EUT443 – Engineering Management

Chapter 1

The World of Project Management

EUT443 – Engineering Management

WHAT IS A PROJECT?

EUT443 – Engineering Management

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.

EUT443 – Engineering Management

Characteristics of Projects

• Unique

• Specific Deliverable

• Specific Due Date

EUT443 – Engineering Management

Other Common Characteristics of Projects

• Multidisciplinary

• Complex

• Conflict

• Part of Programs

EUT443 – Engineering Management

PMI Definition

A temporary endeavor undertaken to create a unique product or service. Project Management Institute, 2000

Specific, timely, usually multidisciplinary, and always conflict ridden. Mantel et al.

Series of activities or tasks, specific objectives, defined start and end dates, funding limits, consumes resources, multifunctional. Kerzner

EUT443 – Engineering Management

PROJECT MANAGEMENT VS. GENERAL MANAGEMENT

EUT443 – 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

EUT443 – Engineering Management

WHAT IS MANAGED? THE THREE GOALS OF A PROJECT

EUT443 – Engineering Management

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

EUT443 – Engineering Management

Project Performance Goals

• Outcomes/Quality (deliverables and quality)

– exactly what needs to be accomplished at what quality level

• Time

– doing it quickly or on schedule

• Cost

– doing it cheaply or on budget

Unfortunately, tradeoffs among these goals exist

EUT443 – Engineering Management

Project Performance Goals

Which goal is more important: time, cost, or outcomes?

Who decides which goal is more important?

Why is it important for the Project Manager (PM) to know which goal is more important?

EUT443 – Engineering Management

Examples of Projects and Goals

• What are examples of non-project activities?

• What are some examples of projects you’ve worked on?

– What were the desired deliverables/outcomes?

– What was the project time frame?

– What was the biggest challenge during the project?

– Which goals were more important?

– Were all goals fully met?

EUT443 – Engineering Management

THE LIFE CYCLES OF PROJECTS

EUT443 – Engineering Management

Figure 1-2 The Project Life Cycle

EUT443 – Engineering Management

A Common Project Life Cycle

• Slow Start– manager is selected

– team is assembled

– initial resources are allocated

– work program is organized

• Quick Momentum– work progresses

– momentum builds

• Slow Finish– many loose ends to tie up

EUT443 – Engineering Management

Figure 1-3 An Alternate Project Life Cycle

EUT443 – Engineering Management

Resources & Project Life Cycle

Start

Time

Finish

Resourc

es

Concept Planning Execution Wrap-up

Required Resources

EUT443 – Engineering Management

Implications of Project Life Cycles

• Project life cycle shape will affect the timing of resource and funding needs

• Understanding the general project life cycle may help the stakeholders better understand and accept the current status of the project

• Understanding the general project life cycle may also help the PM make better goal tradeoff decisions at particular times during the project

EUT443 – Engineering Management

SELECTING PROJECTS

EUT443 – Engineering Management

Selecting Projects

Who decides which projects will be undertaken by an organization?

What are some examples of criteria that might be used in selecting projects?

Why should the PM be made aware of why a project was selected?

EUT443 – Engineering Management

Nonnumeric Selection Methods

• Sacred Cow– President’s pet project

• Operating/Competitive Necessity– You must do this project to stay in business

• Product Line Extension– Fill the gap with firm current products

• Comparative Benefits– Examine +/- of each potential project

EUT443 – Engineering Management

Figure 1-4 The Q-Sort Method

EUT443 – Engineering Management

Numeric Selection Methods

• Financial Assessment Methods

– payback period

– discounted cash flow

• Scoring Methods

– unweighted 0-1 factor method

– weighted factor scoring method

EUT443 – Engineering Management

Payback Period

InflowsCash Net Annual

Investment Fixed Initial

EUT443 – Engineering Management

Payback Period Example

Expected project costs are $700,000

Expected returns are $200,000 per year

Payback period = 700,000 ÷ 200,000 = 3.5 years

Revenues would cover investment costs in 3.5 yrs.

EUT443 – Engineering Management

Discounted Cash Flow

= +

+=

n

tt

t

k

F

1

0)1(

I- (project) NPV

where

I0 = the initial investment

Ft = the net cash flow in period t

k = the required rate of return or hurdle rate

EUT443 – Engineering Management

Discounted Cash Flow

Initial investment I0 = $700,000;

4-year annual cash flow Ft = $200,000;

required rate of return k = 15%

NPV = -700,000 + 200,000/(1.15)1

+ 200,000/(1.15)2 + 200,000/(1.15)3

+ 200,000/(1.15)4

NPV = -700,000 + 173,913 + 151,229 + 131,503

+ 114,351

NPV = $-129,004

Should they do this project?

EUT443 – Engineering Management

The Weighted Scoring Model

=

=

n

j

jiji wsS1

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

EUT443 – Engineering Management30

Factor Scoring Method

Example: 3 projects; 4 factors; 1-5 scale (5=best)

Factor ProjectA ProjectB ProjectC

Cost 2 4 3

Risk 4 3 1

Suitable 4 2 5

Skills 2 2 5

Total Score: 12 11 14

EUT443 – Engineering Management

Weighted Factor Scoring Method

Example: 3 projects; 4 factors; 1-5 scale (5=best)

Factor Wt. ProjectA ProjectB ProjectC

Cost .4 2 4 3

Risk .3 4 3 1

Suitable .1 4 2 5

Skills .2 2 2 5

Wtd. Score: 2.8 3.1 3.0

EUT443 – Engineering Management

Confronting Uncertainty – The Management of Risk

EUT443 – Engineering Management

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

EUT443 – Engineering Management

Can uncertainty surrounding projects ever be eliminated?

• No, but it can be managed

EUT443 – Engineering Management

Risk Analysis

• Estimate probabilities or distributions associated with key parameters

• Develop analytic or simulation model

• Analyze distribution of outcomes generated by model

EUT443 – Engineering Management

THE PROJECT PORTFOLIO PROCESS

EUT443 – Engineering Management

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

EUT443 – Engineering Management

The Aggregate Project Plan

RnDProjects

EUT443 – Engineering Management

Copyright

Copyright 2005200520052005 John Wiley & Sons, Inc.

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