration is longer project duration is less
than 40 than 40

54
 Problem solving??

In the previous example, If your project is 42

months, which is more feasible: (i) to build your in-
house software or (ii) to buy it? Explain your
answer.

Initial Cost Monthly

expenditure

In-house 25000 2500 *42 130000

Buy option 17000 2700*42 130400

55
56
You are the Construction Manager for a construction
project. You have to determine whether it is feasible to
buy a loader for your project or hire it from a supplier.
The cost of buying the equipment is L.E. 350000 with
monthly maintenance and operation expenditure of L.E.
10000. Alternatively you can hire the equipment for a
L.E. 27500 per month with L.E. 50000 monthly insurance
premium and L.E. 6000 operating cost. How many
months will you hire the equipment before it is better to
buy it? Explain your answer.
Buy Option Hire Option
Initial Cost 350000 0 350000
Monthly 10000 27500+5000+6000= 28500
Expenditure 38500
Number of 350000/28500 = 12 Months
Months
57
 STEP 4

Formally Launch
the Project

58
 STEP 4

Formally Launch
the Project

59
 (4) Formally launch the project
OK, let’s review. So far we’ve:
(1) identified the true need,
(2) determined the best solution to satisfy that need,
(3) described how we’re going to carry out the solution,
(4) developed a sense of how much the solution will cost,
(5) developed a sense of how long it will take to carry it out, and
(6) identified who will be working on it.

At this point, some sort of formal authorization and/or funding approval may be required before
the project can proceed.

• Making a Proposal for Management Approval

• Securing Authorization to Proceed
• Conducting a Team Kickoff Meeting
• The Unspoken Imperative: Evaluate the Political Environment

60
 Formally launch the project

The activities involved in the formal

initiation of project execution depend on the
organization’s specific project procedures.

Project launch activities may include

preparing a business case, making formal
presentations to management, creating and
approving a project charter, and securing
funding to proceed.
61
 Formally launch the project

It also should include team-oriented activities,

such as conducting a kickoff meeting and
establishing mutual expectations between you
and your project team.

62
Scope Creep

63
 The term “Scope Creep” generally refers to
jeopardizing scope of work by uncontrolled changes
that creep towards and into the project scope
causing continuous, but distorted, growth of the
project’s scope.

It is the gradual expansion of project work without

formal acceptance or acknowledgement of their
associated costs, schedule impacts or other effects.

Another definition describes Scope Creep as the

process of adding work and requirements, little by
little, until the final project no longer resembles the
original one and the original cost estimates and
schedule have become meaningless and
unworkable. 64
• Unclear and incomplete project brief
• Inappropriate communication between client and
designer
• Lack of understanding of the Client organisation
• Designers ignore the Client and behave unilaterally
• Lack of presentation and visualisation of design
• Inappropriate feasibility studies
• Initiating value engineering changes
• Project users not involved in the briefing process
• Lack of understanding of different users’ culture and
traditions
• Uncoordinated and incorrect construction documents
Brief information still being given during later design
and construction stages
• Lack of consideration of environmental requirements
Lack of information provision Drivers relating to
regulations and technology advancement
• Lack of regulatory updating
• Changing government regulation and codes.
• Meeting new technology changes
• Lack of communication and coordination between
government authorities and design firms over planning
and approvals.
• Lack of functional, aesthetic, safety requirements and
• construct ability
• Whole project life not considered
• Upgrading project facilities 65
• Upgrading project facilities £
• Eliminate proven poor quality materials and
equipment
• Inadequate available design time
• Restricted design fees
• Unforeseen conditions
• Stakeholders change project requirements
and have second thoughts at later stage
• Project users appear at later stages
• Users exaggerate their needs
• Responding to market demand
• Materials are no longer available in market
or use of
• better/substitute materials
• Lack of design experience

66
Thank You
Dr. Ayman A. E. Othman

67