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									Practical Project Management
         October 2006
   Introduction to Project Management
   Project Management Context
   Integration Management
   Scope Management
   Time Management
   Cost Management
   Quality Management
   Human Resource Management
   Communications Management
   Risk Management
   Procurement Management
             Module 1: Introduction to
             Project Management
   Define what project is and describe project
   Understand the history of project management
   Understand the growing need for better project
   Discuss key elements of the project management
   Discuss recent trends in project management
    research and software products
        Project Management Defined

 Project management is the application of
  knowledge, skills, tools, and techniques to
  project activities in order to meet project
 A project is a temporary endeavor undertaken
  to achieve a particular aim. Project
  management knowledge and practices are
  best described in terms of their component
         History of Project Management

 Some people argue that building the Egyptian
  pyramids was a project, as was building the
  Great Wall of China
 Most people consider the Manhattan Project
  to be the first project to use “modern” project
 This three-year, $2 billion (in 1946 dollars)
  project had a separate project manager and a
  technical manager
          Project Management
   A set of processes, tools and templates,
    designed to be used together to manage a
    project through its lifecycle

          Define your project
 Select a real-life project
 Define the project
 Discuss within group
 Select spokesperson
 Share with the rest

         Recent Trends in Research and
 7 Actions for Success: broaden views,
  communicate in 3D, political operative, assert
  yourself, be flexible, & sharpen social skills
 Five major challenges of today: global teams,
  moving parts, development, partners, and
  project portfolios
 Five levels of excellence: Level 1 is ad-hoc,
  (2) planned, (3) managed, (4) integrated,
  and (5) sustained
 Software: Microsoft Project
           Develop a framework
   Briefly outline your PM framework using the
    real-life project previously described.

             Module 2: The Project
             Management Context
   Understand the systems view of project management
   Explain the differences among functional, matrix, and project
    organizational structures
   Explain why stakeholder management and top management
    commitment are critical for a project’s success
   Understand the initiation, planning, execution, and closure
    phases of the project life cycle
   Understand effective project initiation, planning, execution,
    control, and closing
   Distinguish between project development and product
   Discuss the unique attributes and diverse nature of
    information technology projects
   List the skills and attributes of a good project manager    10
       Systems View
 Systems philosophy: View things as systems,
  interacting components working within an
  environment to fulfill some purpose
 Systems analysis: problem-solving approach
 Systems management: Address business,
  technological, and organizational issues before
  making changes to systems

            Formal Organizational Frames

   Structural frame: Focuses on roles and
    responsibilities, coordination, and control.
    Organization charts help define this frame.
   Human resources frame: Focuses on providing
    harmony between needs of the organization and
    needs of people.
   Political frame: Assumes organizations are
    coalitions composed of varied individuals and
    interest groups. Conflict and power are key issues.
   Symbolic frame: Focuses on symbols and
    meanings related to events. Culture is important. 12
Organizational Structures

Organizational Structures

        Stakeholder and Top
        Management Commitment
Top management can help project managers:
 Secure adequate resources.
 Get approval for unique project needs in a
  timely manner.
 Receive cooperation from people throughout
  the organization.
 Learn how to be better leaders.

Project Life Cycle Phases

           Project Development vs
           Product Development
   Discuss the similarities and differences of
    project development versus product
    development within your specific career. 5
    minutes. Share with your peers.

           What makes a good project
   Discuss the skills and characteristics needed
    to be a good and successful project manager.
    10 minutes. Share with the rest of your peers.

              Module 3: Project
              Integration Management
   Describe an overall framework for project integration
    management as it relates to the other project management
    knowledge areas and the project life cycle
   Understand the integrated change control process, planning
    for and managing changes, and using a change control
   Explain tools and techniques to assist in project plan
    execution of integrated projects such as Gantt Charts, S-
    Curves, and PERTs
   Explain project plan execution, its relationship to project
    planning, the factors related to successful results
   Use guidelines and templates for developing plans and
    perform a stakeholder analysis                              19
        Project Integration
 Project Plan Development: taking the results
  of other planning processes and putting them
  into a consistent, coherent document—the
  project plan
 Project Plan Execution: carrying out the
  project plan
 Integrated Change Control: coordinating
  changes across the entire project
         Integrated Change Control
 Integrated change control involves
  identifying, evaluating, and managing
  changes throughout the project life cycle
 Three main objectives of change control:
    Influence the factors that create changes to
     ensure they are beneficial
    Determine that a change has occurred
    Manage actual changes when and as they
     occur                                    21
Tools and Techniques

Tools and Techniques

Tools and Techniques

Tools and Techniques

           Importance of Project
           Planning the Execution
   Discuss the reason and importance of
    preparing a plan before executing it using
    cases specific to your area of responsibility.
    10 minutes. Share with your peers.

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

   Identify, Prioritize, Understand
         Stakeholder Analysis
 conduct a brief stakeholder analysis
 categorize their relation and advocating of the

             Module 4: Project Scope
   Describe the strategic planning process, apply
    different project selection methods, such as a net
    present value analysis, a weighted scoring model,
    and a balanced scorecard, and understand the
    importance of creating a project charter
   Explain the scope planning process and contents of
    a scope statement
   Discuss the scope definition process and construct a
    work breakdown structure
   Understand the importance of scope verification and
    scope change control                               29
Strategic Planning Process

Strategic Planning Process

        Scope Planning and Definition
 Scope planning: Deciding how the scope
  will be defined, verified, and controlled.
 Scope definition: Reviewing the project
  charter and preliminary scope statement and
  adding more information as requirements are
  developed and change requests are

           Scope Statement
   In your group, place the initial project to be
    managed in the Scope Statement format. 10
    minutes. Share with the rest of your peers.

           Work Breakdown Structure
   Using the same project as before and building
    on previous activities, develop a WBS chart
    with your group. 10 minutes. Share with the
    rest of your peers.

              Basic Principles for Creating
1. A unit of work should appear at only one place in the WBS.
2. The work content of a WBS item is the sum of the WBS items below it.
3. A WBS item is the responsibility of only one individual, even though many
   people may be working on it.
4. The WBS must be consistent with the way in which work is actually going
   to be performed; it should serve the project team first and other
   purposes only if practical.
5. Project team members should be involved in developing the WBS to
   ensure consistency and buy-in.
6. Each WBS item must be documented to ensure accurate understanding of
   the scope of work included and not included in that item.
7. The WBS must be a flexible tool to accommodate inevitable changes while
   properly maintaining control of the work content in the project according
   to the scope statement.

              Scope Verification and Scope
              Change Control
Suggestions for Reducing Incomplete and Changing
   Develop and follow a requirements management process.
   Use techniques such as prototyping, use case modeling.
   Put requirements in writing and keep them current.
   Create a requirements management database for
    documenting and controlling requirements.
   Conduct adequate testing throughout the project life cycle.
   Review changes from a systems perspective.
   Emphasize completion dates to help focus on what’s most
   Allocate resources specifically for handling change requests
    and enhancements                                           36
              Module 5: Project Time
   Understand the importance of project schedules and good
    project time management
   Define activities as the basis for developing project schedules
   Explain how various tools and techniques help project
    managers perform activity duration estimating and schedule
   Understand and use critical path analysis and critical chain
   Describe how to use several techniques for shortening
    project schedules
   Use a Gantt chart for schedule planning and tracking
    schedule information
   Discuss how reality checks and people issues are involved in
    controlling and managing changes to the project schedule 37
               Schedules and Time
   Activity definition: Identifying the specific activities that the project
    team members and stakeholders must perform to produce the project
   Activity sequencing: Identifying and documenting the relationships
    between project activities.
   Activity resource estimating: Estimating how many resources a
    project team should use to perform project activities.
   Activity duration estimating: Estimating the number of work periods
    that are needed to complete individual activities.
   Schedule development: Analyzing activity sequences, activity resource
    estimates, and activity duration estimates to create the project schedule.
   Schedule control: Controlling and managing changes to the project

           Scheduling and Time
   Why are project schedules important? What
    sort of schedule conflicts could with expect in
    your specific project? 10 minutes. Share with
    the rest of your peers.

         Activity Duration Estimating
 After defining activities and determining their
  sequence, the next step in time management
  is duration estimating
 Duration includes the actual amount of time
  worked on an activity plus elapsed time
 Effort is the number of workdays or work
  hours required to complete a task. Effort
  does not equal duration
 People doing the work should help create
  estimates, and an expert should review them
         Schedule Development
 Schedule development uses results of the
  other time management processes to
  determine the start and end date of the
  project and its activities
 Ultimate goal is to create a realistic project
  schedule that provides a basis for monitoring
  project progress for the time dimension of the
 Important tools and techniques include Gantt
  charts, PERT analysis, critical path analysis,
  and critical chain scheduling                  41
         Critical Path Method
 CPM is a project network analysis technique
  used to predict total project duration
 A critical path for a project is the series of
  activities that determines the earliest time by
  which the project can be completed
 The critical path is the longest path through
  the network diagram and has the least
  amount of slack or float
         Finding the Critical Path
 First develop a good project network diagram
 Add the durations for all activities on each
  path through the project network diagram
 The longest path is the critical path

Schedule Trade-offs

Shorten a Project Schedule

         Critical Chain Scheduling
 Critical chain scheduling is a method of
  scheduling that takes limited resources into
  account when creating a project schedule and
  includes buffers to protect the project
  completion date
 Critical chain scheduling assumes resources
  do not multitask because it often delays task
  completions and increases total durations

Example of Critical Chain

              Scheduling using PERT
  PERT weighted average formula:
optimistic time + 4X most likely time + pessimistic time
 Example:
PERT weighted average =
 8 workdays + 4 X 10 workdays + 24 workdays = 12 days
where 8 = optimistic time, 10 = most likely time, and 24 = pessimistic time

   Develop a schedule for your project using
    some of the tools presented thus far. There is
    no rule against combining techniques. If fact,
    pulling the best from each may be
    advantageous. 15 minutes. Share with the
    rest of your peers.

         Controlling and Managing
 Review the draft schedule or estimated
  completion date in the project charter.
 Prepare a more detailed schedule with the
  project team.
 Make sure the schedule is realistic and
 Alert top management well in advance if
  there are schedule problems.
           Managing Change
   Using the recently created schedules, assess
    their reality. What things have been adjusted
    to the schedule to help manage change? 10
    minutes. Share with peers.

             Module 6: Project Cost
   Explain basic project cost management principles,
    concepts, and terms
   Understand the importance of good project cost
   Explain cost estimating using definitive, budgetary,
    and rough order of magnitude (ROM) estimates
   Understand the processes involved in cost budgeting
    and preparing a cost estimate
   Understand the benefits of earned value
    management and project portfolio management
            Cost management
   Resource planning: determining what resources and
    quantities of them should be used
   Cost estimating: developing an estimate of the costs
    and resources needed to complete a project
   Cost budgeting: allocating the overall cost estimate
    to individual work items to establish a baseline for
    measuring performance
   Cost control: controlling changes to the project

          Cost Management
   Why is good cost management important?
    Why bother with it?

Methods of Cost Estimating

         Earned Value Management
 Earned Value - Planned Costs = Schedule
  Variance (SV)
 Earned Value - Actual Costs = Cost Variance

           Cost Control
   Project cost control includes
     monitoring cost performance
     ensuring that only appropriate project changes
      are included in a revised cost baseline
     informing project stakeholders of authorized
      changes to the project that will affect costs
   Earned value management is an important
    tool for cost control

           Project Portfolio Management

   Five levels for project portfolio management
     Put all your projects in one database
     Prioritize the projects in your database
     Divide your projects into two or three budgets
      based on type of investment
     Automate the repository
     Apply modern portfolio theory, including risk-
      return tools that map project risk on a curve

Cost Plan View

             Module 7: Project Quality
   Define project quality management
   Describe quality planning and its relationship to
    project scope management
   Discuss the importance of quality assurance
   Understand the importance of project quality
   List the three outputs of the quality control process
   Understand the tools and techniques for quality
    control, such as Pareto analysis, statistical sampling,
    Six Sigma, quality control charts, and testing       60
            Quality Management Program

   Quality management planning and implementing
    policies, procedures, and requirements.
   Quality control ensuring that work is being
    performed and that work is being checked prior to
    its acceptance.
   Quality assurance verifying that quality control tasks
    are being performed.
   Continuous quality improvement continually
    pursuing improvement in the quality of the project
   Quality costs redoing a project item even when this
    increases the item's cost.                          61
          Quality Planning and Quality
 Quality Definitions
 Quality Materials
 Quality Events

Importance of Quality Management
   Discuss the importance of quality
    management and assurance. How may they
    vary from project to project?
            Tools and Techniques for
            Quality Control
Pareto Analysis
 Steps to identify the important causes using Pareto analysis
 Step 1: Form a table listing the causes and their frequency as
  a percentage.
 Step 2: Arrange the rows in the decreasing order of
  importance of the causes i.e. the most important cause first
 Step 3: Add a cumulative percentage column to the table
 Step 4: Plot with causes on x- and cumulative percentage on
 Step 5: Join the above points to form a curve
 Step 6: Draw line at 80% on y-axis parallel to x-axis. Then
  drop the line at the point of intersection with the curve on x-
  axis. This point on the x-axis separates the important causes
  and trivial causes.
Pareto Analysis Sample

         Six Sigma
 It requires an organization-wide commitment
 Six Sigma organizations have the ability and
  willingness to adopt contrary objectives, like
  reducing errors and getting things done faster
 It is an operating philosophy that is customer-
  focused and strives to drive out waste, raise
  levels of quality, and improve financial
  performance at breakthrough levels
Six Sigma

Quality Control Chart

 Unit test
 Integration testing
 System testing

   A test plan is simply a high-level summary of
    the areas (functionality, elements, regions,

           Quality Control Plan
   What sort of tools would you use and what
    will you be looking for when assessing quality
    in a project?

               Module 8: Project Human
               Resource Management
   Discuss the importance of good human resource management on projects
   Summarize key concepts for managing people by understanding the
    theories of Abraham Maslow, Frederick Herzberg, David McClelland, and
    Douglas McGregor on motivation, H. J. Thamhain and D. L. Wilemon on
    influencing workers, and Stephen Covey on how people and teams can
    become more effective
   Discuss organizational planning and be able to create a project
    organizational chart, responsibility assignment matrix, and resource
   Understand important issues involved in project staff acquisition and
    explain the concepts of resource assignments, resource loading, and
    resource leveling
   Assist in team development with training, team-building activities, and
    reward systems

            Project Human Resources
   Human resource planning: Identifying and
    documenting project roles, responsibilities, and
    reporting relationships.
   Acquiring the project team: Getting the needed
    personnel assigned to and working on the project.
   Developing the project team: Building individual
    and group skills to enhance project performance.
   Managing the project team: Tracking team
    member performance, motivating team members,
    providing timely feedback, resolving issues and
    conflicts, and coordinating changes to help enhance
    project performance.                             71
            Keys to Managing People
 Psychologists and management theorists have
  devoted much research and thought to the
  field of managing people at work
 Important areas related to project
  management include
     motivation (intrinsic and extrinsic)
     influence and power
     effectiveness

Abraham Maslow on

Herzberg’s Motivational and
Hygiene Factors

         McClelland’s Acquired-Needs

 Achievement: People with a high need for
  achievement seek to excel and thus tend to
  avoid both low-risk and high-risk situations.
 Affiliation: Those with a high need for
  affiliation need harmonious relationships with
  other people and need to feel accepted by
  other people.
 Power: A person's need for power can be
  one of two types - personal and institutional.
McGregor’s Theory X and
Theory Y

            Thamhain and Wilemon’s Ways to
            Have Influence on Projects
1. Authority: the legitimate hierarchical right to issue orders
2. Assignment: the project manager's perceived ability to
   influence a worker's later work assignments
3. Budget: the project manager's perceived ability to authorize
   others' use of discretionary funds
4. Promotion: the ability to improve a worker's position
5. Money: the ability to increase a worker's pay and benefits
6. Penalty: the project manager's ability to cause punishment
7. Work challenge: the ability to assign work that capitalizes on
   a worker's enjoyment of doing a particular task
8. Expertise: the project manager's perceived special knowledge
   that others deem important
9. Friendship: the ability to establish friendly personal
   relationships between the project manager and others
           Improving Effectiveness -
           Covey’s 7 Habits
   Project managers can apply Covey’s 7 habits
    to improve effectiveness on projects
     Be proactive
     Begin with the end in mind
     Put first things first
     Think win/win
     Seek first to understand, then to be understood
     Synergize
     Sharpen the saw
           Creating a Motivating
   Discuss various instances where you have
    been motivated and where you have
    motivated others. Try to associate it to one or
    more of the principles discussed in this

         Organizational Planning
 Organizational  planning involves
  identifying, documenting, and assigning
  project roles, responsibilities, and
  reporting relationships
 Outputs and processes include
   projectorganizational charts
   work definition and assignment process
   responsibility assignment matrixes
   resource histograms
Project Organizational Charts

Work Definition and
Assignment Process

Responsibility Assignment

Resource Histogram

           Project Staff Acquisition
   Staffing plans and good hiring procedures are
    important in staff acquisition, as are
    incentives for recruiting and retention

   Research shows that people leave their jobs
    because they don’t make a difference, don’t
    get proper recognition, aren’t learning
    anything new, don’t like their coworkers, and
    want to earn more money
           Resource Loading and Leveling

   Resource loading refers to the amount of
    individual resources an existing project
    schedule requires during specific time periods

   Resource leveling is a technique for resolving
    resource conflicts by delaying tasks. The main
    purpose of resource leveling is to create a
    smoother distribution of resource usage and
    reduce overallocation
Team Development Activities

            Different types of people
   Meyers-Briggs Type Indicator (MBTI)
     Extrovert/Introvert (E/I)
     Sensation/Intuition (S/N)
     Thinking/Feeling (T/F)
     Judgment/Perception (J/P)
   Social Styles Profile
     Drivers
     Expressives
     Analyticals
     Amiables
             General Advice on Teams
   Be patient and kind with your team.
   Fix the problem instead of blaming people.
   Establish regular, effective meetings.
   Allow time for teams to go through the basic team-building
   Limit the size of work teams to three to seven members.
   Plan some social activities to help project team members and
    other stakeholders get to know each other better.
   Stress team identity.
   Nurture team members and encourage them to help each
   Take additional actions to work with virtual team members.
             Module 9: Project
             Communications Mgmt
   Understand the importance of good communication on
    projects and describe the major components of a
    communications management plan
   Discuss the elements of project communications planning,
    including information distribution, performance reporting, and
    administrative closure
   Discuss various methods for project information distribution
    and the advantages and disadvantages of each
   List various methods for improving project communications,
    such as managing conflicts, running effective meetings, using
    e-mail effectively, and using templates
   Understand individual communication needs and how to
    determine the number of communications channels needed
    for a project                                              90
            Communications Management
   A description of a collection and filing structure for
    gathering and storing various types of information
   A distribution structure describing what information
    goes to whom, when, and how
   A format for communicating key project information
   A project schedule for producing the information
   Access methods for obtaining the information
   A method for updating the communications
    management plans as the project progresses and
   A stakeholder communications analysis                91
         Project Communications
         Management Processes
 Communications planning: determining the
  information and communications needs of the
 Information distribution: making needed
  information available in a timely manner
 Performance reporting: collecting and
  disseminating performance information
 Administrative closure: generating, gathering,
  and disseminating information to formalize
  phase or project completion
Communications Planning

           Information Distribution
 Getting the right information to the right
  people at the right time and in a useful
  format is just as important as developing the
  information in the first place
 Important considerations include
     using technology to enhance information
     formal and informal methods for distributing
           Information Distribution
   Discuss various methods for project
    information distribution and the advantages
    and disadvantages of each.

Media Choice Table

              Performance Reporting
   Performance reporting keeps stakeholders informed
    about how resources are being used to achieve
    project objectives
       Status reports describe where the project stands at a
        specific point in time
       Progress reports describe what the project team has
        accomplished during a certain period of time
       Project forecasting predicts future project status and
        progress based on past information and trends
       Status review meetings often include performance
           Administrative Closure
   A project or phase of a project requires

   Administrative closure produces
     project archives
     formal acceptance
     lessons learned

        Suggestions for Improving
        Project Communications
 Manage conflicts effectively
 Develop better communication skills
 Run effective meetings
 Use e-mail effectively
 Use templates for project communications

         Conflict Handling Modes, in
         Preference Order
 Confrontation or problem-solving: directly
  face a conflict
 Compromise: use a give-and-take approach
 Smoothing: de-emphasize areas of
  differences and emphasize areas of
 Forcing: the win-lose approach
 Withdrawal: retreat or withdraw from an
  actual or potential disagreement           100
         Running Effective Meetings
 Determine if a meeting can be avoided
 Define the purpose and intended outcome of
  the meeting
 Determine who should attend the meeting
 Provide an agenda to participants before the
 Prepare handouts, visual aids, and make
  logistical arrangements ahead of time
 Run the meeting professionally
 Build relationships                        101
            Using E-Mail Effectively Tips
   Ensure it is an appropriate medium for what you
    want to communicate
   Be sure to send the e-mail to the right people
   Use meaningful subjects
   Limit the content to one main subject, and be as
    clear and concise as possible
   Limit the number and size of attachments
   Delete e-mail you don’t need, and don’t open it if
    you question the source
   Make sure your virus software is up to date
   Respond to and file e-mails quickly
   Learn how to use important features                102
         Using Templates for Project
 Many people are afraid to ask for help
 Providing examples and templates for project
  communications saves time and money
 Organizations can develop their own
  templates, use some provided by outside
  organizations, or use samples from textbooks
 Recall that research shows that companies
  that excel in project management make
  effective use of templates
          Communication Channels

   Discuss various individual communication
    needs and how to determine the number of
    communications channels.

              Module 10: Project Risk
   Understand what risk is and the importance of good project
    risk management
   Discuss the elements involved in risk management planning
   Describe the risk identification process and tools and
    techniques to help identify project risks
   Discuss the qualitative risk analysis process and explain how
    to calculate risk factors, use probability/impact matrixes, the
    Top Ten Risk Item Tracking technique, and expert judgment
    to rank risks
   Explain the quantify risk analysis process and how to use
    decision trees and simulation to quantitative risks
   Discuss what is involved in risk monitoring and control
   Explain the results of good project risk management
         The Importance of Project Risk
 Project risk management is the art and
  science of identifying, assigning, and
  responding to risk throughout the life of a
  project and in the best interests of meeting
  project objectives
 Risk management is often overlooked on
  projects, but it can help improve project
  success by helping select good projects,
  determining project scope, and developing
  realistic estimates                         106
         Risk Management Planning
 The main output of risk management
  planning is a risk management plan
 The project team should review project
  documents and understand the organization’s
  and the sponsor’s approach to risk
 The level of detail will vary with the needs of
  the project

Risk Management Planning

           Risk Identification
 Risk identification is the process of
  understanding what potential unsatisfactory
  outcomes are associated with a particular
 Several risk identification tools and
  techniques include
     Brainstorming
     The Delphi technique
     Interviewing
     SWOT analysis
Risk Identification

           Activity – Identify Risks
   Identify the risks using the project you have
    been working on for each area of project
    management covered thus far.

           Qualitative Risk Analysis
   A risk analysis assesses the likelihood and
    impact of identified risks to determine their
    magnitude and priority. Risk quantification
    tools and techniques include:
     Probability/Impact matrixes
     The Top 10 Risk Item Tracking technique
     Expert judgment

Probability/Impact Matrices

Top 10 Risk Item Tracking

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

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

Decision Trees and Expected
Monetary Value (EMV)

         Risk Response Planning
 Risk avoidance: eliminating a specific threat
  or risk, usually by eliminating its causes
 Risk acceptance: accepting the consequences
  should a risk occur
 Risk transference: shifting the consequence
  of a risk and responsibility for its
  management to a third party
 Risk mitigation: reducing the impact of a risk
  event by reducing the probability of its
         Risk Monitoring and Control

 Monitoring risks involves knowing their status
 Controlling risks involves carrying out the risk
  management plans as risks occur
 Workarounds are unplanned responses to risk
  events that must be done when there are no
  contingency plans
 The main outputs of risk monitoring and
  control are corrective action, project change
  requests, and updates to other plans
         Good Project Risk
 Unlike crisis management, good project risk
  management often goes unnoticed
 Well-run projects appear to be almost
  effortless, but a lot of work goes into running
  a project well
 Project managers should strive to make their
  jobs look easy to reflect the results of well-
  run projects
              Module 11: Project
              Procurement Management
   Understand the importance of project procurement
    management and the increasing use of outsourcing for
    information technology projects
   Describe the procurement planning process, procurement
    planning tools and techniques, types of contracts, and
    statements of work
   Discuss what is involved in solicitation planning and the
    difference between a request for proposal and a request for
   Explain what occurs during the solicitation process
   Describe the source selection process and different
    approaches for evaluating proposals or selecting suppliers
   Discuss the importance of good contract administration
   Describe the contract close-out process                   121
            Procurement Management
 Procurement means acquiring goods and/or
  services from an outside source.
 We outsource for the following reasons:
     To reduce both fixed and recurrent costs
     To allow the client organization to focus on its
      core business
     To access skills and technologies
     To provide flexibility
     To increase accountability
            Project Procurement
            Management Processes
   Procurement planning: determining what to procure
    and when
   Solicitation planning: documenting product
    requirements and identifying potential sources
   Solicitation: obtaining quotations, bids, offers, or
    proposals as appropriate
   Source selection: choosing from among potential
   Contract administration: managing the relationship
    with the vendor
   Contract close-out: completion and settlement of the
Project Procurement
Management Processes

           Procurement Planning
   Procurement planning involves identifying
    which project needs can be best met by using
    products or services outside the organization.
    It includes deciding
     whether to procure
     how to procure
     what to procure
     how much to procure
     when to procure
              Make-or-buy analysis
Make or Buy Example: Assume you can lease an item you need for a
  project for $150/day. To purchase the item, the investment cost is
  $1,000, and the daily cost would be another $50/day. How long will it
  take for the lease cost to be the same as the purchase cost? If you need
  the item for 12 days, should you lease it or purchase it?

Set up an equation so the “make” is equal to the “buy.” In this example, use
   the following equation. Let d be the number of days to use the item.
                        $150d = $1,000 + $50d
Solve for d as follows:
        Subtract $50d from the right side of the equation to get
                        $100d = $1,000
        Divide both sides of the equation by $100
                        d = 10 days

The lease cost is the same as the purchase cost at 10 days. If you need the
  item for 12 days, it would be more economical to purchase it         126
            Types of Contracts
   Fixed-price or lump-sum: involve a fixed total
    price for a well-defined product or service
   Cost-reimbursable: involve payment to the seller
    for direct and indirect costs
   Time and material contracts: hybrid of both
    fixed-price and cost-reimbursable, often used by
   Unit price contracts: require the buyer to pay the
    seller a predetermined amount per unit of service

            Cost Reimbursable Contracts

   Cost plus incentive fee (CPIF): the buyer pays
    the seller for allowable performance costs plus a
    predetermined fee and an incentive bonus
   Cost plus fixed fee (CPFF): the buyer pays the
    seller for allowable performance costs plus a fixed
    fee payment usually based on a percentage of
    estimated costs
   Cost plus percentage of costs (CPPC): the
    buyer pays the seller for allowable performance
    costs plus a predetermined percentage based on
    total costs                                       128
Contract Types Versus Risk

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

Statement of Work

         Solicitation planning
Solicitation planning involves preparing several
 Request for Proposals: used to solicit
  proposals from prospective sellers
 Requests for Quotes: used to solicit quotes
  for well-defined procurements
 Invitations for bid or negotiation and initial
  contractor responses are also part of
  solicitation planning
           Solicitation planning
Outline for a Request for Proposal:
  I. Purpose of RFP
  II. Organization’s Background
  III. Basic Requirements
  IV. Hardware and Software Environment
  V. Description of RFP Process
  VI. Statement of Work and Schedule Information
  VII. Possible Appendices
       A.     Current System Overview
       B.     System Requirements
       C.     Volume and Size Data
       D.     Required Contents of Vendor’s Response to RFP
       E.     Sample Contract
 Solicitation involves obtaining proposals or
  bids from prospective sellers
 Organizations can advertise to procure goods
  and services in several ways
     approaching the preferred vendor
     approaching several potential vendors
     advertising to anyone interested

   A bidders’ conference can help clarify the
    buyer’s expectations
         Source selection
Source selection involves:
 evaluating bidders’ proposals
 choosing the best one
 negotiating the contract
 awarding the contract

It is helpful to prepare formal evaluation
  procedures for selecting vendors. Buyers
  often create a “short list.”               135
Sample Proposal Evaluation

Detailed Criteria for Selecting

         Contract Administration
 Contract administration ensures that the
  seller’s performance meets contractual
 Contracts are legal relationships, so it is
  important that legal and contracting
  professionals be involved in writing and
  administering contracts
 Many project managers ignore contractual
  issues, which can result in serious problems
         Suggestions on Change
         Control for Contracts
 Changes to any part of the project need to be
  reviewed, approved, and documented by the
  same people in the same way that the
  original part of the plan was approved
 Evaluation of any change should include an
  impact analysis. How will the change affect
  the scope, time, cost, and quality of the
  goods or services being provided?
 Changes must be documented in writing.
  Project team members should also document
  all important meetings and telephone calls 139
           Contract Close-out
   Contract close-out includes
     product verification to determine if all work was
      completed correctly and satisfactorily
     administrative activities to update records to
      reflect final results
     archiving information for future use

   Procurement audits identify lessons learned in
    the procurement process

Review / Summary


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