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TM 665 Lecture 11 Project Audits_ Termination _amp; Review


  • pg 1
									 TM 665: Lecture 11

Project Audits, Termination & Review

           TM 665: Project Planning & Control   1
 Project Audits (CH 12)
    Goal-based Project Outcomes
    Project Audit Reports
    Audit Life Cycle
    Report Credibility
    Revenue Reporting

 Project Termination (CH 13)
    Methods of Project Termination
    Early Project Termination
    Project Shortcomings
    PM Responsibilities
    Project Final Report

 Final Exam Review
                     TM 665: Project Planning & Control   2
  Project Auditing

 A major vehicle for evaluation is the project audit, a
  more or less formal inquiry into any aspect of the project

      A project audit is highly flexible and may focus on
       whatever matters senior management desires

      The evaluation of a project must have credibility in the
       eyes of the management group for whom it is performed
       and also in the eyes of the project team on whom it is

                          TM 665: Project Planning & Control      3
Purposes of Evaluation - Goals of Project Audit

 Four independent dimensions of success:

     The most straightforward dimension is the project’s efficiency
      in meeting both the budget and schedule
     Another dimension, and the most complex, is that of
      customer impact/satisfaction
     A third dimension, again somewhat straightforward and
      expected, is business/direct success
     The last dimension, somewhat more difficult and nebulous to
      ascertain, is future potential

                         TM 665: Project Planning & Control    4
 Purposes of Evaluation - Goals of Project Audit

 Another primary purpose of evaluation is to help translate
  the achievement of the project’s goals into a contribution
  to the parent organization’s goals
 To do this, all facets of the project are studied in order to
  identify and understand the project’s strengths and
 The result is a set of recommendations that can help
  both ongoing and future projects

                          TM 665: Project Planning & Control      5
Evaluation– Benefits of Project Audit

 A successful project evaluation via audit can
   help an organization:
  1.   Identify problems earlier
  2.   Clarify performance, cost, and time relationships
  3.   Improve project performance
  4.   Locate opportunities for future technological advances
  5.   Evaluate the quality of project management
  6.   Reduce costs

                         TM 665: Project Planning & Control     6
Purposes of Evaluation – Need for Project Audit

 Organizational Benefits
     Speed the achievement of results
     Identify mistakes, remedy them, and avoid them in the future
     Provide information to the client
     Reconfirm the organization’s interest in, and commitment to,
      the project

                          TM 665: Project Planning & Control   7
Purposes of Evaluation – Other Project Audit Outcomes

 Ancillary goals are often unstated, but IMPORTANT:

      Identify organizational strengths and weaknesses in
       project-related personnel, management, and decision-
       making techniques and systems
      Identify risk factors in the firm’s use of projects
      Improve the way projects contribute to the professional
       growth of project team members
      Identify project personnel who have high potential for
       managerial leadership

                            TM 665: Project Planning & Control   9
Project Audit
    The project audit is a thorough examination
     of the management of a project, its
     methodology and procedures, its records, its
     properties, its budgets and expenditures and
     its degree of completion

    The formal report may be presented in various
     formats, but should, at a minimum contain
     comments on some specific points…

                   TM 665: Project Planning & Control   10
Project Audit
   Six parts of a project audit:
    1.   Current status of the project
    2.   Future status
    3.   Status of crucial tasks
    4.   Risk assessment
    5.   Information pertinent to other projects
    6.   Limitations of the audit

   It is far broader in scope than a financial audit and
    may deal with the project as a whole or any subset of
    project components

                           TM 665: Project Planning & Control   11
Audit Depth
 Time and money are two of the most common limits
  on depth of investigation and level of detail presented
  in the audit report

 Accumulation, storage, and maintenance of auditable
  data are important cost elements

 Two often overlooked costs are the self protective
  activity of team members during an audit, and the
  potential for project morale to suffer as a result of a
  negative audit

                        TM 665: Project Planning & Control   12
    Audit Depth

   There are three distinct and easily recognized levels
    of project auditing:
    1.   General audit - normally most constrained by time
         and resources and is usually a brief review of the
         project touching lightly on the six parts of an audit
    2.   Detailed audit - usually conducted when a follow-up
         to the general audit is required
    3.   Technical audit - generally carried out by a qualified
         technician under the direct guidance of the project

                           TM 665: Project Planning & Control     13
Audit Timing
  The first audits are usually done early in the
   project’s life, and are often focused on the technical
   issues in order to make sure that key technical
   problems have been solved
  Audits done later in the life cycle of a project are of
   less immediate value to the project, but are more
   valuable to the parent organization

                      TM 665: Project Planning & Control   14
Audit Timing

 As the project develops, technical risks are less likely
  to be matters of concern
 Conformity to the schedule and budget become the
  primary interests
 Management issues are major matters of interest for
  audits made late in the project’s life
 Postproject audits are often a legal necessity because
  the client specified such an audit in the contract

                        TM 665: Project Planning & Control   15
Risk Event Graph

   Risk                                           Cost


            Project Life Cycle
             TM 665: Project Planning & Control          16
Preparation and Use of Audit Reports

 The information should be arranged so as to facilitate
  the comparison of predicted versus actual results

 Significant deviations of actual from predicted results
  should be highlighted and explained in a set of
  footnotes or comments

 Negative comments about individuals or groups
  associated with the project should be avoided

                       TM 665: Project Planning & Control   17
Construction and Use of Audit Reports
   Information that should be contained in the audit report:
    1.   Introduction                                               P
    2.   Current Status
    3.   Future Project Status
    4.   Critical Management issues                             C       T
    5.   Risk Analysis
    6.   Caveats, Limitations, and Assumptions

                           TM 665: Project Planning & Control               18
Project Auditor/Evaluator Responsibilities
 First and foremost, the auditor should “tell the truth”

 The auditor must approach the audit in an objective
  and ethical manner
 Must assume responsibility for what is included and
  excluded from consideration in the report
 The auditor/evaluator must maintain political and
  technical independence during the audit and treat all
  materials as confidential

                       TM 665: Project Planning & Control   19
Project Auditor/Evaluator Responsibilities
   Steps to carry out an audit:
    1.   Assemble a small team of experienced experts
    2.   Familiarize the team with the requirements of the
    3.   Audit the project on site
    4.   After the completion, debrief the project’s

                            TM 665: Project Planning & Control   20
Project Auditor/Evaluator Responsibilities

 Steps to carry out an audit (cont.):
  5. Produce a written report according to a
       prespecified format
  6.   Distribute the report to the project manager
       and project team for their response
  7. Follow up to see if the recommendations
       have been implemented

                     TM 665: Project Planning & Control   21
  The Project Audit Life Cycle
 Like the project itself, the audit has a life cycle
  composed of an orderly progression of well-defined
      Project audit initiation
      Project baseline definition
      Establishing an audit database
      Preliminary analysis of the project
      Audit report preparation
      Project audit termination

                          TM 665: Project Planning & Control   22
Essentials of an Audit/ Evaluation

   For an audit/evaluation to be conducted with skill and
    precision, and to be generally accepted by senior
    management, the client and the project team, several
    conditions must be met:
    1.   The audit team must be properly selected
    2.   All records and files must be accessible
    3.   Free contact with project members must be preserved
        All of these essentials deserve further discussion…

                          TM 665: Project Planning & Control   23
  Audit/Evaluation Team

 The choice of the audit/evaluation team is critical to
  the success of the entire process
 The size of the team will generally be a function of
  the size and complexity of the project
 For a small project, one person can often handle all
  the tasks of an audit, but for a large project, the team
  may require representatives from several areas

                        TM 665: Project Planning & Control   24
The Audit/Evaluation Team
 Typical areas that may furnish audit team members are:
    The project itself
    The accounting/controlling department
    Technical specialty areas
    The customer
    The marketing department
    Purchasing/asset management
    Human resources
    Legal/contract administration department

                      TM 665: Project Planning & Control   25
Audit/Evaluation Team
 The main role of the audit/evaluation team is to conduct
  a thorough and complete examination of the project or
  some prespecified aspect of the project
 The team must determine which items should be brought
  to management’s attention
 The team is responsible for constructive observations
  and advice based on the training and experience of its

                       TM 665: Project Planning & Control   26
Access to Information
 In order for the audit/evaluation team to be effective, it
  must have free access to all information relevant to
  the project
 Most of the information needed will come from the
  project team’s records or from various departments
  such as accounting, personnel, and purchasing
 Some of the most valuable information comes from
  documents that predate the project

                        TM 665: Project Planning & Control     27
 Access to Information

 Examples of documents that predate the project:
    Customer Requirements (i.e. RFP Process)
    Minutes of project selection meetings
    Minutes of senior management committees that
     decided to pursue a specific area of technical interest

 Priorities must be set to ensure that important analyses
  are undertaken before those of lesser importance

                         TM 665: Project Planning & Control    28
Access to Project Team and Others
 Several rules that should be followed when contacting
  project team and other stakeholders
      Avoid misunderstandings between the audit/evaluation
       team and project team members
      Project team should always be made aware of in-progress
      Avoid Critical Comments
         Constructive suggestions where appropriate

      Avoid Off-Hand Comments
         No shooting from the hip

         Avoid excess comment that could be misinterpreted

                         TM 665: Project Planning & Control   29
Access to Project Team and Others
 At times, information may be given to audit evaluation
  team members in confidence
 Discreet attempts should be made to confirm such
  information through non-confidential sources
 If it cannot be confirmed, it should not be used

 The auditor/evaluator must protect the sources of
  confidential information

                       TM 665: Project Planning & Control   30
 Measurement is an integral part of the audit/evaluation
 Performance against planned budget and schedule
  usually poses no major measurement problems
 Measuring the actual expenditure against the planned
  budget is harder and depends on an in-depth
  understanding of the procedures used by the accounting

                       TM 665: Project Planning & Control   31
 Big Challenge: determine what revenues should be
  assigned to a project
 All cost/revenue allocation decisions must be made when
  the various projects are initiated
 When the battles are fought “up front”, the equity of
  cost/revenue allocations ceases to be so serious an issue
 As long as allocations are made by a formula, major
  conflict is avoided-or at least mitigated

                       TM 665: Project Planning & Control   32

 Above all else, the auditor/evaluator needs
  “permission to enter the system”
 If the auditor maintains a calm, relaxed attitude,
  the project team generally begins to extend
  limited trust
 The first step is to allow the auditor qualified
  access to information about the project

                     TM 665: Project Planning & Control   33
 Advice for the Auditor/Evaluator

 Deal professionally with information gathered, neither
  ignoring nor stressing the project’s shortcomings
 Recognize and reinforce aspects of the project’s
 Trust is earned during an audit, even with negative
 Trust-building is a slow and delicate process that is
  easily lost

                       TM 665: Project Planning & Control   34
 Next Up:
   Project   Termination

                TM 665: Project Planning & Control   35
    Project Termination Conditions

    A project can be said to be terminated when work
     on the substance of the project has ceased or
     slowed to the point that further progress is no
     longer possible

    There are four fundamentally different ways to close
     out a project:
     1. Extinction
     2. Addition
     3. Integration
     4. Starvation

                       TM 665: Project Planning & Control   36
Project Termination Factors

1. Low Probability of Success:
    Technical Objectives
    Commercial Viability
    ROI Achieved

2. No Solution
    Engineering Design
    Lasting Process

3. Intellectual Property Issues

                  TM 665: Project Planning & Control   37
Project Extinction

 All (substantive) activity ceases
 Stopped:
    Successful
         Met goals
      Unsuccessful
         Failed tests

      Superceded
         External event

 “Extinction by Murder”
    Political assassination; “projecticide”
    Merger redundancy

                           TM 665: Project Planning & Control   38
Project Addition

 Project becomes a part of organization
    New functionality
    “Protected” status disappears – eventually

 Transfer of assets
    People
    Equipment

 Addition of responsibilities
    Budgets
    Practices and procedures
    “P & L”

                       TM 665: Project Planning & Control   39
Project Integration

 Most common form of termination and also the
  most complex

 Project Outcome:
     Becomes Part of Acquiring Organization
     Requires Redistribution of Residual Resources
          Equipment
          Capital Improvements
          Follow-on Support

                        TM 665: Project Planning & Control   40
Project Starvation

 Budget Decrement

 Reallocation of Resources Away from Project
      Business Conditions
      “Political” Considerations

 “Active” without Activity

                       TM 665: Project Planning & Control   41
When to Terminate a Project

 Some questions to ask when considering termination:

      Has the project been obviated by technical advances?
      Is the output of the project still cost-effective?
      Is it time to integrate or add the project as a part of
       regular operations?
      Are there better alternative uses for the funds, time and
       personnel devoted to the project?
      Has a change in the environment altered the need for
       the project’s output?

                           TM 665: Project Planning & Control    42
When to Terminate a Project

 Reasons projects fail:
     Project organization was not required
          Non-Projects and Pseudo-Projects

     Insufficient support from senior management
     Wrong person as project manager
     Poor (or insufficient) planning
     Lack of “Critical Success Factors”

                        TM 665: Project Planning & Control   43
 The Termination Process
 Components of the termination process
   Whether or not to terminate
          Goal/Objective-based
          Qualification factors
     If terminating:
          Carry out termination procedures
          Should have been planned at start
          Should be done in an orderly manner
          Procedures vary by firm & project type

                          TM 665: Project Planning & Control   44
Project Termination Decision Tree
  Internal Info                                                   External Info
    Systems               Decision


   Continue       Keep                           Uncertain           Sensitivity
    Project                                                           Analysis


                             TM 665: Project Planning & Control                    45
    Project Termination Areas

                       Project Closeout

Organization     Financial                    Purchasing            Site

Closeout Mtg     Payables                      Contracts      Close Facilities
   Plans       Receivables                Supplier Comm      Dispose Equip/Mat'l
 Personnel     Budget Report              Final Payments

                        TM 665: Project Planning & Control                 46
The Implementation Process
 Duties of the termination manager                        (not always the PM!):
     Complete all remaining work
     Notification to & acceptance by client
     Complete documentation (accurately!)
     Final payments
     Redistribute assets
     Legal review
     Archive files & records (legal req’mnts)
     Follow-on support arrangements

                      TM 665: Project Planning & Control                   47
The Final Report - A Project History
 Historical recap

 Project “biography”
     “The Good, the Bad, and the Ugly”

 Previous documents
     Project plan
     Audit(s)
     Change orders

                      TM 665: Project Planning & Control   48
The Final Report
 Focus areas:
  1. Project performance
  2. Administrative performance
  3. Organizational structure
  4. Project and administrative teams
  5. Techniques of project management

                    TM 665: Project Planning & Control   49
The Final Report

 Focus area recommendations are minimum

 “Lessons learned”
     Benchmarks
     Killers

 Goal: Future project management improvement

                   TM 665: Project Planning & Control   50
Bonus Considerations
 On-Campus Students:
     Discussion participation the last two lectures

 Off-Campus Students:
     Personal Project Plan –
          Short paper summarizing what you consider to
           be the major points of project management
          Your personal PMBOK that you could see
           yourself applying as a project manager
          Due by e-mail before requesting the Final Exam

                       TM 665: Project Planning & Control   51
 Final Examination
 Monday, 07 May, 7:00–9:00 PM, CB 110
   Bring Engineering Notebook, calculator, & PENCIL

 Format:
    Multiple Choice
       Select the BEST answer

       Don’t take too long – avoid looking them up

    Short Answer & Short Calculation
       No need to show your work completely

       Answer all parts for full credit

    Charts & Networks
       Plan for several minutes to study & solve

       Read carefully

                        TM 665: Project Planning & Control   52

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