fall2005.ppt

Fall 2005Tim Eiler

CE 4101W-01Project Management and Economics

Class Roll

• If you are NOT officially enrolled in this class, see me at break or at end of class tonight

• All students sign the sheet being passed around

• All students obtain and complete an information sheet – turn in at class end

Agenda• Why are we here tonight?

• Expectations – of the class, of me, of you

• Course mechanics – how it all will work

• What is PM and Why is it important?

• Starting out with basic PM

• Homework 1 assigned

• Why are you in this class?

Open PM Discussion

• What questions do you have

about PM?

• For those of you who see themselves as future PM’s…

– Figure out what PM is and isn’t– More importantly, figure out why PM is important to your

businesses and careers

• For those who see themselves as engineers, but not PM’s…

– It’s the soft stuff that’s hard, the hard stuff is easy (Doug Wilde, quoted in Leifer, 1997)

– “Those organizations that take project management seriously as a discipline, as a way of life, are likely to make it into the 21st century. Those that do not are likely to find themselves in good company with dinosaurs.” (Tom Peters)

– In the new economy, all work is project work. (Tom Peters; The Wow Project ;Fast Company, 24, 116)

What’s The Point of This Class?

Why is any business in business?

$ € £ ¥

• Increases profit (margin) by reducing cost/unit output

– Increasing work output by the same resources

– Reducing cost of work done

Why Project Management (PM)?

• Drives Innovation

– In how individual contributor & management (mgmt) work is done

– In product

Why PM?

“The difference between a company and its competitor is the ability to execute. If your competitors are executing better than you are, they’re beating you in the here and now…Execution is the great unaddressed issue in the business world today. Its absence is the

single biggest obstacle to success…” Ram Charan & Larry Bossidy, Execution: The Discipline of Getting Things Done, 2002, Crown Business

• Increases sales– Improved quality

– Ability to be a price leader

– Differentiates your company

Why PM?

In short:

Project Management (PM) strives to achieve success from entropy-driven chaos…

A recent survey of technology projects in the United States by the Project Management Institute reveals some startling percentages:

• Close to half of the projects started were never finished

• 30% were completed but took at least twice as long - some took 5 times as long

• Only 10% of the projects were finished on time

Why Is PM Important?

This course has wide breadth with less topic depth

Secret 1 About This Course


Project Management (PM) isn’t rocket science

Secret 3 About This CourseThis class is yours if you choose to own it.

If you choose not to get involved in it, you only have yourself to blame at the end for not getting something from it.

Being involved means joining in discussions, doing the work, understanding why things are done the way they are

"Learning occurs when people engage in complicated undertakings and find a way to reflect on how they're doing it - and perhaps engage a coach or mentor who has some tools and methods for learning. Those tools are different from answers. Answers are for lazy people who don't want to learn how to use a thinking method to learn how to deal with a practical problem. I have zero respect for trying to find an "answer". There is a profound difference between having an answer and having an approach you can use to deal with a complicated and difficult practical problem. "

Peter Senge


“Simple is Sexy. Complex Sucks.” Rob Thomsett, Radical Project Management

The Story of The Skilcraft Method…

This is an application-level course– Needs critical thinking…

not just formulaic regurgitation

What You Can Expect…

–Process:

•3rd – Apply

•2nd – Practice

•1st – Know

–5th - Explain

–4th - Synthesize

–3rd - Challenge

–2nd - Listen

–1st - Read

This is a

PRACTICAL

Course

Getting new knowledge…

– Interactive, Socratic-style Lecture• Listen

• Ask questions

• Answer questions

• Discuss topics


– Examples

•The right way (we hope) first

•One planned for crucial or difficult topics

•More as you require

Practicing to solidify new knowledge…

– Facilitated Practice

• Use the knowledge you have

• Apply it to new situation

– In class assignment

• Given information

• Do (use a tool, create a document, etc.)

– Group-style work

• Ask questions

• Help each other


• Applying what you know…

– Requires melding of appropriate concepts• Given in the class• “Common sense” and practical experience• Readings

– You WILL NOT always have everything spelled out to you in checklist format

– Sometimes you will have to MAKE ASSUMPTIONS to fill in the missing pieces


• This is a Civil Engineering course

• It will use mostly examples and homework related to Civil Engineering

• It is also a course in Project Management

• It is not exclusive to Civil Engineering

– Not all the examples, homework, etc will be exactly in the CE domain

– You are to focus on PM 1st and CE second…I will not be evaluating you on your CE prowess


I Expect of You…• Do the readings

• Attend class

• Ask questions & challenge the instructor

• Actively participate in discussions & groups

• Speak up when you have a question or concern

• Satisfactorily complete (on time) all writing assignments, examinations, projects, homeworks & exams.

Be An Active

Learner

• Syllabus is posted at course site on WebCT

• You are responsible for printing it if you

want a printout

• You are responsible to keep up with

revision updates

Syllabus Review

• Course Objectives• Teaching Team• Textbook(s)• Computer Use• Homework• Grading• Calendar• Attendance• Academic Honesty• Etc…

Syllabus Review

READ THE SYLLABUS

Syllabus Review - Slide DecksAvailable via WebCT

• You are responsible for printing if you want a printout

• All slides are posted already

Syllabus – Cont’d• Demonstrate knowledge of the concepts and principles of

project management and economics

• Formulate and analyze project management and engineering economics problems

• Use project management and communications software

• Demonstrate knowledge of teamwork and interpersonal skills

• Process group work and the overall functioning of the course

• Demonstrate written and verbal skills

• Actively reflect on and process your learning in the course

• Apply concepts, principles, methods, algorithms, and heuristics

• Teaching Team

– Instructor: Tim Eiler

– Office: CE 147

– Phone 1: 612.327.1553 (cell)

– Phone 2: 952.446.1615 (home)

– Email 1: [email protected]

– Email 2: [email protected]

Syllabus – Cont’d

Rhetoric Consultant: Dave Kmiec

Office:Phone: 612.379.3251, 919.749.5580 (c )

Email: [email protected]

Office Hours: As Needed

Teaching Assistant: Ryan Owen

Office:Phone: 952.239.9349

Email: [email protected]

mailto:[email protected]

mailto:[email protected]

• Program Manager GMAC-RFC, Bloomington, MN (current)

Manage software development program office and staff of project managers and technical resources (6)

• Adjunct Professor of Project Management U of MN, Minneapolis, MN (current)

Manage and deliver project management course content

• Partner RocketScienz Group LLC, Rosemount, MN Graphic Design, Web Development and Hosting, Software Development, Training, PM Consulting

• Release Manager Tellabs, Plymouth, MN Led $300M, 36-month project to develop optical broadband switch

• Manager of Project Management Digi International, Minnetonka, MN Managed project management office/project management staff

• Project Manager ADC Telecommunications, Minnetonka, MN Managed broadband access equipment product development projects

• Project Manager Microwave Network Systems, Houston, TXManaged microwave radio/radio network equipment development projects

• Astronaut Instructor Rockwell Space Operations, Houston, TXProvided multi-discipline technical training to US & foreign astronauts

• PMP (Project Mgmt Professional) Certification Project Mgmt Institute (PMI)• MBA University of Houston• BS ME/IEOR University of Minnesota• CTM Certification Toastmasters International• National Board of Directors Triangle Fraternity

Teaching Team – Tim Eiler

Syllabus – Cont’d• Computer Use

– WebCT

• This course uses WebCT for disseminating and collecting information

• If you don’t know how to use WebCT, contact the department office for further instructions

– MS-Project and Other Tools

• You will be required to perform work using MS-Project and other software applications

• If you do not now have access to MS-Project, please arrange to get it

Syllabus – Cont’dCalendar

– See Syllabus

– Shows week numbers and date of Monday of each week

– Explains lecture material to be covered in class week

– Identifies prep. reading assignments for each class:• PMBOK 2004 edition• Other• Note that reading assignments and/or homework

assignments may not seem 100% synchronous with lecture material

– Identifies work to be assigned in each class

– Identifies work to be submitted in each class (or week)

Academic Honesty– Expectation: All students are expected to complete coursework

responsibilities with fairness and honesty.

– Definition: Scholastic dishonesty means plagiarizing; cheating on assignments or examinations; engaging in unauthorized collaboration on academic work; taking, acquiring, or using test materials without faculty permission; submitting false or incomplete records of academic achievement; acting alone or in cooperation with another to falsify records or to obtain dishonestly grades, honors, awards, or professional endorsement; altering forging , or misusing a University academic record; or fabricating or falsifying data, research procedures, or data analysis.

– Consequences: Scholastic dishonesty WILL result in disciplinary action. Within this course, a student responsible for scholastic dishonesty can be assigned a penalty up to and including an "F" or "N" for the course.

Reasonable Accommodation

If you have a special need that requires any additional reasonable accommodation, I encourage you to please see or contact me at any time

Contract Grading

NOTE: In cases of conflict between these slides and the syllabus, the syllabus will have precedence

To Receive an A To Receive a B To Receive a C

Abide by all Class Policies Abide by all Class Policies Abide by all Class Policies

Actively engage in class discussions – small group and whole class

Actively engage in class discussions – small group and whole class

Actively engage in class discussions – small group

Submit 100% of homework Submit 100% of homework Submit 100% of homework

Receive P grade on Problem/Solution Memo



Receive P grade on Project Proposal



Receive P grade on 100% quizzes and assignments given in class



Receive a cumulative mean score of >= 90% for 2 exams



Receive P grade on Project Plan

Receive P grade on Project Plan

Complete Writing Interview Form

Grading – Cont’d

Assignments

• Exams 3

• Out of class assignments

• In class assignments TBD

• Quizzes TBD

• Mastery Learning – you may, at my discretion only, resubmit homework NLT one week following receipt of graded work

Quality

Quantity

Attendance

Incredibly important in a class of this type

You lose much more than your grade by not coming

I will be flexible with attendance and assignments IFF…

• Form groups of 6

• Each person to collect contact information (phone, email, etc) from ALL 5 other people on the team – also submit your group’s info to me

• Class Group is your first line of defense. Call them 1st to:– Get info you need if you missed class– Get help obtaining or using a tool– Etc.

• Class Group is your team for assignments

• If your group shrinks < 4 people, see me

Class Groups

• The literature says that classes should be broken up to have a break after roughly every 45-50 minutes of class.

• I assume you’re all adults, though, and you can make your own choices and follow through on those choices.

• Do you want 1 or 2 breaks during each class period?

Breaks

General Course Organization

1. PM Planning

2. PM Execution

3. PM Leadership and Ethics

4. Project Closure

Project Management is the application of knowledge, skills, tools, and techniques to project activities to meet project requirements.

It is accomplished through the use of processes such as initiating, planning, executing, controlling, and closing.

(PMBOK, 2000, PMI)

What Is Project Management?

Project Management is the intersection of:

Tools People Systems

(Lewis, James P. 2000. Project Planning, Scheduling & Control, 3rd ed. McGraw‑Hill)

What Employers Want

• Learning to Learn• Listening and Oral Communication• Competence in Reading, Writing, and Computation• Adaptability: Creative Thinking and Problem Solving• Personal Management: Self-Esteem, Goal Setting/Motivation, and

Personal/Career Development• Group Effectiveness: Interpersonal Skills, Negotiation, and Teamwork• Organizational Effectiveness and Leadership

Workplace basics: The skills employers want. 1988. American Society for Training and Development and U.S. Department of Labor.

Why Is PM Important To You?

Employer’s Checklist C: Boeing Company[1]

A good grasp of these engineering fundamentals:

Mathematics (including statistics), Physical & life sciences, Information technology

A good understanding of design & manufacturing processes (i.e. understanding of engineering concepts and practice)

A basic understanding of the context in which engineering is practiced, including:Economics and business practice, History, The environment, Customer and societal needs

A multidisciplinary systems perspective Good communication skills: Written, Verbal, Graphic, Listening High ethical standards An ability to think critically, creatively, and independently & cooperatively Flexibility--an ability and the self-confidence to adapt to rapid/major change Curiosity and a lifelong desire to learn A profound understanding of the importance of teamwork

[1]ASEE Prism, December 1996, p. 11.


Desired Attributes of a Global Engineer

A good grasp of these engineering science fundamentals, including:Mechanics & dynamics, Math (including statistics), Physical & life sciences, Information science/technology

A good understanding of the design & manufacturing process (i.e., understands engineering and industrial perspective)

A multidisciplinary, systems perspective, along with a product focusA basic understanding of the context in which engineering is practiced, including:

Customer & societal needs/concerns, Economics & finance, The environment & its protection, The history of technology & society

Awareness of the boundaries of one’s knowledge, along with an appreciation for other areas of knowledge & their interrelatedness with one’s own expertiseAwareness & appreciation of other cultures & their diversity, distinctiveness, & inherent valueCommitment to teamwork, including extensive experience/understanding with team dynamicsGood communication skills, including written, verbal, graphic, and listeningHigh ethical standards (honesty, sense of personal and social responsibility, fairness, etc)An ability to think both critically and creatively, in both independent and cooperative modes Flexibility: the ability and willingness to adapt to rapid and/or major changeCuriosity and the accompanying drive to learn continuously throughout one’s careerAn ability to impart knowledge to others

[1]A Manifesto for Global Engineering Education, Summary Report of the Engineering Futures Conference, January 22-23, 1997. The Boeing Company & Rensselaer Polytechnic Institute.


• Professional skills – memos, reports, directives, plans, proposals, etc.

• Critical element of engineering and project management– Key to project management effectiveness (90%

rule)– Employers concerned about communication skills

• Writing Intensive Curriculum Requirement

Why Writing In this Course?

Why Writing Intensive?ABET Criteria 2004-2005 Criteria for Accrediting Engineering Programs

– Engineering programs must demonstrate that their graduates have:– (a) ability to apply knowledge of mathematics, science, and engineering– (b) ability to design and conduct experiments, & to analyze and interpret data– (c) ability to design a system, component, or process to meet desired needs– (d) an ability to function on multi-disciplinary teams– (e) an ability to identify, formulate, and solve engineering problems– (f) an understanding of professional and ethical responsibility– (g) an ability to communicate effectively– (h) the broad education necessary to understand the impact of

engineering solutions in a global and societal context– (i) a recognition of the need for, and an ability to engage in life-long learning– (j) a knowledge of contemporary issues– (k) an ability to use the techniques, skills, and modern engineering tools

necessary for engineering practice.Source: ABET. 2004-2005 Criteria for Accrediting Engineering Programs. Accessed June 12, 2004.

available: <http://www.abet.org/images/Criteria/E001%2004-05%20EAC%20Criteria%2011-20-03.pdf>

Meeting the ABET criteria• Interviewing a Practicing Engineer in your Area

– (f) an understanding of professional and ethical responsibility

– (g) an ability to communicate effectively

• Writing and Peer Reviewing a Problem-Solution Memo– (d) an ability to function on multi-disciplinary teams– (f) an understanding of professional and ethical

responsibility– (g) an ability to communicate effectively

• Writing a Proposal in a Collaborative Team– (d) an ability to function on multi-disciplinary teams– (g) an ability to communicate effectively

Writing as a Process– To succeed in these assignments, you will need to

think of writing as a process, not a product.

– Be sure to follow the steps specified in the assignment for the purposes of this course. As you write in your career, you can find ways to adapt this basic process to the needs in your organization.

- Your writing assignments are graded pass/fail

based on whether you:

* follow the writing process * apply the writing process effectively to your subject

• Critical element of project management– economics used in making decisions

• related to engineering projects

– Even if you aren’t the decision maker, you will be a participant in some form

– same principles are used for many other types of decisions

• Life skills – loans, mortgages, etc.

• FE, PE Exam

Why Engineering Economics?

• Is a 3-year payback on your project sufficient to meet company objectives?

• If you have competing repeatable projects with different lives, you can use the lowest common multiple of their project lives as the period of analysis…True or False?

• You just heard through the grapevine that the company is changing the way it handles depreciation expense. You shouldn’t worry about how that will affect how your project is accepted…True or False?

• (FE exam problem) A bank uses the following formula to compound interest in a passbook savings account F = P (1 + i/4)4n. Interest is stated as an annual rate. How are they compounding? (1) Daily, (2) Weekly, (3) Monthly, (4) Quarterly, (5) Annually

Engineering Econ - Examples

Earlier, we saw these definitions:

Project Management is the application of knowledge, skills, tools, and techniques to project activities to meet project requirements. (PMBOK, 2000)

Project management focuses on a project. Management, bringing together and optimizing the resources necessary to successfully complete the project. These resources include the skills, talents, and cooperative efforts of a team of people; facilities, tools and equipment; information, systems and techniques; and money. (Haynes, 1989)

What Is Project Management?

So, if Project Management (PM)

“focuses on a project,”

what is a project?

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

A Guide to the Project Management Body of Knowledge,

Project Management Institute

What Is A Project?

A project is a one-time, multitask job with a definite starting point, definite ending point, a clearly defined scope of work, a budget, and (usually) a temporary team. Lewis (2000).

… a combination of human and nonhuman sourcespulled together in a temporary organization to achievea specified purpose. (Cleland and Kerzner, 1985; Nicholas, 1990)

Characteristics Of A Project?• Temporary, with specific endpoint

• Unique

• Specific Deliverable

• Specific Spending Limit

• (Typically) Involve groups, across organizational lines

• Element of Risk

TRIPLE CONSTRAINT

Defining a Project - Old

Budget = Cost

Schedule = Time

Performance = Itself

Client Acceptance a.k.a Customer Satisfaction

Defining a Project – Current

QUADRUPLE CONSTRAINT

• Science

– Tools-based

– Process-based

– Some things are essentially same across projects & time

• Art

– Relies on Heuristics (Rules of Thumb)

– Many aspects not consistent across time or projects

– Critical decisions require experience basis

Is PM Art, Science, or Both?

Fundamental tools for the new generation of engineers and project managers…

• Basic Thinking (Occam’s Razor)• Systems/ systems thinking/ systems

engineering• Models• Teamwork• Quality

Fundamental Tools

Customer Request

Planning

Execution

Closure

customer internal

PM Process at the High-Level

The PM Process – Detail LevelSOW Project Charter

Requirements Document

WBS

Network Diagram

Duration Estimation Resource Assignment

Schedule Budget

Stakeholder Analysis

Critical Path Assessment

Comm Plan Quality Plan Admin Plan

Project Plan

customer internal

Predictors of Lowered Project Success

• Unrealistic project work plans• Inability to deal early with suspected problem

issues• Technical complexities not well communicated

to team members• Conflict between client expectations and the

state of deliverables• Insufficient involvement on the part of senior

management early in the life cycle

Project Management

Function 1 Function 2 Function n

Other

Project

Program Management

Project 1 Project 2 Project n

Other

Program

Function 1 Function 2 Function n

Other

• Wild enthusiasm• Disillusionment• Total confusion• Search for the guilty• Punishment of the innocent• Praise and honors for the non-participants

It’s only funny because it’s so true…

Project Life Cycle

Feasibility, Planning/Design, Construction, Turnover/Startup

Project Life Cycle

Project Life Cycle

• Early: ensure project is defined correctly to:– Meet the needs of the client– Fit the abilities of the team– Be consistent with goals, objectives, values

of the firm– Speculation

• Middle: keeping project “on” triple constraint targets, negotiating project trade-offs

• End: “Punch list” mentality…ensuring everything is done and done correctly

PM Attention/Methods over PLC

• Planning

• Organizing

• Staffing

• Directing

• Controlling

PM’s Role Over PLC

Planning

• Establish project objectives and performance requirements

• Involve key participants in the process

• Establish well-defined milestones with deadlines

• Build in contingencies to allow for unforeseen problems

• Prepare formal agreements to deal with changes

• Clearly define responsibilities, schedules, and budgets

1Oberlender, G.D. 1993. Project management for engineering and construction. New York: McGraw-Hill.

PM Role Over PLC - Planning

Organizing

• Develop a WBS that divides project into units of work • Create a project organization chart • Clearly define responsibilities, schedules, and budgets

Staffing

• Select team members using work requirements and input from appropriate managers’ input • Orient team members to overall project• Seek each team members’ input to define & agree upon scope, budget, and schedule• Set specific performance expectations with each team member

PM Role Over PLC – Organizing/Staffing

Directing • Coordinate all project components• Display positive attitude• Be available to team members• Investigate potential problems as soon as they arise• Research and allocate necessary resources • Recognize good work of team members & guide necessary improvement

Controlling • Measure project performance using record of planned & completed work • Chart planned and completed milestones chart • Chart monthly project costs• Document agreements, meetings, telephone conversations• Communicate regularly with team members

PM Role Over PLC – Directing/Controlling

The PM Process – Planning DetailSOW Project Charter

Requirements Document

WBS

Network Diagram

Duration Estimation Resource Assignment

Schedule Budget

Stakeholder Analysis

Critical Path Assessment

Comm Plan Quality Plan Admin Plan

Project Plan

customer internal

• SOW – what the customer wants

• Charter – turns the project “ON”, identifies project rules

• Requirements Doc – Details of the customer “wants”

• WBS – breaks work into manageable “packages”

• Stakeholder Analysis – identifies who can impact project

• Network Diagram – identifies dependencies of tasks

• Duration Estimation – estimates task length

• Critical Path Assessment – finds the longest schedule

• Resource Assignment – assigning the right people to tasks

• Schedule – ND + Duration Estimates + Resources

• Communication Plan – who needs to know what, when, how

• Budget – based on estimates, how many & for project

• Quality Plan – how quality of project output will be ensured

• Admin Plan – how mundane aspects of the project will be handled

• Project Plan – single location of most of the above (and more)

The Process Steps - Overview

What it takes to be successful PM• Relentless Planning• Vision• Servant Leadership Approach

• Delegation

• Communication

• Support

• Optimism

• Tenacity

• Balance

• Listening

• Accountability

PM: A Different Way of Thinking Required

• PM (indeed, management in general) requires a different way of thinking that most engineers are taught to use.

• YOU have to figure out how to make the transition .

• The good thing is that the shift is not as difficult as it might first seem.

Where Do Projects Come From?

It is not only all about the customer…

It all starts with the customer!

• Customer’s need

• Internal vs external customer

Where Do Projects Come From?

So how does the customer tell the “do-er” what is needed (and constraints)?

The Statement of Work (SOW)

• What is the purpose of an SOW?

• Is an SOW created before or after charter?

• Who is accountable for creating the SOW?

• What are the “typical” contents of a SOW?

Narrative description of the work/deliverables required for the project contract

Before OR After…depends on type of project and who the “vendor” is

The “customer” who requires the final output

Statement of Work (SOW)

User-level requirements

• Constraints

– Procedural– Methodology– Materials

• Documentation Rules– What documentation is required

• Testing results• Manufacturers’ literature• Samples• Product data• Color selections• Etc.

– When documentation is required– Format required for documentation

SOW

• There is no “official standard version” of an SOW

• An example (paper airplane)


Where Do Projects Come From?1. Every project a company executes either contributes to that company's

success of that company's failure. There is no in-between. A project that "does no harm" uses resources that could be better spent on a project that contributes to the company's objectives

2. All projects are not created equal. Every project contributes differently. In is not in the company's best interests to treat projects equally.

3. There are more good projects than there are resources with which to accomplish them. The corollary is "you can not do them all." Many foolish companies try to do too much and the result of this is poor quality, missed dates, cost overruns, and dissatisfied customers.

4. Not all projects contribute to all corporate objectives. It would be nice if everything we did contributed to every company objective, but the do not and will not. It is acceptable to have a project that does not contribute to one or more company objectives. It is even acceptable from time to time to have a project that actually goes against an objective!

Case Study Used In CourseThe Situation:

The Avanti Motors Corporation of Norcross, GA, has begun production of the Studebaker XUV and needs a new parts warehouse (depot) in the midwest. They’ve chosen Bloomington, MN, have purchased the land, and have solicited bids. Your company (your group) submitted a bid and won.

Further Definition To Be Available In:

• SOW

• Homework Instructions

Case Study Used In Course

Statement Of WorkParts Depot

333 W 78th StBloomington, MN

Avanti Motor Corporation of America

19740 Inglewilde Dr

Norcross, Georgia

Mark Ross, Customer Representative

Case Study Used In Course1. General Requirements

Not Applicable

2. Site work

2.1 Excavation

Flat and compacted to support slab foundation and building

2.2 Landscaping

Turf

3. Concrete

3.1 Footing and Slab

Poured, reinforced concrete

3.2 Parking lot and street edging

Curb and gutter

3.3 Walls

Precast, reinforced concrete

Typical Project Documents• Request For Information (RFI)

A memo requesting specific information from someone

• Transmittal

A memo that introduces/outlines/explains the material being sent (much like a fax cover sheet)

1. Genuinely and sincerely thank at least one person who performs routine cleaning maintenance on a building in which you work or live.

Doing this activity in person is strongly recommended. If you choose to

do this activity other than in person, you must include a copy of any correspondence you use to accomplish it.

You must provide the name of this person and the building in which s/he works. You must also provide me with some way of remotely contacting

this person (phone number or email address preferred).

• Submit via hardcopy

• Submit in next class (no late homework accepted)

• Your signature must be on the submitted version

Homework 1

2. Find 2 examples of SOWs to study and submit as part of the assignment. Answer the following questions:

• What is the expected outcome required by each SOW (describe briefly)?

• Were the formats similar? If not, what were some of the major differences between them?

• Was the content of each similar even if the formats were not? What were some of the similar content items? What were some of the different content items?

• Who (organization) wrote each SOW? Who was the SOW being given to do the work to develop the expected outcome (if you can tell)?

• Submit by hardcopy a copy of each SOW and the answers to the questions.

• Submit in next class (no late homework accepted)

Homework 1

• What is the purpose of an SOW?

• Who is accountable for creating the SOW?

• What are the “typical” contents of a SOW?

Narrative description of the work/deliverables required for the project contract

The “customer” who requires the final output


User-level requirements

• What is a User-Level Requirement?

– I (the customer) want the output to do x

– I (the customer) want the output to be like y

User-Level Requirements

• How is a User-Level Requirement different than other requirements?

– Focus on the need rather than the how need fulfilled

– Often less detailed than requirements used to design/develop output

• Who is accountable for creating project charter?

The Project Charter

– There is a project (formal authorization)

– The project’s output will be “x” (product description)

– The business need fulfilled by the project is “y”

– The project manager will be <name>

– The project manager has accountability & responsibility

– The project will have listed constraints & assumptions

– The Project Sponsor

• What does charter tell the project team & others?

• Break into support groups

• In 10 minutes, create a project charter for the paper airplane project

• If you have a question the answer to which all groups might need to know, please ask it

• Turn in a copy of the charter with all group members’ names affixed

Project Charter

• Detailed description of the external perceptions of the desired outcome of project (triple constraint…transforming into quadruple constraint)

• Can be several “levels” or “layers” of requirements, each with successive levels of detailed (recommended) or tailored to a different audience (be careful).

• One of most reliable methods of ensuring project success is to have (& widely communicate) correctly & fully documented requirements

Requirements

• Need to be clear, complete, reasonably detailed, cohesive, attainable, and testable

• Take care to involve as many of a project’s stakeholders in requirements development as feasible. Anyone who could later derail the project should her/his expectations not be met should be included as a customer here.

• Quality Function Deployment (QFD) is a good tool for requirements development if you have available time to use it

Requirements

• Will:

• Shall:

• Should:

Requirements Semantics

Used to indicate a factual statement or assumption

“This class will end” “This class will end on time”

Used to direct mandatory action

“The student shall complete the homework”

Synonyms include must, required to, necessary to

Used to request non-mandatory work

“The student should purchase supplementary reading materials”

• Your design/build firm has been contracted to act as general contractor design and install a new parts depot at 333 W 78th St in Bloomington, MN for the Avanti Corporation of America. The company is based in Norcross, GA and has just launched the Studebaker XUV into the American automobile market. It also currently sells two models of the Avanti sports car originally introduced in 1963 by the original Studebaker Corporation of South Bend, IN.

• At the initial meeting with your team, the client told you that it already has chosen the site.

• The rough particulars of site and building are:

• Facility to be used for automobile parts (14,000 parts) warehousing & some light assembly

• 100,000 total square feet – 200’ x 500’ (lot size is 500’ x 1000’, details as attached)

• One story

• Steel frame

• Concrete pre-fabricated exterior

• Steel stud & drywall interior

• Two closed offices (each 15’ x 15’)

• One conference room (20’ x 20’)

• Lunch room (20’ x 20’)

• Restrooms (1 each for male and female)

• Loading dock (2 delivery stalls)

• Air conditioning & heating plant required to support entire space

• Security & fire suppression systems required to support entire space

• On-site parking required – 2 visitor spaces, 5 employee spaces


• Break into support groups

• In 5 minutes, create as detailed an SOW as possible for building a 3-car residential garage


Project Evaluation Criteria• These are the measurements which the Project

Manager (and hopefully others) will use to judge whether the project has been successful:

– Along the way

– When the project is complete

• Why is this important? If you have:

– a car that gets 30 mpg, – 10 gallons of gas in the car– $50 for gas @ $2/gallon– One day

How far could you go?

To what city could you get?

Project Evaluation Criteria• To be manageable, criteria must originate from

project goals & objectives (there is an important difference between those concepts, by the way)– Goal– Objective

• From where do the goals and objectives – and then eval criteria - come?

• What manageable targets should the evaluation criteria cover? (hint: TC)

• Do they need to be approved once they’ve been identified? If so, by whom?

• PM gather personnel on the internal team

• Meet to discuss the initial requirements-generation part of the project (a mini-project of its own, for the most part)

– Establish objectives

– Review the process to be followed

– Determine the information to be obtained

– Establish team member data-gathering/other roles to perform

Small Team Kickoff Meeting

• What’s the difference?

– Goal: very broad in scope, only the final outcome measurable

– Objective: a clearly measurable outcome, typically related to triple/quadruple constraint

– Task: A specific, measurable activity required to accomplish the objective(s)

• Determining which is which is often as much art as science

Goals, Objectives (and Tasks)

• Requirements are the detailed description of the external perceptions of the desired outcome of the project (triple constraint…transforming into quadruple constraint)

• Requirements need to be clear, complete, reasonably detailed, cohesive, attainable, and testable

Defining Requirements

• One of the most reliable methods of ensuring project success is to have (and widely communicate) correctly and fully documented requirements

• Take care to involve as many of a project’s stakeholders in requirements development as feasible. Anyone who could later derail the project should her/his expectations not be met should be included as a customer here.

• Quality Function Deployment (QFD)

Defining Requirements

Project Planning

Project Planning is Extremely

ITERATIVE

Why? Because projects are progressively elaborated!

Concept Note: Rolling Wave Planning

• SOW, Requirements Documents, and charter (and other documents) “talk to each other”

• Acceptance Criteria – how will the customer/you know when the project is done?

Reflective Listening

Requirements Analysis/Agreement• Review SOW, specs, drawings for

completeness

• Document issues in Requests For Information (RFI)

• Get customer addendums and do it all again until you’re satisfied

• SOW says: “3.0 No more than three folds”

• Requirements Document (Rdoc) says:

“Requirement 3.0: No more than three folds 3.1 Direction of folds not specified 3.2 That any/all folds must be in parallel direction not specified

3.3 That folds must be all in same direction not specified”

• From where did the Rdoc get the added detail?

Reflective Listening Example

• Differentiated by:– Whether PM coordination is vertical or horizontal– How much authority a PM has

• On a linear continuum from functional to projectized– Functional: silos, staff reports to a mgr, PM reports to a mgr– Matrix: staff report to both mgr and PM

• Weak Matrix• Balanced Matrix• Strong Matrix

– Composite: same as matrix, but there is a “functional” PM group– Projectized: everyone reports to a PM (but…)– Mixed: Some projectized, some matrix

• Important because it affects how a PM manages

Organization Types

Project control

CEO

Engineering Manufacturing Human Resources

Finance

Staff

Staff

Staff

Staff

Staff

Staff

Staff

Staff

Staff

Staff

Staff

Staff

Organization Types - Functional

• Advantages– technological depth– High degree of standardization and control in each

silo

• Drawbacks– lines of communication outside functional department

slow– technological breadth– project rarely given high priority

Organization Types - Functional

Project control

CEO

Engineering Manufacturing Human Resources

Finance

Staff

Staff

Staff

Staff

Staff

Staff

Staff

Staff

Staff

Staff

Staff

Staff

In a Balanced Matrix, one staff is replaced by a PM

In a Composite Matrix, PM has its own functional organization

Organization Types - Matrix

• Advantages– flexibility in way it can interface with parent organization– strong focus on the project itself– contact with functional groups minimizes projectitis– ability to manage fundamental trade-offs across projects

• Drawbacks– violation of the Unity of Command principle– complexity of managing full set of projects– conflict

Organization Types - Matrix

Project control

CEO

PM 1 PM 2 PM 3 PM 4

Staff

Staff

Staff

Staff

Staff

Staff

Staff

Staff

Staff

Staff

Staff

Staff

There is likely to be a separate network of functional managers

A Mixed Organization is a mix of projectized, matrix/functional

Organization Types - Projectized

• Advantages– Effective and efficient for large projects– Resources available as needed– Broad range of specialists– short lines of communication

• Drawbacks– May require high levels of duplication for some specialties – Expensive for small projects– Specialists may have limited technological depth– No “home” for staff at end of project

Organization Types - Projectized

• Project Management Office (PMO)– Not very standard in objective/work– May be responsible for providing support functions (project

coordination, other admin functions), to providing “process ownership” and training, to actually being responsible for project results

• Sometimes known by other names– Project Management Process Group– Project Management Center Of Excellence

Organization Types - PMO

Functional Weak Matrix Balanced Matrix

Strong Matrix Projectized

PM Authority Little/None Limited Low/Moderate Moderate/High High/Total

% assigned personnel full-time on project work

Virtually None 0-25% 15-60% 50-95% 85-100%

PM Role Part-time Part-time Full-time Full-time Full-time

Common PM Titles

Project Coordinator/

Project Leader

Project Coordinator/

Project Leader

Project Manager/ Project Officer

Project Manager/ Program Manager

Project Manager/ Program Manager

PM Admin Staff

Part-time, if any Part-time, if any Part-time, if any Full-time Full-time

Project Management Institute, 2000, PMBOK, p. 19

Organization Types - Summary

• Organization types typically evolve, rather than get “selected”

• Some factors influencing the evolution1. Technology2. Finance and accounting3. Communication4. Responsibility to a project/product5. Coordination6. Customer relations

Organization Types - Selection

• Why would an organization choose functional form over projectized form?

• Why would an organization choose strong matrix from the matrix options?

Organization Types - Selection

• Once the SOW and charter are available, PM begins the process of creating the Project Plan.

• The Project Plan is a document that essentially:

• Helps organize the project planning process

• Helps communicate project planning information

• Puts all project planning information into one, easily-obtained location

• Why is is important to have a PM process?

Project Plan

• Overview– brief description of project– deliverables– milestones– expected profitability and

competitive impact– intended for senior

management

• Objectives– detailed description of

project’s deliverables– project mission statement

• General Approach– technical and managerial

approaches– relationship to other

projects– deviations from standard

practices

• Contractual Aspects– agreements with clients

and third parties– reporting requirements– technical specifications– project review dates

Elements of a Project Plan

Project Plan

• Now that you know what a Project Plan is, is for, and what specific concept areas make up its contents, we’re going to move on.

• Keep those concepts in mind, however, as we move along.

• The tools you learn during the next few weeks feed the Project Plan (they become the contents).

• What is a WBS?

– deliverable-oriented grouping of project components that organizes and defines the total scope of the project

• What is a DELIVERABLE?

Work Breakdown Structure

• What a WBS does:

– Break the work down into smaller, more manageable parts (what does “more manageable” mean?)

– Clearly/visually show the full scope of the project

• Work not in the WBS is OUTSIDE scope of the project

• Aids development/confirmation of common scope definition/understanding


• Break down the project level either by functional area/activity or by timeline area/activity (Gozinto Analysis)

• Can be graphical or numbered text (outline) format

• Each descending level represents an increasingly detailed description of project deliverables


• How to create it:– Break the work down (decompose the work) into smaller, more

manageable parts (Identify deliverables)• Until sub/deliverables are defined in sufficient detail to support mgmt

(can adequate duration & cost estimates be developed?)• Each descending level represents an increasingly detailed description of

project deliverables

• ID tangible, verifiable constituent components of deliverables (to facilitate performance measurement)

• Verify correctness of the decomposition


The following activities must be accomplished to complete an office remodeling project:

Activity Estimated Duration (Days)

Procure Paint 2

Procure New Carpet 5

Procure New Furniture 7

Remove Old Furniture 1

Remove Old Carpet 1

Scrub Walls 1

Paint Walls 2

Install New Carpet 1

Move in New Furniture 1

Create a WBS using this information

WBS Exercise

1.0 Office Remodel Project

1.1 Procure1.1.1 Procure Paint1.1.2 Procure New Carpet

1.1.2.1 Request Bids 1.1.2.2 Purchase

1.1.2.3 Receive Carpet1.1.3 Procure New Furniture

1.2 Prepare1.2.1 Remove Old Furniture1.2.2 Remove Old Carpet1.2.3 Scrub Walls

1.3 Install1.3.1 Paint Walls1.3.2 Install New Carpet1.3.3 Move in New Furniture

WBS Exercise1. Create a WBS

2. Is this (at right) organized by project life cycle phase or by function?

3. What would happen when decomposing deliverables far in the future?

WBS Exercise1.0 Office Remodel Project

1.1 Procure 1.2 Prepare 1.3 Install

1.1.1 Procure

Paint

1.1.3 Procure New

Furniture

1.1.2 Procure New

Carpet

1.1.2.1 Request Bids

1.1.2.2 Purchase

1.1.2.3 Receive Carpet

1.1.1 Remove Old

Furniture

1.1.3 Scrub Walls

1.1.2 Remove Old

Carpet

1.1.1

Paint Walls

1.1.3 Move In New

Furniture

1.1.2 Install New Carpet

• Ok, up to now you’ve learned to:

1. Receive the customer specification2. Officially start the project 3. Get the requirements right4. Figure out who the project stakeholders are and what they want5. Break the work down

• So now what?

Network Diagrams

Put the work into a flow/logical sequence

Identify and assign resources

Create a schedule plan

• How does PM put activities in logical order?

– Activities progressively dependent upon each other

– Start at the project end and work backward

– Start at the project start and work forward

• Purpose

– Gives schematic display of the logic relationships of project activitiesNote: Sequence order – NOT time order

– Helps find which activities most important according to current plan

Network Diagrams

• The Language of Network Diagrams:– Task: specific work items that require resources

– Activity: Synonymous with task, but may also be task groups

– Event: Zero-time, zero-resource state resulting from completion of one or more predecessor activities

– Milestone: Zero-time, zero-resource marking point (significant progress, etc)

– Network: Diagram of nodes & lines (arrows) showing work flow logic

– Path: Series of connected activities between 2 or more nodes

Network Diagrams

• Dependencies– Finish-Start: successor can’t start until predecessor finishes– Finish-Finish: successor cannot finish until predecessor finishes– Start-Start: successor can’t start until predecessor starts– Start-Finish: successor can’t finish until predecessor starts

• AON vs AOA

– AON = Activity on Node (Precedence Diagramming – PDM)

– AOA = Activity on Arrow (Arrow Diagramming – ADM)

Network Diagrams

Network Diagram Example - AON

Network Diagram Example - AOA

• It really ISN’T project planning, but…– It is what is often done in practical settings– It is network diagramming– It leads to the initial stages of scheduling

• How To:– Group (project team) activity– One task per sticky note

• Task name• Task description• Estimated duration (see estimating duration)

– Arrange sticky notes in network diagram form– Draw/string arrows to indicate dependencies– Rearrange, add tasks as required

Sticky Note Project Planning

The following activities must be accomplished to complete an office remodeling project:

Activity Estimated Duration (Days)

Procure Paint 2

Procure New Carpet 5

Procure New Furniture 7

Remove Old Furniture 1

Remove Old Carpet 1

Scrub Walls 1

Paint Walls 2

Install New Carpet 1

Move in New Furniture 1

Network Diagram Example

Estimating Activity Duration• THE WORK:

Tim shall walk across the room, turning off the projector along the way, & then write “The Instructor Is Only As Good As His or Her Students” on the chalkboard

• YOUR TASK:A) Individually estimate (write it) how long (seconds) the work will take

(30 seconds)

B) In Groups, estimate (write it) how long the work will take

(3 minutes)

• How did your individual estimates compare to group estimates?

• Why?

• What strategies did you use to derive the estimates?

• Consistency of estimate…

1. Heuristic: Activity length between 0.5% and 2% of project duration. E.G. If an activity takes a year, each activity should be between a day and a week.

2. Critical activities that fall below this range should be included.

3. If the number of activities is very large (say, above 250), consider dividing the project into subprojects, and individual schedules developed for each. Why?

Estimating Activity Duration

• A next step beyond WBS for process of assignment of resources• Must have a good “catalog” or “database” of resource capabilities• Use functional managers to assign resources

Responsibility Assignment

• CPM = Critical Path Method- Method used to determine the longest time for the project to

take according to plan

• Critical Path– Path that, if delayed, will delay completion of project– The series of activities that determines project duration– The longest path through the project– Change in start or finish time of a critical task will affect

project end

• Critical Time– Time required to complete all activities on the critical path

Network Diagrams - CPM

• Calculate float to determine which activities have the least scheduling flexibility

• Float = amount of time a task may be delayed without impacting project finish date

(a/k/a total slack)

• Visual Method:– Find EVERY path– Add each path– Longest path is critical path

Network Diagrams - CPM

Task Predecessor Duration

a -- 4

b -- 6

c a 3

d b 4

e b 5

f c, d 2

g e 7

CPM Example

Find the critical path and the critical time

Bus Shelter Construction Example

Job Name Duration Resources Predecessor(s)

1 Shelter Slab 2 2 5

2 Shelter Walls 1 1 1

3 Shelter Roof 2 2 2,4

4 Roof Beam 3 2 2

5 Excavation 2 3

6 Curb and Gutter 2 3 5

7 Shelter Seat 1 2 4,6

8 Paint 1 1 7

9 Signwork 1 2 2,6

CPM - Practice

2

20

2

1

1

1 1 0

3 2

0

Bus Shelter ConstructionCritical Path Method Results

ACT NAME DUR RES EARLY LATE FLOAT CURstart

CRITPATH

ST FN ST FN TOT FREE

1 Shelter Slab 2 2 2 4 2 4 0 0 2 YES

2 Shelter Walls1 1 4 5 4 5 0 0 4 YES

3 Shelter Roof2 2 8 10 8 10 0 0 8 YES

4 Roof Beam 3 2 5 8 5 8 0 0 5 YES

5 Excavation 2 3 0 2 0 2 0 0 0 YES

6 Curb andGutter

2 3 2 4 6 8 4 1 2 NO

7 Shelter Seat 1 2 8 9 8 9 0 0 8 YES

8 Paint 1 1 9 10 9 10 0 0 9 YES

9 Signwork 1 2 5 6 9 10 4 4 5 NO

• Since critical path activities cannot be delayed without causing the project to be delayed, it follows that activities not on the critical path CAN be delayed without delaying the project.

Slack

• BUT – only within limits.

• Critical Path activities have 0 slack

• The amount of time a non-critical path task may be delayed without delaying the project end (or internally to the network, a later task) is called

slack or float.

Slack

Task 1 Task 2

Task 3

Sta rt En d

3 3

3

• Calculated by:

LST – EST = LFT – EFT = slack

Where: LST = Latest Start TimeEST = Earliest Start TimeLFT = Latest Finish TimeEFT = Earliest Finish Time

Slack

Task

LST LFT

EFTEST

Displayed by:

0

0

0

5

S

T

A

R

T

Task A Task B

Task C

END

5 6

6

5

5

5

5

6

11

11

11

Forward Pass

Backward Pass

1 5 6 7 8 9 10 112 43

0 4 5 6 7 10 11 121 32Number Convention

• PERT = Program Evaluation Review Technique

• Formula calculation using std dev of project completion date using weighted averages of the durations

• Uses 3 input estimates of duration to counter uncertainty in the individual activity durations (CPM only uses 1)– Low duration (fastest likely)– Medium duration (most likely)– High duration (longest likely)

PERT

• Sometimes called “Method of Moments”

• Network Diagrams often mistakenly called PERT Charts

• Examples of projects in which PERT is good?

PERT

Network Diagrams - PERT

MS Project PERT representation

QuestionsKnowing what you have learned up to this point

in the course:

• What are some likely things that can cause project failure? (Impact, Probability)

• What are some things you can try as PM to overcome the possible, typical causes of project failure?

• What is scheduling?

Bringing together as much information as is known at a given time regarding tasks, tasks sequence, and task durations

Scheduling

• What is the purpose of scheduling?

– Helps PM/Team determine project task order, time requirements, personnel requirements/choices, budget, etc.

– “Whole project” big picture

– Visual representation

– “One Stop” Convenience

– Monitor/Control• What If? Analysis• Risk ID/Assessment

Scheduling

• How is scheduling done? – What do we know already?

– What do we need to find out?

– How should we go about getting that info?

Scheduling

• What do we know already? – Activities Identified (WBS)

– Activities Sequenced (Network diagram)

Scheduling

• What do we need to find out?– Estimates of how long the tasks will take

• How should we go about getting the info?– Personnel assignments– Expert input– Historical information

• Can/should PM do this on her/his own?

Scheduling

• Who/What else could/should be involved?– Impacted by Organizational Structure– Functional Managers?– Expert Staff?– Resource skills database?– Other PMs?– Historical records?

Resource Planning

• At what level should PM’s schedule be?

– Top-down estimation

– Bottom-up estimation

• How do you think the organizational structure of the company affects this effort?

Scheduling

• A next step beyond WBS for process of assignment of resources• Must have a good “catalog” or “database” of resource capabilities• Use functional managers to assign resources

Responsibility Assignment

• Used as a high-level summary

• Typically Zero-Time Events

• Easier to understand for managers Sometimes also called Waterfall Diagram because of the way the milestones tend to “flow” downward over time in the chart

• Milestones may be events “inside” or “outside” schedule

Milestone Chart

Milestone Chart

Class start

Exam 2

Exam 3

Grades posted

Exam 1

Jan Feb Mar MayApr

CE 4101W-01: Spr 2005

Milestone Chart

Class start

Exam 2

Exam 3

Grades posted

Exam 1

Sep Oct Nov JanDec

CE 4101W-01: Fall 2003

9/4

10/7

11/4

12/9

12/19

Labor Day 9/3

• Break into support groups• 5 minutes• Using the course syllabus, create a

milestone chart of the course assignments and exams

Milestone Chart - Example

Gantt Chart• Used to represent the timing of tasks

• Column 1 = task, each additional column is a time period

• Each task on its own row

• Expected time for each task represented by a horizontal bar

< Left end of the bar marks the expected beginning of the task

> Right end of the bar marks the expected end of the task

• Tasks may run sequentially, in parallel, or overlapping

• Milestones (tasks with no time) may be included (represented by diamonds, triangles, etc)

Gantt Schedules

Task 1

Task 3

Task 4

Task 5

Task 2

t1 t2 t3

10/7

Gantt Schedules

Task 1

Task 3

Task 4

Task 5

Task 2

t1 t2 t3

• Project progress is marked by filling in a task bar

75%

10/7

Modified Gantt ChartPossible Modifications:

• Show dependencies (this example)

• Show resource assignments

• Task roll-ups (this example)

Modified Gantt ChartBetter way to do task ID notation

• Draw two network diagrams (AON, AOA)• Determine the critical path (CPM)

Scheduling - Practice

• Draw a Gantt AND a Modified Gantt chartProject Management – Resource Leveling

Task Duration Resources Predecessor

1 7 8

2 5 6

3 4 4 2

4 2 4 1, 3

5 3 6 2

6 1 6 5

Assume resources are transferrable. Determine the smoothest distribution of resources.

Break into support groups…In 10 minutes:

Scheduling Computer Tools• Which ones are there?

• Microsoft Project

• ABT Project Manager Workbench

• Primavera Tools (SureTrak, Expedition, etc)

• MS-Office tools (Exel, Word, Access, etc)

• What are they good for?• Automation of tasks

• Handling large numbers of tasks

• Resource leveling• “Any form of network analysis in which scheduling decisions are

driven by resource management concerns (e.g. limited resource availability or difficult to manage changes in resource levels).”

• Resource Histogram

• AMS RealTime

• Scitor Project Scheduler

• Artemis

• Many Others

• Power to handle complex tasks

• “What if” Analysis

• Example Schedule in Microsoft Project

• Use information from previous exercise

Scheduling Computer Tools

Project Calendars• Project Scheduling Tools have the option of

setting project calendars

– Number of hours/workday

– Number of workdays/week

– Default setting is *usually* 7 8-hour days/week

Project Calendars1. Why is it important to set your calendar for

the correct days of the week, correct hours per day, and correct holidays?

2. How should overtime be factored into the project (tool) calendar?

Theory Of Constraints• What is it (TOC)?

• Real systems must have at least one constraint – a factor that limits the system from getting more of whatever it is trying to achieve

• To achieve more, one must manage the constraint(s)

• TOC models system as a chain. To improve strength of a chain, must identify weakest link & concentrate efforts on strengthening weakest link

Acrobat Document

Theory Of Constraints• TOC Goals:

• Increase system throughput

• Reduce work in process (WIP)

• Decrease costs

• Reduce lost income by achieving schedule prediction 90+% of time

Theory Of ConstraintsProcesses & Tools

Problem-solving tools - the Thinking Processes (TP) – logically/systematically answer 3 questions needed for process of on-going improvement: "What to change?", "To what to change?" & "How to cause the change?";

Daily management tools - taken from Thinking Processes - can be used to significantly improve vital management skills, such as communication, effecting change, team building and empowerment

Proven solutions - created by applying Thinking Processes to specific application areas, such as production (as introduced in The Goal), distribution (Its Not Luck), Marketing/Sales (Its Not Luck), project management, & setting company direction, to name only a few.

Theory Of Constraints• How does it work?

1. Identify the System's constraints.Analyze process to identify task/activity limiting system productivity

2. Decide how to exploit the system's constraints.Modify/redesign task/activity to perform work more effectively/efficiently

3. Subordinate everything else to the step 2 decision. Direct all efforts to improving performance of constraining task/activity &

other tasks/activities directly affecting constraining task/activity

4. Elevate the system's constraint.Add capacity to increase (elevate) output of constraining task/activity

5. If a constraint has been broken in previous step, go back to step 1 but do not allow inertia to cause a new constraintThis sets up a process of ongoing improvement

Theory Of Constraints• How to identify constraints?

1. Look for bottlenecks

2. Can stem from physical constraints or policy constraints

Physical:• Machine, people, facilities, tangible sources • Easier to identify and break

Policy:• Rules, training, measures (RTM) • More difficult to identify and break

• Identify possible constraints in a building project

Critical Chain

• Get realistic Commitments

• Eliminate multi-tasking

• Manage constraints

• Manage Uncertainty

Critical ChainRules:

• Aggressive estimates

Planned pad hierarchy

Parkinson’s Law

Student Syndrome

• Include dependencies other than time in management focus

• No multi-tasking on critical chain

• Relay-runner ethic/system

• Report early finishes

• Aggregate safety (buffers) and manage to the buffers

Planned Pad Hierarchy

Feeder Task 1

Feeder Task 2

C.C. Task 1

C.C. Task 3

Feeding Buffer

C.C. Task 2

C.C. Task 4

Project Buffer

EndAcrobat Document

Communication Planning• What is Project Communication?

Exchanging project-specific information from sender to recipient

Communication is best done when it is:

• Recipient-focused

• Done to serve an end

Communication Planning• What is Communications Planning?

Determining the information and communications needs of the stakeholders:

• Who needs information?

• What information do they need?

• When will they need that information?

• What options do you have to give them the information and which way(s) are best?

Communication Planning• What’s the purpose of it?

• How is it done?

• Why not just do it “on the fly” instead of early/in the project planning stages?

• Does it change with scale (duration, cost, complexity) of project? Other scales?

Communication Planning• Who needs information?

• Do internal stakeholders need more or different information than external stakeholders? Explain…

Communication Planning• What data/information do they need?

• What’s the difference between “data” and “information?”

Communication Planning• Communication Management Plan:

– Methods/procedures for info collection/storage structure

– Details of data/info distribution structure for various data/info types

– Description of data/info to be distributed

– Schedules showing when each type of communication is anticipated to be produced

– Methods for accessing data/info between scheduled communications

– Methods for updating/refining the CMP over time

• Review PMBOK Chapter 10!

Communication Planning• When will they need that information?

– Before “event”

– During “event”

– After “event”

– Periodically vs. ad hoc

Communication Planning• What options do you have to give them the

information and which way(s) are best?

– Reports

– Briefings

– Status meetings

– Email

– Others?

Communication Planning - Example

• Project: Student going to school

Stakeholder 1 2 3 n

Data/Info Needed?

Main Distrib Method(s)?

When Distrib?

How Distrib?

Methods/Procedures for info collection/storage

Methods for data access between scheduled communications

Methods for updating/refining CMP over time

Who is responsible?

When will it be done?

Typical Project Documents• Submittal

A specific artifact/item to be reviewed for approval, archived, etc.

• Transmittal

A memo that outlines/explains submittals included with the transmittal and the actions required by the recipient

Typical Project Documents• There are no world-wide formats for these

documents.

• Formats will be:

– Company specific

– Recipient specific

– Industry specific

– Project specific

Procurement Planning• Is it likely that you will be able to do all the

work with internal resources?

• How do you decide what to outsource?

• How do you procure the outsourced work?

Procurement Planning• Procurement Management Plan: Describes

how procurement process – from solicitation planning through contract closeout – will be managed

• Types of contracts to be used

• If independent estimates to be used, who will prepare them and when

• If there is a procurement organization in your company, what actions PM/Project Team can take independently

• Where procurement documents can be found

• How each contractor will be managed

• How procurement processes will coordinate with other PM processes

• Includes your SOW to the contractor

Make or Buy Analysis• Expert Judgment

Do you have the right resources for the job?

Do you have the right skills to do a quality job?

Experts might include: internal experts, other units, consultants, professional and technical associations, other industry groups, etc.

• Opportunity Cost Analysis & Cost/Benefit Analysis

Can we use internal resources more productively than this job?

• Lease vs. Buy Analysis

Opportunity Cost• What is it?

• Why is important?

• A well run business or project doesn’t have a great deal of excess (i.e. unallocated) cash/other resources lying around

• Projects compete with one another for resources

• Goal is to optimize use of limited supply

• Requires making trade-offs

The cost of making a trade-off

Cost/Benefit Analysis• Cost Benefit Analysis is a tool to evaluate options

Is it worth spending $5000 to crash a schedule and gain 5 days? Is it worth dropping a product feature from this software release in

order to be able to achieve the baseline schedule release or would it be better to keep the feature and slip the scheduled release by 20 days?

• You first need to have the costs and benefits Costs and benefits must be in a quantifiable unit (dollars,

production units gained or lost, days, etc.) Costs do NOT have to be in equivalent units to Benefits

• You also need to know the acceptable target tradeoff range(s) if there are absolute values (otherwise, rely on relative comparisons)

I once caught a fish this big |

Buy vs. Lease

Lessee: The one receiving the capital

Lessor: The one who owns the capital

A lease “acts like” an amortized purchase – for both lessor and lessee

Why lease instead of buying?

• Avoid technical obsolescence

• Tax advantages

• Asset/payment flexibility

Why buy instead of leasing?

• Possibility of salvage value + value obtained from asset use being greater than amortized cost

• Tax advantages

Main Types of Contract• Firm Fixed Price

Buyer pays seller a set amount regardless of seller costs

• Fixed Price Incentive FeeBuyer pays seller a set amount & seller can earn additional fee if

performance criteria are met

• Cost Plus Fixed FeeBuyer reimburses seller costs plus a fixed profit fee

• Cost Plus Incentive FeeBuyer reimburses seller costs & seller earns profit if performance

criteria met

• Time & Material (T&M)

“Hybrid” of cost reimbursement and fixed fee

• Purchase Order

• Who has the risks in each type?

Solicitation1. Send bid/proposal request documents to prospective

vendors

o Presumes you have a sufficient list of applicable vendors

o Distribution may be direct, via bidder conference, via advertising, etc.

o Bid & Quote used when selection based on price

o Proposal used when other than price (tech skills, etc) paramount

o Request for Bid (RFB), Invitation to Bid (IFB)

o Request for Quote (RFQ), Invitation to Quote (IFQ)

o Request for Proposal (RFP), Invitation for Proposal (IFP)

o Include SOW, description of required response/response format, explanation of pro forma contract terms and agreement structure

Solicitation2. Obtain bids/proposals from sellers

3. Evaluate bids/proposals & cycle thru SOW updates

4. Select bidder (based on criteria), negotiate, & award contract

Contracts• You are the owner of a small excavation

contracting business that has a multi-year T&M contract with a customer. The contract specifies the rate of pay for personnel types on the project.

1. Qualify the risks you face related to management of the contract.

2. Qualify the risks the buyer faces.

• What does the word “quality” mean?– Features and functionality

• Scope requirements filled and working properly• Conformance to specification or design

– Fitness for use• Degree of excellence at an acceptable price• Control of variability at an acceptable cost• How well the product fits patterns of user preferences

• Why is it important for the PM to focus on quality?– Driver of customer satisfaction: Triple/Quadruple Constraint

• Time (schedule)• Cost (budget)

• Performance (specifications/quality)

Quality For Project Managers

• What is the cost of quality?

Prevention costs – costs incurred to prevent failure and minimize

appraisal costs

Appraisal costs – discovering the condition of the process or

product

Internal Failure costs – costs due to raw materials, WIP, or finished goods not being

manufactured right 1st time

External Failure costs – costs from customer discovering a lack of

product quality


• Management’s Role:

Ask questions:o What is next?o What can I do?

Preach Teach Be an example Provide resources Seek never-ending improvement Follow Deming’s 14 points

• It is the PM’s role to be a leader of quality in your projects


• Quality Systems

TQM (Kaizen/Continuous Improvement)

Six Sigma

ISO standards

Quality Circles

Minnesota Quality Award Baldrige Award Deming Prize

Quality Systems You Can Use

• TQM (Total Quality Management)

– Objective: Improve quality by analyzing the whole “production process” using quantitative and qualitative information

– Method:• Clear, visible leadership from top• Ensure that the system is ‘known’• Use statistical measurements to monitor the system• Use statistical measurements to make changes only when needed and

relatively predictable• Use statistical measurements to monitor the changes

(PLAN, DO, CHECK, ANALYZE)

Total Quality Management

1. Create constancy of purpose toward improvement2. Adopt the new philosophy3. Cease dependence on inspection.4. Minimize total costs5. Constant and perpetual improvement6. Institute training7. Institute leadership8. Drive out fear9. Break down internal barriers10. Eliminate slogans, targets etc.11. Eliminate management by objective12. Remove barriers 13. Institute program of education and self-improvement.14. Everybody’s job is to accomplish the transition.

- W. Edwards Deming

Fourteen Points of Quality

1. Lack of constancy of purpose to improve products & services by providing resources for long-term planning, for research, & for training

2. An emphasis on short-term profits & quarterly dividend

3. Individual performance evaluations through merit ratings & annual reviews

4. Managers who are highly mobile & hop from company to company

5. Management use of numbers & figures that are visible & available with no thought of info that may be needed, but unknown or hidden

6. Excessive medical costs

7. Excessive legal liability costs, which can be swelled by lawyers who work on “contingency” fees

Deming’s 7 Deadly Diseases

Four Basic Principles

1. Develop a Strong Customer Focus

2. Continually Improve All ProcessesIdentify ThemImprove Them (Plan, Do Check, Act)

3. Involve Employees

4. Mobilize Both Data & Team Knowledge to Improve Decision Making

(The Memory Jogger: A Pocket Guide of Tools for Continuous Improvement and Effective Planning)

Continuous Quality Improvement

• Six Sigma – Objective:

• A comprehensive and flexible system for achieving, sustaining, and maximizing business success. Six Sigma is uniquely driven by close understanding of customer needs, disciplined use of facts, data, and statistical analysis, and diligent attention to managing, improving, and reinventing business processes.

• Encompasses a broad array of business best practices and skills (some advanced, some common sense) that are essential ingredients for success and growth.

• Applicable to all types of organizations• As much about people excellence as technical excellence

– Method:• There are many “Six Sigma Ways.” – there is no fixed prescription• Sort of a culmination/combination of various other systems

Six Sigma

1. A genuine focus on the customer

2. Data- and fact-driven management

3. Process focus, management & improvement as an engine for growth & success

4. Proactive management

5. Boundaryless collaboration

6. A drive for perfection, and yet a tolerance for failure

Six Sigma – Essential Themes

Mc-Graw Hill, 2000

Six Sigma

1. Identify core processes & key customers

2. Define customer Requirements

3. Measure current Performance

4. Prioritize, analyze & implement improvements

5. Expand & integrate six sigma system

DMAIC: Define, Measure, Analyze, Improve, Control

Six Sigma Roadmap

•Continuous Improvement

•Process Design/Redesign

•Analysis of Variance

•Balanced Scorecard

•Voice of the Customer

•Creative Thinking

•Design of Experiments

•Process Management

•Statistical Process Control

Six Sigma – Methods/Tools

– ISO standards (900x, 1400x, etc.)

– Objective: • Improve processes & reduce process variation

– Method:• “Tell me what you’re going to do. Do it. Show me that you did it.”• Set requirements for process performance in various operational areas• Company establishes process to comply with the ISO specifications• Registrar evaluates company ISO system

• ISO system meets/exceeds ISO standard, company is “certified”/”registered”

• ISO system does not meet/exceed, company goes back to previous step

• Company uses periodic audits to validate process validity and adherence

• Internal

• External (registrar)

• Failures found during audits must be dealt with via a process established as part of the company’s ISO system

ISO Standards

– Objective:

• Improve product quality by soliciting group input from workers (and sometimes customers and/or users) in order to improve product process, features, etc.

– Method:

• Bring teams together to brainstorm solutions to a problem, then implement the ones that seem logical, are generally desirable, and are economically feasible and see what happens.

Quality Circles

• Quality Tools Inspection Benchmarking Process flowcharting Run chart Histogram Scatter diagram Ishikawa Diagram Pareto analysis Fault-tree analysis/FMEA Control Charts (X-bar, R) Auditing Simulation (Monte Carlo, What-if) QFD

Quality Tools

Procurement Planning• Is it likely that you will be able to do all the

work with internal resources?

• How do you decide what to outsource?

• How do you procure the outsourced work?

Procurement Planning• Procurement Management Plan: Describes

how procurement process – from solicitation planning through contract closeout – will be managed

• Types of contracts to be used

• If independent estimates to be used, who will prepare them and when

• If there is a procurement organization in your company, what actions PM/Project Team can take independently

• Where procurement documents can be found

• How each contractor will be managed

• How procurement processes will coordinate with other PM processes

• Includes your SOW to the contractor

Make or Buy Analysis• Expert Judgment

Do you have the right resources for the job?

Do you have the right skills to do a quality job?

Experts might include: internal experts, other units, consultants, professional and technical associations, other industry groups, etc.

• Opportunity Cost Analysis & Cost/Benefit Analysis

Can we use internal resources more productively than this job?

• Lease vs. Buy Analysis

Opportunity Cost• What is it?


• A well run business or project doesn’t have a great deal of excess (i.e. unallocated) cash/other resources lying around

• Projects compete with one another for resources

• Goal is to optimize use of limited supply

• Requires making trade-offs

The cost of making a trade-off

Cost/Benefit Analysis• Cost Benefit Analysis is a tool to evaluate options

Is it worth spending $5000 to crash a schedule and gain 5 days? Is it worth dropping a product feature from this software release in

order to be able to achieve the baseline schedule release or would it be better to keep the feature and slip the scheduled release by 20 days?

• You first need to have the costs and benefits Costs and benefits must be in a quantifiable unit (dollars,

production units gained or lost, days, etc.) Costs do NOT have to be in equivalent units to Benefits

• You also need to know the acceptable target tradeoff range(s) if there are absolute values (otherwise, rely on relative comparisons)

I once caught a fish this big |

Buy vs. Lease

Lessee: The one receiving the capital

Lessor: The one who owns the capital

A lease “acts like” an amortized purchase – for both lessor and lessee

Why lease instead of buying?

• Avoid technical obsolescence

• Tax advantages

• Asset/payment flexibility

Why buy instead of leasing?

• Possibility of salvage value + value obtained from asset use being greater than amortized cost

• Tax advantages

Main Types of Contract• Firm Fixed Price

Buyer pays seller a set amount regardless of seller costs

• Fixed Price Incentive FeeBuyer pays seller a set amount & seller can earn additional fee if

performance criteria are met

• Cost Plus Fixed FeeBuyer reimburses seller costs plus a fixed profit fee

• Cost Plus Incentive FeeBuyer reimburses seller costs & seller earns profit if performance

criteria met

• Time & Material (T&M)

“Hybrid” of cost reimbursement and fixed fee

• Purchase Order

• Who has the risks in each type?

Solicitation1. Send bid/proposal request documents to prospective

vendors

o Presumes you have a sufficient list of applicable vendors

o Distribution may be direct, via bidder conference, via advertising, etc.

o Bid & Quote used when selection based on price

o Proposal used when other than price (tech skills, etc) paramount

o Request for Bid (RFB), Invitation to Bid (IFB)

o Request for Quote (RFQ), Invitation to Quote (IFQ)

o Request for Proposal (RFP), Invitation for Proposal (IFP)

o Include SOW, description of required response/response format, explanation of pro forma contract terms and agreement structure

Solicitation2. Obtain bids/proposals from sellers

3. Evaluate bids/proposals & cycle thru SOW updates

4. Select bidder (based on criteria), negotiate, & award contract

Contracts• You are the owner of a small excavation

contracting business that has a multi-year T&M contract with a customer. The contract specifies the rate of pay for personnel types on the project.

1. Qualify the risks you face related to management of the contract.

2. Qualify the risks the buyer faces.

• What does the word “quality” mean?– Features and functionality

• Scope requirements filled and working properly• Conformance to specification or design

– Fitness for use• Degree of excellence at an acceptable price• Control of variability at an acceptable cost• How well the product fits patterns of user preferences

• Why is it important for the PM to focus on quality?– Driver of customer satisfaction: Triple/Quadruple Constraint

• Time (schedule)• Cost (budget)

• Performance (specifications/quality)


• What is the cost of quality?

Prevention costs – costs incurred to prevent failure and minimize

appraisal costs

Appraisal costs – discovering the condition of the process or

product

Internal Failure costs – costs due to raw materials, WIP, or finished goods not being

manufactured right 1st time

External Failure costs – costs from customer discovering a lack of

product quality


• Management’s Role:

Ask questions:o What is next?o What can I do?

Preach Teach Be an example Provide resources Seek never-ending improvement Follow Deming’s 14 points

• It is the PM’s role to be a leader of quality in your projects


• (some) Quality Systems

TQM (Kaizen/Continuous Improvement)

Six Sigma

ISO standards

Quality Circles

Quality Systems You Can Use

• TQM (Total Quality Management)

– Objective: Improve quality by analyzing the whole “production process” using quantitative and qualitative information

– Method:• Clear, visible leadership from top• Ensure that the system is ‘known’• Use statistical measurements to monitor the system• Use statistical measurements to make changes only when needed and

relatively predictable• Use statistical measurements to monitor the changes

(PLAN, DO, CHECK, ANALYZE)

Total Quality Management

1. Create constancy of purpose toward improvement2. Adopt the new philosophy3. Cease dependence on inspection.4. Minimize total costs5. Constant and perpetual improvement6. Institute training7. Institute leadership8. Drive out fear9. Break down internal barriers10. Eliminate slogans, targets etc.11. Eliminate management by objective12. Remove barriers 13. Institute program of education and self-improvement.14. Everybody’s job is to accomplish the transition.

- W. Edwards Deming

Fourteen Points of Quality

1. Lack of constancy of purpose to improve products & services by providing resources for long-term planning, for research, & for training

2. An emphasis on short-term profits & quarterly dividend

3. Individual performance evaluations through merit ratings & annual reviews

4. Managers who are highly mobile & hop from company to company

5. Management use of numbers & figures that are visible & available with no thought of info that may be needed, but unknown or hidden

6. Excessive medical costs

7. Excessive legal liability costs, which can be swelled by lawyers who work on “contingency” fees

Deming’s 7 Deadly Diseases

Four Basic Principles

1. Develop a Strong Customer Focus

2. Continually Improve All ProcessesIdentify ThemImprove Them (Plan, Do Check, Act)

3. Involve Employees

4. Mobilize Both Data & Team Knowledge to Improve Decision Making

(The Memory Jogger: A Pocket Guide of Tools for Continuous Improvement and Effective Planning)

Continuous Quality Improvement

• Six Sigma – Objective:

• A comprehensive and flexible system for achieving, sustaining, and maximizing business success. Six Sigma is uniquely driven by close understanding of customer needs, disciplined use of facts, data, and statistical analysis, and diligent attention to managing, improving, and reinventing business processes.

• Encompasses a broad array of business best practices and skills (some advanced, some common sense) that are essential ingredients for success and growth.

• Applicable to all types of organizations• As much about people excellence as technical excellence

– Method:• There are many “Six Sigma Ways.” – there is no fixed prescription• Sort of a culmination/combination of various other systems

Six Sigma

1. A genuine focus on the customer

2. Data- and fact-driven management

3. Process focus, management & improvement as an engine for growth & success

4. Proactive management

5. Boundaryless collaboration

6. A drive for perfection, and yet a tolerance for failure

Six Sigma – Essential Themes

Mc-Graw Hill, 2000

Six Sigma

1.Identify core processes & key customers

2. Define customer Requirements

3. Measure current Performance

4. Prioritize, analyze & implement improvements

5. Expand & integrate six sigma system

Six Sigma Roadmap

•Continuous Improvement

•Process Design/Redesign

•Analysis of Variance

•Balanced Scorecard

•Voice of the Customer

•Creative Thinking

•Design of Experiments

•Process Management

•Statistical Process Control

Six Sigma – Methods/Tools







• Internal



ISO Standards

– Objective:


– Method:


Quality Circles


Quality Tools







• Internal



ISO Standards

– Objective:


– Method:


Quality Circles


Quality Tools

Inspection

– OLD WAY: Check at the end of a process to see if it meets specified parameters. Throw away or rework (and check again) output that doesn’t meet specifications.

Inspection

YOU CAN’T INSPECT QUALITY INTO A PRODUCT

– NEW WAY: – Confirm the process is in statistical control by checking planned random

samples of output at planned stages of the process– Feedback to the production process to correct the process for future

revisions– Throw away or rework (and check again) output that doesn’t meet

specifications

Where will you find inspection during your typical projects?

– Systematized, planned method of looking at processes other than the one in which you’re interested to

a) Compare the process in question to the comparable processes

b) Find out new ways to make the process in question better (Best Practices)

– Be very careful with benchmarking…It seems easy, but without proper analysis, it is very easy to fool oneself into thinking

that a = b = c and that is NOT ALWAYS THE CASE.

Benchmarking

– Can’t improve a process until all understand and agree what the process actually is

– Flowchart is a model of the process

– Improvement can come in the form of:• Whole team working in concert rather than

against each other

• Make changes to the process steps

– Eliminate

– Shorten

– Rearrange

FlowchartingStart

End

Step A

Step B

Step C

Pass?

Yes

No

– The 80/20 chart

– Used to determine priorities

– May be able to determine what you can do to fix the problem directly from this chart

– May need to subsequently use other tools to figure out what to fix

– Once you’ve corrected the first priority problem, may need to go through subsequent rounds

Pareto Analysis

Pro

cess

ste

p A

Pro

cess

ste

p B

Pro

cess

ste

p C

Pro

cess

ste

p D

Def

ect

s

Also known as Cause & Effect Diagram, Fishbone Diagram– The process of chart creation is itself useful (discussion that causes people to learn)– Helps keep focus on issue at hand, reducing complaints & irrelevant discussion– Results in an active search for the cause– Data often must be collected for study– Demonstrates the level of understanding…more complex the diagram, the more sophisticated the users are about

the process– Problem Agnostic

Ishikawa Diagram

Problem to solve

Major Cause 1

Major Cause 4Major Cause 3

Major Cause 2

Minor Cause

Minor Cause

Minor Cause Minor Cause

Minor Cause

May also be situation desired

Fault Tree Analysis/FMEA

A.0

A.1

A.2 A.3

A.3.1 A.3.2

– “What happens if” chart

– Study causes and effects of failures

– Focuses thinking on system functioning and interaction of system component parts

– Define all ways that a system can fail

– Decomposes potential faults through several fault ‘layers’

– Allows assignment of risk factors to the possible faults

– Next probable step is a Pareto

Run Chart

• Trend analysis

Histogram

• Trend analysis

Scatter Plot

• Trend analysis• Should use some statistical

validation as well as visual

Statistical Process Control

Control Charts

– Sometimes called Statistical Process Control (SQC) or Statistical Quality Control (SQC)

– A run chart with statistically determined upper and lower control limits drawn on either side of the process average. (limits are NOT specifications)

– Every process has variation. Once the process is in statistical control (i.e. it is running on its own – no special correcting influence from humans – and there are very few points beyond the control limits), it is possible to more economically and scientifically decrease variation in the process output

– Special cause: 90%. easier to eliminate. Show up as points outside the limits

– Common cause: 10%. changeable only by management

Statistical Process Control

Lower Control Limit (LCL)

Upper Control Limit (UCL)

Average

time

Mea

sure

men

t (#

def

ectiv

e, e

tc)

– Rule of 7: a process can be out of control even if there are no outliers…for instance, when there are 7 contiguous points on either side of the line.– You’ll never eradicate variation…(“average” will get in your way), but see Deming point 5

Auditing

- Independent, objective review of the effectiveness of a system

• Process

• Product

• System

• Management

- Identify whether process failure is common cause or special cause

- Provide for tracking of appropriate corrective actions to process

- Everyone dislikes being criticized, but REMEMBER that the audit function is intended to help the company be better at what it does.

- Being better can mean a competitive advantage (cha-ching) or, as in most cases, it can simply mean that you are able to remain competitive (like the ante into a poker game).

- Don’t hate the auditor…unless he comes to deserve it!

Process Auditing

– Set up models of a process or situation and vary parameters to see what outcome will be after simulating what might happen

– “What if” Analysis

• Once the model is established and verified, varying a parameter by a specified amount and see what happens to the outcome parameter(s)

– Monte Carlo Simulation

• Once the model is established and verified, vary a parameter or parameters through use of randomized (statistically distributed histogram randomization) trials to see what happens to the outcome parameter(s).

Simulation

– Focus on creating a connection between quality, from the perspective of the user, through the ENTIRE process of creation

– QFD matrices are used to show the links between the user’s quality concepts and technical quality. Successive decompositions of needs-related quality into quality associated with subsystems allows relation of every important aspect of project quality to competitive quality

Quality Function Deployment

Product Planning

Cus

tom

er

Req

uire

men

ts

Design Requirements

Product Design

Des

ign

Req

uire

men

ts

Component Characteristics

Process Planning

Com

pon

ent

Cha

ract

eris

tics

Key Processes

Process Control Planning

Key

Pro

cess

es

Control Methods

Please Remember:

1)

No chart or equation will ever improve a process…

People improve processes

2)

Think before you decide.

Numbers are only models of reality.

Garbage In…Garbage Out (GIGO)


Project Budgeting• “It’s hard to predict, especially the future”

– Niels Bohr

• “Life is what happens when you’re making other plans”

– John Lennon

• If it’s so hard to predict and everything is already obsolete by the time it’s “on paper,” why budget?

Project Budgeting• Budgets are plans for allocating organizational

resources to project activities– Must forecast required resources, quantities needed,

when needed, and costs

• Budgets help tie project to organizational objectives Requires decisions of priority

• Budgets can be used as tool by upper management to monitor and guide projects We anticipated spending $100M by this time. How

much did we actually spend?

• Most budgeting is done by multiplying a factor x “last year’s budget data”

• ZBB calls for starting from a “clean sheet of paper” and then estimating the necessary functions from educated “scratch.” Often goes hand-in hand with Activity Based Costing Practice.

• This can be tedious, but is very useful because it requires you to think about each budget line item more clearly

Zero Base Budgeting

• Non ZBB:

– This year’s budget had $5000 for employee project management training

– For next year’s budget, because we know that we are intending to continuously move toward PM practice at our company (but don’t have everything planned out yet), we’ll “bump” the budget up from last year by 1.5

• ZBB:– Throw out last year’s budget– Start over with a total replanning effort using more distinct,

factual analysis

Zero Base Budgeting

Top Down Budgeting

• Based on collective judgements and experiences of top and middle managers.

• Overall project cost estimated by estimating costs of work packages/major tasks from WBS

• Advantages– Accuracy of estimating overall budget– Errors in funding small tasks need not be individually

identified

• Disadvantages– May miss a material, though small-appearing, item

Project Budgeting

How Top-Down Budgeting works (a very, very basic example):

WBS Task Cost2.0 Design

$50,0003.0 Concrete

$500,0004.0 Frame $200,0005.0 Electrical $

75,000

Bottom Up Budgeting• WBS identifies elemental tasks

• Those responsible for executing these tasks estimate resource requirements

• Technical Estimation

• Time & Cost Estimation

• Advantage– More accuracy from detailed lower-level analysis

• Disadvantage– Tedious, long– Not focused on larger picture; can get lost in details– GIGO

Project BudgetingHow Bottom-Up Budgeting works (a very, very basic example):

WBS Task Resource Duration (day) Cost2.0 Design

$44,1602.1 Site Survey 4 3 $ 7,6802.2 Architectural Design 1 20 $24,0002.3 Drafting 2 12 $12,480

3.0 Concrete3.1 Excavation3.2 Pour Concrete3.3 Test Concrete

4.0 Frame4.1 Arrange Materials4.2 Erect Walls

5.0 Electrical5.1 Arrange Materials5.2 Run Circuit Wiring5.3 Test Electrical Systems

• Determine resource requirements, then task costs– fixed costs (e.g., materials)– labor time & labor rate– equipment time & equipment rate– Overhead/G&A

• Levels of Estimate– ROM = Rough Order of Magnitude (~20% accurate, 10

minutes)– System Estimate (~10% accurate, 1 day)– Unit Estimate (~5% accurate, 1-3 weeks)

Work Element Costing

Engineering News Record, http//:www.enr.com/cost/cost1.asp

ENR publishes both a Construction Cost Index and a Building Costs Index that are widely used in the Construction Industry. This web site contains an explanation of the indexes methodology and a complete history of the 20-city national average for the CCI and BCI.Both indexes have a material and labor component. In the second issue of each month ENR publishes the CCI and BCI, materials index, skilled labor index and common labor index for 20 cities and the national average. The first issue also contains an index review of all five national indexes for the latest 14 month period.ENR also publishes various materials prices in each issue for the 20 US cities and 2 Canadian cities. The first issue of the month contains prices for paving asphalt, portland cement, ready-mix concrete, concrete block, brick and aggregates. The second issue for the month has prices for various pipe including reinforced concrete pipe, corrugated steel pipe, PVC water and sewer pipe, ductile iron pipe and copper water tubing. The third issue of the month contains prices for lumber, plywood, plyform, particle board and gypsum board. The fourth issue of the month has prices for structural steel reinforcing bar, aluminum, and stainless steel sheet and plate. If a month has 5 Mondays, the fifth issue will have union wage rates for 21 trades in all 20 cities.The 20 US cities that ENR maintains cost data on are: Atlanta, Baltimore, Birmingham, Boston, Chicago, Cincinnati, Cleveland, Dallas, Denver, Detroit, Kansas City, Los Angeles, Minneapolis, New Orleans, New York, Philadelphia, Pittsburgh, St. Louis, San Francisco, Seattle. ENR also tracks cost data for Montreal and Toronto, Canada.In addition, ENR publishes four quarterly cost reports in the last issue of March, June, September and December. These issues analyze cost trends from ENR’s data base and explain the movement in the indexes. They also contain various other cost data including open-shop wage rates, workers compensation rates and international prices, wages and cost indexes just to name a few.Tim Grogan, Senior Editor, Costs, Data & Material Prices.

Work Element Costing

ENR - Building Cost Index HistoryHow ENR builds the Index: 66.38 hours of skilled labor at the 20-city average of bricklayers, carpenters and structural ironworkers rates, plus 25 cwt of standard structural steel shapes at the mill price prior to 1996 and the fabricated 20-city price from 1996, plus 1.128 tons of Portland cement at the 20-city price, plus 1,088 board.ft of 2X4 lumber at the 20-city price (cwt = hundred weight. 45.36 kg, 0.04536 tons).

YEAR JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC AVER

1978 1609 1617 1620 1621 1652 1663 1696 1705 1720 1721 1732 1734 1674

1979 1740 1740 1750 1749 1753 1809 1829 1849 1900 1900 1901 1909 1819

1980 1895 1894 1915 1899 1888 1916 1950 1971 1976 1976 2000 2017 1941

1981 2015 2016 2014 2064 2076 2080 2106 2131 2154 2151 2181 2178 2097

1982 2184 2198 2192 2197 2199 2225 2258 2259 2263 2262 2268 2297 2234

1983 2311 2348 2352 2347 2351 2388 2414 2428 2430 2416 2419 2406 2384

1984 2402 2407 2412 2422 2419 2417 2418 2428 2430 2424 2421 2408 2417

1985 2410 2414 2406 2405 2411 2429 2448 2442 2441 2441 2446 2439 2428

1986 2440 2446 2447 2458 2479 2493 2499 2498 2504 2511 2511 2511 2483

1987 2515 2510 2518 2523 2524 2525 2538 2557 2564 2569 2564 2589 2541


1988 2574 2576 2586 2591 2592 2595 2598 2611 2612 2612 2616 2617 2598

1989 2615 2608 2612 2615 2616 2623 2627 2637 2660 2662 2665 2669 2634

1990 2664 2668 2673 2676 2691 2715 2716 2716 2730 2728 2730 2720 2702

1991 2720 2716 2715 2709 2723 2733 2757 2792 2785 2786 2791 2784 2751

1992 2784 2775 2799 2809 2828 2838 2845 2854 2857 2867 2873 2875 2834

1993 2886 2886 2915 2976 3071 3066 3038 3014 3009 3016 3029 3046 2996

1994 3071 3106 3116 3127 3125 3115 3107 3109 3116 3116 3109 3110 3111

1995 3112 3111 3103 3100 3096 3095 3114 3121 3109 3117 3131 3128 3111

1996 3127 3131 3135 3148 3161 3178 3190 3223 3246 3284 3304 3311 3203

1997 3332 3333 3323 3364 3377 3396 3392 3385 3378 3372 3350 3370 3364


There is no evidence of mystical inborn talent for cost- estimating.

‘Expertise’ is not a universal phenomenon, but rather very project-specific.

The most crucial attributes of good estimators are knowledge and care.

Good estimators have exactly the same attributes as good gamblers: • they research selectively and thoroughly.• they weigh each decision against possible outcomes & behave accordingly

Different building types demand different approaches.

Special attention is required for complexity of the project.

The easiest projects to estimate are the industrial factories and residential houses.

Office construction projects are hardest to estimate, due to design/option variety

Skitmore, R.M., Stradling, S.G., & Tuohy, A.P. 1994. Human effects in early stage contract price forecasting. IEEE Transactions on Engineering Management, 41 (1), 29-39.

Estimating Expertise

Hybrid Budgeting

• Best of both Top-down and Bottom-up mixed

• Can be conflict (in fact, you want it)

• If you have the time and the expertise available, this is, IN MY OPINION, the best approach

• Find FV of $1 today invested for n years at i%/year

Future Value (FV)

FV1 = PV1 (1 + i)

0 54321

$PV

i% i%i%i%i%

FV1 FV2FV5FV4FV3

FV = PV (1 + i)n

• Generic Case Equation

• Timeline Method

• Find PV of $1 today of FV dollars received n years in the future, assuming i%/year

PV = FV x 1 FV

(1+i)n (1+i)n

=

Present Value (PV)

Compounding• What is it?


• Use Timeline Method: How much money will be your return at the end of 5 years with 5% annual interest on a deposit of $500

• Think of 3 specific examples when you might need to know the concept of PV/FV and how to calculate it.

• How would the situation change if you had a second investment of $250 in the third year? How would the formulaic calculation change?

Group Work

Annuity• What is it?

A series of equal payments at fixed intervals for a

specified number of periods

E.G. – marketing tells you that Project X, of which you’ll be the PM, will generate $1M per year for 5 years starting at project release in January 2005

• How is it calculated?

FVAn = PMT/(1+i) + PMT/(1+i)2 + … + PMT/(1+i)t

= PMT Σ 1/(1+i)t

t=1

n

• Why is it important? • Couldn’t we just do an FV analysis on a $5M payback at the

end of 5 years in the 5 year, $5M project example?• In the example above, what amount of money would you want

to receive now to be able to turn down the $1000/year for 3 year deal?

• Example

Annuity

Promise to pay $1000/year for 3 years. If you were to receive this money and invest it with a 4% return, how much would you have at the end of 3 years?

0 321

i% i%i%

$1000 $1000$1000

i =

t =

n =

PMT =

Are we solving for PV or FV? Answer?

Net Present Value (NPV)

NPV = Σ (FVt / (1+i)t) - It=1

n

FVt = incremental, after tax net cash flow in year t

I = the investment (capital outlay), which is assumed to all happen in year 0)

NPV > 0 is good (project or activity may be chosen)

Depreciation• Paying the equipment

Suppose you buy a machine for $100k, use it for 5 years to do “your thing,” and then scrap it. The cost of the work produced by the machine must include a charge for the machine (depreciation).

As depreciation increases, net income decreases

Unlike paying the staff, depreciation is NOT a cash charge – cash flows are not decreased…

• Methods

• Straight Line

• Double declining balance

• Sum of the years’ digits

• Accelerated Cost Recovery System (ACRS)

• Modified Accelerated Cost Recovery System (MACRS)

Depreciation actually increases cash flow!!!

Depreciation

(Purchase Amount – Salvage Value) / Depreciation life

• Straight Line Method

Depreciation Life determined by the estimated useful life of the asset

Salvage Value = value the asset is expected to have at end of depreciation life

Year 1 Year 2 Year 3 Year 4

Purchase Value

Salvage Value

What is the effect on cash flow of changing the salvage value?

Modified Accelerated Cost Recovery System

• Sum of purchase price for any year x the depreciation % for that year

• MACRS

• Depreciation Life determined by Asset Class rules

Class Asset Type

3 year Computers & research equipment

5 year Automobiles, tractors, light duty trucks, computers

7 year Industrial equipment, furniture, fixtures

10 year Certain long-lived equipment

27.5 year Residential rental property

31.5 year Non-residential property

MACRS Continued• 21.5 and 31.5 year class property uses straight line method

• 3, 5, 7, 10 year class property uses accelerated method in table below (or alternative straight line method for very small businesses)

Ownership year 3 5 7 10

1 33% 20% 14% 10%

2 45 32 25 18

3 15 19 17 14

4 7 12 13 12

5 11 9 9

6 6 9 7

7 9 7

8 4 7

9 7

10 6

11 3

MACRS Continued

Salvage Value: Add the difference of (actual sale price – undepreciated value) to normal operating income for taxation at the normal rate

E.G. - $100k equipment with 5 year class life sold at end of year 4 for $25k

$25,000 – ($100,000(.11+.06)) = $8000 to add to operating income

Depreciable basis: Purchase price + shipping and installation costs [NOTE: NO classes allow salvage value as part of depreciable basis]

Half-year convention: Assumes property put in service in middle of first year – extends recovery period by one more year (3 year class property is depreciated over 4 years)

MACRS Example

Excellanz buys a computer for $150k. It requires an additional $15k for delivery and $15k for installation. The company expects to be able to sell the equipment for $25k at the end of the straight line depreciable life.

What is the depreciable basis?

What is the depreciation for each year and the total depreciation?

• How are they used?

Baselines• What is a baseline?

“snapshot” of project schedule, cost (budget), or scope

• Used as the basis for measuring and reporting actual performance against the plan (schedule, cost, scope)

• Used to manage project changes to scope, schedule, cost (i.e. – get rid of the “creep”)

• When are the “snapshots” taken?

When the plan (schedule, scope (budget), scope) is considered feasible technically and in terms of resources

Homework 4• Posted via WebCT

Project Control and Configuration MgmtRisk MgmtProject Budgeting

• Due 7/18 via hardcopy

• Work in support groups (only)

– Set up models of a process or situation and vary parameters to see what outcome will be after simulating what might happen

– “What if” Analysis

• Once the model is established and verified, varying a parameter by a specified amount and see what happens to the outcome parameter(s)

– Monte Carlo Simulation

• Once the model is established and verified, vary a parameter or parameters through use of randomized (statistically distributed histogram randomization) trials to see what happens to the outcome parameter(s).

Simulation

• What is it?

– Risk is anything that affects triple constraint objectives

– PMBOK: Systematic process of identifying, analyzing, and responding to project risks

– AKA: Crossing bridges before you get to them

Risk Management

• Why do it?

– The future is uncertain

– When those unplanned, unplannable good or bad things happen to a project, the PM must be ready to deal with them and their consequences in order to meet the triple/quadruple constraint

Risk Management

• How do you manage risks?

– Initiate the process,

– Identify the risks,

– Assess/analyze the risks,

– Organize (rank) the risks,

– Plan responses to the important risks,

– Implement the RMP (Risk Management Plan),

• Monitoring• Reporting• Responding

– Review (cyclical)

Risk Management

• How you do it? - The Risk Mgmt Plan table

• Risk Identifier

• Risk

• Probability of risk occurrence (P)

• Impact if risk occurs (I)

• Risk “Rank”

• Risk Owner

• Monitoring Plan

• Response Strategy

• Response Plan (outline)

The RMP Table

Risk Identifier

• Helps you track the risk

• Helps you communicate the risk

• May be nothing more than a sequential system

• May be something other than sequential

• What do you do with the risk ID when the risk “goes away?”

Risk Management

1. Critical person lost time injury

2. Fire damages structure

3. Rain delay to critical path task

1. Critical person lost time injury

2. Fire damages structure

3.

Risk (Identification)

• Something that affects triple constraint objectives• Negative

• Positive (Examples?)

• Measurable/Quantifiable is best, but sometimes there will be qualifiable-only risks

• Risks can be identified with use of many tools, methods• Project Plan, Network Diagram, Schedule, Policies, Expert

Opinion, Historical Information, WBS, FMEA, etc.

• Risk identified by a group effort

• Risk identified• At project start

• Over and over, repeatedly, again and again, until project end

Risk Management

Probability of risk occurrence (P)

• How likely is the risk event?

• Can be classified by judgment

• Can be classified by statistical tools

Risk Management

Impact if risk occurs (I)

• What will happen if the risk event occurs?

• Can be classified by judgment

• Can be classified by statistical tools

Risk Management

Risk Rank

• You can’t have everything…where would you put it?

• P x I

• Group all the equally ranked items together

• There can be multiple 1, 2, 3, etc.

• If multiple 1’s, 2’s, etc, can rank inside each group (use time of likely occurrence, relative impact, etc)

• May have to go through several rounds of successively detailed analysis to get top (10, 20, 50, 75, 100)

Risk Management

Risk Owner

• Handles monitoring & responding (within constraints)

• Why doesn’t the PM just do the risk monitoring?

• Who can the PM assign to be a risk monitor?

Risk Management

Monitoring Plan

• How/what will you/r team watch to see if the risk may be happening?

• Discuss some examples

Risk Management

Response Strategy

• Avoid: Do something to ensure risk won’t occur (100% mitigation)

• Mitigate: Accept that risk might happen, but do something to alleviate the either/both the P or I if it does

• Accept: What’s left when there’s nothing feasible to do

• Transfer: Do something to allocate the risk onto someone else

Risk Management

Accept Mitigate Avoid

Response Plan

• What do you intend to do if the risk starts happening/happens?

• In outline form – things change too rapidly, frequently to warrant more

Who is responsible for keeping the Risk Management Plan (RMP)?

Risk Management

Example:

Project: Create a lighted sign for a new building into which an engineering forensics company will be moving in 2 months.

RMP creation example/discussion

Risk Management

In support groups:

Project: Build a four-car garage

Constraints: Cost not to exceed $10,000, Construction to be completed NLT 2 months from project initiation

Complete an RMP with 10 risks. At least 3 must be cost-related, 3 must be quality-related, and 4 must be schedule-related

Risk Management

How can you use a project schedule to actually manage (not just plan) a project?

Schedule Management

How do you collect status from the people doing the work?

• GIGO• Reporting/data gathering systems• use of % complete

• Scheduling is extremely iterative process– In fact, changes during last few days are likely!

– Management always wants it done faster and/or cheaper!

• So how can you shorten the schedule?

– Scope Modification: Delete task(s)

– Crashing: Adding more resources to task(s)

– Fast Tracking: Doing more tasks in parallel

Schedule Compression

• Scope Modification– Eliminate task(s)– Shrink work required to do particular task(s)– Not always viable – why not?


• Crashing

– Add more resources to shorten time required to do the work (1+1=2)


– Appropriate resources may not be available at all or only with equal or worse impact

– Learning curves can actually result in 1+1=0.5

– Can increase cost more than budget allows

Not always feasible/viable option – why not?

• Fast Tracking

– Reworking task sequencing so more activities are done in parallel rather than sequentially


Not always feasible/viable option – why not?

– Often results in rework– Increases risk (often dramatically)– Increases confusion

• Can we agree that getting the project done late (after pre-agreed time) is BAD?

• Is it BAD to come in ahead of schedule:

– By a little bit?

– By a lot?

– Why/Why not?


What is it?

Establish revision control and change control methods

Similar to baseline

Why is it done?

Communication – keeping everyone on the same page

Limit unnecessary scope creep

Change impact estimation

Work billing

Configuration Management

How does it work?

Written process (per project, per company, etc)

Identify change possibility (acceptable person?)

If CR accepted, evaluate

Decide outcome of change

If outcome is to proceed, • create/publish ECN• Update plan information


This page intentionally left blank


What is it?

Exception Management for the Manager(s) of the Project Manager

Management by Stage Gates

Reqmts Gathering

SolicitationPre-solicitation

Bid

Award

Buildout

Completion

Do you suppose your (PM) manager will just say “go at it and let me know when you’re done”?

Project Planning

Project Execution