VIEWS: 13 PAGES: 51 POSTED ON: 5/30/2012
TM 665: Lecture 11 Project Audits, Termination & Review TM 665: Project Planning & Control 1 Agenda 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 performed 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 weaknesses 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 auditor 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 High Low 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 project 3. Audit the project on site 4. After the completion, debrief the project’s management 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 events: 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 members 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 audit 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 Measurement is an integral part of the audit/evaluation process 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 department TM 665: Project Planning & Control 31 Measurement 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 Auditor/Evaluator 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 strengths Trust is earned during an audit, even with negative findings Trust-building is a slow and delicate process that is easily lost TM 665: Project Planning & Control 34 Break! 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 or 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 Systems Database(s) Termination Rules Continue Keep Uncertain Sensitivity Termination Project Analysis Decision? Terminate Termination Procedures 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
"TM 665 Lecture 11 Project Audits_ Termination _amp; Review"