Unit 7 Scheduling, Allocating Resources, Monitoring and - - PDF document

Source: Project Management in Practice, 5th Edition, Mantel, Meredith, Shafer, Sutton, Wiley, 2014. Project Management: A Systems Approach to Planning, Scheduling, and Controlling, 10th Edition, Harold Kerzner, Wiley, 2009.

Unit 7

Scheduling, Allocating Resources, Monitoring and Controlling, Evaluating and Terminating the Project

1

Project Scheduling

 Project planning, budgeting, and scheduling is interdependent on each other.  Project scheduling is the discipline of organizing and time‐phasing the activities required to complete the objectives of an effort.  Project schedule is the project plan in an altered format for monitoring and controlling project activities.

2

PERT and CPM

Both PERT and CPM were developed in the late 1950s

Program Evaluation and Review Technique (PERT)

• by U.S. Navy, Booz‐Allen Hamilton, and Lockheed Aircraft
• used probabilistic activity durations

Critical Path Method (CPM)

• by Dupont De Nemours Inc.
• used deterministic activity durations

Both employed networks to schedule and display task sequences. While theyuse slightly different ways in drawing the networks, anything one can do with PERT, could also do with CPM and vice versa.

3

The Language of PERT/CPM

Activity

• a task or set of tasks
• uses resources and time

Event

• an identifiable state resulting from completion of
• ne or more activities
• consumes no resources or time
• predecessor activities must be completed before

an event can be achieved.

4

The Language of PERT/CPM continued

Milestones

• identifiable and noteworthy events that mark

significant progress

Network

• a diagram of nodes (activities or events) and arrows

(directional arcs) that illustrate the technological relationships of activities

• usually drawn with a “Start” node on the left and a

“Finish” node on the right.

Path

• a series of connected activities between any two

events

5

The Language of PERT/CPM concluded

Critical Path

• the set of activities on a path (from the project’s

start event to its finish event) that, if delayed, will delay the completion date of the project

Critical Time

• the time required to complete all activities on the

critical path

6

Building the Network

It’s necessary to know the predecessor/successor relationship (technological dependences) in building the network

Two ways of displaying a project network

• Activities on Arrows (AOA) network … in which the

activities are shown as arrows and events as nodes, usually associated with PERT.

• Activities on Nodes (AON) network … in which each task

(activity) is shown as a node and the technological relationship is shown by the arrows, usually associated with CPM. (will use in this course)

7

Example –

Table 7‐1 A Sample Set of Project Activities and Precedencies

Task Predecessor

a

• b
• c

a d b e b f c, d g e

8

AON Network Stage 1

9

Start with task a and b, because they have no predecessors

AON Network ‐ Stage 2

10

Next, connect task c with a (its predecessor), and d, e with b (their predecessor).

AON Network ‐ Complete

11

Next, connect task f with c, d (its predecessors), and g with e (its predecessor). Since there is no other tasks, f and g are connected to the “finish” node.

Example ‐

Table 7‐2 A Sample Problem for Finding the Critical Path and Critical Time

Activity Predecessor Duration a

• 5 days

b

• 4

c a 3 d a 4 e a 6 f b, c 4 g d 5 h d, e 6 i f 6 j g, h 4

12

As AON is easier to deal with, will be using AON notations mostly (adopted by most project management software.)

Example ‐

Figure 7‐1 Stage 1 of a Sample Network

13

Start with task a and b, also noted their durations. Next, connect task c, d, e with a (their predecessor).

Example ‐

Figure 7‐2 A Complete Network

14

Connect tasks g and h with task d; h with task e; j with task g, h; and i with task f. Since there is no other tasks, i and j are connected to the “finish” node.

Example ‐

Figure 7‐3 Information Contents in an AON Node

15 For task a, its ES is day 0, EF is (0 + 5) = 5. Task c, d, e cannot start before a is completed on day 5, their ESs. Adding their respective durations to their ESs, give their EFs.

Example ‐

ES, EF calculation (forward pass)

16

Task f cannot start until both b and c are completed, giving its ES = 8 and EF = 12. Task g cannot start until d is completed, giving its ES = 9 and EF = 14. Task h cannot start until both d and e are completed, giving its ES = 11 and EF = 17.

Example ‐

ES, EF calculation (forward pass)

17

Example ‐

ES, EF calculation (forward pass)

Task j cannot start until both g and h are completed, giving its ES = 17 and EF = 21. Task i cannot start until f is completed, giving its ES = 12 and EF = 18. The shortest time for completion is the longest path through the network, in this case, a- e-h-j, and the critical time is 21 days. 18

Example –

Figure 7‐4 The Critical Path and Time for Sample Project

19

Example ‐

LS, LF calculation (backward pass)

Task j and i must be completed by day 21, giving their LFs = 21, where the LS for j = 21-4 = 17, and LS for i = 21-6 = 15. Task g and h could have their LFs = 17, and LS for g = 17-5 = 12, and LS for h = 17-6 = 11. 20

Example ‐

LS, LF calculation (backward pass)

Task f must be completed by day 15, giving its LF = 15, where the LS for f = 15-4 = 11. Task b has thus its LF = 11, and LS = 11-4 = 7. Task d, e, c have their LFs = 11, and LSs = 7, 5, and 8 respectively. Task a has its LF = 5, and LS = 0 21

Calculating Activity Slack

Latest Start Time (LS) – Earliest Start Time (ES) = Slack Latest Finish time (LF) – Earliest Finish time (EF) = Slack Example –

Activity a, e, h, and j, all on the critical path, has no slack. Activity i has a slack = 15 – 12 = 3 days, Activity f has a slack = 11 – 8 = 3 days, Activity g has a slack = 12 – 9 = 3 days, Activity d has a slack = 7 – 5 = 2 days, Activity c has a slack = 8 – 5 = 3 days, and Activity b has a slack = 7 – 0 = 7 days,

22

Building the Network with MSP

23 See Example 1 in supplemental Material

Building the Network with MSP

24 See Example 1 in supplemental material

Building the Network with MSP

View Total Slack & Free Slack

25 Total slack = LF – EF = LS – ES. For task b, total slack = 7 – 0 = 7 Free Slack = the time an activity can be delayed without affecting the start time of any successor activity. For task b, free slack = ES of (f) – EF (b) = 8 – 4 = 4

Calculating Probabilistic Activity Times

Assume that all possible durations for some tasks could be represented by the beta distribution as shown in figure 5‐13

 The expected time (TE) is based on three time estimates

• pessimistic (a) – the actual duration of the task will be a or

lower less than 1 percent of the time

• most likely (m) – the mode of the distribution
• optimistic (b) – the actual duration of the task will be b or

higher less than 1 percent of the time

26

6 ) 4 ( TE b m a   

Figure 7‐4 The Beta Distribution of all Possible Times for an Activity

27

The Beta Distribution The Beta Distribution

28 By approximation, The general formula for the probability density function of the beta distribution defined on the interval (a, b) parameterized by two positive shape parameters, α and β is where p and q are the shape parameters, a and b are the lower and upper bounds, respectively, of the distribution, and B(p,q) is the beta

• function. The beta function has the formula

Mathematical Expectations,

6 ) ( 6 ) 4 ( a b b m a       

With  = (b-a)/6, it assumes that the range between a and b will cover 99.7% of all durations.

The Probabilistic Network

An Example

29 Table 7‐3 A Sample Set of Project Activities with Uncertain Durations Opt.

• Norm. Pess.

TE Var. Activity Pred a m b (a + 4m + b)/6 ((b ‐ a)/6)2 A ‐ 8 10 16 10 4/6 1.78 B a 11 12 14 12 1/6 .25 C b 7 12 19 12 2/6 4.00 D b 6 6 6 6 .00 E b 10 14 20 14 2/6 2.78 F c,d 6 10 10 9 2/6 .44 G d 5 10 17 10 2/6 4.00 H e,g 4 8 11 7 5/6 1.36

The Probabilistic Network

An Example

30

Figure 7‐5 An AON network from Table 5‐4.

The Probabilistic Network

An Example

31

The critical path is a-b-d-g-h The critical time is 47 days Some concerns -

• Since 47 days is the mean, it means that the project has a

50% chance to complete before 47 days and 50% chance to be more than 47 days.

• The critical path may not be a-b-d-g-h if an activity on another

path might have a longer duration (for example a-b-c-f, if activity c or f or both got delayed.)

The Probabilistic Network

An Example – MSP View

32 See Example 2 in supplemental material

The Probabilistic Network

An Example – MSP Network View

33 See Example 2 in supplemental material

The Probability of Completing the Project on Time

) ) ( .( Pr ) .( Pr



      D Z D x

where D = the desired project completion time  = the sum of TE activities on the path being investigated 

 = the sum of variances of the activities on the path

 = the standard deviation

34

Critical time = 47 days, to complete the project by this time requires that all paths in the project’s network be completed by the specified time. The probability that the a‐b‐d‐g‐h path will be completed on or before a desired day, D, is

The Probability of Completing the Project on Time

8643 . ) 1 . 1 .( Pr ) 718 . 2 ) 47 50 ( .( Pr ) ) ( .( Pr         Z Z D Z



  Do the same for paths a‐b‐c‐f, a‐b‐e‐h, and a‐b‐d‐f, obtained the probabilities as 0.985, 0.978, and 1.000. The Probability of Completing the Project in 50 days is thus 0.864 x 0.985 x 0.978 x 1.000 = 0.832 or 83.2%

35

Based on Table 7‐3,  = 10 4/6 + 12 1/6 + 6 + 10 2/6 + 7 5/6 = 47 

 =1.78 + 0.25 + 0 + 4.00 + 1.36 = 7.39

 =2.718 If D = 50 days, the probability that the a-b-d-g-h path will be completed on or

before a desired day, D (Use Normal table)

The Probability of Completing the Project on Time

36

Based on Table 7‐3,  = 10 4/6 + 12 1/6 + 6 + 10 2/6 + 7 5/6 = 47 

 =1.78 + 0.25 + 0 + 4.00 + 1.36 = 7.39

 =2.718 If D = 50 days, the probability that the a-b-d-g-h path will be completed on or

before a desired day, D, Find Pr. (x < 50) = 0.8651

(Use Minitab)

The Probability of Completing the Project on Time

Selecting Risk and Finding D Once P is determined, D can be found.

Example – Find the days that path a‐b‐d‐g‐h (critical path) could be completed with a 95% probability.

37 days D D D Z D Z 5 . 51 645 . 1 718 . 2 ) 47 ( 645 . 1 ) ( 95 . ) 645 . 1 .( Pr 95 . ) ) ( .( Pr              

 

   

(use normal table) p D Z D x      ) ) ( .( Pr ) .( Pr



 

The Probability of Completing the Project on Time

Selecting Risk and Finding D Once P is determined, D can be found.

Example – Find the days that path a‐b‐d‐g‐h (critical path) could be completed with a 95% probability.

38

p D Z D x      ) ) ( .( Pr ) .( Pr



  (use Minitab)

• Pr. (x < D) = 0.95 => D = 51.47 days

Simulation of the Probabilistic Network

An Example ‐

39

Based on the sample Set from Table 7‐3. (see Example 2 in Excel)

Simulation of the Probabilistic Network

An Example ‐

40

Based on the sample Set from Table 7‐3. (see Example 2 in Excel)

Simulation of the Probabilistic Network

An Example ‐

41

Based on the sample set from Table 7‐3. TE =47 days (see Example 2 in Excel)

Statistics: Forecast values Trials 1,000 Base Case 46.00 Mean 47.69 Median 47.55 Mode

• Standard Deviation

2.65 Variance 7.02 Skewness 0.1752 Kurtosis 2.76

• Coeff. of Variability

0.0556 Minimum 40.30 Maximum 55.89 Range Width 15.59 Mean Std. Error 0.08 Forecast: Project Completion Time (cont'd) Percentiles: Forecast values 0% 40.30 10% 44.31 20% 45.39 30% 46.27 40% 46.89 50% 47.54 60% 48.23 70% 49.09 80% 49.99 90% 51.13 100% 55.89 End of Forecasts

The Probability of Completing the Project on Time

42

Based on Table 7‐3,  = 10 4/6 + 12 1/6 + 6 + 10 2/6 + 7 5/6 = 47 

 =1.78 + 0.25 + 0 + 4.00 + 1.36 = 7.39,  =2.718

If D = 50 days, the probability that the a-b-d-g-h path will be completed on or

before a desired day, D,

• Pr. (x < 50) = 0.8651

(Use Minitab) (Use Crystal Ball)

• Pr. (x < 50) = 0.7907

The Probability of Completing the Project on Time

Selecting Risk and Finding D

Once P is determined, D can be found. Example – Find the days that path a‐b‐d‐g‐h (critical path) could be completed with a 95% probability.

43

p D Z D x      ) ) ( .( Pr ) .( Pr



 

(use Minitab) (Use Crystal Ball)

• Pr. (x < D) = 0.95 => D = 51.47 days
• Pr. (x < D) = 0.95 => D = 52.4 days

Traditional Statistics Versus Simulations

Similarity

• both procedures assume that task durations are

statistically independent and the paths are independent

Difference

• a simulation can circumvent the assumption of

statistical independence by including the activity or path dependencies as part of the model

• A simulation can help facilitate the task of selecting

appropriate distributions to be used in the model

44

Expediting a Project – Crashing a Project

The Critical Path Method When a project must be completed in much less time than its expected duration, it is a “crash project”

• Normal Project

– Normal duration estimates – Normal costs

• Crash Project

– Crash duration estimates – Crash costs – Crash cost per day

45

Crashing a Project

Activity Slope The activity slope or cost per day is:

46

time normal

• crash time

cost normal

• cost

crash

Two key principles:

• Focus on the critical path(s) when trying to shorten the

duration of a project

• When shortening a project’s duration, select the least

expensive way to do it

Crashing a Project ‐ An Example of a Normal/Crash Project

* Partial crashing allowed ** Partial crashing not allowed

47

Crashing a Project ‐ A PERT/CPM Example of

AOA Network

48

Choose an activity on the critical path to shorten with the minimum cost, chose a. If a is shortened to 2 days, additional cost = $40. Next target, b or e or both If b is shortened to 1 day, additional cost = $40+ $60=$100 If b remains at 2 days, e is shortened to 1 day, d has also to be shortened by 1 day, additional cost = $40+$70 + $30 = $140. ($200 from normal) Shorten both b and e to 1 day, and d to 2 days, additional cost = $40+$60+ $70 + $30x2 = $230

Crashing a Project

CPM Crash Cost‐duration History

49

$120 $160 $220 $260 $390 $350

Final Thoughts on Project Scheduling

The software could do the arithmetic but the analyst must enter the appropriate information and ask for the appropriate analysis. Parkinson “work tends to fill the time allowed, and activities lose their slacks” “student syndrome” – given more time, many simply postpone starting the work.  Goldratt “delays resulting from task finishing late are not often offset by the potential gains from those finished early”

50

Allocating Resources

 Projects compete with one another for resources in two different ways

• non‐consumed when used(e.g., equipment, technical specialist;

who gets it first and who must wait.)

• consumed when used(e.g., materials; those has to wait may

suffer a schedule delay.)  Activities on the same project may compete for resources  Goal of resource allocation is to optimize use of limited supply  Allocations requires making trade‐offs to help the project to meet its most important goals (time, budget, and scope)

• time constrained … completion by a fixed time; resources could

vary

• resource constrained … limited budget or resource; time could

vary

51

Resource Allocation

Allocating physical and human resources to projects. Concerns how we allocate specific, limited resources to specific activities when there are competing demands for the same limited resources.

52

Resource Loading

Resource loading refers to the amounts of specific resources that are scheduled for use

• n specific activities or projects at specific

time It is usually presented in the form of a list or table

53

Project Plan and Gantt Chart

for Production of a Short Documentary Film

54

Figure 7-7 Project plan and Gantt chart for producing a short documentary film (see Example5_1)

Project Plan and Gantt Chart

for Production of a Short Documentary Film

55

Figure 7-8 Project plan and Gantt chart for producing a short documentary film (see Example5_2)

Project Plan and Gantt Chart

for Production of a Short Documentary Film

56

Figure 7-9 Project plan and Gantt chart for producing a short documentary film (see Example5_2)

Project Plan and Gantt Chart

for Production of a Short Documentary Film

57

Figure 7-10 Project plan and Gantt chart for producing a short documentary film (see Example5_3)

Adjusting the predecessors -

Resource Leveling

Resource leveling is a way to fix resource

• verallocation.

– overallocation: The result of assigning more tasks to a resource than the resource can accomplish in the working time available. – leveling: Resolving resource conflicts or

• verallocations by delaying or splitting certain
• tasks. When Project levels a resource, its selected

assignments are distributed and rescheduled.

58

Resource Leveling

Generally, resources are leveled in two ways:  By delaying a task until the assigned resource has time to work on it.

– (delay: The amount of time between the scheduled start of a task and the time when work should actually begin on the task; it is often used to resolve resource overallocations. There are two types of delay: assignment delay and leveling delay.)

 By splitting a task so that part of a task is done when planned and the rest of it is done later when the assigned resource has time.

– (split task: A task whose schedule is interrupted. For example, a two‐day task that does not require contiguous work might be split so that the first day of work is scheduled for Monday, and the second day is scheduled for Thursday.)

• You can delay or split tasks yourself, or you can have Microsoft Office

Project do it for you, using the Resource Leveling feature

59

Resource Leveled Report

for Scriptwriter Showing All Activities

60

Figure 7-11 Resource leveled report for scriptwriter (RESOURCE>Level Resource>Select Resource to Level or Level All. MSP moved task “Propose Shoots” to two places to level the resource. see Example5_4) When we leveled resources in the case of the overworked scriptwriter, MSP simply used the available activity slack to reschedule task “Propose Shoots” and the project completion date was not altered since there was enough slack.

Graphic Resource Leveled Report

for Scriptwriter

61

Figure 7-12 Graphic Resource leveled report for scriptwriter (RESOURCE>Resource Graph)

Monitoring and Controlling

Monitoring is the collection, recording, and reporting of project information Controlling uses the monitored data to bring actual performance into agreement with the plan

Monitoring and Controlling are the opposite sides of project selection (which dictates what to monitor) and planning (which identifies the elements to be controlled)

62

Plan‐Monitor‐Control Cycle

It is important to spend time up front designing the planning‐monitoring‐controlling process. The fundamental items to be planned, monitored, and controlled are time, cost, and scope so that the project stays on schedule, budget, and specifications. The plan–monitor‐control cycle constitutes a “closed loop” process There is often a temptation to minimize the planning–monitoring–controlling effort so that “real work” can be done (doing something…)

63

Project Authorization and Expenditure Control System Information Flow in a “Plan‐Monitor‐Control” Cycle

64 Figure 7 ‐ 13

Designing the Monitoring System

Identify special characteristics of scope, cost, and time that need to be controlled

• specific performance characteristics should be set for each

level of detail in the project

Real‐time data must be identified (i.e., collected) to measure achievement against the plan regarding

what is being done, when, and the level of resource usage …

• mechanisms to collect this data must be designed

Avoid the tendency to focus on easily collected

data

• Collect not only the “hard”, “objective” data but also the

“soft”, “subjective” data such as comments, conversations, etc.

65

Common Errors in Setting up the Monitoring System

Monitoring on easy measures instead of relevant measures Monitoring activities instead of results Monitoring inputs as surrogates for outputs Monitoring measures that don’t change from

• ne period to the next.

66

Data Collection Formats

Once the type of data to be monitored is determined, the next question is how to collect them

Frequency counts – defects per 1,000 of products Raw numbers – dollar spent, hours consumed in

comparison to planned amount

Subjective numeric ratings – ranking of

performance, priority, etc.

Indicators and surrogates – humidity and

temperature as surrogate measures to “comfort” felt by workers

Verbal characterizations – verbal description of

certain variables in the project such as the cooperation among team members.

67

Data Analysis

Following the collection of the data, it is necessary to analyze or process the data using Aggregation techniques Fitting statistical distributions Curve fitting

68

Number of Bugs per Unit of Test Time During Test of Software

69

Figure 7 – 14 (curve fitting)

Percent of Specified Performance Met During Successive Repeated Trials

70

Figure 7 – 15 (curve fitting)

Ratio of Actual Material Cost to Estimated Material Cost

71

Figure 7 – 16 (trend analysis)

Other Data Analysis Tools

• Fishbone (Cause and Effect) Diagrams
• Histograms
• Pareto Analysis
• Scatter Plots
• Run Charts
• Control Charts

72

Reporting

After the data have been collected and analyzed, they need to be reported.

Routine performance reports

• project status reports
• time/cost reports
• variance reports

Special or exception reports

• report at milestones or scope changes or problems.
• Report for special decisions or unexpected situations
• Report results of a special study

Not all stakeholders need to receive same information Impact of electronic media

• More data are available for collections, and more updating is

possible, could lead to an overload of reporting

73

Conventions Used to Estimate Progress on Tasks

50‐50

• task is listed as 50% complete when initiated and the

remaining 50% added when task is completed

100%

• the task is 100% complete when finished … and zero

percent before that

• projects will always appear to be “behind schedule”

Ratio of cost (or time) expended to cost (or time) budgeted

» neither is an accurate estimator of percentage completion

74

Earned Value Analysis

It is important to derive a measure of the overall project progress in terms of performance, budget, and schedule. This measure is “earned value”

The earned value (EV) of a task or project is the budgeted cost of the work actually done

• it is calculated by multiplying the budgeted cost of the task by

the percentage completion of the task

The percent of a task’s budget actually spent is not good indicator of percent completion –Why?

(Cost might not be charged until the completion of certain tasks so it won’t reflect the percent of completion.)

75

Earned Value Analysis

• Variances on the earned value chart follow two primary

guidelines:

– 1. A negative means there is a deviation from plan—not good – 2. The cost variances are calculated as the earned value minus some

• ther measure
• EV ‐ Earned Value: budgeted cost of work performed (BCWP)
• AC ‐ actual cost of work performed
• PV ‐ Planned Value: budgeted cost of work scheduled (BCWS)
• ST ‐ scheduled time for work performed
• AT ‐ actual time of work performed

76

Variance Cost/Spending Variance

• earned value (EV) – actual cost (AC)

Schedule Variance

• earned value (EV) – planned value (PV)

CPI (Cost Performance Index)

• earned value (EV)/actual cost (AC)

SPI (Schedule Performance Index)

• earned value (EV)/planned cost (PV)

77

Earned Value Analysis Earned Value Analysis

• Variances are also formulated as ratios rather than

differences

– Cost Performance Index (CPI) = EV/AC – Schedule Performance Index (SPI) = EV/PV – Time Performance Index (TPI) = ST/AT

• Use of ratios is particularly helpful when comparing

the performance of several projects

78

Additional Items of Interest Estimated remaining cost to completion

• estimated cost to completion (ETC) = budget at

completion (BAC) – earned value (EV) divided by cost performance index (CPI)

Estimated total cost at completion

• estimated at completion (EAC) = estimated cost to

completion ( ETC) + actual cost (AC)

79

Earned Value Analysis The Earned Value Chart

80

Figure 7 – 17 (a project significantly behind schedule and considerably

• ver budget.)

The Earned Value Chart

• If the earned value chart shows a cost overrun or

performance under‐run, the project manager must figure out what to do to get the system back on target

• Options may include borrowing resources, or holding a

meeting of project team members to suggest solutions,

• r notifying the client that the project may be late or
• ver budget

81

Earned Value Analysis

Example ‐

Planned $1500 to complete work package. Scheduled to have been finished today. Actual expenditure to date is $1350. Estimate work is 2/3 complete.

What are cost and schedule variances?

82

Example ‐

Cost variance = EV – AC = $1500(2/3) ‐ $1350 = $1000 ‐ $1350 = ‐$350 Schedule variance = EV – PV = $1500(2/3) ‐ $1500 = ‐$500

83

Earned Value Analysis

• negative variance is undesirable

Two Simple Rules for Variances

• 1. A negative variance is bad and a positive

variance is good

• 2. The spending and schedule variances are

calculated as the earned value minus some

• ther measure

84

Example ‐ CPI (cost performance index)

= EV/AC =($1500/(2/3) / $1350) = 1000/1350 = 0.74

SPI (schedule performance index)

= EV/PV = ($1500(2/3))/$1500 = $1000/$1500 = 0.67

• Value less than 1 is undesirable
• Allow comparisons been made at different point in, or across different projects.

85

Earned Value Analysis

Example ‐

• Estimate to complete

ETC = (BAC‐EV)/CPI =(1500‐1000)/.74 = $676

• Estimate at completion

EAC = ETC + AC = $676 + $1350 = $2026

* Estimated additional cost to complete the project is $676, added to the actual cost to date $1,350, gives a total task to completion of $2,026, $526 above the $1,500 cost planned

86

Earned Value Analysis

Various Variances Visually

Figure 7-18

a: Positive schedule variance, negative spending variance b: Negative schedule variance, negative spending variance c: Negative schedule variance, positive spending variance

87

EV

Project Control

• Control, the act of reducing differences between the

plan and actuality

• It is the final element in the planning‐monitoring‐

controlling cycle

• It is to no avail if actions are not taken when reality

deviates significantly from what was planned

• Control is a difficult task

– It involves human behavior – Problems are rarely clear cut so the need for change and redirection is also fuzzy

88

Purposes of Control

• 1. Stewardship of organizational assets

– Physical asset control – Human resources management – Financial control through the use of accounting tools

• 2. Regulation of results through the alteration of

activities

– This step involves taking action when reality deviates from plan – It includes both mechanistic and human elements

89

Purposes of a Control System

• Primary purpose is to correct errors

– Not to identify and punish the guilty – Managers must realize that the past cannot be changed

• Control the investment, subject to diminishing

returns

• Consider impact on creativity and innovation
• The control system should employ the lowest degree
• f hassle consistent with accomplishing its goals

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Primary Mechanisms by which Project Manager Exerts Control

1. Process reviews

• An analysis of the process of reaching the project
• bjectives

2. Personnel assignment

• Control can also be exercised through personnel

assignments based on past productivity

3. Resource allocation

• Resources are usually allocated to the more productive
• r important tasks and this can significantly influence the

attainment of project results

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Common Mistakes

• Emphasizing short‐run results at the expense of long‐

run objectives

• Excessive control directed to specific objectives can

result in sacrificing other project objectives

• Across‐the‐board cuts in resource allocations tend to

reward those who have already overspent or over hired while penalizing the frugal and efficient

• Focusing on certain items for control can distract the

attention of team members from other, equally important items

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Control System Components

• Sensor

– Its purpose is to measure any aspect that one wishes to control

• Standard

– The control system must have a standard of items to measure against

• Comparator

– Compares the output of the sensor with the standard

• Decision maker

– To decide if the difference between what is measured and the standard is large enough to warrant attention.

• Effector

– If some action is required to reduced the difference, the effector must then take action

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Tools for Control

• Some already covered

– Variance analysis – Trend projections – Earned value

• Critical ratio

– Indicates when a task is becoming unacceptable

• When the ratio drops below one

– CR = (actual progress/scheduled progress)  (budgeted cost/actual cost) 94

Critical Ratio Calculations

Table 7-4

95 * 1 or above is good. Unacceptable when dropped below 1

Project Evaluation

 Appraises the progress and performance of the project relative to

• the goals and objectives set for it during the selection process

and

• the initial or revised plan
• other similar projects

 Projects should be evaluated at key points in the project life cycle, not just an after‐the‐fact analysis.  Provide feedback to senior management for decision and control purposes

• Decision purpose is to improve the selection process
• Control Purpose is to improve process of carrying out projects

 Post‐Project evaluation could help the organization improve its project management skills on future projects.

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Evaluation Criteria

 Original criteria for selecting and funding the project

• such as profitability, acquiring new competencies, getting into

a new market segment.

 Success to‐date – measured by four dimensions

• Efficiency in meeting the budget and schedule
• Customer impact/satisfaction
• Business/direct success ‐ such as the level of commercial success for

external projects and reduced throughput time for internal projects

• Future potential – such as establish a presence in a new market,

develop a new technology

For non‐routine projects,  Contribution to organization’s goals  Contribution to team member objectives

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Measurement of a Project’s Performance

Measuring performance against planned budgets and schedules

• relatively straightforward

Measurement of actual expenditure and earned values

• more complicated, each group wants credits for

revenues but wants the costs assigned elsewhere.

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Project Auditing

Project audit is a thorough examination of the management of a project, its methodology and procedures, its records, properties, inventories, budgets, expenditures, progress, and so on. The project audit is not a financial audit, but is far broader in scope and may deal with the whole or any part of the project.

 The timing of the audit depends on the purpose

• Early audit tends to focus on technical issues, more

valuable to the project team

• Late audit tends to focus on budget and schedule, more

valuable to project management

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Project Auditing

An audit can be conducted at three levels:

• General – a brief investigation of project essentials.
• detailed – initiated if problems identified in general

audit

• technical – looked at technical aspects

Typical Steps in a Project Audit

• Familiarize audit team with the requirements of the

project

• Conduct audit on site
• Write up audit report
• Distribute report

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Keys to Ensuring an Effective Audit

Audit team must

• have free access to all information relevant to the

project

• have free access to anyone with knowledge of the

project (except the customer)

• make sure the project team is aware of the audit
• avoid misunderstanding between audit team members

and project personnel

• understand the politics of project team
• confirm all information ( wherever possible)
• understand that project team members rarely trust

auditors

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The Audit Report

The audit report should be written with a professional and constructive tone and its content restricted to information and issues relevant to the project. It should contain the following sections:

Introduction

• description of project including its goals and objectives

Current status

• comparison of work completed and planned

Future project status

• conclusions regarding project progress
• recommendations for changes for subsequent projects

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The Audit Report, continued

Critical management issues

• issues senior management should monitor

Risk analysis and risk management

• Addresses the potential for project failure and

monetary loss

• Major risks and their impacts shall be identified

Final comments

• caveats, assumptions, limitations, and information

applicable to other projects

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Project Termination

Determining whether or not to terminate a project

 If sunk cost is irrelevant to current investment decisions, the extent to which the organization is willing to invest additional time and cost required to complete the project generally fall into two categories:

• the degree to which the project has met its goals and
• bjectives, and
• the degree to which the project qualifies against a set of

factors associated with success or failure

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Table 7 ‐4 Rank‐ordered Factors Considered in Terminating R&D projects

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• No. of Companies Reporting

Factors

the Factor as being Important

Technical

• Low probability of achieving technical objectives or

34 commercializing results

• Technical or manufacturing problems cannot be solved with

11 available R&D skills

• Higher priority of other projects requiring R&D labor or funds

10 Economic

• Low profitability or return on investment

23

• Too costly to develop as individual product

18 Market

• Low market potential

16

• Change in competitive factors or market needs

10 Others

• Too long a time required to achieve commercial results

6

• Negative effects on other projects or products

3

• Patent Problems

1

Fundamental Reasons for Project Failure

Most common reason for early termination is a technical

• r commercial failure, in addition, the reasons are:

 Project was not required at the first place  Insufficient support from senior management  Naming the wrong project manager  Poor up‐front planning

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Determining Which Project should be Continued and Which should be Dropped

Wheatley suggested to ask these questions. Which projects have a legal or strategic imperative? Which projects are luxuries? Which projects are likely to drive future revenue and growth? Which projects best match our skill sets and strengths? What are the risks to the business if we do not service the project’s deliverables?

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Types of Project Termination

Project Extinction

• project activity suddenly stops because it has either been

successfully completed or has a high expectation of failure

Termination‐by‐addition

• when an in‐house project is successfully completed and is

institutionalized as a new formal part of the organization

Termination‐by‐integration

• the output of the project becomes a standard part of the
• perating system of the sponsoring firm or the client

Termination‐by‐starvation

• occurs when it is impolitic to terminate a project but its budget

can be squeezed until it is a project in name only

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The Termination Process

Decision should be made by a broad based committee of senior managers  Detail the criteria and explain the rationale for the committee’s decision. Termination process should be included in the initial project plan A termination manager (project undertaker) should be appointed

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The Termination Process

Personnel Reassignment – Most difficult Functional Organization – people returned to their

functional unit but many team members may get laid off if in large scale project.

 Pure Project Organization – people may get reassigned

to other project or get laid off if no longer needed.

Matrix Organization – people could return to their

functional unit or get reassigned to other projects, least problematic.

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The Project Final Report

The project final report is a history of the project, addressing the following items:  Project performance

• what was achieved and reasons for resulting performance

 Administrative performance

• review of how well administrative practices worked

 Organizational structure

• identify modifications to help future projects

 Project teamwork

• Identify team members, and their performance

 Project management techniques

• recommendations for improvements in future projects

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The End! Thank You!

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