CE 4101W-01 Project Management and Economics

CE 4101W-01 Project Management and Economics
Fall 2005 Tim Eiler

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

Open PM Discussion Why are you in this class?
What questions do you have about PM?

What’s The Point of This Class?
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)

Why is any business in business?
$ € £ ¥

Why Project Management (PM)?
Increases profit (margin) by reducing cost/unit output Increasing work output by the same resources Reducing cost of work done Drives Innovation In how individual contributor & management (mgmt) work is done In product

Why PM? Increases sales Improved quality Ability to be a price leader
Differentiates your company “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

Why PM? In short: Project Management (PM) strives to achieve success from entropy-driven chaos…

Why Is PM Important? Close to half of the projects started were
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

Secret 1 About This Course
This course has wide breadth with less topic depth

Project Management (PM) isn’t rocket science

This 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 a PRACTICAL Course
What You Can Expect… This is an application-level course Needs critical thinking… not just formulaic regurgitation This is a PRACTICAL Course 5th - Explain 4th - Synthesize 3rd - Challenge 2nd - Listen 1st - Read Process: 3rd – Apply 2nd – Practice 1st – Know

What You Can Expect… Getting new knowledge… Examples
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

What You Can Expect… 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

What You Can Expect… 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

What You Can Expect… 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… Be An Active Learner 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 Review 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… READ THE SYLLABUS

Syllabus Review - Slide Decks
Available 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

Syllabus – Cont’d Teaching Team Instructor: Tim Eiler Office: CE 147
Phone 1: (cell) Phone 2: (home) 1: 2: Office Hours: As Needed Teaching Assistant: Ryan Owen Office: Phone: Rhetoric Consultant: Dave Kmiec Office: Phone: , (c )

Teaching Team – Tim Eiler
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, TX Managed microwave radio/radio network equipment development projects Astronaut Instructor Rockwell Space Operations, Houston, TX Provided 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

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’d Calendar 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 To Receive an A To Receive a B To Receive a C Abide by all Class Policies Actively engage in class discussions – small group and whole class Actively engage in class discussions – small group 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 P grade on 90% quizzes and assignments given in class Receive P grade on 80% quizzes and assignments given in class Receive a cumulative mean score of >= 90% for 2 exams Receive a cumulative mean score of >= 80% for 2 exams Receive a cumulative mean score of >= 70% for 2 exams Receive P grade on Project Plan Complete Writing Interview Form NOTE: In cases of conflict between these slides and the syllabus, the syllabus will have precedence

Grading – Cont’d Assignments Quality Exams  3 Quantity
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…

Class Groups Form groups of 6
Each person to collect contact information (phone, , 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

Breaks The literature says that classes should be broken up to have a break after roughly every 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?

General Course Organization
PM Planning PM Execution PM Leadership and Ethics Project Closure

What Is Project Management?
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) Project Management is the intersection of: Tools People Systems (Lewis, James P Project Planning, Scheduling & Control, 3rd ed. McGraw‑Hill)

Why Is PM Important To You?
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 American Society for Training and Development and U.S. Department of Labor.

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 focus A 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 expertise Awareness & appreciation of other cultures & their diversity, distinctiveness, & inherent value Commitment to teamwork, including extensive experience/understanding with team dynamics Good communication skills, including written, verbal, graphic, and listening High 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 change Curiosity and the accompanying drive to learn continuously throughout one’s career An ability to impart knowledge to others [1]A Manifesto for Global Engineering Education, Summary Report of the Engineering Futures Conference, January 22-23, The Boeing Company & Rensselaer Polytechnic Institute.

Why Writing In this Course?
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 Intensive? ABET Criteria 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 Criteria for Accrediting Engineering Programs. Accessed June 12, available: <

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 Writing a Proposal in a Collaborative Team

Writing as a Process - Your writing assignments are graded pass/fail
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

Why Engineering Economics?
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

Engineering Econ - Examples
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

What Is Project Management?
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) So, if Project Management (PM) “focuses on a project,” what is 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 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 sources pulled together in a temporary organization to achieve a specified purpose. (Cleland and Kerzner, 1985; Nicholas, 1990)

Characteristics Of A Project?
Temporary, with specific endpoint Unique Specific Deliverable Specific Spending Limit Element of Risk (Typically) Involve groups, across organizational lines

Defining a Project - Old
TRIPLE CONSTRAINT

Defining a Project – Current
Budget = Cost Schedule = Time Performance = Itself Client Acceptance a.k.a Customer Satisfaction QUADRUPLE CONSTRAINT

Is PM Art, Science, or Both?
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

Fundamental Tools Fundamental tools for the new generation of engineers and project managers… Basic Thinking (Occam’s Razor) Systems/ systems thinking/ systems engineering Models Teamwork Quality

PM Process at the High-Level
Planning Customer Request Execution customer internal Closure

The PM Process – Detail Level
SOW Project Charter Requirements Document WBS Stakeholder Analysis customer internal Network Diagram Critical Path Assessment Duration Estimation Resource Assignment Schedule Comm Plan Budget Quality Plan Admin Plan Project Plan

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 Project Function 1 Function 2 Function n Other

Program Management Program Project 1 Project 2 Project n Other
Function 1 Function 2 Function n Other Other

Project Life Cycle Wild enthusiasm Disillusionment Total confusion
It’s only funny because it’s so true… Wild enthusiasm Disillusionment Total confusion Search for the guilty Punishment of the innocent Praise and honors for the non-participants

Project Life Cycle Feasibility, Planning/Design, Construction, Turnover/Startup

Project Life Cycle

PM Attention/Methods over PLC
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’s Role Over PLC • Planning • Organizing • Staffing • Directing
• Controlling

PM 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 Project management for engineering and construction. New York: McGraw-Hill.

PM Role Over PLC – Organizing/Staffing
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 – Directing/Controlling
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

The PM Process – Planning Detail
SOW Project Charter Requirements Document WBS Stakeholder Analysis customer internal Network Diagram Critical Path Assessment Duration Estimation Resource Assignment Schedule Comm Plan Budget Quality Plan Admin Plan Project Plan

The Process Steps - Overview
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)

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

So how does the customer tell the “do-er” what is needed (and constraints)? The Statement of Work (SOW)

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 User-level requirements

SOW Constraints Documentation Rules Procedural Methodology Materials
What documentation is required Testing results Manufacturers’ literature Samples Product data Color selections Etc. When documentation is required Format required for documentation

There is no “official standard version” of an SOW An example (paper airplane)

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

Statement Of Work Parts Depot 333 W 78th St Bloomington, MN Avanti Motor Corporation of America 19740 Inglewilde Dr Norcross, Georgia Mark Ross, Customer Representative

General Requirements Not Applicable Site work 2.1 Excavation Flat and compacted to support slab foundation and building 2.2 Landscaping Turf 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)

Homework 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 address preferred). Submit via hardcopy Submit in next class (no late homework accepted) Your signature must be on the submitted version

Homework 1 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)

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

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 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

The Project Charter Who is accountable for creating project charter?
The Project Sponsor What does charter tell the project team & others? 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

Project Charter 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

Requirements 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 Semantics
Will: Shall: Should: 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 $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?

Small Team Kickoff Meeting
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

Goals, Objectives (and Tasks)
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

Defining Requirements
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)

Project Planning is Extremely ITERATIVE
Why? Because projects are progressively elaborated! Concept Note: Rolling Wave Planning

Reflective Listening 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?

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

Reflective Listening Example
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?

Organization Types 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 - Functional
CEO Engineering Manufacturing Human Resources Finance Staff Staff Staff Staff Staff Staff Staff Staff Staff Staff Staff Staff Project control

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 - Matrix
CEO Engineering Manufacturing Human Resources Finance Staff Staff Staff Staff Staff Staff Staff Staff Staff Staff Staff Staff Project control 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 - Projectized
CEO PM 1 PM 2 PM 3 PM 4 Staff Staff Staff Staff Staff Staff Staff Staff Staff Staff Staff Staff Project control 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 - PMO
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 Central Concept - Innovation Dominant Project Characteristics - Overlapping, Fewer boundaries Main Thrust - Modifying and Adapting Demands Metaphor - Designing Means - Creativity, Higher Technology Ability

Organization Types - Summary
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 Full-time Common PM Titles Project Coordinator/ Project Leader Project Manager/ Project Officer Project Manager/ Program Manager PM Admin Staff Part-time, if any Project Management Institute, 2000, PMBOK, p. 19

Organization Types - Selection
Organization types typically evolve, rather than get “selected” Some factors influencing the evolution 1. Technology 2. Finance and accounting 3. Communication 4. Responsibility to a project/product 5. Coordination 6. Customer relations Central Concept - Innovation Dominant Project Characteristics - Overlapping, Fewer boundaries Main Thrust - Modifying and Adapting Demands Metaphor - Designing Means - Creativity, Higher Technology Ability

Organization Types - Selection
Why would an organization choose functional form over projectized form? Why would an organization choose strong matrix from the matrix options? Central Concept - Innovation Dominant Project Characteristics - Overlapping, Fewer boundaries Main Thrust - Modifying and Adapting Demands Metaphor - Designing Means - Creativity, Higher Technology Ability

Project Plan 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?

Elements of a 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

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).

Work Breakdown Structure
What is a WBS? deliverable-oriented grouping of project components that organizes and defines the total scope of the project What is a DELIVERABLE?

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

Create a WBS using this information
WBS Exercise 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 Scrub Walls Paint Walls Install New Carpet Move in New Furniture Create a WBS using this information

WBS Exercise 1. Create a WBS
1.0 Office Remodel Project 1.1 Procure 1.1.1 Procure Paint 1.1.2 Procure New Carpet Request Bids Purchase Receive Carpet 1.1.3 Procure New Furniture 1.2 Prepare 1.2.1 Remove Old Furniture 1.2.2 Remove Old Carpet 1.2.3 Scrub Walls 1.3 Install 1.3.1 Paint Walls 1.3.2 Install New Carpet 1.3.3 Move in New Furniture 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?

1.0 Office Remodel Project
WBS Exercise 1.0 Office Remodel Project 1.1 Procure 1.2 Prepare 1.3 Install 1.1.1 Procure Paint 1.1.3 Procure New Furniture 1.1.1 Remove Old Furniture 1.1.3 Scrub Walls 1.1.1 Paint Walls 1.1.3 Move In New Furniture 1.1.2 Procure New Carpet 1.1.2 Remove Old Carpet 1.1.2 Install New Carpet Request Bids Purchase Receive Carpet

Network Diagrams Put the work into a flow/logical sequence
Ok, up to now you’ve learned to: Receive the customer specification Officially start the project Get the requirements right Figure out who the project stakeholders are and what they want Break the work down So now what? Put the work into a flow/logical sequence Identify and assign resources Create a schedule plan

Network Diagrams How does PM put activities in logical order? Purpose
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 activities Note: 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 AON vs AOA
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 Diagram Example - AON

Network Diagram Example - AOA

Sticky Note Project Planning
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

Network Diagram Example
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 Scrub Walls Paint Walls Install New Carpet Move in New Furniture

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: 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…

Estimating Activity Duration
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?

Responsibility Assignment
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

Network Diagrams - CPM CPM = Critical Path Method Critical Path
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

Find the critical path and the critical time
CPM Example Find the critical path and the critical time

CPM - Practice 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

1 2 1 1 2 2 1 3 2

Bus Shelter Construction
Critical Path Method Results ACT NAME DUR RES EARLY LATE FLOAT CUR start CRIT PATH ST FN TOT FREE 1 Shelter Slab 2 4 YES Shelter Walls 5 3 Shelter Roof 8 10 Roof Beam Excavation 6 Curb and Gutter NO 7 Shelter Seat 9 Paint Signwork

Slack BUT – only within limits.
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. BUT – only within limits.

Slack 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. 3 3 Task 1 Task 2 Start End 3 Task 3

Slack Displayed by: Forward Pass Backward Pass Calculated by: Task
LST – EST = LFT – EFT = slack Where: LST = Latest Start Time EST = Earliest Start Time LFT = Latest Finish Time EFT = Earliest Finish Time Task LST LFT EFT EST Displayed by: Forward Pass S T A R Task A Task B Task C END 5 6 5 5 11 5 5 11 6 Backward Pass 5 11 Number Convention 1 2 3 4 5 6 7 10 11 12 1 2 3 4 5 6 7 8 9 10 11

PERT 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?

Network Diagrams - PERT
MS Project PERT representation

Questions Knowing 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?

Scheduling 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?

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

Scheduling 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?

Responsibility Assignment
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

Milestone Chart 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 CE 4101W-01: Spr 2005 Class start Exam 1 Exam 2 Exam 3
Grades posted Jan Feb Mar Apr May

Milestone Chart CE 4101W-01: Fall 2003 Labor Day 9/3 Class start 9/4
Exam 1 10/7 Exam 2 11/4 Exam 3 12/9 Grades posted 12/19 Sep Oct Nov Dec Jan

Milestone Chart - Example
Break into support groups 5 minutes Using the course syllabus, create a milestone chart of the course assignments and exams

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 2 10/7 Task 3 Task 4 Task 5 t1 t2 t3

Gantt Schedules Project progress is marked by filling in a task bar Task 1 75% Task 2 10/7 Task 3 Task 4 Task 5 t1 t2 t3

Modified Gantt Chart Possible Modifications:
Show dependencies (this example) Show resource assignments Task roll-ups (this example)

Modified Gantt Chart Better way to do task ID notation

Scheduling - Practice Break into support groups…In 10 minutes:
Draw two network diagrams (AON, AOA) Determine the critical path (CPM) Draw a Gantt AND a Modified Gantt chart

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

Scheduling Computer Tools
Example Schedule in Microsoft Project Use information from previous exercise

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 Calendars Why is it important to set your calendar for the correct days of the week, correct hours per day, and correct holidays? 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

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 Constraints Processes & 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?
Identify the System's constraints. Analyze process to identify task/activity limiting system productivity Decide how to exploit the system's constraints. Modify/redesign task/activity to perform work more effectively/efficiently 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 Elevate the system's constraint. Add capacity to increase (elevate) output of constraining task/activity If a constraint has been broken in previous step, go back to step 1 but do not allow inertia to cause a new constraint This sets up a process of ongoing improvement

Theory Of Constraints How to identify constraints?
Look for bottlenecks 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 Chain Rules: 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 Feeding Buffer
C.C. Task 1 C.C. Task 2 C.C. Task 3 C.C. Task 4 Project Buffer End

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

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?

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?

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

What data/information do they need? What’s the difference between “data” and “information?”

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!

When will they need that information? Before “event” During “event” After “event” Periodically vs. ad hoc

What options do you have to give them the information and which way(s) are best? Reports Briefings Status meetings Others?

Communication Planning - Example
Project: Student going to school Stakeholder 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?

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

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 Lease vs. Buy Analysis
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?
The cost of making a trade-off 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

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 Lessor: The one who owns the capital
Lessee: The one receiving 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 Who has the risks in each type?
Firm Fixed Price Buyer pays seller a set amount regardless of seller costs Fixed Price Incentive Fee Buyer pays seller a set amount & seller can earn additional fee if performance criteria are met Cost Plus Fixed Fee Buyer reimburses seller costs plus a fixed profit fee Cost Plus Incentive Fee Buyer 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?

Solicitation Send bid/proposal request documents to prospective vendors Presumes you have a sufficient list of applicable vendors Distribution may be direct, via bidder conference, via advertising, etc. Bid & Quote used when selection based on price Proposal used when other than price (tech skills, etc) paramount Request for Bid (RFB), Invitation to Bid (IFB) Request for Quote (RFQ), Invitation to Quote (IFQ) Request for Proposal (RFP), Invitation for Proposal (IFP) Include SOW, description of required response/response format, explanation of pro forma contract terms and agreement structure

Solicitation Obtain bids/proposals from sellers
Evaluate bids/proposals & cycle thru SOW updates 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. Qualify the risks you face related to management of the contract. Qualify the risks the buyer faces.

Quality For Project Managers
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: What is next? 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 You Can Use
TQM (Kaizen/Continuous Improvement) Six Sigma ISO standards Quality Circles Minnesota Quality Award Baldrige Award Deming Prize

Total Quality Management
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)

Fourteen Points of Quality
Create constancy of purpose toward improvement Adopt the new philosophy Cease dependence on inspection. Minimize total costs Constant and perpetual improvement Institute training Institute leadership Drive out fear Break down internal barriers Eliminate slogans, targets etc. Eliminate management by objective Remove barriers Institute program of education and self-improvement. Everybody’s job is to accomplish the transition. - W. Edwards Deming

Deming’s 7 Deadly Diseases
Lack of constancy of purpose to improve products & services by providing resources for long-term planning, for research, & for training An emphasis on short-term profits & quarterly dividend Individual performance evaluations through merit ratings & annual reviews Managers who are highly mobile & hop from company to company Management use of numbers & figures that are visible & available with no thought of info that may be needed, but unknown or hidden Excessive medical costs Excessive legal liability costs, which can be swelled by lawyers who work on “contingency” fees

Continuous Quality Improvement
Four Basic Principles Develop a Strong Customer Focus 2. Continually Improve All Processes Identify Them Improve 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)

Six Sigma Six Sigma Objective: Method:
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 – Essential Themes
A genuine focus on the customer Data- and fact-driven management Process focus, management & improvement as an engine for growth & success Proactive management Boundaryless collaboration A drive for perfection, and yet a tolerance for failure

Six Sigma Mc-Graw Hill, 2000

Identify core processes & key customers
Six Sigma Roadmap Identify core processes & key customers Define customer Requirements Measure current Performance Prioritize, analyze & implement improvements Expand & integrate six sigma system DMAIC: Define, Measure, Analyze, Improve, Control

Six Sigma – Methods/Tools
Continuous Improvement Process Design/Redesign Analysis of Variance Balanced Scorecard Voice of the Customer Creative Thinking Design of Experiments Process Management Statistical Process Control

ISO Standards ISO standards (900x, 1400x, etc.) Objective: Method:
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

Quality Circles Objective: Method:
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 Tools 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