Software Project Management

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Software Project Management

 Discussion and brainstorming session

 Students’ motivation and reflection
 Information Systems related project experience
 Overview on the course outline
 Setting common ground

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Introduction to Project
Management

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Objectives
At the end of this chapter students should be able to
 Explain what a project is and provide examples of IT
projects
 Describe what project management is and discuss key
elements of the project management framework
 Describe how project management relates to other
disciplines
 Understand the history of project management (RA)
 Explain the growing need for better project management,
especially for IT projects

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Information Systems

 An information system (IS) is an

arrangement of people, data, processes,
communications, and information technology
that interact to support and improve day-to-
day operations in a business as well as
support the problem-solving and decision
making needs of management and users.

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What Is a Project?

 A project is a temporary, non-repetitive, goal-

oriented activity that has measurable outputs and
a particular set of constraints.

 A project is a unique process consisting of

coordinated and controlled activities with start
and finish dates, undertaken to achieve an
objective conforming to specific requirements
including constraints of time, cost and resources.

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What Is a Project?
 A project is “a temporary endeavor
undertaken to accomplish a unique product
or service” (PMBOK® Guide 2000, p. 4)
 Attributes of projects
 unique purpose
 temporary
 require resources, often from various areas
 should have a primary sponsor and/or customer
 involve uncertainty
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Attributes of project products
 The project product can take many forms from
the entirely physical-the construction of new
building or automobile, to the virtually abstract-
procedure for dealing with emergency
 Between the two extremes there will be
diversity of products each with its own
particular requirements and hence variations in
managing different projects.
 However all projects have common features

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The Triple Constraint
 Every project is constrained in different ways by
its
 Scope goals: What is the project trying to
accomplish?
 Time goals: How long should it take to
complete?
 Cost goals: What should it cost?

 It is the project manager’s duty to balance these

three often competing goals
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The Triple Constraint (cont’d)

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Program Vs Projects
 A program is a single use plan comprising
multiple activities orchestrated to achieve one
important objective.
 Projects are smaller, separate portions of
programs which are limited in scope and
contain distinct directives concerning
assignments and time.
 A program is wider in scope than a project
 There may be office automation program
consisting of a number of projects
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What is Project Management?
 Project management is “the application of
knowledge, skills, tools, and techniques to
project activities in order to meet project
requirements” (PMI*, Project Management Body
of Knowledge (PMBOK Guide), 2000, p. 6)

 It is the process of planning, organizing,

integrating, and overseeing the development of a
project to ensure that the project’s objectives are
achieved and the system is implemented
according to expectations.
*The Project Management Institute (PMI) is an international professional
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society. Their web site is www.pmi.org.
Project Management (cont’d)
 “Project management is no longer about
managing the sequence of steps required to
complete the project on time.

 "It is about systematically incorporating the

voice of the customer, creating a disciplined
way of prioritizing effort and resolving trade-
offs, working concurrently on all aspects of
the project in multi-functional teams, and
much more”
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Project Management Framework

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Project Management Framework

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Advantages of Using Formal Project
Management
 Better control of financial, physical, and human
resources
 Improved customer relations
 Shorter development times
 Lower costs
 Higher quality and increased reliability
 Higher profit margins
 Improved productivity
 Better internal coordination
 Higher worker morale

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Project Stakeholders
 Stakeholders are the people involved in or
affected by project activities
 Stakeholders include
 the project sponsor and project team
 support staff
 customers
 users
 suppliers

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9 Project Management Knowledge Areas

 Knowledge areas describe the key competencies that project

managers must develop
 4 core knowledge areas lead to specific project objectives (scope, time, cost, and
quality)
 4 facilitating knowledge areas are the means through which the project objectives
are achieved (human resources, communication, risk, and procurement
management
 1 knowledge area (project integration management) affects and is affected by all
of the other knowledge areas

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Project Management Tools and
Techniques
 Project management tools and techniques assist project
managers and their teams in various aspects of project
management
 Some specific ones include
 Project Charter and WBS (scope)
 Gantt charts, network diagrams, critical path analysis, critical chain
scheduling (time)
 Cost estimates and earned value management (cost)

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How Project Management (PM) Relates to
Other Disciplines
 Much of the knowledge needed to manage projects is unique
to PM
 However, project managers must also have knowledge and
experience in
 general management
 the application area of the project
 Project managers must focus on meeting specific project
objectives

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Project Management and Other
Disciplines

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Reading Assignment
 History of Project Management
 The Project Management Profession
 PMBOK
 Project Management Software

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The Project Management
Context and Processes

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Objectives
At the end of this chapter students should be able to
 Explain the four general phases of project life cycle
 Distinguish between project development and product
development
 Analyze a formal organization using the four frames of
organizations
 Explain the differences among functional, matrix, and
project organizational structures
 List important skills and attributes of a good project
manager
 Describe the five process groups of project management,
the typical level of activity for each, and the interactions
among them
 Have a basic view of how the project process groups
relate to the project management knowledge areas.
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A Systems View of Project
Management
 A project is viewed as a conversion or
transformation of some form of Input into an
output—a system
 The project will take place under a set of
controls or constraints
 The mechanisms are those resources that
make the transformation process possible

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The Project as a conversion process
Constraints
Financial
Legal
Ethical
Environmental
Time
Quality, etc

Input: Output:
Project Satisfied need
Want/Need

Mechanisms
Knowledge and
Expertise
Tools and techniques
Technology, etc
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Project Phases and the Project Life Cycle

 A project life cycle is a collection of project

phases
 Project phases vary by project or industry, but
some general phases include
 Concept initiation
 Development planning
 Implementation executing
 Close-out closing

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Phases of the Project Life Cycle

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Product Life Cycles
 Products also have life cycles
 The Systems Development Life Cycle (SDLC) is
a framework for describing the phases
involved in developing and maintaining
information systems
 Typical SDLC phases include planning,
analysis, design, implementation, and
support

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Sample SDLC Models
 Waterfall model: has well-defined, linear stages of
systems development and support
 Spiral model: shows that software is developed
using an iterative or spiral approach rather than a
linear approach
 Incremental release model: provides for
progressive development of operational software
 RAD model: used to produce systems quickly
without sacrificing quality
 Prototyping model: used for developing prototypes
to clarify user requirements
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Spiral Model of Software Development
(Boehm, 1988)

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Rational Unified Process (RUP)
 Floyd from Kruchten and Ivar Jacobson
 Craig Larman
 Phases of RUP
 Inception phase
 Elaboration phase
 Construction phase
 Transition phase

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Distinguishing Project Life Cycles and
Product Life Cycles
 The project life cycle applies to all projects,
regardless of the products being produced
 Product life cycle models vary considerably
based on the nature of the product
 Most large IT products are developed as a
series of projects
 Project management is done in all of the
product life cycle phases

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Many Organizations Focus on the
Structural Frame
 Most people understand what organizational
charts are
 Many new managers try to change
organizational structure when other changes
are needed
 3 basic organization structures
 functional
 project
 matrix

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Functional, Project, and Matrix Organizational
Structures

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What Helps Projects Succeed?
According to the Standish Group’s report CHAOS
2001: A Recipe for Success, the following items help
IT projects succeed, in order of importance:
 Executive support
 User involvement
 Experience project manager
 Clear business objectives
 Minimized scope
 Standard software infrastructure
 Firm basic requirements
 Formal methodology
 Reliable estimates

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Skills for a Project Manager
 Management skill to
o Leadership skill
o Communication skill
o Negotiation skill
o Problem solving skill
o Ability to influence organizations
 Organizational skill to plan, analyze and
achieve project objectives
 IT skill as it relates to specific projects

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Project Management Process Groups
 Project management can be viewed as a
number of interlinked processes
 A process is a serious of interrelated activities or
actions directed towards a specific result
 The project management process groups
include
 initiating processes
 planning processes
 executing processes
 controlling processes
 closing processes
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Overlap of Process Groups in a
Phase (PMBOK Guide, 2000, p. 31)

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Relationships Among Process Groups, Activities, &
Knowledge Areas

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Relationships Among Process Groups, Activities,
and Knowledge Areas

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Reading Assignment
 Project Management Job Functions
 Suggested Skills for a Project Manager
 Most Significant Characteristics of Effective and
Ineffective Project Managers

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Project Integration
Management

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Objectives
 Understand the importance of project integration
management
 Describe an overall framework for project integration
management as it relates to the other project
management knowledge areas and the project life cycle
 Describe project plan development and the major
components of a good project plan
 Explain project plan execution and key aspects of getting
work results
 Describe the overall change control process and the
creation of project plan updates, corrective action, and
lessons learned
 Explain why top management commitment to project
management is critical for a project’s success

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The Key to Overall Project Success: Good Project
Integration Management
 Project managers must coordinate all of the
other knowledge areas throughout a project’s
life cycle
 Many new project managers have trouble
looking at the “big picture” and want to focus
on too many details
 Project integration management is not the
same thing as software integration

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Project Integration Management
Processes
 Project Plan Development: taking the
results of other planning processes and
putting them into a consistent, coherent
document—the project plan
 Project Plan Execution: carrying out the
project plan
 Integrated Change Control: coordinating
changes across the entire project

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Project Integration Management
Overview

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Note: The PMBOK Guide includes similar charts for each knowledge area.
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Framework for Project Integration
Management
Focus on pulling everything to-
gether to reach project success!

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Project Plan Development
 A project plan is a document used to
coordinate all project planning documents
 Its main purpose is to guide project execution
 Project plans assist the project manager in
leading the project team and assessing
project status
 Project performance should be measured
against a baseline project plan

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Attributes of Project Plans
Just as projects are unique, so are project plans
 Plans should be dynamic

 Plans should be flexible

 Plans should be updated as changes occur

 Plans should first and foremost guide project execution

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Common Elements of a Project
Plan
 Introduction or overview of the project
 Description of how the project is organized
 Management and technical processes used
on the project
 Work to be done, schedule, and budget
information

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Sample Outline for a Software Project Management
Plan (SPMP)
Project Management Plan Sections
Introduction Project Managerial Technical Work
Organization Process Process Packages,
Schedule, and
Budget
Section Project Process model; Management Methods, tools, Work
Topics overview; organizational objectives and and packages;
project structure; priorities; techniques; Dependencies;
deliverables; organizational assumptions, software resource
evolution of boundaries and dependencies, documentation; requirements;
the SPMP; interfaces; and and project budget and
reference project constraints; support resource
materials; responsibilities risk functions allocation;
definitions and management; and schedule
acronyms monitoring
and
controlling
mechanisms;
and staffing
plan
IEEE Std 10581-1987

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Stakeholder Analysis
 A stakeholder analysis documents important (often sensitive)
information about stakeholders such as
 stakeholders’ names and organizations
 roles on the project
 unique facts about stakeholders
 level of influence and interest in the project
 suggestions for managing relationships

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Sample Stakeholder Analysis
K e y S ta k e h o ld e rs
A hm ed S u san E rik M a rk D a v id
O rg a n iz a tio n In te rn a l P r o je c t te a m P r o je c t te a m H a rd w a re P ro je c t
s e n io r vendor m a n a g e r fo r
m anagem ent o th e r
in te rn a l
p ro je c t
R o le o n S p o n so r o f D N A Lead S u p p lie s C o m p e tin g
p ro je c t p ro je c t a n d s e q u e n c in g p ro g ra m m e r so m e fo r c o m p a n y
o n e o f th e e x p e rt in s tru m e n t re so u rc e s
c o m p a n y 's h a rd w a re
fo u n d e rs
U n iq u e fa c ts D e m a n d in g , V e r y s m a rt, B est S ta rt-u p N ic e g u y ,
lik e s d e ta ils , P h .D . in p ro g ra m m e r com pany, he o n e o f o ld e s t
b u sin e ss b io lo g y , I know , know s w e p e o p le a t
fo c u s, e a s y to w o rk w e ird s e n se can m ake com pany,
S ta n fo rd w ith , h a s a of hum or h im ric h if h a s 3 k id s in
M B A to d d le r th is w o rk s c o lle g e
Level of V e ry h ig h V e ry h ig h H ig h V e ry h ig h L o w to
in te re s t m e d iu m
Level of V e ry h ig h ; S u b je c t H ig h ; h a rd L o w ; o th e r L o w to
in flu e n c e c a n c a ll th e m a tte r to re p la c e v e n d o rs m e d iu m
sh o ts e x p e rt; a v a ila b le
c r itic a l to
su ccess
S u g g e s tio n s K eep M a k e su re K e e p h im G iv e h im H e know s
o n m a n a g in g in f o r m e d , le t sh e re v ie w s h ap p y so h e e n o u g h le a d h is p ro je c t
r e la tio n s h ip h im le a d s p e c ific a tio n sta y s; tim e to ta k e s a b a c k
c o n v e rs a tio n s a n d le a d s e m p h a s iz e d e liv e r se a t to th is
s ,d o a s h e te s tin g ; c a n sto c k h a rd w a re one, but I
sa ys an d d o so m e o p tio n s ; c a n le a rn
q u ic k ly w o rk fro m lik e s fro m h im
hom e M e x ic a n
fo o d
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Project Plan Execution
 Project plan execution involves managing
and performing the work described in the
project plan
 The majority of time and money is usually
spent on execution
 The application area or the project directly
affects project execution because the
products of the project are produced during
execution

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Important Skills for Project Execution
 General management skills like leadership,
communication, and political skills
 Product skills and knowledge (see example
of “What Went Right?”)
 Use of specialized tools and techniques

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Tools and Techniques for Project
Execution
 Work Authorization System: a method for
ensuring that qualified people do work at the
right time and in the proper sequence
 Status Review Meetings: regularly
scheduled meetings used to exchange
project information
 Project Management Software: special
software to assist in managing projects

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Integrated Change Control
 Integrated change control involves
identifying, evaluating, and managing
changes throughout the project life cycle
(Note: 1996 PMBOK called this process
“overall change control”)
 Three main objectives of change control:
 Influence the factors that create changes to
ensure they are beneficial
 Determine that a change has occurred
 Manage actual changes when and as they
occur
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Integrated Change Control Process

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Change Control on Information
Technology Projects
 Former view: The project team should strive to do exactly what was
planned on time and within budget
 Problem: Stakeholders rarely agreed up-front on the project scope, and
time and cost estimates were inaccurate
 Modern view: Project management is a process of constant
communication and negotiation
 Solution: Changes are often beneficial, and the project team should
plan for them

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Change Control System
 A formal, documented process that describes when and how
official project documents and work may be changed
 Describes who is authorized to make changes and how to
make them
 Often includes a change control board (CCB), configuration
management, and a process for communicating changes

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Change Control Boards (CCBs)
 A formal group of people responsible for approving or
rejecting changes on a project
 Provides guidelines for preparing change requests, evaluates
them, and manages the implementation of approved changes
 Includes stakeholders from the entire organization

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Making Timely Changes
 Some CCBs only meet occasionally, so it may take too long
for changes to occur
 Some organizations have policies in place for time-sensitive
changes
 “48 hour policy” allowed project team members to make decisions,
then they had 48 hours reverse the decision pending senior
management approval
 Delegate changes to the lowest level possible, but keep everyone
informed of changes

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Configuration Management
 Ensures that the products and their descriptions are
correct and complete
 Concentrates on the management of technology by
identifying and controlling the functional and
physical design characteristics of products
 Configuration management specialists identify and
document configuration requirements, control
changes, record and report changes, and audit the
products to verify conformance to requirements

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Suggestions for Managing Integrated Change
Control
 View project management as a process of constant
communications and negotiations
 Plan for change
 Establish a formal change control system, including a
Change Control Board (CCB)
 Use good configuration management
 Define procedures for making timely decisions on smaller
changes
 Use written and oral performance reports to help identify
and manage change
 Use project management and other software to help
manage and communicate changes
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Note: See the text itself for full citations.
 Understand the importance of project cost
management
 Explain basic project cost management principles,
concepts, and terms
 Discuss different types of cost estimates and
methods for preparing them

Copyright 2009 2
 Understand the processes involved in cost
budgeting and preparing a cost estimate and
budget for an information technology project
 Understand the benefits of earned value
management and project portfolio management to
assist in cost control
 Describe how project management software can
assist in project cost management

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 IT projects have a poor track record for meeting
budget goals
 The CHAOS studies found the average cost
overrun (the additional percentage or dollar
amount by which actual costs exceed estimates)
ranged from 180 percent in 1994 to 56 percent in
2004; other studies found overruns to be 33-34
percent

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Management, Sixth Edition Copyright 2009 4
 The U.S. government, especially the Internal Revenue
Service (IRS), continues to provide examples of how not to
manage costs
◦ A series of project failures by the IRS in the 1990s cost taxpayers
more than $50 billion a year
◦ In 2006, the IRS was in the news for a botched upgrade to its fraud-
detection software, costing $318 million in fraudulent refunds that
didn’t get caught
◦ A 2008 Government Accountability Office (GAO) report stated that
more than 400 U.S. government agency IT projects, worth an
estimated $25 billion, suffer from poor planning and
underperformance
 The United Kingdom’s National Health Service IT
modernization program was called the greatest IT disaster
in history with an estimated $26 billion overrun
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Management, Sixth Edition Copyright 2009 5
 Cost is a resource sacrificed or foregone to achieve
a specific objective or something given up in
exchange
 Costs are usually measured in monetary units like
dollars
 Project cost management includes the processes
required to ensure that the project is completed
within an approved budget

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Management, Sixth Edition Copyright 2009 6
 Estimating costs: developing an approximation or
estimate of the costs of the resources needed to
complete a project
 Determining the budget: allocating the overall
cost estimate to individual work items to establish a
baseline for measuring performance
 Controlling costs: controlling changes to the
project budget

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 Most members of an executive board better
understand and are more interested in financial
terms than IT terms, so IT project managers must
speak their language
◦ Profits are revenues minus expenditures
◦ Profit margin is the ratio of revenues to profits
◦ Life cycle costing considers the total cost of ownership,
or development plus support costs, for a project
◦ Cash flow analysis determines the estimated annual
costs and benefits for a project and the resulting annual
cash flow

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 Many organizations use IT to reduce operational costs
 Technology has decreased the costs associated with
processing an ATM transaction:
◦ In 1968, the average cost was $5
◦ In 1978, the cost went down to $1.50
◦ In 1988, the cost was just a nickel
◦ In 1998, it only cost a penny
◦ In 2008, the cost was just half a penny!
 Investing in green IT and other initiatives has helped
both the environment and companies’ bottom lines;
Michael Dell, CEO of Dell, reached his goal to make his
company “carbon neutral” in 2008

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Management, Sixth Edition Copyright 2009 11
 Tangible costs or benefits are those costs or
benefits that an organization can easily measure in
dollars
 Intangible costs or benefits are costs or benefits
that are difficult to measure in monetary terms
 Direct costs are costs that can be directly related
to producing the products and services of the
project
 Indirect costs are costs that are not directly
related to the products or services of the project,
but are indirectly related to performing the project
 Sunk cost is money that has been spent in the
past; when deciding what projects to invest in or
continue, you should not include sunk costs

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Management, Sixth Edition Copyright 2009 12
 Learning curve theory states that when many
items are produced repetitively, the unit cost of
those items decreases in a regular pattern as
more units are produced
 Reserves are dollars included in a cost estimate
to mitigate cost risk by allowing for future
situations that are difficult to predict
◦ Contingency reserves allow for future situations that
may be partially planned for (sometimes called known
unknowns) and are included in the project cost baseline
◦ Management reserves allow for future situations that
are unpredictable (sometimes called unknown
unknowns)

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 Project managers must take cost estimates
seriously if they want to complete projects within
budget constraints
 It’s important to know the types of cost estimates,
how to prepare cost estimates, and typical
problems associated with IT cost estimates

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 A cost management plan is a document that
describes how the organization will manage cost
variances on the project
 A large percentage of total project costs are often
labor costs, so project managers must develop
and track estimates for labor

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 Basic tools and techniques for cost estimates:
◦ Analogous or top-down estimates: use the actual cost
of a previous, similar project as the basis for estimating
the cost of the current project
◦ Bottom-up estimates: involve estimating individual work
items or activities and summing them to get a project total
◦ Parametric modeling uses project characteristics
(parameters) in a mathematical model to estimate project
costs

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Management, Sixth Edition Copyright 2009 18
 Estimates are done too quickly
 Lack of estimating experience
 Human beings are biased toward underestimation
 Management desires accuracy

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 See pages 265-270 for a detailed example of
creating a cost estimate for the Surveyor Pro
project described in the opening case
 Before creating an estimate, know what it will be
used for, gather as much information as possible,
and clarify the ground rules and assumptions for
the estimate
 If possible, estimate costs by major WBS
categories
 Create a cost model to make it easy to make
changes to and document the estimate

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 Cost budgeting involves allocating the project cost
estimate to individual work items over time
 The WBS is a required input to the cost budgeting
process since it defines the work items
 Important goal is to produce a cost baseline
◦ A time-phased budget that project managers use to
measure and monitor cost performance

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 U.S. President Barack Obama successfully used the
media and information technology in his campaign
◦ The Obama campaign used 16 different online social platforms
to interact with people of various backgrounds; sources say 80
percent of all contributions originated from these social
networks
◦ In a 60 Minutes episode shortly after the election, campaign
leaders discussed some of the details of the campaign
◦ The Web site My.BarackObama was created to develop an
online community with more than a million members

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Management, Sixth Edition Copyright 2009 25
 Project cost control includes:
◦ Monitoring cost performance
◦ Ensuring that only appropriate project changes are
included in a revised cost baseline
◦ Informing project stakeholders of authorized changes to
the project that will affect costs
 Many organizations around the globe have
problems with cost control

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Management, Sixth Edition Copyright 2009 26
 EVM is a project performance measurement
technique that integrates scope, time, and cost data
 Given a baseline (original plan plus approved
changes), you can determine how well the project is
meeting its goals
 You must enter actual information periodically to
use EVM
 More and more organizations around the world are
using EVM to help control project costs

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Management, Sixth Edition Copyright 2009 27
 The planned value (PV), formerly called the budgeted
cost of work scheduled (BCWS), also called the budget,
is that portion of the approved total cost estimate planned
to be spent on an activity during a given period
 Actual cost (AC), formerly called actual cost of work
performed (ACWP), is the total of direct and indirect
costs incurred in accomplishing work on an activity
during a given period
 The earned value (EV), formerly called the budgeted
cost of work performed (BCWP), is an estimate of the
value of the physical work actually completed
 EV is based on the original planned costs for the project
or activity and the rate at which the team is completing
work on the project or activity to date

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 Rate of performance (RP) is the ratio of actual
work completed to the percentage of work planned
to have been completed at any given time during
the life of the project or activity
 Brenda Taylor, Senior Project Manager in South
Africa, suggests this term and approach for
estimating earned value
 For example, suppose the server installation was
halfway completed by the end of week 1: the rate of
performance would be 50% because by the end of
week 1, the planned schedule reflects that the task
should be 100 percent complete and only 50
percent of that work has been completed
Information Technology Project
Management, Sixth Edition Copyright 2009 29
Information Technology Project
Management, Sixth Edition Copyright 2009 30
Information Technology Project
Management, Sixth Edition Copyright 2009 31
 Negative numbers for cost and schedule variance
indicate problems in those areas
 CPI and SPI less than 100% indicate problems
 Problems mean the project is costing more than
planned (over budget) or taking longer than
planned (behind schedule)
 The CPI can be used to calculate the estimate at
completion (EAC), an estimate of what it will cost
to complete the project based on performance to
date; the budget at completion (BAC) is the
original total budget for the project
Information Technology Project
Management, Sixth Edition Copyright 2009 32
Information Technology Project
Management, Sixth Edition Copyright 2009 33
 Many organizations collect and control an entire
suite of projects or investments as one set of
interrelated activities in a portfolio
 Five levels for project portfolio management
1. Put all your projects in one database
2. Prioritize the projects in your database
3. Divide your projects into two or three budgets based on
type of investment
4. Automate the repository
5. Apply modern portfolio theory, including risk-return tools
that map project risk on a curve

Information Technology Project

Management, Sixth Edition Copyright 2009 34
 Schlumberger saved $3 million in one year by
organizing 120 information technology projects into a
portfolio
 ROI of implementing portfolio management software
by IT departments:
◦ Savings of 6.5 percent of the average annual IT budget by
the end of year one
◦ Improved annual average project timeliness by 45.2 percent
◦ Reduced IT management time spent on project status
reporting by 43 percent and IT labor capitalization reporting
by 55 percent
◦ Decreased the time to achieve financial sign-off for new IT
projects by 20.4 percent, or 8.4 days

Information Technology Project

Management, Sixth Edition Copyright 2009 35
 A global survey released by Borland Software in 2006
suggests that many organizations are still at a low level of
maturity in terms of how they define project goals, allocate
resources, and measure overall success of their
information technology portfolios; some of the findings
include the following:
◦ Only 22 percent of survey respondents reported that their
organization either effectively or very effectively uses a project plan
for managing projects
◦ Only 17 percent have either rigorous or very rigorous processes for
project plans, which include developing a baseline and estimating
schedule, cost, and business impact of projects
◦ Only 20 percent agreed their organizations monitor portfolio
progress and coordinate across inter-dependent projects

Information Technology Project

Management, Sixth Edition Copyright 2009 36
 Spreadsheets are a common tool for resource
planning, cost estimating, cost budgeting, and cost
control
 Many companies use more sophisticated and
centralized financial applications software for cost
information
 Project management software has many cost-
related features, especially enterprise PM
software
 Portfolio management software can help reduce
costs

Information Technology Project

Management, Sixth Edition Copyright 2009 37
 Project cost management is a traditionally weak
area of IT projects, and project managers must
work to improve their ability to deliver projects
within approved budgets
 Main processes include:
◦ Estimate costs
◦ Determine the budget
◦ Control costs

Information Technology Project

Management, Sixth Edition Copyright 2009 38
Project Time Management

2
Objectives
At the end of this chapter, students should be able to
⚫ Understand the importance of good project time
management
⚫ Explain the basic process for developing project
schedules
⚫ Describe how various tools and techniques help project
managers perform activity definition, activity
sequencing, activity duration estimating, schedule
development, and schedule control
⚫ Use a Gantt chart for schedule planning and tracking
schedule information
⚫ Construct a project network diagram and understand
its importance for determining overall project
completion dates
⚫ Understand and use critical path analysis

3
Project Time Management
Processes
⚫ Project time management involves the
processes required to ensure timely
completion of a project. Processes include:
⚫ Activity definition
⚫ Activity sequencing
⚫ Activity duration estimating
⚫ Schedule development
⚫ Schedule control

4
Where Do Schedules Come From? Defining
Activities

⚫ Project schedules grow out of the basic

document that initiate a project
⚫ Project charter includes start and end dates and
budget information
⚫ Scope statement and WBS help define what will
be done
⚫ Activity definition involves developing a more
detailed WBS and supporting explanations to
understand all the work to be done

5
Iterative Approach to Project
Time planning
⚫ The general approach to planning involves
starting with a rough overview and
conducting revisions—the process is known
as iterative—involves going through the cycle
several times to test the effects of the
changes on the outcome
⚫ The major objective of iterative approach is to
⚫ To make the major revisions early in the cycle
⚫ Make minor refinements to the plan later

6
Activity Sequencing—
dependency
⚫ Involves reviewing activities and determining
dependencies
⚫ Mandatory dependencies: inherent in the
nature of the work; hard logic
⚫ Discretionary dependencies: defined by
the project team; soft logic
⚫ External dependencies: involve
relationships between project and non-
project activities
⚫ You must determine dependencies in order
to use critical path analysis
7
Project Network Diagrams
⚫ Project network diagrams are the preferred technique for
showing activity sequencing
⚫ A project network diagram is a schematic display of the
logical relationships among, or sequencing of, project
activities
⚫ Project network diagrams are graphical techniques used to
illustrate the relationship between the activities and time

8
Sample Activity-on-Arrow (AOA) Network
Diagram for Project X

9
Arrow Diagramming Method (ADM)
⚫ Also called activity-on-arrow (AOA) project network diagrams
⚫ Activities are represented by arrows. An activity is an element
of the work entailed in the project—a task that must be
carried out.
⚫ Nodes or circles are the starting and ending points of
activities—events
⚫ Can only show finish-to-start dependencies

10
Types of Dependencies (Relationships)
1. Finish-to-start→ the preceding activity
should be finished to start the succeeding
one.
2. Start-to-start→ the preceding activity must
start when or before starting the succeeding
activity
3. Finish-to-finish→ the preceding activity must
finish before the succeeding activity finishes
4. Start-to-finish→ the “from” activity must start
before the “to” activity can finish
11
Process for Creating AOA
Diagrams
1. Find all of the activities that start at node 1. Draw their
finish nodes and draw arrows between node 1 and those
finish nodes. Put the activity letter or name and duration
estimate on the associated arrow The events and
activities should be given unique identifiers or labels
2. Continuing drawing the network diagram, working from
left to right. Look for bursts and merges. Bursts occur
when a single node is followed by two or more activities.
A merge occurs when two or more nodes precede a
single node
3. Continue drawing the project network diagram until all
activities are included on the diagram that have
dependencies
4. As a rule of thumb, all arrowheads should face toward the
right, and no arrows should cross on an AOA network
diagram
12
Precedence Diagramming Method (PDM)
⚫ Activities are represented by boxes
⚫ Arrows show relationships between activities
⚫ More popular than ADM method and used by project
management software
⚫ Better at showing different types of dependencies

13
Sample Precedence Diagramming Method
(PDM) Network Diagram for Project X

14
Activity Duration Estimating
⚫ After defining activities and determining their
sequence, the next step in time management
is duration estimating
⚫ Duration includes the actual amount of time
worked on an activity plus elapsed time
⚫ People doing the work should help create
estimates, and an expert should review them

15
Schedule Development
⚫ Schedule development uses results of the
other time management processes to
determine the start and end date of the
project and its activities
⚫ Ultimate goal is to create a realistic project
schedule that provides a basis for monitoring
project progress for the time dimension of the
project
⚫ Important tools and techniques include Gantt
charts, PERT analysis, critical path analysis

16
Gantt Charts
⚫ Gantt charts provide a standard format for
displaying project schedule information by listing
project activities and their corresponding start and
finish dates in a calendar format
⚫ Symbols include:
⚫ A black diamond: milestones or significant events on a
project with zero duration
⚫ Thick black bars: summary tasks
⚫ Lighter horizontal bars: tasks
⚫ Arrows: dependencies between tasks

17
Gantt Chart for Project X

Project 98 file 18
Sample Tracking Gantt Chart

white diamond: slipped milestone

19
two bars: planned and actual times
Program Evaluation and Review
Technique (PERT)
⚫ PERT is a network analysis technique used
to estimate project duration when there is a
high degree of uncertainty about the
individual activity duration estimates
⚫ PERT uses probabilistic time estimates
based on using optimistic, most likely, and
pessimistic estimates of activity durations
⚫ Is one of the major management tool for
scheduling and controlling project time.

20
Steps in Developing PERT NW

1. Identify each activity to be Activity Immediate

done in the project Predecessors
2. Determine the sequence of A --
activities and identify B --
predecessors for each activity
C B
D A, C
E C
F C
G D, E, F
21
Steps in Developing PERT NW
(Cont’d)
3. Draw the network—normally PERT
networking follows a structure of activity on
arrow, event on node.

A 3 D
1

C
B

22
Steps in Developing PERT NW (Cont’d)
4. Make time estimates for each activity—the PERT
algorithm requires that three estimates be obtained:
⚫ the optimistic (a)—the time required in ideal
manner
⚫ most likely time (m)—the most likely activity time
under normal condition
⚫ the pessimistic (p)—the activity time if the project
encounters major breakdown/delays
⚫ These three estimates enable the manager to
develop better guess of the most likely activity
time
23
Steps in Developing PERT NW (Cont’d)
5. Calculate the expected time (t)

⚫ PERT weighted average formula: Expected time (t) is given

by the formula

optimistic time + 4X most likely time + pessimistic time

t=
6

24
Steps in Developing PERT NW
(Cont’d)
Optimistic Probable Pessimistic Expected
Activity time (a) time (m) time (p) time (t)
A 5 12 6
4
B 1 1.5 5 2

C 2 3 4 3

D 3 4 11 5

E 2 3 4 3

F 1.5 2 2.5 2

G 1.5 3 4.5 3

25
Steps in Developing PERT NW (Cont’d)
Logic dummies
30
A
10
D
G
50 60
B E

40 Identity
F dummies

C 45

26
Steps in Developing PERT NW (Cont’d)
6. Calculate the variance (σ2) of each activity time. The
variance of each activity is calculated as

 b − a
2

 =
2

 6 
⚫ The variance describes the dispersion or deviation
in the activity time
⚫ The difference b/n the pessimistic (p) and optimistic
(a) time estimates affects the value of the variance.
⚫ Large difference in the two values implies high
degree of uncertainty in the activity time
7. Calculate the critical path
27
Critical Path Method (CPM)
⚫ The next step is calculating the critical path
⚫ CPM is a project network analysis
technique used to predict total project
duration
⚫ A critical path for a project is the series of
activities that determines the earliest time
by which the project can be completed
⚫ The critical path is the longest path through
the network diagram and has the least
amount of slack or float
28
CPM (Cont’d)
⚫ A path is a sequence of connected activities
that leads from the starting node to the
completion node
⚫ The longest path determines the expected
total time or expected duration of the project
⚫ The longest path activities are the critical
path activities of the project and the longest
path is called the critical path of the network
⚫ Finding the critical path of the project involves
the following steps
29
CPM (Cont’d)
a. Work on the forward pass calculation
⚫ Starting at the origin (node 1) and using a
starting time of 0, compute the earliest start (ES)
and earliest finish (EF) time for each activity on
the network.
⚫ ES—earliest start time for a particular activity
⚫ EF—earliest finish time for a particular activity
⚫ t—expected activity time
EF = ES + t
⚫ When two or more activities are entering a node,
we have the earliest time rule. 30
CPM (Cont’d)
⚫ Earliest Time Rule
⚫ The earliest start time for an activity leaving a
particular node is equal to the largest value of
the earliest finish times for all activities entering
the node.

b. Work on backward pass calculation

⚫ Starting at the completion point (node 8)
and using a latest finish time (of 17) for
activity (J), trace back through the network,
computing a latest start and latest finish
time for each activity
31
CPM (Cont’d)
⚫ LS = Latest starting time for a particular
activity
⚫ LF = Latest finishing time for a particular
activity
⚫ t= expected time of the activity
LS = LF-t
⚫ Latest Finish time rule
⚫ The latest finish time for an activity entering a
particular node is equal to the smallest value of
the latest starting time for all activities leaving the
node
32
CPM (Cont’d)
c. Calculate slack time
⚫ Slack time is the length of time an activity
can be delayed without affecting the
completion date for the project calculated as

Slack time = LS – ES = LF – EF

⚫ The critical path activities are the activities

with zero slack

33
Determining the Critical Path for
Project X

34
More on the Critical Path
⚫ If one or more activities on the critical path takes
longer than planned, the whole project schedule will
slip unless corrective action is taken
⚫ Misconceptions:
⚫ The critical path is not the one with all the critical activities;
it only accounts for time
⚫ There can be more than one critical path if the lengths of
two or more paths are the same
⚫ The critical path can change as the project progresses

35
Using Critical Path Analysis to Make
Schedule Trade-offs
⚫ Knowing the critical path helps you make
schedule trade-offs
⚫ Free slack or free float is the amount of time
an activity can be delayed without delaying
the early start of any immediately following
activities
⚫ Total slack or total float is the amount of
time an activity may be delayed from its early
start without delaying the planned project
finish date
36
Free and Total Float or Slack for Project X

37
Techniques for Shortening a Project Schedule

⚫ Shortening durations of critical tasks for adding more

resources or changing their scope
⚫ Crashing tasks by obtaining the greatest amount of schedule
compression for the least incremental cost
⚫ Fast tracking tasks by doing them in parallel or overlapping
them

38
Crashing Activity Times
⚫ Sometimes it may be difficult to meet project
completion dates in that the time for the
critical path may be longer than the time
given by management.
⚫ Hence, shortening activity time may be
needed at a cost of additional resources-such
a process is known as crashing activity
time
⚫ But crashing always results in added project
costs

39
Crashing Activity Times (Cont’d)

⚫ Project managers should identify activities

that cost least to crash and crash only the
amount necessary to meet completion dates
⚫ To determine where and how much to crash,
the following information is needed
a. Estimated activity costs under the normal time
b. Activity completion time under maximum crashing
(the shortest possible activity time)
c. Estimated activity cost under maximum crashing

40
Crashing Activity Times (Cont’d)
⚫ Let
T = Normal activity time
T1 = Crashed activity time under maximum crashing
Cn = Normal activity cost
Cc = Crashed activity cost under maximum crashing
⚫ Maximum possible activity time reduction M
due to crashing is
M = T - T1

41
Crashing Activity Times (Cont’d)

⚫ On a per unit time basis (e.g. per day) the

crashing cost K for each activity is given by

Cc − Cn Cc − Cn
=
M T−T 1

42
Crashing Activity Times (Cont’d)

⚫ If activity A has a normal activity time of 14 days at a

cost of birr 1000 and a maximum crash activity time
of 8 days at a cost of birr 1600, we have T = 14,
T1 = 8, Cc = 1600 and Cn = 1000
MA = 14 – 8 = 6 days

1600 − 1000 600

KA = = = Birr100 perday
14 − 8 6
⚫ Activity A can be crashed a maximum of 6
days at a crashing cost of birr 100 per day
43
Crashing Activity Times (Cont’d)
⚫ Any portion of the activity crash time can be
achieved at a corresponding portion of activity
cost
⚫ If we decide to crash activity A by only 3½ days,
the assumption is that it can be accomplished
with added cost of 3½ (100) = birr 350 which
results in a total activity cost of 1000 + 300 =
1350

44
Total Activity
Crashing Activity Times (Cont’d)
Cost
Maximum Possible
1800 Crashing Operation

1600

1400
Normal
1200 Operation

1000

800

600

400

200

1 2 3 4 5 6 7 8 9 10 11 12 13 14

Activity Time in Days

45
Importance of Updating Critical Path Data

⚫ It is important to update project schedule

information
⚫ The critical path may change as you enter
actual start and finish dates
⚫ If you know the project completion date will
slip, negotiate with the project sponsor

46
Critical Chain Scheduling
⚫ Technique that addresses the challenge of meeting or
beating project finish dates and an application of the
Theory of Constraints (TOC)
⚫ Developed by Eliyahu Goldratt in his books The Goal
and Critical Chain
⚫ Critical chain scheduling is a method of scheduling
that takes limited resources into account when
creating a project schedule and includes buffers to
protect the project completion date
⚫ Critical chain scheduling assumes resources do not
multitask because it often delays task completions
and increases total durations

47
Multitasking Example

48
Buffers and Critical Chain
⚫ A buffer is additional time to complete a task
⚫ Murphy’s Law states that if something can go wrong,
it will, and Parkinson’s Law states that work expands
to fill the time allowed. In traditional estimates, people
often add a buffer and use it if it’s needed or not
⚫ Critical chain schedule removes buffers from
individual tasks and instead creates
⚫ A project buffer, which is additional time added before the
project’s due date
⚫ Feeding buffers, which are addition time added before tasks
on the critical path

49
Example of Critical Chain Scheduling

50
Reading Assignment
⚫ Controlling Changes to the Project Schedule
Perform reality checks on schedules

51
52
Project Risk
Management

53
Objectives
At the end of this chapter, students should be able to
⚫ Understand the importance of good project risk
management
⚫ Understand what risk is and describe different tolerances
of risk
⚫ Identify common sources of risk on information
technology projects and develop strategies for reducing
them
⚫ Describe common risk conditions that occur in each
project management knowledge area
⚫ Explain various techniques for quantifying risk and
calculate expected monetary values of projects
⚫ Explain how a Monte Carlo simulation works and how it
can be used in risk management
⚫ Use the Top 10 Risk Tracking approach 54
Project Management Maturity by
Industry Group and Knowledge Area

55
What is Risk?
⚫ A dictionary definition of risk is “the possibility of loss or injury”
⚫ Project risk involves understanding potential problems that
might occur on the project and how they might impede project
success
⚫ Risk management is like a form of insurance; it is an
investment

56
Risk Utility
⚫ Risk utility or risk tolerance is the amount of
satisfaction or pleasure received from a
potential payoff
⚫ Utility rises at a decreasing rate for a person who
is risk-averse
⚫ Those who are risk-seeking have a higher
tolerance for risk and their satisfaction increases
when more payoff is at stake
⚫ The risk neutral approach achieves a balance
between risk and payoff

57
Risk Utility Function and Risk Preference

58
What is Project Risk Management?
The goal of project risk management is to minimize potential risks
while maximizing potential opportunities. Major processes include
⚫ Risk management planning: deciding how to approach and plan
the risk management activities for the project
⚫ Risk identification: determining which risks are likely to affect a
project and documenting their characteristics
⚫ Qualitative risk analysis: characterizing and analyzing risks and
prioritizing their effects on project objectives
⚫ Quantitative risk analysis: measuring the probability and
consequences of risks
⚫ Risk response planning: taking steps to enhance opportunities
and reduce threats to meeting project objectives
⚫ Risk monitoring and control: monitoring known risks, identifying
new risks, reducing risks, and evaluating the effectiveness of
risk reduction

59
Risk Management Planning
⚫ The main output of risk management planning is a risk
management plan
⚫ The project team should review project documents and
understand the organization’s and the sponsor’s approach to
risk
⚫ The level of detail will vary with the needs of the project

60
Questions Addressed in a Risk Management Plan

61
Contingency and Fallback Plans,
Contingency Reserves
⚫ Contingency plans are predefined actions that the project
team will take if an identified risk event occurs
⚫ Fallback plans are developed for risks that have a high impact
on meeting project objectives
⚫ Contingency reserve or allowances are provisions held by the
project sponsor that can be used to mitigate cost or schedule
risk if changes in scope or quality occur

62
Risk Identification
⚫ Risk identification is the process of
understanding what potential unsatisfactory
outcomes are associated with a particular
project
⚫ Several risk identification tools and
techniques include
⚫ Brainstorming
⚫ The Delphi technique
⚫ Interviewing
⚫ SWOT analysis
63
Potential Risk Conditions Associated
With Each Knowledge Area
Knowledge Area Risk Conditions
Integration Inadequate planning; poor resource allocation; poor integration
management; lack of post-project review
Scope Poor definition of scope or work packages; incomplete definition
of quality requirements; inadequate scope control
Time Errors in estimating time or resource availability; poor allocation
and management of float; early release of competitive products
Cost Estimating errors; inadequate productivity, cost, change, or
contingency control; poor maintenance, security, purchasing, etc.
Quality Poor attitude toward quality; substandard
design/materials/workmanship; inadequate quality assurance
program
Human Resources Poor conflict management; poor project organization and
definition of responsibilities; absence of leadership
Communications Carelessness in planning or communicating; lack of consultation
with key stakeholders
Risk Ignoring risk; unclear assignment of risk; poor insurance
management
Procurement Unenforceable conditions or contract clauses; adversarial relations
64
Quantitative Risk Analysis
⚫ Assess the likelihood and impact of
identified risks to determine their
magnitude and priority
⚫ Risk quantification tools and techniques
include
⚫ Probability/Impact matrixes
⚫ The Top 10 Risk Item Tracking technique
⚫ Expert judgment

65
Sample Probability/Impact Matrix for
Qualitative Risk Assessment

66
Chart Showing High-, Medium-, and
Low-Risk Technologies

67
Top 10 Risk Item Tracking

⚫ Top 10 Risk Item Tracking is a tool for

maintaining an awareness of risk throughout
the life of a project
⚫ Establish a periodic review of the top 10
project risk items
⚫ List the current ranking, previous ranking,
number of times the risk appears on the list
over a period of time, and a summary of
progress made in resolving the risk item

68
Example of Top 10 Risk Item
Tracking
Monthly Ranking
Risk Item This Last Number Risk Resolution
of Months Progress
Month Month
Inadequate 1 2 4 Working on revising the
planning entire project plan
Poor definition 2 3 3 Holding meetings with
of scope project customer and
sponsor to clarify scope
Absence of 3 1 2 Just assigned a new
leadership project manager to lead
the project after old one
quit
Poor cost 4 4 3 Revising cost estimates
estimates
Poor time 5 5 3 Revising schedule
estimates estimates
69
Expert Judgment
⚫ Many organizations rely on the intuitive feelings and past
experience of experts to help identify potential project risks
⚫ Experts can categorize risks as high, medium, or low with or
without more sophisticated techniques

70
Quantitative Risk Analysis
⚫ Often follows qualitative risk analysis, but both can be done
together or separately
⚫ Large, complex project involving leading edge technologies
often require extensive quantitative risk analysis
⚫ Main techniques include
⚫ Decision tree analysis
⚫ simulation

71
Decision Trees and Expected Monetary
Value (EMV)
⚫ A decision tree is a diagramming method used to help you
select the best course of action in situations in which future
outcomes are uncertain
⚫ EMV is a type of decision tree where you calculate the
expected monetary value of a decision based on its risk event
probability and monetary value

72
Expected Monetary Value (EMV) Example

73
Simulation
⚫ Simulation uses a representation or model of a system to analyze the
expected behavior or performance of the system
⚫ Monte Carlo analysis simulates a model’s outcome many time to
provide a statistical distribution of the calculated results
⚫ To use a Monte Carlo simulation, you must have three estimates (most
likely, pessimistic, and optimistic) plus an estimate of the likelihood of
the estimate being between the optimistic and most likely values

74
Sample Monte Carlo Simulation Results
for Project Schedule

75
Sample Monte Carlo Simulations
Results for Project Costs

76
Risk Response Planning
⚫ After identifying and quantifying risk, you must decide how to respond
to them
⚫ Four main strategies:
⚫ Risk avoidance: eliminating a specific threat or risk, usually by eliminating its
causes
⚫ Risk acceptance: accepting the consequences should a risk occur
⚫ Risk transference: shifting the consequence of a risk and responsibility for its
management to a third party
⚫ Risk mitigation: reducing the impact of a risk event by reducing the probability of
its occurrence

77
General Risk Mitigation Strategies for Technical, Cost,
and Schedule Risks

78
Risk Monitoring and Control

⚫ Monitoring risks involves knowing their status

⚫ Controlling risks involves carrying out the risk management
plans as risks occur
⚫ Workarounds are unplanned responses to risk events that
must be done when there are no contingency plans
⚫ The main outputs of risk monitoring and control are corrective
action, project change requests, and updates to other plans

79
Risk Response Control
⚫ Risk response control involves executing the
risk management processes and the risk
management plan to respond to risk events
⚫ Risks must be monitored based on defined
milestones and decisions made regarding
risks and mitigation strategies
⚫ Sometimes workarounds or unplanned
responses to risk events are needed when
there are no contingency plans

80
Reading Assignments
⚫ McFarlan’s Risk Questionnaire
⚫ Categories of Risk

81
Project Procurement
Management

82
Objectives
At the end of this chapter, students should be able to
⚫ Understand the importance of good procurement management
and the increasing use of outsourcing for information technology
projects
⚫ Describe the main processes and deliverables of procurement
management
⚫ Perform a simple make-or-buy analysis
⚫ Explain the various types of contracts, the risks involved in using
each, and provide examples of when each might be used for an
information technology project
⚫ Describe the basic contents of a Request for Proposal
⚫ Create and use a proposal evaluation worksheet
⚫ Understand the importance of having good contracts and
managing them well

83
Importance of Project Procurement
Management
⚫ Procurement means acquiring goods and/or services from an
outside source
⚫ Other terms include purchasing and outsourcing
⚫ Experts predict that by the year 2003 the worldwide
information technology outsourcing market will grow to over
$110 billion

84
Why Outsource?
⚫ To reduce both fixed and recurrent costs
⚫ To allow the client organization to focus on its core business
⚫ To access skills and technologies
⚫ To provide flexibility
⚫ To increase accountability

85
Project Procurement
Management Processes
⚫ Project procurement includes the process
required to acquire goods and services for a
project from outside the performing
organization.
⚫ Project procurement management process
includes
⚫ Procurement planning: determining what to
procure and when.
⚫ It involves deciding what to outsource and determining the
type of contract.
⚫ Makes make-or-buy decision

86
PPMP (Cont’d)
⚫ Solicitation planning: documenting
product requirements and identifying
potential sources
⚫ Solicitation: obtaining quotations, bids,
offers, or proposals as appropriate
⚫ Source selection: choosing from among
potential vendors
⚫ Contract administration: managing the
relationship with the vendor
⚫ Contract close-out: completion and
settlement of the contract
87
Project Procurement Management Processes and Key
Outputs

88
Procurement Planning
⚫ Procurement planning involves identifying
which project needs can be best met by
using products or services outside the
organization. It includes deciding
⚫ whether to procure
⚫ how to procure
⚫ what to procure
⚫ how much to procure
⚫ when to procure

89
Collaborative Procurement
⚫ Several organizations, even competitors, have found that it
makes sense to collaborate on procurement for some projects
⚫ Kodak worked with several competitors to develop the
Advantix Advanced Photo System (see What Went Right?)

90
Procurement Planning Tools and
Techniques
⚫ Make-or-buy analysis: determining whether a particular
product or service should be made or performed inside the
organization or purchased from someone else. Often
involves financial analysis
⚫ Experts, both internal and external, can provide valuable
inputs in procurement decisions

91
Make-or Buy Example
⚫ Assume you can lease an item you need for a project for
$150/day. To purchase the item, the investment cost is
$1,000, and the daily cost would be another $50/day.
⚫ How long will it take for the lease cost to be the same as the
purchase cost?
⚫ If you need the item for 12 days, should you lease it or
purchase it?

92
Make-or Buy Solution
⚫ Set up an equation so the “make” is equal to the “buy”
⚫ In this example, use the following equation. Let d be
the number of days to use the item.
$150d = $1,000 + $50d
⚫ Solve for d as follows:
⚫ Subtract $50d from the right side of the equation to get
$100d = $1,000
⚫ Divide both sides of the equation by $100
d = 10 days
⚫ The lease cost is the same as the purchase cost at 10
days
⚫ If you need the item for 12 days, it would be more
economical to purchase it
93
Types of Contracts
⚫ Fixed price or lump sum: involve a fixed
total price for a well-defined product or
service
⚫ Cost reimbursable: involve payment to the
seller for direct and indirect costs
⚫ Unit price contracts: require the buyer to
pay the seller a predetermined amount per
unit of service. Sometimes, it is also known
as Time and Material Contract

94
Cost Reimbursable Contracts
⚫ Cost plus incentive fee (CPIF): the buyer pays
the seller for allowable performance costs plus a
predetermined fee and an incentive bonus
⚫ Cost plus fixed fee (CPFF): the buyer pays the
seller for allowable performance costs plus a fixed
fee payment usually based on a percentage of
estimated costs
⚫ Cost plus percentage of costs (CPPC): the buyer
pays the seller for allowable performance costs
plus a predetermined percentage based on total
costs

95
Contract Types Versus Risk

96
Statement of Work (SOW)
⚫ A statement of work is a description of the work required for
the procurement
⚫ Many contracts, mutually binding agreements, include SOWs
⚫ A good SOW gives bidders a better understanding of the
buyer’s expectations

97
Solicitation Planning
⚫ Solicitation planning involves preparing several
documents:
⚫ Request for Proposals: used to solicit proposals from
prospective sellers where there are several ways to
meet the sellers’ needs
⚫ Requests for Quotes: used to solicit quotes for well-
defined procurements
⚫ Invitations for bid or negotiation and initial contractor
responses are also part of solicitation planning

98
Outline for a Request for Proposal (RFP)
I. Purpose of RFP
II. Organization’s Background
III. Basic Requirements
IV. Hardware and Software Environment
V. Description of RFP Process
VI. Statement of Work and Schedule Information
VII. Possible Appendices
A. Current System Overview
B. System Requirements
C. Volume and Size Data
D. Required Contents of Vendor’s Response to RFP
E. Sample Contract

99
Solicitation
⚫ Solicitation involves obtaining proposals or
bids from prospective sellers
⚫ Organizations can advertise to procure
goods and services in several ways
⚫ approaching the preferred vendor
⚫ approaching several potential vendors
⚫ advertising to anyone interested
⚫ A bidders’ conference can help clarify the
buyer’s expectations

100
Source Selection
⚫ Source selection involves
⚫ evaluating bidders’ proposals
⚫ choosing the best one
⚫ negotiating the contract
⚫ awarding the contract
⚫ It is helpful to prepare formal evaluation
procedures for selecting vendors
⚫ Buyers often create a “short list”

101
Sample Proposal Evaluation Sheet

102
Detailed Criteria for Selecting Suppliers

103
Contract Administration
⚫ Contract administration ensures that the
seller’s performance meets contractual
requirements
⚫ Contracts are legal relationships, so it is
important that legal and contracting
professionals be involved in writing and
administering contracts
⚫ Many project managers ignore contractual
issues, which can result in serious problems

104
Suggestions on Change
Control for Contracts
⚫ Changes to any part of the project need to be
reviewed, approved, and documented by the same
people in the same way that the original part of the
plan was approved
⚫ Evaluation of any change should include an impact
analysis. How will the change affect the scope,
time, cost, and quality of the goods or services
being provided?
⚫ Changes must be documented in writing. Project
team members should also document all important
meetings and telephone phone calls

105
Contract Close-out
⚫ Contract close-out includes
⚫ product verification to determine if all work was
completed correctly and satisfactorily
⚫ administrative activities to update records to reflect
final results
⚫ archiving information for future use
⚫ Procurement audits identify lessons learned in
the procurement process

106
Project Post-Mortem

107
Companies Rarely Perform Post-Project
Audits
⚫ Most companies spend thousands of hours planning
a project, millions of dollars implementing it—and
nothing evaluating and learning from it!
⚫ Few companies examine their completed projects
⚫ in any depth
⚫ When they do conduct post project audits, they are
often superficial
⚫ When project members conduct post project
reviews, they are likely to have preconceived ideas
or even a vested interest in the outcome of the
review

108
The value of a Post Project Appraisal
Group
⚫ Ideally, a post project appraisal group would consist of
members that have no affiliation with the project they
appraise—allowing them to evaluate projects more
objectively
⚫ A post project appraisal group can help a company to learn
from its mistakes and repeat its successes
⚫ Ideally, the group would report directly to the board of
directors or to the firm’s audit committee

109
Conducting Post Project Audits
⚫ An appraisal of a large investment project
can take up to six months to complete
⚫ Because of the time and cost associated with
a full-blown audit, it may make sense to only
review those projects that will contribute to
organizational learning
⚫ Projects that are likely to hold new lessons as
opposed to simply duplicating lessons drawn from
previous projects that have been audited

110
Conducting Post Project Audits
⚫ A complete audit would examine the project
from its conception—before the project
proposal is even written—until after it is
implemented and has become operational
⚫ The post project audit should attempt to
determine the important factors that
contributed to a project’s problems or
success

111
Conducting Post Project Audits
⚫ Initially, the post project appraisal team focuses on
the files to become familiar with the project
⚫ Ideally, the team should then interview everyone
involved in the project
⚫ It is best if two interviewers are present for each interview -
one can ask questions while the other observes and keeps
notes
⚫ Interviews are costly and time consuming but are far more
effective than sending out questionnaires for answering
certain types questions
⚫ After the investigation is completed, a report should
be drafted and circulated
112
Note: See the text itself for full citations.
 The International Organization for Standardization
(ISO) defines quality as “the degree to which a set
of inherent characteristics fulfils requirements”
(ISO9000:2000)
 Other experts define quality based on:
◦ Conformance to requirements: the project’s processes
and products meet written specifications
◦ Fitness for use: a product can be used as it was intended

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 Project quality management ensures that the project
will satisfy the needs for which it was undertaken
 Processes include:
◦ Planning quality: identifying which quality standards are
relevant to the project and how to satisfy them; a metric is a
standard of measurement
◦ Performing quality assurance: periodically evaluating overall
project performance to ensure the project will satisfy the
relevant quality standards
◦ Performing quality control: monitoring specific project
results to ensure that they comply with the relevant quality
standards

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 Implies the ability to anticipate situations and
prepare actions to bring about the desired
outcome

 Important to prevent defects by:

◦ Selecting proper materials

◦ Training and indoctrinating people in quality

◦ Planning a process that ensures the appropriate

outcome

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 Design of experiments is a quality planning
technique that helps identify which variables have
the most influence on the overall outcome of a
process

 Also applies to project management issues, such

as cost and schedule trade-offs

 Involves documenting important factors that

directly contribute to meeting customer
requirements
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 Functionality is the degree to which a system performs
its intended function
 Features are the system’s special characteristics that
appeal to users
 System outputs are the screens and reports the system
generates
 Performance addresses how well a product or service
performs the customer’s intended use
 Reliability is the ability of a product or service to perform
as expected under normal conditions
 Maintainability addresses the ease of performing
maintenance on a product
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 Project managers are ultimately responsible for
quality management on their projects

 Several organizations and references can help

project managers and their teams understand
quality

◦ International Organization for Standardization

(www.iso.org)

◦ IEEE (www.ieee.org)

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 Quality assurance includes all the activities related to
satisfying the relevant quality standards for a project
 Another goal of quality assurance is continuous quality
improvement
 Benchmarking generates ideas for quality
improvements by comparing specific project practices
or product characteristics to those of other projects or
products within or outside the performing organization
 A quality audit is a structured review of specific quality
management activities that help identify lessons
learned that could improve performance on current or
future projects
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 The main outputs of quality control are:
◦ Acceptance decisions
◦ Rework
◦ Process adjustments
 There are Seven Basic Tools of Quality that help
in performing quality control

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 Cause-and-effect diagrams trace complaints
about quality problems back to the responsible
production operations
 They help you find the root cause of a problem
 Also known as fishbone or Ishikawa diagrams
 Can also use the 5 whys technique where you
repeated ask the question “Why” (five is a good
rule of thumb) to peel away the layers of
symptoms that can lead to the root cause

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 Flowcharts are graphic displays of the logic and
flow of processes that help you analyze how
problems occur and how processes can be
improved
 They show activities, decision points, and the
order of how information is processed

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 Six 9s of quality is a measure of quality control
equal to 1 fault in 1 million opportunities

 In the telecommunications industry, it means

99.9999 percent service availability or 30 seconds
of down time a year

 This level of quality has also been stated as the

target goal for the number of errors in a
communications circuit, system failures, or errors
in lines of code
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 Many IT professionals think of testing as a stage
that comes near the end of IT product
development

 Testing should be done during almost every phase

of the IT product development life cycle

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 Unit testing tests each individual component (often
a program) to ensure it is as defect-free as possible

 Integration testing occurs between unit and system

testing to test functionally grouped components

 System testing tests the entire system as one entity

 User acceptance testing is an independent test

performed by end users prior to accepting the
delivered system

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 Watts S. Humphrey, a renowned expert on software
quality, defines a software defect as anything that must
be changed before delivery of the program

 Testing does not sufficiently prevent software defects

because:
◦ The number of ways to test a complex system is huge

◦ Users will continue to invent new ways to use a system that

its developers never considered

 Humphrey suggests that people rethink the software

development process to provide no potential defects when
you enter system testing; developers must be responsible
for providing error-free code at each stage of testing
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 Modern quality management:

◦ Requires customer satisfaction

◦ Prefers prevention to inspection

◦ Recognizes management responsibility for quality

 Noteworthy quality experts include Deming, Juran,

Crosby, Ishikawa, Taguchi, and Feigenbaum

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 Suggestions for improving quality for IT projects
include:

◦ Establish leadership that promotes quality

◦ Understand the cost of quality

◦ Focus on organizational influences and workplace factors

that affect quality

◦ Follow maturity models

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 As Joseph M. Juran said in 1945, “It is most
important that top management be quality-minded.
In the absence of sincere manifestation of interest
at the top, little will happen below.”*
 A large percentage of quality problems are
associated with management, not technical issues

*American Society for Quality (ASQ), (www.asqc.org/about/history/juran.html).

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 The cost of quality is the cost of conformance
plus the cost of nonconformance
◦ Conformance means delivering products that meet
requirements and fitness for use
◦ Cost of nonconformance means taking responsibility
for failures or not meeting quality expectations
 A study reported that software bugs cost the U.S.
economy $59.6 billion each year and that one third
of the bugs could be eliminated by an improved
testing infrastructure

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 Prevention cost: cost of planning and executing a project
so it is error-free or within an acceptable error range
 Appraisal cost: cost of evaluating processes and their
outputs to ensure quality
 Internal failure cost: cost incurred to correct an identified
defect before the customer receives the product
 External failure cost: cost that relates to all errors not
detected and corrected before delivery to the customer
 Measurement and test equipment costs: capital cost of
equipment used to perform prevention and appraisal
activities

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 Maturity models are frameworks for helping
organizations improve their processes and systems

◦ The Software Quality Function Deployment Model

focuses on defining user requirements and planning
software projects

◦ The Software Engineering Institute’s Capability Maturity

Model Integration is a process improvement approach
that provides organizations with the essential elements of
effective processes

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 CMMI levels, from lowest to highest, are:
◦ Incomplete
◦ Performed
◦ Managed
◦ Defined
◦ Quantitatively Managed
◦ Optimizing
 Companies may not get to bid on government projects
unless they have a CMMI Level 3

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 OPM3 provides the following example to illustrate a best
practice, capability, outcome, and key performance
indicator:
◦ Best practice: establish internal project management
communities
◦ Capability: facilitate project management activities
◦ Outcome: local initiatives, meaning the organization
develops pockets of consensus around areas of special
interest
◦ Key performance indicator: community addresses local
issues

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Note: See the text itself for full citations.
▪ The greatest threat to many projects is a failure to
communicate
▪ Our culture does not portray IT professionals as
being good communicators
▪ Research shows that IT professionals must be able
to communicate effectively to succeed in their
positions
▪ Strong verbal skills are a key factor in career
advancement for IT professionals

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 Identifying stakeholders: identifying everyone involved in or affected
by the project and determining the best ways to manage relationships
with them
▪ Planning communications: determining the information and
communications needs of the stakeholders
▪ Distributing information: making needed information available to
project stakeholders in a timely manner
▪ Managing stakeholder expectations: managing communications to
satisfy the needs and expectations of project stakeholders and to
resolve issues
▪ Reporting performance: collecting and disseminating performance
information, including status reports, progress measurement, and
forecasting

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 Recall that the ultimate goal of project
management is to meet or exceed stakeholder
needs and expectations from a project, so you
must first identify who your particular project
stakeholders are
 Two key outputs of this process include:
◦ Stakeholder register: a public document that includes
details related to the identified project stakeholders
(see Table 3-4 for an example)
◦ Stakeholder management strategy: an approach to
help increase the support of stakeholders throughout
the project; often includes sensitive information

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▪ Every project should include some type of
communications management plan, a document
that guides project communications

▪ Creating a stakeholder analysis for project

communications also aids in communications
planning (see Table 10-2 for an example)

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▪ Stakeholder communications requirements

▪ Information to be communicated, including format,

content, and level of detail

▪ The people who will receive the information and

who will produce it

▪ Suggested methods or technologies for conveying

the information

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▪ Frequency of communication

▪ Escalation procedures for resolving issues

▪ Revision procedures for updating the

communications management plan

▪ A glossary of common terminology

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▪ Getting the right information to the right people at
the right time and in a useful format is just as
important as developing the information in the first
place

▪ Important considerations include:

▪ Using technology to enhance information distribution

▪ Formal and informal methods for distributing information

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▪ Don’t bury crucial information

▪ Don’t be afraid to report bad information

▪ Oral communication via meetings and informal talks

helps bring important information—good and bad—
out into the open

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▪ Research says that in a face-to-face interaction:
▪ 58 percent of communication is through body language
▪ 35 percent of communication is through how the words are
said
▪ 7 percent of communication is through the content or
words that are spoken
▪ Pay attention to more than just the actual words
someone is saying
▪ A person’s tone of voice and body language say a
lot about how he or she really feels

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▪ Short, frequent meetings are often very effective in
IT projects

▪ Stand-up meetings force people to focus on what

they really need to communicate

▪ Some companies have policies preventing the use

of e-mail between certain hours or even entire days
of the week

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 People are not interchangeable parts

 As illustrated in Brooks’ book The Mythical Man-

Month, you cannot assume that a task originally
scheduled to take two months of one person’s time
can be done in one month by two people

 Nine women cannot produce a baby in one month!

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 Introverts like more private communications, while
extroverts like to discuss things in public
 Intuitive people like to understand the big picture,
while sensing people need step-by-step details
 Thinkers want to know the logic behind decisions,
while feeling people want to know how something
affects them personally
 Judging people are driven to meet deadlines while
perceiving people need more help in developing
and following plans

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 Rarely does the receiver interpret a message
exactly as the sender intended

 Geographic location and cultural background affect

the complexity of project communications
◦ Different working hours

◦ Language barriers

◦ Different cultural norms

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 As the number of people involved increases, the
complexity of communications increases because
there are more communications channels or
pathways through which people can communicate
 Number of communications channels = n(n-1)
2
where n is the number of people involved

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 Project managers must understand and work with
various stakeholders

 Need to devise a way to identify and resolve

issues

 An expectations management matrix can help

clarify expectations

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Performance reporting keeps stakeholders informed
about how resources are being used to achieve
project objectives:
◦ Status reports describe where the project stands at a
specific point in time

◦ Progress reports describe what the project team has

accomplished during a certain period of time

◦ Forecasts predict future project status and progress based

on past information and trends

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 Manage conflicts effectively

 Develop better communication skills

 Run effective meetings

 Use e-mail and other technologies effectively

 Use templates for project communications

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1. Confrontation: directly face a conflict using a problem-
solving approach
2. Compromise: use a give-and-take approach
3. Smoothing: de-emphasize areas of difference and
emphasize areas of agreement
4. Forcing: the win-lose approach
5. Withdrawal: retreat or withdraw from an actual or potential
disagreement
6. Collaborating: decision makers incorporate different
viewpoints and insights to develop consensus and
commitment

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 Conflict often produces important results, such as
new ideas, better alternatives, and motivation to
work harder and more collaboratively

 Groupthink: conformance to the values or ethical

standards of a group; groupthink can develop if
there are no conflicting viewpoints

 Research suggests that task-related conflict often

improves team performance, but emotional conflict
often depresses team performance

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 Companies and formal degree programs for IT
professionals often neglect the importance of
speaking, writing, and listening skills

 As organizations become more global, they realize

they must invest in ways to improve communication
with people from different countries and cultures

 It takes leadership to improve communication

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 Determine if a meeting can be avoided
 Define the purpose and intended outcome of the
meeting
 Determine who should attend the meeting
 Provide an agenda to participants before the
meeting
 Prepare handouts and visual aids, and make
logistical arrangements ahead of time
 Run the meeting professionally
 Build relationships

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 Make sure that e-mail, instant messaging, or
collaborative tools are an appropriate medium for
what you want to communicate

 Be sure to send information to the right people

 Use meaningful subject lines, limit the content of

e-mails to one main subject, and be as clear and
concise as possible

 Be sure to authorize the right people to share and

edit your collaborative documents
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 Alaska Airlines uses secure project wikis to
facilitate project communications and
collaborations
 Benefits include:
◦ Better documentation
◦ Improved trust and information sharing
◦ Sustained growth
 The Alaska Airlines IT department even created a
“Mother of All Wikis” to serve as an index for all the
known project wikis

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 Many technical people are afraid to ask for help

 Providing examples and templates for project

communications saves time and money

 Organizations can develop their own templates, use

some provided by outside organizations, or use
samples from textbooks

 Recall that research shows that companies that

excel in project management make effective use of
templates

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 The project manager and project team members
should each prepare a lessons-learned report
◦ A reflective statement that documents important things an
individual learned from working on the project

 The project manager often combines information

from all of the lessons-learned reports into a
project summary report

 See template and sample in Chapter 3

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 It is also important to organize and prepare project
archives
 Project archives are a complete set of organized
project records that provide an accurate history of
the project
 These archives can provide valuable information
for future projects as well

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▪ Many project teams create a project Web site to
store important product documents and other
information

▪ Can create the site using various types of

software, such as enterprise project management
software

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