Project Management

Mrs. Shubhashri Waghmare

Why Project Management?

Todays complex environments require ongoing implementations Project management is a method and mindseta disciplined approach to managing chaos Project management provides a framework for working amidst persistent change
Mrs. Shubhashri Waghmare

Project Management: Official Definition

A project is a temporary endeavor undertaken to create a unique product or service. It implies
a specific timeframe a budget unique specifications working across organizational boundaries

Mrs. Shubhashri Waghmare

Project Management: Unofficial Definition

Project management is about organization Project management is about
decision making Project management is about changing peoples behavior

Project management is about creating an environment conducive to getting critical projects done!
Mrs. Shubhashri Waghmare

Why Projects Fail

Failure to align project with organizational objectives Poor scope Unrealistic expectations Lack of executive sponsorship Lack of project management Inability to move beyond individual and personality conflicts Politics

Mrs. Shubhashri Waghmare

Why Projects Succeed!

Project Sponsorship at executive level Good project charter Strong project management The right mix of team players Good decision making structure Good communication Team members are working toward common goals

Mrs. Shubhashri Waghmare

Core Project Management Tools

Project Charter Work Breakdown Structure (WBS) Project Schedule Project Budget

Mrs. Shubhashri Waghmare

Project Charter
What must be done?
o o o

What are the required resources? What are the constraints? What are the short and long term implications?

Why do it? When must it be done? Where must it be done? Who does what?
o o o

Who is behind the project? Who is funding the project? Who is performing the work of the project?

Mrs. Shubhashri Waghmare

Project Charter
Who What Where Why When

Mrs. Shubhashri Waghmare

Project Charter
Project Goal & Objective Sponsor Stakeholders Timeline Resources required Deliverables Decision making Assumptions Risks Business process changes Project manager Project team Budget Signatures

Mrs. Shubhashri Waghmare

Project Management Life cycle

Mrs. Shubhashri Waghmare

Project Life cycle

Mrs. Shubhashri Waghmare

Mrs. Shubhashri Waghmare

Project into phases

Mrs. Shubhashri Waghmare

Mrs. Shubhashri Waghmare

Organizational Structure

Mrs. Shubhashri Waghmare

Organization Structure
Created on the basis of arrangement of activities in the organization Three types of structural forms in the organization 1. Functional Structure 2. Divisional Structure 3. Adaptive Structure

Mrs. Shubhashri Waghmare

Functional Structure
Organizational structure that is based on the functions of the units and sub-units of activities. Every organization has specialized functions and they constitute as separate units of the organization. The entire activities that are connected with such functions are placed in the same unit. The increase in volume of activity results in addition of number of persons under each manager at various levels. It also results in the increase of sub-units that are created at lower levels in each unit. functional specialization in each unit. It leads to operational efficiency of the persons engaged in the organization. gets the benefit of specialized operations.

Mrs. Shubhashri Waghmare

Divisional Structure
suited for large enterprise. It works effectively to those large enterprises that deal in multiple products serving many distinct markets. The division of organization takes place into small business units that are entrusted with business related to difficult products or different market territories. All the divisional managers are given authority and autonomy to run all function relating to their respective products or marketing segments or regional markets. Each division contributes planned profits to the organization but works as independent business. Managers head the functional units while divisional managers take the final authority. Divisional managers are provided with opportunities to take initiative in matters that are within their jurisdiction. Its demerits are that it involves heavy financial costs due to the duplication of supporting functional u nits for the divisions.

Mrs. Shubhashri Waghmare

Adaptive Structure
Designed as to cope with the unique nature of undertaking and the situations in the organization. There are two types of adaptive structure : a) Project organization b) Matrix organization

Mrs. Shubhashri Waghmare

Project Organization
Suitable when an organization undertakes specialized work for a particular period as one time operation. To deal with such situations organizations develops a unit which is specially designed to accomplish such project works without disturbing the routine jobs of the organization. The organizations engage their existing employees on deputation basis to deal with a particular project and then that particular executive resumes to his parent department after the completion of the project. The advantage of such organizations is that it does not disturb the regular work of the organization. It enables the better control over the project activities because the managers enjoy the authority to function the projects effectively. But at times these organizations spoil the stability of the various departments as the personnel are shifted for the sake of the project and thus disrupt the basic functioning of the parent department.
Mrs. Shubhashri Waghmare

Matrix organization
Aims to combine the advantages of autonomous project organization and functional specialization. Structure functional departments are having full time specialized workers to accommodate and are capable of handling more than one project at a time. This is found suitable as the organization is most of the time engaged in the project activities and the managers are also more in number and can accomplish the project work effectively. It provides for the flexible system of working as it adapts the changes quickly. The demerit of such organizations is that the employees are engaged in dual jobs and are burdened with more work which affects the unity of command at times in the organization.

Mrs. Shubhashri Waghmare

Project Planning

Mrs. Shubhashri Waghmare

WBS.
This is a technique to analyse the content of work and cost by breaking it down into its component parts. It is produced by : Identifying the key elements Breaking each element down into component parts Continuing to breakdown until manageable work packages have been identified. These can then be allocated to the appropriate person.

Mrs. Shubhashri Waghmare

work breakdown structure for the recruitment of a new person to fill a vacant post.

Mrs. Shubhashri Waghmare

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MANAGING PROJECT RESOURCES

Mrs. Shubhashri Waghmare

Project Crashing
The process of accelerating a project is referred as crashing. Crashing a project relates to resource commitment; the more resources expended, the faster the project will finish. There are several reasons to crash a project:
1.Initial schedule was too optimistic 2.Market needs change and the project is in demand earlier than anticipated 3.The project has slipped considerably behind schedule 4.There are contractual late penalties

Project Crashing
Principal methods for crashing o Improving existing resources productivity o Changing work methods o Increasing the quantity of resources Increasing the quantity of resources is the most commonly used method for project crashing. There are 2 approaches: o Working current resources for longer hours (overtime, weekend work) o Adding more personnel

Project Crashing
Fully expedited (no expense is spared)

Time-Cost Trade-Offs for Crashing Activities

Project Crashing
In analyzing crash options, the goal is to find the point at which time and cost trade-offs are optimized. Various combinations of time-cost trade-offs for crash options can be determined by using the following formula:

Slope = crash cost normal cost normal time crash time

Example
SUPPOSE: NORMAL ACTIVITY DURATION = 8 WEEKS NORMAL COST = Rs.14,000 CRASHED ACTIVITY DURATION = 5 WEEKS CRASHED COST = Rs.23,000 THE ACTIVITY COST SLOPE = 23,000 14,000 OR Rs.9,000 = Rs.3,000 per week 853 Cease crashing when the target completion time is reached the crash cost exceeds the penalty cost

Example
Normal Crashed Activity Duration Cost Duration Cost A 4 days Rs.1,000 3 days Rs.2,000 B 5 days Rs.2,500 3 days Rs.5,000 C 3 days Rs.750 2 days Rs.1,200 D 7 days Rs.3,500 5 days Rs.5,000 E 2 days Rs.500 1 day Rs.2,000 F 5 days Rs.2,000 4 days Rs.3,000 G 9 days Rs.4,500 7 days Rs.6,300

a) Calculate the per day costs for crashing each activity b) Which are the most attractive candidates for crashing? Why?

Example
Activity Per Day Cost A Rs.1,000 B Rs.1,250 C Rs.450 D Rs.750 E Rs.1,500 F Rs.1,000 G Rs.900

Resource Allocation Problem

A shortcoming of most scheduling procedures is that they do not address the issues of resource utilization and availability. Scheduling procedures tend to focus on time rather than physical resources.

Resource Allocation Problem

1.Schedules should be evaluated not merely in terms of meeting project milestones, but also in terms of the timing and use of scarce resources. 1.A fundamental measure of the project managers success in project management is the skill with which the trade-offs among performance, time, and cost are managed.

1.I can shorten this project by 1 day at a cost of Rs.400. Should I do it?

Resource Allocation Problem

The extreme points of the relationship between time use and resource use are the following:

1.Time Limited: The project must be finished by a certain time, using as few resources as possible. But it is time, not resource usage, that is critical
1.Resource Limited: The project must be finished as soon as possible, but without exceeding some specific level of resource usage or some general resource constraint

Resource Loading
Resource loading describes the amounts of individual resources an existing schedule requires during specific time periods The loads (requirements) of each resource type are listed as a function of time period Resource loading gives a general understanding of the demands a project or set of projects will make on a firms resources

Resource Loading
The project manager must be aware of usage flow for each input resource throughout the life of the project. It is the project managers responsibility to ensure that the required resources, in the required amounts, are available when and where they are needed.

Resource Loading Table

Resource Leveling (Smooting)

Resource leveling aims to minimize the period-by-period variations in resource loading by shifting tasks within their slack allowances. The purpose is to create a smoother distribution of resource usage. Resource leveling, referred to as resource smoothing, has two objectives:
To determine the resource requirements so that they will be available at the right time, o To allow each activity to be scheduled with the smoothest possible transition across usage levels
o

Resource Leveling (Smooting)

Resource management is a multivariate, combinatorial problem, i.e. multiple solutions with many variables, the mathematically optimal solution may be difficult or infeasible. More common approach to analyzing resource leveling problems is to apply some resource leveling heuristics.

Resource Leveling Heuristics

Prioritizing resource allocation include applying resources to activities: with the smallest amount of slack with the smallest duration that start earliest with the most successor tasks requiring the most resources

Resource Leveling Steps

Create a project activity network diagram Create a table showing the resources required for each activity, durations, and the total float available Develop a time-phased resource loading table Identify any resource conflicts and begin to smooth the loading table using one or more heuristics

Resource Loading Chart

Display the amount of resources required as a function of time.
4B5 Res = 2 5D9 Res = 7 9 E 11 Res = 3

0A4 Res = 6

1. Start with a network diagram 4C7 Res = 2

Mrs. Shubhashri Waghmare

11 F 12 Res = 6

Resource Loading Charts

Activity Resource Duration ES Slack LF

A B C D E F

6 2 2 7 3 6

4 1 3 4 2 1

0 4 4 5 9 11

0 0 4 0 0 0

4 5 11 9 11 12

1. Produce a table that shows the duration, early start, late finish, slack, and resource(s) required for each activity.
Mrs. Shubhashri Waghmare

Resource Loading Charts

8 1. Draw an initial loading chart with each activity scheduled at its ES.

6 Resources 4
A 2 C 2 4 B

D E 6 8 10 12 Project Days
Mrs. Shubhashri Waghmare

Resource imbalance

14

Resource Loading Charts

8 1. Rearrange activities within their slack to create a more level profile. Splitting C creates a more level project.

6 Resources 4
A 2 C 2 4 B

C F E

6 8 10 12 Project Days
Mrs. Shubhashri Waghmare

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Resource Loading Chart

Cost and Resource Management

Mrs. Shubhashri Waghmare

What is Cost and Project Cost Management?

Cost is a resource sacrificed or foregone to achieve a specific objective or something given up in exchange Costs are usually measured in monetary units like dollars Project cost management includes the processes required to ensure that the project is completed within an approved budget

Mrs. Shubhashri Waghmare

Project Cost Management Processes

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 budget
Mrs. Shubhashri Waghmare

Basic Principles of Cost Management

Profits are revenues minus expenses Life cycle costing is estimating the cost of a project plus the maintenance costs of the products it produces Cash flow analysis is determining the estimated annual costs and benefits for a project Benefits and costs can be tangible or intangible, direct or indirect Sunk cost should not be a criteria in project selection

Mrs. Shubhashri Waghmare

Basic Principles of Cost Management

Tangible costs or benefits are those costs or benefits that an organization can easily measure in Rupees. Intangible costs or benefits are costs or benefits that are difficult to measure in monetary terms. Direct costs are costs that can be directly related to producing the products and services of the project. Indirect costs are costs that are not directly related to the products or services of the project, but are indirectly related to performing the project. Sunk cost is money that has been spent in the past; when deciding what projects to invest in or continue, you should not include sunk costs.

Mrs. Shubhashri Waghmare

Basic Principles of Cost Management

Learning curve theory states that when many items are produced repetitively, the unit cost of those items decreases in a regular pattern as more units are produced. Reserves are Rupees included in a cost estimate to mitigate cost risk by allowing for future situations that are difficult to predict.
Contingency reserves allow for future situations that may be partially planned for (sometimes called known unknowns) and are included in the project cost baseline. o Management reserves allow for future situations that are unpredictable (sometimes called unknown unknowns).
o

Mrs. Shubhashri Waghmare

Resource Planning
The nature of the project and the organization will affect resource planning
How difficult will it be to do specific tasks on the project? Is there anything unique in this projects scope statement that will affect resources? o What is the organizations history in doing similar tasks? o Does the organization have or can they acquire the people, equipment, and materials that are capable and available for performing the work?
o o

Mrs. Shubhashri Waghmare

Cost Estimating
An important output of project cost management is a cost estimate There are several types of cost estimates and tools and techniques to help create them It is also important to develop a cost management plan that describes how cost variances will be managed on the project

Mrs. Shubhashri Waghmare

Types of Cost Estimates

Mrs. Shubhashri Waghmare

Cost Estimation Tools and Techniques

3 basic tools and techniques for cost estimates:
analogous or top-down: use the actual cost of a previous, similar project as the basis for the new estimate o bottom-up: estimate individual work items and sum them to get a total estimate o parametric: use project characteristics in a mathematical model to estimate costs
o

Mrs. Shubhashri Waghmare

Cost Management Plan

A cost management plan is a document that describes how the organization will manage cost variances on the project. A large percentage of total project costs are often labor costs, so project managers must develop and track estimates for labor.

Mrs. Shubhashri Waghmare

Mrs. Shubhashri Waghmare

Estimating Projects
Estimating
The process of forecasting or approximating the time and cost of completing project deliverables o The task of balancing the expectations of stakeholders and the need for control while the project is implemented
o

Types of Estimates
Top-down (macro) estimates: analogy, group consensus, or mathematical relationships o Bottom-up (micro) estimates: estimates of elements of the work breakdown structure
o

Mrs. Shubhashri Waghmare

Why Estimating Time and Cost Are Important

Estimates are needed to support good decisions. Estimates are needed to schedule work. Estimates are needed to determine how long the project should take and its cost. Estimates are needed to determine whether the project is worth doing. Estimates are needed to develop cash flow needs. Estimates are needed to determine how well the project is progressing. Estimates are needed to develop time-phased budgets and establish the project baseline.

EXHIBIT 5.1 Mrs. Shubhashri Waghmare

Factors Influencing the Quality of Estimates

Planning Horizon
Other (Nonproject) Factors Project Duration

Organization Culture

Quality of Estimates

People

Padding Estimates

Project Structure and Organization

Mrs. Shubhashri Waghmare

Estimating Guidelines for Times, Costs, and Resources

1.Have people familiar with the tasks make the estimate. 2.Use several people to make estimates. 3.Base estimates on normal conditions, efficient methods, and a normal level of resources. 4.Use consistent time units in estimating task times. 5.Treat each task as independent, dont aggregate. 6.Dont make allowances for contingencies. 7.Adding a risk assessment helps avoid surprises to stakeholders.

Mrs. Shubhashri Waghmare

Macro versus Micro Estimating

Conditions for Preferring Top-Down or Bottom-Up Time and Cost Estimates
Condition Macro Estimates Micro Estimates Strategic decision making X Cost and time important X High uncertainty X Internal, small project X Fixed-price contract X Customer wants details X Unstable scope X

TABLE 5.1 Mrs. Shubhashri Waghmare

Estimating Projects: Preferred Approach

Make rough top-down estimates Develop the WBS Make bottom-up estimates Develop schedules and budgets Reconcile differences between top-down and bottom-up estimates

Mrs. Shubhashri Waghmare

Methods for Estimating Project Times and Costs

Macro (Top-Down) Approaches
Consensus methods Ratio methods Apportion method Function point methods for software and system projects o Learning curves
o o o o
Project Estimate Times Costs

Mrs. Shubhashri Waghmare

TYPES OF ESTIMATES
1. Preliminary 2. Unit price 3. Assembly or Conceptual Cost

4. Detailed estimate
2 Million dollars building
Accuracy within 20% 15% 10% 5% Preliminary Unit Price Assembly Detailed Time 5min 1hour 1day 3 weeks

Each phase of a project life cycle requires a different type of estimate--each estimate requires different types

1. Preliminary Estimate Order of Magnitude

A cost prediction based solely on size and/or capacity of a proposed project. Before any engineering or design is completed. Rely on broad data from already executed similar project
relate cost in Rupee to the main capacity/size parameter
number of beds in hospital square feet of office space number of students in school

Preliminary Estimate .
Advantageous
o o

Allows a quick determination of the feasibility of a project A quick screening on alternatives, etc. (e.g., should it be a concrete building or a steel building !).
1. Ranking alternatives 2. Evaluate economics and financial feasibility 3. As a check on more detailed estimates

Purpose:

Mrs. Shubhashri Waghmare

2. Unit Price Estimate

Unit prices are obtained from data on projects already performed.
Cost of labor, material, and equipment for all units of work are added together and divided by the number of units involved.

Example of Unit Price Estimating Technique for Heavy Construction

_______________________________________________________ _____ Work Item Estimated Quantity Unit Price Total _______________________________________________________ _____ Site Preparation 50,000 sq. yd $ 7 $ 350,000 Earth Excavation 100,000 cu.yd. $ 12 $ 1,200,000 Paving 50,000 sq.yd. $ 8 $ 400,000 Total bid price $ 1,950,000 _______________________________________________________ _____

3. Assembly or Conceptual Estimate

Performed when conceptual design decisions are being made. Work package concept can be used to determine the element or assembly to be studied need a breakdown of cost of a completed project into its functional elements to:
1. Find the relationship between element cost and project cost 2. Distribution of cost between constituent elements (sq. feet of _____)

Mrs. Shubhashri Waghmare

Elemental Estimate Analysis Gross floor Area = 250,000 ft2

4. Detailed (Definitive )Estimate

Prepared after drawings and specification are completed. Requires a complete quantity takeoff based on drawing and the complete set of contract documents Need information on labor rate "productivity", material cost, cost of renting or purchasing equipment

Cost Management

Mrs. Shubhashri Waghmare

Basic Principles of Cost Management Learning curve theory

are Rupees included in a cost estimate to mitigate cost risk by allowing for future situations that are difficult to predict 1. Contingency reserves allow for future situations that may be partially planned for (sometimes called known unknowns) and are included in the project cost baseline e.g. Recruiting and training costs for expected personnel turnover during a project 1. Management reserves allow for future situations that are unpredictable (sometimes called unknown unknowns) e.g. Extended absence of a manager; supplier goes out of business
Mrs. Shubhashri Waghmare

states that when many items are produced (or tasks are performed) repetitively, the unit cost of those items decreases in a regular pattern as more units are produced (or more tasks performed)

Reserves

Cost Estimating
After developing a good resource requirements list, PMs and their teams must develop several estimates of the costs for these resources Project managers must take cost estimates seriously if they want to complete projects within budget constraints Its important to know the types of cost estimates, how to prepare cost estimates, and typical problems associated with IT cost estimates
Mrs. Shubhashri Waghmare

Types of Cost Estimates

It is important to provide supporting details (assumptions, project scope, WBS, etc) used in computing estimates so that it will be easier to prepare updates as needed or similar estimates on other Mrs. Shubhashri Waghmare projects.

Cost Estimating
Rough Order of Magnitude (ROM) estimate provides an estimate of what a project will cost. Also referred to as a ballpark estimate, a guesstimate, a swag, or a broad gauge. Done very early in a project, often three or more years prior to project completion, or even before a project is officially started to help PMs make project selection decisions. Accuracy is typically -50 percent to +100 percent, meaning the projects actual costs could be 50 percent below the ROM estimate or 100 percent above.
o

A ROM estimate that actually cost Rs.100,000 would range between Rs. 50,000 to Rs.200,000. The accuracy range is often much wider for IT projects.

Mrs. Shubhashri Waghmare

Cost Estimating
A budgetary estimate is used to allocate money into an organizations budget. o Many organizations develop budgets at least two years into the future. Budgetary estimates are made one to two years prior to project completion. o The accuracy of budgetary estimates is typically -10% to +25% A budgetary estimate that actually costs Rs.100,000 would range between Rs.90,000 to Rs.125,000.

Mrs. Shubhashri Waghmare

Cost Estimating
A definitive estimate provides an accurate estimate of project costs (most accurate of the three types). Definitive estimates are used for making many purchasing decisions for which accurate estimates are required and for estimating final project costs. E.g, if a project involves purchasing 1000 personal computers from an outside supplier in the next three months, a definitive estimate would be required to aid in evaluating supplier proposals and allocating the funds to pay the chosen supplier. Definitive estimates are made one year or less prior to project completion Accuracy range is normally -5% to +10%

Mrs. Shubhashri Waghmare

Cost Estimation Tools and Techniques

Analogous or top-down estimates: use the actual cost of a previous, similar project as the basis for estimating the cost of the current project
o

How similar the current and previous project are determines the accuracy of the estimate. Using a different language or hardware can skew the estimate

Bottom-up estimates or Activity Based Costing : involve estimating individual work items or activities and summing them to get a project total
o

The smaller the work items, the better the estimate but these estimates are usually time intensive and expensive to develop

Mrs. Shubhashri Waghmare

Cost Estimation Tools and Techniques

Parametric modeling: uses project characteristics (parameters) in a mathematical model to estimate project costs
o

For example, a model might provide an estimate of Rs.50 per line of code for a s/w development project based on the programming language, level of expertise of the programmers, size and complexity of the data involved, etc Some models may be simpler such as a Rs.10,000 ballpark estimate per workstation in a large office automation project based on history of similar projects during the same time period

Mrs. Shubhashri Waghmare

Typical Problems with IT Cost Estimates1

Estimates are done too quickly o Many estimates must be done quickly, before clear system requirements have been produced Lack of estimating experience o The people developing the costs estimates often dont have much experience, especially on large projects o There is not enough accurate, reliable project data available on which to base estimates Human beings are biased toward underestimation o Senior team members make estimates based on their skill level but should take into account the junior people on the project Management desires accuracy but wants to spend less in order to win a bid or internal funding o Top management never forgets the first estimate and rarely, if ever, remembers how approved changes affect the estimate.
The PM must keep the communication lines open at all times
_______________________________________________________________
1. DeMarco, Tom, Controlling Software Projects, New York:Yourdon Press, 1982.

Mrs. Shubhashri Waghmare

Cost Budgeting
Cost budgeting involves allocating the project cost estimate to individual work items over time The WBS is a required input to the cost budgeting process since it defines the work items An important goal is to produce a cost baseline o A time-phased budget that project managers use to measure and monitor cost performance o Estimating costs for each major project activity over time provides management with a foundation for project cost control o Cost budgeting also provides info for project funding requirements at what point(s) in time will the money be needed

Mrs. Shubhashri Waghmare

Cost Control
Project cost control includes: o Monitoring cost performance o Ensuring that only appropriate project changes are included in a revised cost baseline o Informing project stakeholders of authorized changes to the project that will affect costs Many organizations around the globe have problems with cost control

Mrs. Shubhashri Waghmare

Cost Control
Performance review meetings can be a powerful tool to help control project costs o Knowing you have to report on your progress is an incentive for people to perform better Performance measurement is another important tool for cost control o There are many general accounting approaches for measuring cost performance but earned value management is a tool unique to project management

Mrs. Shubhashri Waghmare

Earned Value Management (EVM)

EVM is a project performance measurement technique that integrates scope, time, and cost data Given a baseline (original plan plus approved changes), you can determine how well the project is meeting its goals You must enter actual information periodically to use EVM
o o o

Was a WBS item completed or approximately how much of the work was completed Actual start and end dates Actual cost

More and more organizations around the world are using EVM to help control project costs

Mrs. Shubhashri Waghmare

Earned Value Analysis Terms

The planned value (PV), or formerly called the budgeted cost of work scheduled (BCWS), also called the budget, is that portion of the approved total cost estimate planned to be spent on an activity during a given period Actual cost (AC), or formerly called actual cost of work performed (ACWP), is the total of direct and indirect costs incurred in accomplishing work on an activity during a given period o Rs.20,000 AC to accomplish task over two weeks Rs.15K AC week 1and Rs.5K week 2 The earned value (EV), or formerly called the budgeted cost of work performed (BCWP), is an estimate of the value of the physical work actually completed o EV is based on the original planned costs for the project or activity and the rate at which the team is completing work on the project Mrs. Shubhashri Waghmare or activity to date

Rate of Performance
Rate of performance (RP) is the ratio of actual work completed to the percentage of work planned to have been completed at any given time during the life of the project or activity Brenda Taylor, Senior Project Manager in South Africa, suggests this term and approach for estimating earned value
o

For example, suppose the server installation was halfway completed by the end of week 1; the rate of performance would be 50% because by the end of week 1, the planned schedule reflects that the task should be 100% complete and only 50% of that work has been completed The EV would thus be Rs.5,000 after week 1 (Rs.10,000*50%)
Mrs. Shubhashri Waghmare

Earned Value Formulas and Interpretations

- VE numbers for cost and schedule variance indicate problems in those areas. If CV is negative - it means that performing the work cost more than planned If SV is negative - it means that it took longer than planned to perform the work CPI can be used to estimate the projected cost of completing the project based on performance to date (EAC) =1:the planned and actual costs are the same; < 1: over budget ; >1: under budget SPI can be used to estimate the projected time to complete the project =1: on schedule; < 1 behind schedule; > 1 ahead of schedule
Mrs. Shubhashri Waghmare

Earned Value Calculations for One Activity After Week One

Mrs. Shubhashri Waghmare

Earned Value Chart for Project after Five Months

EAC = Rs.122,308 = BAC/CPI = Rs.100,000/.81761 ETC = 12.74 months = Original Time Estimate/SPI = 12 months/.94203

Mrs. Shubhashri Waghmare

Project Portfolio Management

Many organizations collect and control an entire suite of projects or investments as one set of interrelated activities in a portfolio Five levels for project portfolio management
1.Put all your projects in one database 2.Prioritize the projects in your database 3.Divide your projects into two or three budgets based on type of investment 4.Automate the repository 5.Apply modern portfolio theory, including risk-return tools that map project risk on a curve

Mrs. Shubhashri Waghmare

Risk Management
Mrs. Shubhashri Waghmare

Risk DEFINITION

Possibility of meeting danger or suffering harm. OXFORD dictionary Risk can be defined as a measure of the probability and consequence of not achieving a defined project goal.
PMBOK

The chance of an adverse event, depending upon circumstances.

(2010)

Risk is the probability of an adverse outcome. (Graham and Weiner, 1995). Risk equals to the expected loss in a project. (Willis, 2007). Risk is the measure of probability & severity of adverse effects.
(Lowrance 1976).

Risk is the combination of probability of an event with its consequences.

(ISO 2002).

Risk is defined as a set of scenarios, each of which has a probability and a consequence.
(Kaplan and Garrick 1981, Kaplan 1991).

Risk is equal to combination of events /consequences& associated uncertainties.

(Aven 2007).

Risk refers to situations with known probabilities for the randomness the decisionmaker is faced with.
(Knight 1921, Douglas 1983).
Mrs. Shubhashri Waghmare

WHAT is Risk?
Risk
Uncertain event that has a positive or negative effect. On at least one of the project objectives (scope, schedule, budget, quality).

WHAT is Risk Management?

Risk Management
The practice of dealing with project risk. It includes PLANNING for risk, ASSESSING risk, Developing risk response STRATEGIES, MONITORING risk throughout the project life cycle.

Mrs. Shubhashri Waghmare

WHY Risk Management?

To Cope with Changing Environment: Internally & Externally Effective policy making Increased profitability Better Project performance and control To win a contract Prediction business needs
.

Mrs. Shubhashri Waghmare

Theory and Practice

Text Book Definition: Risk Management is the systematic process of identifying, analyzing, and responding to project risk. It includes maximizing the probability and consequences of positive events and minimizing the probability and consequences of adverse events to project objectives.

Simple Terminology: Risk Management is the identification of an unborn issue (a risk) that will have a negative impact on the project that must be eliminated with proactive planning, monitoring, and activities or tasks.

Mrs. Shubhashri Waghmare

Risk Management Processes

Risk Identification

Risk Assessment

Risk Analysis
Risk Prioritization

Risk Management
Risk Mgmt Planning

Risk Control

Risk Resolution Risk Monitoring

Mrs. Shubhashri Waghmare

Risk Management Planning

DEFINITION: The process of deciding how to approach and plan the risk management activities for a project.
Inputs 1. 2. 3. 4. 5. 6. Project Charter Organizations Risk Mgmt Policy Defined Roles & Responsibilities Stakeholder Risk Tolerances Template for the Organizations risk management plan Work breakdown structure Output Risk Management Plan Tools & Techniques Planning Meetings

Organizational Risk Management Policy: Predefined approaches to risk analysis and resolution that needs tailoring to a particular project. Defined roles and responsibilities: Predefined roles, responsibilities, and authority levels for decision making will influence planning. Stakeholder Risk Tolerance: Different organizations and different individuals have different tolerances for risk. Policies or historical actions may communicate this. Planning Meetings: Project teams hold risk management planning meetings to develop the plan.

Mrs. Shubhashri Waghmare

Risk Management Plan

The plan describes how risk identification, qualitative and quantitative analysis, resolution planning, monitoring, and control will be structured and performed during the project life cycle. The plan may include: Methodology Roles & Responsibilities Budgeting Timing Scoring and interpretation Thresholds Reporting formats Tracking
Mrs. Shubhashri Waghmare

Risk Identification
The process of determining which risks might affect the project and document the characteristics.
** Risk identification is an iterative process **
Inputs
1. 2. 3. 4. Risk management plan Project planning outputs Risk categories Historical information

Output
1. 2. 3. Risks Triggers Inputs to other processes

Tools & Techniques

1. 2. 3. 4. 5. 6. Documentation reviews Information gathering techniques Checklists Assumption analysis Diagramming techniques

INPUTS Risk Management Plan: See previous slide Project Planning Outputs: Items to be reviewed, but not limited to: project charter, WBS, product description, schedule and cost estimates, resource plan, procurement plan, assumption and constraints. Risk Categories: Risks that may affect a project for better or worse can be identified and organized into risk categories. Categories include: o Technical, quality, and performance risks o Project Management risks o Organizational Risks cost, time, and scope o External risks shifting legal or regulatory environment, labor issues, natural events. Historical Information: Information on prior projects may be available to help leverage lessons learned.

Mrs. Shubhashri Waghmare

Risk Identification- Tools/Techniques and Outputs

Outputs Risks: Yep! This an output! Triggers: Sometimes called risk assumptions or warning signs, these are indications that a risk has occurred or is about to occur. Inputs to other processes: Risk identification may identify a need for a further action in another area or to other projects.
Tools and Techniques Documentation Reviews: Performing a structured review of the project plans and assumptions. Information gathering techniques: Examples of information gathering include: o Brainstorming most common o Delphi technique Consensus of experts on a subject area o Interviewing Seek input from project managers or subject matter experts o Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis Checklist: Using historical information and knowledge is a quick and simple . way to identify risk. Assumption analysis: Every project is conceived and developed based on a set of hypotheses, scenarios, or assumptions. Diagram techniques: Cause-and-effect, System or process flow charts, and Influence diagrams Mrs. Shubhashri Waghmare

Risk Analysis
Quantitative: The process of measuring the probability and consequences of risks and estimating their implications for project objectives.
Determine the probability of achieving a specific project objective. o Quantify the risk exposure for the project, and determine the cost and schedule contingency reserves that may be needed. o Identify risks requiring the most attention by quantifying their relative contribution to project risks. o Identify realistic and achievable cost, schedule, and scope targets.
o

Qualitative: The process of performing a qualitative analysis of risks and conditions to prioritize their effects on project objectives.
Mrs. Shubhashri Waghmare

Rating Impacts for a Risk

Evaluating Impact of a Risk during Major Project Milestones
Project Very Low Low Moderate High Very High Objective .05 .1 .2 .4 .8 Cost Insignificant <5% 5-10% 10 20% >20% Cost Increase Increase Increase Increase Increase Schedule Insignificant Schedule Slip Overall Prj Slip Overall Prj Slip Overall Prj Slip
Schedule Slippage <5% 5-10% 10-20% Slips>20%

Scope Scope Reduction Minor areas of Major Areas Scope Reduction Project end item
scope affected of scope affected unacceptable to is not meeting client business need

Quality Quality Only very Quality Reduction Quality Reduction Project end item
Degradation small demanding Apps requires client unacceptable to is useless affected approval client

Mrs. Shubhashri Waghmare

Risk Resolution
DEFINITION: The process of developing procedures and techniques to reduce threats to the project objectives.
Inputs 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Risk Management Plan List of prioritized risks Risk ranking of the project Prioritized list of quantified risks Probabilistic analysis of the project Probability of achieving the cost and time objectives List of potential resolutions Risk thresholds Risk owners Common risk causes Trends in qualitative and quantitative risk analysis results Output 1. 2. 3. 4. 5. 6. 7. Risk resolution plan Residual risks Secondary risks Contractual agreements Contingency reserve amounts needed Inputs to other processes Inputs to a revised project plan Tools & Techniques 1. 2. 3. 4. Avoidance Transference Mitigation Acceptance

Mrs. Shubhashri Waghmare

Risk Resolution Outputs

Risk Resolution plan: This is also called risk register and should include some or all of the following: o Identify risks, their description, the area(s) of the project effected, their causes, and how they may affect project objectives o Risk owners and assigned responsibilities o Results from the qualitative and quantitative risk analysis o Agreed to response including avoidance, transference, mitigation, acceptance for each risk in the risk resolution plan o The level of residual risk expected to be remaining after the strategy is implemented o Specific actions to implement the chosen resolution strategy o Budget and times for resolution o Contingency plans and fallback plans Residual risk: Residual risk are those that remain after avoidance, transfer, or mitigation resolutions have been taken. They also include minor risks that have been accepted and addresses. Secondary risks: These risks arise as a direct result of implementing a risk resolution. Contractual agreements: Contractual agreements may be used to specify each partys responsibility for risks. Contingency reserve amounts needed: Probabilistic analysis of the project and risk thresholds help the project manager determine the amount of contingency needed to reduce risk. Inputs to other processes: Most resolutions to risk involve expenditure of additional time, cost, or resources and require changes to project plans. Inputs to a revised project plan: The results of the resolution planning process must be incorporated into the project plan, to ensure that agreed actions are implemented and monitored as part of the ongoing project.

Mrs. Shubhashri Waghmare

Risk Resolution Tools/Techniques

Tools and Techniques

Avoidance: Risk avoidance is changing the project plan to eliminate the risk or condition or to protect the project objectives from its impact. Transference: Risk transference is seeking to shift the consequences of a risk to a third party together with ownership of the resolution. (Financial risk is most common) Mitigation: Mitigation seeks to reduce the probability and or consequences of an adverse risk event to an acceptable threshold. Acceptance: This technique indicates that a project team has decided not to change the project plan to deal with a risk. Developing a contingency plan is a way to managing known risks. The contingency plan adopt contingency allowance or reserve that includes:
o o o

Time Money Resources

Mrs. Shubhashri Waghmare

Risk Monitoring & Control

DEFINITION: The process of monitoring residual risks, identifying new risks, executing risk reduction plans, and evaluating their effectiveness throughout the project life cycle.
The purpose of risk monitoring is to determine if:
Risk resolution have been implemented as planned Risk resolution actions are as effective as expected, or if new resolutions should be developed Project assumptions are still valid Risk exposure has changed from its prior state, with analysis and trends A risk trigger has occurred Proper policies and procedures are followed Risks have occurred or arisen that were not previously identified

Inputs 1. 2. 3. 4. 5. Risk Management Plan Risk resolution plan Project communication Additional risk identification and analysis Scope Changes

Output 1. 2. 3. 4. 5. 6. Workaround plans Corrective action Project change request Updates to the task resolution plan Risk database Updates to risk identification checklist

Tools & Techniques 1. 2. 3. 4. Project Risk resolution audits Periodic project risk reviews Earned Value analysis Technical performance measurements Additional risk resolution planning

5.

Mrs. Shubhashri Waghmare

Project Risk Management In Practice

Project Risk Identification > Use a Questionnaire

Risk Monitor and Control

o

Project Risk Management Plan = The Project Risk Log

Describes Quantifies Probability of Occurrence Resolution Prioritizes Ownership Status Risk Ranking

Project Schedule > Risk Items get put into project WBS (as contingency) and Assigned Ownership

Mrs. Shubhashri Waghmare

Project Risk Management In Risk Identification Categories Practice

Project Integration Management Scope Management Time Management Cost Management Human Resource Management Communication Management Procurement Management Quality Management Technology Data Conversions External Factors

Mrs. Shubhashri Waghmare

Risk Assessment Questionnaire

Risk Identification using a questionnaire

Completed By:________________________________________ Date:______________________

Project Size
Resource Hours Total estimated resource hours: <=5,000 > 5,000 and <=20,000 > 20,000 <= 4 months > 4 months and <=12 months > 12 months <= 4 participants > 4 and <= 12 participants > 12 participants Low Medium High Low Medium High Low Medium High
Notes

Calendar Time Estimated calendar duration:

Notes

Team Size Maximum team size at any time during the project:

Notes

Mrs. Shubhashri Waghmare

Risk Identification using a questionnaire (contd)

Project Structure - Definition
Project Scope The boundaries of the project are: well defined and accepted conceptually understood ill defined
Low Medium High Notes

Project Deliverables The tangible information from the project is:

well defined and accepted named but not detailed not identified

Low Medium High

Notes

New System Benefits The benefit of doing the project is:

well defined and accepted, and/or of strategic importance generally understood, but not quantified ill defined or not identified

Low Medium High

Notes

Mrs. Shubhashri Waghmare

Risk Identification using a questionnaire (contd)

Project Structure - Sponsorship & Commitment
Project Sponsorship The project is sponsored by: respected and enthusiastic business manager passive business manager unidentified, or I/S manager committed to the project (understands value and is supportive) involved, but not committed skeptical or resistant Low Medium High Low Medium High
Notes

Commitment of Sponsor(s) The sponsor is:

Notes

Commitment of Sponsoring Business Area(s) The sponsoring business area(s) are:

committed to the project (understands value and is supportive) involved, but not committed skeptical or resistant

Low Medium High

Notes

Relation to Information Strategy Plan The new system is:

included in or approved for addition included, but not yet approved not yet part of the plan

Low Medium High

Notes

Mrs. Shubhashri Waghmare

Risk Identification using a questionnaire (contd)

Mrs. Shubhashri Waghmare

Managing the Risk Assessment Results

Risk Monitor and Control
The No Surprise Approach to Risk Management is accomplished by:
1. All identified risk items get put into the project work breakdown structure (WBS) 2. All risk items have owners > including the executive sponsors and senior management 3. Risks are reported to the senior and executive leadership in the project dashboard 4. When a RISK EVENT does occur, becomes an issue, then a Project Change Request (PCR) is immediately submitted . No Surprise PCR

Mrs. Shubhashri Waghmare

Project WBS Example

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Project Dashboard

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Risk Summary Dashboard Example 1

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Project Closure
Please refer the Last phase of Project management Life cycle.

Mrs. Shubhashri Waghmare