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A temporary endeavour undertaken to create a unique product or service. Projects are:

 Unique
 Have Specific Deliverables
 Have Specific Start Date and End Date

Complete the project in time and within allocated budget without compromising on quality.

Operational work is ongoing (repetitive) whereas project has an end date.

A business process that is ongoing and repeatable is best managed in a functional organization (e.g.,
publishing, manufacturing).

Program is a group of related projects.

Portfolio is a group of programs which may not be related but which are carried out to achieve strategic
business goals.

Project Management Office (PMO): It is a centralized office which provides policies, processes,
templates, and training for managing projects within an organization.

Project Charter documents project description and objectives. It gives authorization to begin a
project. It is issued by the project sponsor. It is the project manager’s role to accomplish the project

Delphi technique leads to consensus of expert opinion and is therefore the best way to determine the
project objectives, requirements and risks.

Phases of a Project: Initiating, Planning, Executing, Monitoring and controlling, Closing

Initiating Planning Executing Monitoring& Closing

Select PM Create project scope Hold meetings Perform cost Confirm work is done
Develop Project Charter statement Send and receive info. control to requirements
Identify Stake Holders Determine Team Facilitate conflict resoln. Perform Schedule Gain formal
Determine Schedule Request changes control acceptance of the
Determine Budget Implement approved Determine product
changes variances and if Hand off completed
Perform QA they warrant a product
change request Archive records
Create forecasts Update lessons learnt
knowledge base
Release resources
 No project is complete unless there has been final acceptance from the customer.

ENTERPRISE ENVIRONMENTAL FACTORS: Existing systems and culture of a company.


 project management processes, risk procedures, and quality procedures.

 historical information and lessons learned for all previous projects

Project Constraints:


 Spends time planning, managing, and controlling time, cost, scope, quality, customer satisfaction,
risk and resources
 The project manager makes sure all the terms of the contract are met and the project objectives are
 A project Manager’s mail role is to perform Integration Management – putting all the pieces of
the project together into one cohesive
 The project manager spends 90% of the time communicating
 The project manager spends more time focusing on preventing problems rather than dealing with

Organization Structure:
Functional Organization (Silo): Organization is grouped by area of specialization such as accounting,
finance, design, marketing, manufacturing etc. Team members report to functional manager.
Projectized Organization (No home): The project manager has control of projects and team members
report to the project manager. When one project is complete, the team members are assigned to another
project or they may join other employers.

Matrix Organization (two bosses): Team members report to two bosses, project manager and functional
manager. Team members do project work in addition to routine departmental work. In strong matrix,
power rests with project manager. In weak matrix, power rests with functional manager.


 A project management plan is a series of management plans approved by all parties to the project.
It is consisted of scope, time, cost, quality, integration, human resources, communication, risk and
procurement management plans.


 Stakeholders are involved throughout the project. Their needs are taken into account while
planning the project and creating the communications management plan. They may also help
identify and manage risks.

Scope Management

Project Scope Statement: describes

 detailed description of the project
 acceptance criteria
 constraints and assumptions

Scope Management Plan deals with how scope will be planned, executed and controlled.

Scope creep refers to incremental expansion of the project scope.

Gold Plating is the act of giving the customer more than what he originally asked for, something that is
not in the scope.

The project scope statement and project charter describes the project work on a high-level basis.

WBS: The process of subdividing project work into smaller, more manageable components called work
packages. WBS dictionary clearly defines what work is included in each work package.

The scope baseline includes the WBS, WBS dictionary, and the project scope statement


Schedule Management Plan is developed to manage timely completion of a project. It involves:


Milestones are not work activities but just a completion date of an activity. For example submission date
of preliminary design, detail design, tender document etc. Milestone dates are shown in the project
schedule and are used as check points to help control the project.

Network diagram is schematic display of the logical relationship among activities. It shows when work
on each activity will be done and in what order.
For example
Precedence Diagram (Activity on Node)
Arrow Diagram (Activity on Arrow)

A pad is extra time or cost added to an estimate because the estimator does not have enough information.

One Point Estimate: Estimator submits one estimate per activity based on expert judgment or by looking
at historical information. This method can force people into padding their estimates.

3 Point Estimating (PERT): PERT uses weighted average of optimistic, pessimistic and most likely
duration estimates to compute activity durations. Activity Duration = (P+4M+O)/6

Critical path: The longest duration path. It is the shortest time in which a project can be completed. More
than one critical path increases project risk because now you have to focus on completing activities of
two or more critical paths compared to only one critical path.

Total float is the amount of time an activity can be delayed without delaying the end date of the project.
Activities on critical path have zero float.
Float : Late Start – Early Start OR Late Finish – Early Finish.

Duration: Late Finish – Late Start OR Early Finish – Early Start

Schedule Compression: If the schedule performance index is less than 1 that means the project is behind
schedule. In order to achieve the desired completion date, the schedule is compressed by either fast
tracking or crashing.
Fast Tracking: This technique involves doing critical path activities in parallel that were originally
planned in series. An example is constructing the foundation of a building while completing all of the
architectural drawings.

Crashing: Getting the maximum schedule compression for the least cost say by adding more resources.

Note that Fast tracking increases project risk. Thus Crashing is a better option.

Resource leveling refers to keeping the number of resources the same and letting time and cost be
flexible. It makes efficient use of available resources.

Schedule Representation:

 Network Diagram shows logical relationships between activities.

 Milestone charts are more effective for reporting to management and customer, where you want to
report in a less detailed way.
 Team members need to see details and so they need a bar chart rather than a milestone chart.

Schedule baseline is the final schedule. Cost Baseline is the final planned cost (D Estimate). Meeting the
schedule baseline and cost baseline are measures of project success.

Present Value (PV): Today’s value of future cash flow.

Value Analysis (Value Engineering): Finding less costly way to do the same work without loss of
performance. If a team is looking at decreasing project cost but maintaining the same scope, they are
performing value analysis.

Earned Value (EV): As of today, what is the value of work actually accomplished.
Planned Value (PV): As of today, what is the estimated value of work planned to be done

The schedule performance index (SPI) is a measure of schedule progress achieved on a project.
If SPI is < 1, it means that the project is behind schedule and efforts (fast tracking or crashing) are
required to bring the project back on track. It does not mean that the project will be late.

The cost performance index (CPI) is a measure of the cost progress achieved on a project.
CPI = EV/AC. If CPI < 1, as of today, the actual cost of completing the work is higher than what was
planned (bad)

Schedule Variance: EV - PV. If negative, it means behind schedule

Cost Variance: EV-AC. If negative means over budget

Cost Management – Chapter 7

Types of Costs

Variable Costs: These costs change with production. As production increases so do the variable cost. For
example; costs of material and labour.
Fixed Costs: These costs do not change with production. For example, rent, insurance etc remain the
same even if production increases.
Direct Cost: These are directly attributable to the work on the project. For example, team travel, team
wages, team training for the project, stationary used for project, cost of material used on the project.
Indirect Cost: Overhead items or costs incurred for the benefit of more than one project. For example,
Management Salaries, fringe benefits, taxes general office expenses (electric, phone, water bills etc),
janitorial services etc.

For large projects, cost is estimated and controlled at a higher level than the work packages in the WBS.
This is called Control Account.

Contingency Reserves are used for known risks

Management Reserves are used for unknown risks

Life Cycle Costing: It is a concept of looking at the whole life of the product (including maintenance and
operating cost not just the capital cost).

Types of Cost Estimates:

Rough order of magnitude estimate: is made in the initiating phase. This estimate is accurate to +/- 50
percent of the actual cost

Budget Estimate: is made in the planning phase and is -10 to + 25% of the actual cost

Definitive Estimate is made later during the project (eg C Estimate once design is completed) and is ±
10% of the actual cost

Risk Management

Risk Management includes risk identification, qualitative risk analysis (subjective), quantitative risk
analysis (objective e.g. Monte Carlo simulation), risk response planning, and monitoring and controlling
the risks. Through risk management, a project manager works to increase the probability and impact of
opportunities on the project (positive events), while decreasing the probability and impact of threats
(negative events) to the project. Probability Impact Matrix is used to evaluate risks.

If risks are not considered carefully before starting a project, project cost overruns, project delays, or poor
quality may result.

Example of opportunity: If we buy equipment X over 20 items at once, it will be 20% cheaper than

Examples of negative risks that can cause project delay and cost overrun are bureaucratic delays, changes
in funding policy, unexpected weather conditions, unfinished utility relocations

Risk Analysis

Risk analysis can be qualitative (subjective) or quantitative (objective).

Three techniques are commonly used for qualitative risk analysis:
 Check list of risks compiled from previous experience
 Interviews with project stake holders
 Brain-storming with the project team

Quantitative Risk Analysis (Objective)

Sensitivity analysis and probability analysis are used to quantify risks involved in a project.

Risk Averse: Someone who does not want to take risks.

Risk Register: The risk register contains details of risks uncovered to date.

Risk Triggers: These are events that trigger the contingency response. Project Manager identifies early
warning signs for each risk on a project so that he should know when to take action.

Risk Response Plans:

Contingency plan: It is prepared in advance and includes contingency reserves (10% of project cost)
which account for known risks and Management Reserves account for the unknown risks (may be 5% of
cost baseline).

Fallback Plan: Such a plan is a backup plan – Plan B. What if Contingency plan doesn’t work? Then we
will use Fallback Plan.

Procurement Management

The most common procurement documents are RFP, Invitation for Bid, and Request for Quotation.

Contract refers to an agreement between two parties. A contract is a legally binding document. A contract
involves an offer and acceptance.

Letter of Intent: is not a contract. It is simply a letter which says the buyer intents to hire the seller and
the formal contract will be signed soon.

Contract Types:

The three broad categories of contracts are:

1. Fixed Priced or Lump Sum

2. Cost Reimbursable
3. Time and Material

Fixed Price Contract: is used for projects that have completely defined scope. If the actual contract cost
is more than the agreed upon cost, the seller (contractor) must bear the additional costs. Therefore, the
buyer has the least cost risk in this type of contract.

Cost Reimbursable Contract: It is used when the exact scope of work is unknown. The buyer pays the
seller allowable incurred costs upto the upset limit of the conract. Here the buyer has the most cost risk
because the total costs are unknown. Research and development or information technology projects in
which the scope in unknown are typical examples of cost reimbursable contracts.

Time and Material Contract: In this type of contract, the buyer pays on a per-hour or per-item basis. It is
used on contracts where the level of effort cannot be defined at the time the contract is awarded. This type
of contract is best used for work valued at small dollar amounts and lasting a short amount of time. In
such contracts, the buyer has a medium amount of cost risk compared with fixed price and cost
reimbursable contracts.

Non-Competitive Contracts

Single Source: You contract directly with your preferred contractor with whom you may have worked
before and you do not want to look for another contractor.

Soul Source: In this type of contract, there is only one seller who can provide the service or goods. This
may be the seller who holds a patent for the item you need.

Special Provisions: Any changes, additions, or deletions to standard provisions are called special
Force Majeur: Act of God such as Fire, Flood, and Earthquake because of which a contract can’t be
completed in time.

Breach/Default: This occurs when any obligation of a contract is not met.

Indemnification: Who is liable for personal injury, damage, accidents etc?

Termination: Stopping the contract before it is completed

Privity: simply means contractual relationship

Bid Bond: is issued as part of a bidding process by a surety company to the buyer, to guarantee that the
winning bidder will undertake the contract.

Performance Bond: is issued by a surety company to the buyer, to guarantee satisfactory completion of a
project by the contractor.

Labor and Material Bond: is issued by a surety company to the buyer to guarantee payments by the
Contractor to third parties for equipment, labor and materials.

Shop drawings are set of drawings produced by the contractor or supplier typically required for
prefabricated components such as elevators, structural steel trusses, pre-cast girders, windows etc.

The main Items to negotiate are:


A procurement audit includes what went right and wrong for the purposes of creating historical records
and improving future performance.

Bidder conferences (Pre-bid meeting) are held to provide all bidders a clear and common understanding
of the work required. Ensures that the sellers ask all their questions and all the questions and answers are
sent to all the sellers in writing.

Claim: A claim is an assertion that the owner did something that has hurt the contractor and the contractor
is asking for compensation. The best way to settle claims is through negotiation or alternate dispute
resolution (mediation, or arbitration). Settling claims through litigation (court cases) is expensive and time

Mediation: In mediation, a third, unbiased party (the mediator) facilitates negotiation between the
disputing parties to reach a resolution. The mediator doesn't impose a final decision on the disputing

Arbitration: In arbitration, a third, unbiased party (the arbitrator) is appointed to review the case and
make a final decision in favor of one of the disputing parties. Essentially, the arbitrator acts as the judge
and jury.


Problem Solving: It is considered to be the best conflict resolution technique. It aims at solving the real
problem so that the problem goes away. Confronting leads to a win-win resolution.

Compromising: It is considered the 2nd best technique. It involves finding solutions that bring some
degree of satisfaction to both parties. This is a loose-loose situation since no party gets everything.

Avoidance: The parties retreat or postpone decision on the problem at hand. It’s not the best choice for
resolving conflicts

Accommodating: This technique emphasizes agreement rather than differences of opinion.

Collaborating: In this technique, the parties try to incorporate multiple viewpoints in order to reach

Forcing: This involves pushing one viewpoint at the expense of another.

Communication Management

Communication Type When to use

Formal Written Complex problems, memos, progress reports, project mgt plans, project charter
Informal Written Email, hand written notes
Formal Verbal Presentations
Informal Verbal Meetings, conversations

Communications management plan deals with who will be communicated with, when, and in what
format. Timely communication with right format is very important for project success.
Six Sigma: It is a quality control standard in which 99.99966% of products created are expected to be
statistically free from defects.

Factors considered before announcing a tender:

1. Whether funding is available for the proposed project?

2. Whether the detailed design has been completed?
3. Appropriate Timing for tender opening?

If actual construction for a project is to start in May (construction season runs from May-Oct), then the
tender should be announced in February or March in order to avail maximum working days. Secondly, at
this time, more contractors would be available and there will be a good chance to get the work done on
competitive prices. Thirdly, if there are any questions about the detailed design those questions can be
addressed well ahead of actual construction start time.

Pre-qualification of Contractor on the basis of:

(a) Experience and past performance in the execution of similar type of contracts

(b) Capabilities of the contractors with respect to trained personnel, equipment and materials

(c) Financial capability.

Pre-qualification is often used for contracts where technical capability is critical or where the number of
potential bidders is too large and a short listing process is a more effective option. In such a process the
contractors completes a pre-qualification questionnaire (PQQ). The PQQ will be assessed and if it is
acceptable then the contractor will be sent an Invitation to Bid.

Tender Recommendation Principles:

 Award should be based on the most appropriate lowest price conforming tender in conjunction
with project specifics (due date, quality, delivery method, and materials).
 If a non lowest bidder has been selected the reasons supporting the selection should be reported
 Unsuccessful bidders must be formally informed after award of the contract.

An analysis of tenders against key criteria which include:

 Method of delivery (environmentally friendly and efficient)
 Cost (unit price, life cycle cost)
 Time (project to be finished on specific due date)
 Quality (past performance with similar type of works)
 Team (experienced team)

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