Project Management
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Project Management


Project Screening and Selection
Project Organisation and Structure
Project Scheduling and Management
 CPM/PERT,
 crashing, resource management
 LP models


Managing Multiple Projects
Project Control
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Project Organisation and Structure
Organisation Breakdown Structure
Work Breakdown Structure
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Project Organisation
A project is a one-time effort to achieve a specific
goal within a certain time and under a given set of
resources and budgeting constraints.
A project is usually too large to be accomplished
by a single person within the scheduled time frame.
Thus, project management involves the
breakdown of the entire project into tasks, the
allocation of tasks to the participating units and
project team members, and the continuous
integration of output from participating units and
team members.
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Project Structure
To have a better coordination among
different participating units and among the
project team members, it is important for a
project manager to know how to organize
and structure a project.
There are two types of “structures”
involved in a project:
• The organizational breakdown structure (OBS).
• The work breakdown structure (WBS).
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Organizational structures
The following three types of organizational
structures are commonly adopted by
companies:
• Function-oriented organizational structure;
• Project-oriented organizational structure;
• Matrix organizational structure.
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Function-oriented organizational structure
The organizational structure is designed around
the functions performed by each organizational
unit.
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Function-oriented organizational structure
Advantages:
• Similar processes are performed by the same
organizational elements, and thus capital investment is
minimized.
• Efficient use of collective experience and facilities to
perform a same function.
• Encourages long-term planning and resource allocation.
• Encourages development of advanced technology in
anticipation of future business.
• Career continuity and growth for technical personnel;
fostering stability, security and morale.
• Good technology transfer between projects.
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Function-oriented organizational structure
Disadvantages:
• Weak interface with customer.
• Weak project authority.
• Poor communications among functions; slower
work flow for projects.
• Tendency of decisions to favor strongest
functional group.
• Not quite suitable for project management
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Project-oriented organizational structure
The organizational structure is designed around
the activities for projects.
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Project-oriented organizational structure
Advantages:
• Strong control by a single project authority.
• Rapid reaction time.
• Encourages performance, schedule, and cost
tradeoffs.
• Personnel accountable to a single project.
• Interfaces well with outside units.
• Good interface with customer; single point of
contact.
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Project-oriented organizational structure
Disadvantages:
• Duplication of resources, as similar processes and
activities are performed by different units of the
organization on different projects.
• Due to the limited life span of projects, long-term
technology investment is discouraged.
• Knowledge/Know-how gained may be lost in future;
poor crossfeed of technical info between projects.
• Minimal career continuity for project personnel; no
loyalty and alliances among workers; insecurity
regarding future job assignments.
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Matrix organizational structure
A combination of the function-oriented structure with the
project-oriented structure, with well-defined interfaces
between projects teams and functional elements.
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Matrix organizational structure - Benefits
Better utilization of resources. Because the functional
manager assigns resources to all projects, he/she can allocate
resources in the most efficient manner.
State-of-the-art technology. The knowledge gained from
various projects is accumulated at the functional level.
Adaptation to changing environments. The matrix structure
can adapt to changing conditions, including the arrival of
new projects, the termination of existing projects, etc. The
experience and technology are not lost when projects
terminate since the experts are kept within the functional
units.
Combination of the strengths of functional and projectoriented organizations.
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Matrix organization - Potential difficulties
Authority. Whereas the resources are under the control of the
functional manager in the long run, it is the project manager
who assigns them to work on a day-to-day basis.
Communications. Workers have to report to their functional
manager and to their project manager to whom they are
assigned. Double reporting is difficult to develop and
manage.
Conflict in goals. The project manager tends to see the shortterm objectives of the project most clearly, while the
functional manager typically focuses on the long-term goals.
These different perspectives frequently conflict and create
friction within the organization.
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Project Work Structure
In setting up a project we also need to specify the
set of tasks involved. This process is the “work
breakdown”.
A Work Breakdown Structure (WBS) is a
schematic presentation that divides the project into
tasks to be accomplished. It usually appears in a
hierarchical structure.
Complicated task is subdivided into several
smaller tasks. Process continued until task can no
longer be subdivided.
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Work Breakdown Structure
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Work breakdown structure (WBS)
Work Package - The entity that consists of a task to be
performed by an organizational unit for a given schedule
and budget is called a work package.
As for the entire project, each work package should specify:
• Objectives - What are to be achieved.
• Deliverables – What are to be produced (hardware, software,
reports, recommendations, etc.)
• Schedule – When to do what.
• Budget – A time-phrased allocation of monetary resource for the
task.
• Performance measures – How to judge the success of the task.
• Responsibility – The organizational unit responsible for the task.
This is done by associating a task in the WBS with an
organizational unit in the OBS (Organizational breakdown
structure).
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Work breakdown structure (WBS)
A project may be structured as different WBSs. The
choice depends on how you would like the project
to be executed.
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Work breakdown structure (WBS)
Example: A university initiates a project to
design a new MBA program.
The development of a specific course for
the program can be defined as a task, and
the organizational unit responsible for that
course (a professor) can be associated with
the task to form a work package.
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Work breakdown structure (WBS)
Approach 1 -- Divide the entire project directly into work
packages. Suppose there are 30 courses required in the
program and each course is designed by one processor,
then there are 30 work packages, as illustrated below.
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Work breakdown structure (WBS)
Approach 2 -- Divide the entire project by functional area
and then further divide the work content in each area into
specific work packages, as illustrated below.
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Work breakdown structure (WBS)
Approach 3 -- Divide the entire project according to the year in
the program, then functional areas, and then specific work
packages.
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Work breakdown structure (WBS)

WBS selected should be
1.Complete – it should capture all the work to be
performed for the project.
2.Detailed – its lowest level should specify the
executable tasks with specific schedules,
budgets, objectives, and the deliverables.
3.Accurate – after the work is divided into tasks,
the output of the tasks can be integrated to form
the desired complete product of the project.
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Integrating WBS with OBS


Integrating a unit of OBS with a task of WBS
generates a work package.
Work packages are the elements to be used and
managed by the project manager for planning,
control, and execution.
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Project Management


Project Screening and Selection
Project Organisation and Structure
Project Scheduling and Management
 CPM/PERT,
 crashing, resource management
 LP models


Managing Multiple Projects
Project Control
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Project Monitoring and Control
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Plan vs. Implementation
A detailed plan covering the technological, budgetary,
scheduling, organizational, and risk-related aspects is
essential to the success of a project.
However, in practice, it is inevitable that uncertainty
and changing environmental conditions exist, which
affect a project in unforeseen ways.
The actual execution of a project will most likely
deviate from the original plans that are made based on
estimation of such factors as activity durations,
resource availability, labour efficiency, and cost, each
of which may be subject to a high degree of variations.
Thus, a fundamental need exists to have a proper and
effective project control.
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Control Systems
Formal systems: accounting, periodic
status reports, scheduled milestone
meetings, internal audits, client reviews,
and external benchmarks
Informal systems: meetings, e-mail, and
just walking around (MBWA) and asking
project team members questions
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Project Control
The basic function of project control is to
monitor the deviations of the actual project
execution from its plan, and then to take
corrective actions and/or to revise the original
plan.
Performance measures are important factors in
project control, which should represent the most
important concerns in project execution and
which will affect the decisions on the adoption
of corrective/preventive actions aimed at
keeping the project on track.
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Control System Issues
How frequently should performance data be
collected, and from what sources?
Which performance metrics should be
used?
How should data be analyzed to detect
current and future deviations?
How frequently, and to whom, should the
results of the analysis be reported?
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Controlling Projects
Key decisions in controlling performance in
project management:
• What is the optimal review frequency?
• What are appropriate acceptance levels at each
review stage?
“Both over-managed and under-managed
development processes result in lengthy design
lead time and high development costs.”
R.H. Ahmadi, R. Wang. 1999. Managing
Development Risk in Product Design Processes.
Operations Research 47, 235-246
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Types of System Variation
Common cause variation: “in-control” or
normal variation
Special cause variation: variation caused
by forces that are outside the system


Treating common cause variation as
if it were special cause variation is
called “tampering”
Tampering always degrades the
performance of a system
– W.E. Deming
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Control System Example 1
Week 2: Task expenses = 460 worker-hours
Planned Cost
Week
(BCWS)
1
400
2
400
470
Actual Cost
420
460
Actual
460
Cost (in worker-hours)
Cumulative
Actual Cost
(ACWP)
420
880
450
440
430
420
Planned
410
400
390
Is the task
“out of
control”?
380
370
1
2
3
4
Week
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Control System Example 1
Week 3: Task expenses = 500 worker-hrs
Week
Planned cost
(worker-hours )
Actual cost
(worker-hours )
Cumulative cos t
(worker-hours )
1
2
3
400
400
400
420
460
500
420
880
1380
600
Actual
Worker-hours
500
400
Planned
300
200
100
0
1
2
3
4
Again, is
the task
“out of
control”?
Week
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Earned Value Analysis
A cost control and accounting system developed
by the U.S. Department of Defense (1962)
Integrates cost, schedule, and work performed
Based on three metrics that are used as building
blocks:
• ACWP: Actual cost of work performed
• BCWS: Budgeted cost of work scheduled (Planned
Value)
• BCWP: Budgeted cost of work performed (Earned
Value)
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The earned value approach

Budgeted cost of work scheduled (BCWS) is
defined as the cost (in monetary units) of the
work scheduled to be accomplished in a given
period of time.
Actual cost of work performed (ACWP) is
defined as the cost actually incurred and
recorded in accomplishing the work
performed within the control period.
Budgeted cost of work performed (BCWP) is
defined as the monetary value of the work
actually accomplished within the control
period. This is also called the earned value.
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Estimation of BCWP
Estimating BCWP requires the manager to
estimate the proportion of work completed
during each period. This may be difficult if
value accrues mainly at the end, e.g. software
development project.
Fixed rules to estimate BCWP generally take
the form:
• X% completed at the start of a task
• (1-X)% completed at the end of a task
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Performance Metrics for Example 1
Week BCWS ACWP
1
2
3
4
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400
800
1,200
1,600
420
880
1,380
1,500
Percent of work
completed (PWC)
23%
50%
85%
100%
BCWP
368
800
1,360
1,600
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Budgeted cost of work scheduled (BCWS)
• Example, suppose three activities (A, B, and E) are
scheduled to start from the first week of the project,
assuming an early start schedule. The duration and cost
of these activities are summarized in Table 11-2.
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Actual Performance
Actual performance for the first month of the project
(weeks 1 through 4) is summarized below.
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Performance Measures (Activity A)
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Performance Measures (Activity B)
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Performance Measures (Activity E)
This activity is late and experiences a budget
overrun.
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The earned value approach

Performance measures:
BCWS: The value of the work scheduled,
calculated at the cost rate according to the budget.
BCWP: The value of the work actually performed,
calculated at the cost rate according to the budget.
(The EV)
ACWP: The actual cost of the work actually
performed.

These three measures are the basis by which
deviations in cost and schedule are detected.
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Schedule Variance (SV)
Schedule Variance (SV)
═ difference between value of work completed and
value of scheduled work
═ Earned Value - Planned Value
═ BCWP - BCWS
Week
BCWS
ACWP
PWC
BCWP
SV
1
400
420
23%
368
(32)
2
800
880
50%
800
0
3
1,200
1,380
85%
1,360
160
4
1,600
1,500
100%
1,600
0
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Schedule deviations


The schedule variance (SV) is defined as:
SV = BCWP - BCWS
SV indicates (in monetary units) the deviation
between the work content performed and the
work content scheduled for the control period.

If SV > 0, the progress is ahead of schedule;
If SV = 0, the progress is on schedule;
If SV < 0, the progress is behind schedule.
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Example - Schedule deviations
Thus, based on the SV values, we can conclude that (for the
control period of 4 weeks):
 In activity A, the work performed is worth $300 more than what
was planned for the control period, thus the processing of A is
ahead of schedule.
 In activity B, the work performed is exactly equal to what was
planned (although taking one more week), thus the processing of
B has no variance by week 4.
 In activity E, the work performed is worth $1628 less that what
was planned, thus the processing of E is behind the schedule.
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Schedule deviations



The cumulative variance is an indication in terms of
the work content performed for the whole project.
A negative cumulative variance indicates that the
project is late.
The schedule delay detected by the earned value
analysis should be monitored closely.
When the delay exceeds the control level, analysis
of resource requirements should be initiated to test
whether, due to resource limits, the entire project
may be delayed. If yes, additional resources may
have to be allocated to speed up the relevant
activities.
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Cost Variance (CV)
Cost Variance (CV)
═ difference between value of work completed
and actual expenditures
═ Earned Value - Actual Cost
═ BCWP - ACWP
Week
BCWS
ACWP
PWC
BCWP
CV
1
400
420
23%
368
(52)
2
800
880
50%
800
(80)
3
1,200
1,380
85%
1,360
(20)
4
1,600
1,500
100%
1,600
100
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Cost deviations


The cost variance (CV) is defined as :
CV = BCWP - ACWP
CV indicates (in monetary units) the deviation between
the budgeted cost of work performed and the actual cost
of work performed for the control period.
If CV > 0, the progress consumes less cost than budget;
If CV = 0, the progress is on budget;
If CV < 0, the progress is over budget.
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Cost deviations

For the example project, we have:

Thus, based on the CV values, we can conclude that:
 Activities A and B are exactly on budget.
 Activity E, however, shows a budget overrun of $1272, since the
work performed on this activity was budgeted at $1628 whereas
the actual cost turned out to be $2900.
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Total Variance (TV)
Total Variance
=Cost Variance–Schedule Variance
=(BCWP-ACWP)-(BCWP-BCWS)
=BCWS-ACWP
Week
BCWS
ACWP
PWC
BCWP
TV
1
400
420
23%
368
(20)
2
800
880
50%
800
(80)
3
1,200
1,380
85%
1,360
(180)
4
1,600
1,500
100%
1,600
100
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Time Variance (tV)
Ο
Time Variance
= (BAC * PWC) – Current Time
BAC: Budget at Completion
After week 3
PWC: Percent of Work Completed
tV =4 * 85% - 3
=0.4 (weeks)
Week
BCWS
ACWP
PWC
BCWP
tV
1
400
420
23%
368
(0.08)
2
800
880
50%
800
0
3
1,200
1,380
85%
1,360
0.4
4
1,600
1,500
100%
1,600
0
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Earned Value Metrics Illustrated
Worker-Hours
Present time
Planned Value
(BCWS)
BAC
Budget at
Completion
Actual Cost
(ACWP)
Cost Variance
(CV)
Earned Value
(BCWP)
Schedule Variance
(SV)
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Week 1
Week 2
Week 3
Week 4
Week 5
Week 6
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Schedule Index and Cost Index




SV and CV are absolute measures indicating
deviations between planned performance and actual
progress.
Based on these measures, it is difficult to judge the
relative schedule and cost deviation.
A relative measure is important because a $1000 cost
overrun of an activity budgeted for $500 is clearly
more troublesome than the same overrun on an
activity budgeted for $50,000.
A schedule index (SI) and a cost index (CI) are
designed to be the relative measures of schedule and
cost performances, respectively.
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Relative Measure: Schedule
Index
Schedule Index
(SI ) =
BCWP
BCWS
If SI = 1,
the task is on schedule
If SI > 1,
the task is ahead of schedule
If SI < 1,
the task is behind schedule
Q: When is SV = BCWP-BCWS more
useful than SI, and vice versa?
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Relative Measure: Cost Index
Cost Index (CI) =
BCWP
ACWP
o
If CI = 1, then work completed equals
payments
o
If CI > 1, then work completed is ahead
of payments (cost saving)
o
If CI < 1, then work completed is behind
payments (cost overrun)
As on the previous page, sometimes CV is
more useful than CI, and vice versa.
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Schedule Index and Cost Index

For the example project 4 weeks after its starts, we
have:
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Schedule Index and Cost Index -Example

The values in the table above indicate that during the control
period:
 For activity A, 25% more work was performed than
planned (since SI=1.25), but at the exact cost budgeted for
that work content (since CI=1).
 For activity B, the planned work content was performed at
the planned cost (since SI=1 and CI=1).
 For activity E, only half of the planned work content was
performed (since SI=0.5), and the planned cost of
performing that work content was only 56% (since
CI=0.56) of the actual cost.
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Integrated Schedule and Cost Index


To integrate schedule and
cost information, the values
of SI and CI are plotted
together in the Figure
below. Each point on the
graph corresponds to a
control period. By
observing the time
associated with each point,
it is possible to see the
trend in the cost and
schedule indices.
The objective of project
management is to have both
SI and CI larger than or
equal to 1, which would
place them in the upper
right quadrant of the above
figure.
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The above figure shows an improvement from weeks 1 to
2, followed by a poor performance from weeks 2 to 3, and
an improvement again from weeks 3 to 4.
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Control System Example 2
cumulative
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Control System Example 2
Progress report at the end of week #5:
Cumulative Percent of Work
Completed:
Worker-Hours Charged to Project:
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Control System Example 2
Progress report at the end of week #5:
SV=BCWP-BCWS
CV=BCWP-ACWP
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Control System Example 2
WorkerHours
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Using a Fixed 20/80 Rule
Cumulative Percent of Work Completed:
1
Week
Task A 20%
Task B
Task C
2
3
4
5
20%
20%
20%
20%
20%
20%
Assume that 20% of a
task’s work is
completed when it is
started, and 80% when
it is finished
Not started yet
W E E K
Cumulative
Scheduled
Worker-Hrs
(BCWS)
Actual WorkerHrs Used
(ACWP)
Earned Value
(BCWP)
Schedule
Variance (SV)
Cost
Variance
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(CV)
1
2
3
4
5
6
7
8
9
10
6
12
18
38
60
82
92
104
116
128
5
11
19
44
64
7.2
7.2
7.2
14.4
14.4
1.2
-4.8
-10.8
-23.6
-45.6
SV=BCWP-BCWS
2.2
-3.8
-11.8
-29.6
-49.6
CV=BCWP-ACWP
66
Using a Fixed 20/80 Rule
WorkerHours
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Updating cost and schedule estimates
When data on the current status of the activities and
actual costs are collected, we can update estimates of
the project’s completion time and budgetary
requirements.
New estimates derived from updated information are
the basis of trend analysis. The revised estimate may
cause:
• a change of design specification so that the expected total cost
will not exceed the budget;
• a change in schedule aimed at re-planning future cash flow
according to available budgets; or
• in the extreme, a complete abandonment of the whole project.
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Updating Forecasts: Pessimistic
Viewpoint (Example 2)
Assumes that the rate of cost overrun will
continue for the life of the project.
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Updating Forecasts: Optimistic
Viewpoint (Example 2)
Assumes that no further cost overruns will
occur.
Estimate at Completion (EAC)
= BAC – CV
= 128+11.8
= 139.8 worker hrs
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Boondoggles
A “boondoggle” is a technically successful
project that is allowed to continue, long after its
operators have realized that it is never going to
be commercially successful.
This word originated from a 1935 New York
Times article criticizing New Deal government
expenditure on training the unemployed to
“make boon doggles”.
Recently, “boondoogle” has been used more
broadly, for example to describe a business trip
to a resort destination during which little work
gets done!
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Boondoggle Examples
A notorious boondoggle is RCA’s Selectavision video
disk system, developed in 1970. It used LP-sized disks. It
was launched in 1980, but demand was initially weak.
This led RCA to invest in new models even while
emerging digital technology was making them obsolete.
By the time the project was finally killed in 1984, it had
cost $750m and tied up resources for 14 years. RCA
went bankrupt in 1988.
Another notorious boondoggle is the Anglo-French
Concorde project. By the mid-1970s, it was obvious both
to the airlines and the public that the project could not
compete with lower cost alternative transport.
Nevertheless, Concorde aircraft continued to be built
and passenger services continued to be operated for
another 25 years.
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Reasons for Boondoggles
Widespread persistent belief among management in
the inevitability of the project’s success: “failure is
impossible” mentality
Managers have their reputations invested in the
projects they started
Recommendations by others to abandon the project
are seen as disloyal, and are ignored
Charismatic and persuasive “project champions”
Reduced performance benchmarks
Fear of the organizational consequences of
admitting failure
Symbolic value of the project, e.g. Concorde
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How to Avoid Boondoggles
Establish benchmarks for success and failure and
stick with them
Be open to different views
Rotate management in and out of the project
Limit the consequences of admitting failure
Ensure that project progress evaluation is unbiased
Recognize that no single project is as important as
the success of the overall organization
Appoint an “exit champion” to play the role of
Devil’s Advocate against the project
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Closing a Project (1 of 2)
This is one of the most important, but frequently
undervalued, parts of a project.
• In many cases, this project management step is
viewed as wasted effort, as it “produces nothing”.
• Failing to close a project the right way can prevent
you from ending expenditure, gaining formal client
acceptance, and create confusion as to the state of
the project.
• It also keeps you from adequately building the
project archive, which is valuable to future planning
of similar projects.
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Closing a Project (2 of 2)
This is one of the most important, but frequently
undervalued, parts of a project.
• It is the project manager’s responsibility to prove to
management the importance of proper project closing.
While “Planning” is probably the most important phase to
the success of this project, “Closing” is the most
important to the success of future projects.
• The project manager has to demonstrate empirically how
“lessons learned” on a past project have materialized into
gains on a current project.
• “Commodity”-type projects, which are often similar to
others, are perfect candidates; an example is annual
software updates.
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Problems with Recognizing Project Failure
Dilbert by Scott Adams
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