TM 665: Lecture 11

Project Audits, Termination & Review

TM 665: Project Planning & Control

Agenda
Project Audits (CH 12) Goal-based Project Outcomes Project Audit Reports Audit Life Cycle Report Credibility Revenue Reporting Project Termination (CH 13) Methods of Project Termination Early Project Termination Project Shortcomings PM Responsibilities Project Final Report Final Exam Review
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Project Auditing
A major vehicle for evaluation is the project audit, a

more or less formal inquiry into any aspect of the project

A project audit is highly flexible and may focus on whatever matters senior management desires The evaluation of a project must have credibility in the eyes of the management group for whom it is performed and also in the eyes of the project team on whom it is performed

TM 665: Project Planning & Control

Purposes of Evaluation - Goals of Project Audit

Four independent dimensions of success:

The most straightforward dimension is the projects efficiency in meeting both the budget and schedule Another dimension, and the most complex, is that of customer impact/satisfaction A third dimension, again somewhat straightforward and expected, is business/direct success

The last dimension, somewhat more difficult and nebulous to ascertain, is future potential

TM 665: Project Planning & Control

Purposes of Evaluation - Goals of Project Audit

Another primary purpose of evaluation is to help translate

the achievement of the projects goals into a contribution to the parent organizations goals
To do this, all facets of the project are studied in order to

identify and understand the projects strengths and weaknesses

The result is a set of recommendations that can help

both ongoing and future projects

TM 665: Project Planning & Control

Evaluation Benefits of Project Audit

A successful project evaluation via audit can

help an organization:
1. 2.

3.
4. 5. 6.

Identify problems earlier Clarify performance, cost, and time relationships Improve project performance Locate opportunities for future technological advances Evaluate the quality of project management Reduce costs

TM 665: Project Planning & Control

Purposes of Evaluation Need for Project Audit

Organizational Benefits

Speed the achievement of results Identify mistakes, remedy them, and avoid them in the future

Provide information to the client

Reconfirm the organizations interest in, and commitment to, the project

TM 665: Project Planning & Control

Purposes of Evaluation Other Project Audit Outcomes

Ancillary goals are often unstated, but IMPORTANT:

Identify organizational strengths and weaknesses in project-related personnel, management, and decisionmaking techniques and systems

Identify risk factors in the firms use of projects

Improve the way projects contribute to the professional growth of project team members

Identify project personnel who have high potential for managerial leadership

TM 665: Project Planning & Control

Project Audit
The project audit is a thorough examination

of the management of a project, its methodology and procedures, its records, its properties, its budgets and expenditures and its degree of completion
The formal report may be presented in various

formats, but should, at a minimum contain comments on some specific points

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Project Audit

Six parts of a project audit:

1. 2. 3. 4. 5. 6.

Current status of the project Future status Status of crucial tasks Risk assessment Information pertinent to other projects Limitations of the audit

It is far broader in scope than a financial audit and may deal with the project as a whole or any subset of project components

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Audit Depth
Time and money are two of the most common limits

on depth of investigation and level of detail presented in the audit report

Accumulation, storage, and maintenance of auditable

data are important cost elements

Two often overlooked costs are the self protective

activity of team members during an audit, and the potential for project morale to suffer as a result of a negative audit

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Audit Depth

There are three distinct and easily recognized levels of project auditing:
1.

General audit - normally most constrained by time and resources and is usually a brief review of the project touching lightly on the six parts of an audit Detailed audit - usually conducted when a follow-up to the general audit is required Technical audit - generally carried out by a qualified technician under the direct guidance of the project auditor

2. 3.

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Audit Timing
The first audits are usually done early in the

projects life, and are often focused on the technical issues in order to make sure that key technical problems have been solved
Audits done later in the life cycle of a project are of

less immediate value to the project, but are more valuable to the parent organization

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Audit Timing
As the project develops, technical risks are less likely

to be matters of concern
Conformity to the schedule and budget become the

primary interests
Management issues are major matters of interest for

audits made late in the projects life

Postproject audits are often a legal necessity because

the client specified such an audit in the contract

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Risk Event Graph

Risk Cost

High

Low Project Life Cycle

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Preparation and Use of Audit Reports

The information should be arranged so as to facilitate

the comparison of predicted versus actual results

Significant deviations of actual from predicted results

should be highlighted and explained in a set of footnotes or comments

Negative comments about individuals or groups

associated with the project should be avoided

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Construction and Use of Audit Reports

Information that should be contained in the audit report:

1. 2. 3.

Introduction Current Status Future Project Status

4.
5. 6.

Critical Management issues

Risk Analysis

Caveats, Limitations, and Assumptions

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Project Auditor/Evaluator Responsibilities

First and foremost, the auditor should tell the truth The auditor must approach the audit in an objective

and ethical manner

Must assume responsibility for what is included and

excluded from consideration in the report

The auditor/evaluator must maintain political and

technical independence during the audit and treat all materials as confidential

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Project Auditor/Evaluator Responsibilities

Steps to carry out an audit:

1.
2.

Assemble a small team of experienced experts

Familiarize the team with the requirements of the project

3.
4.

Audit the project on site

After the completion, debrief the projects management

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Project Auditor/Evaluator Responsibilities

Steps to carry out an audit (cont.):
5. Produce a written report according to a

prespecified format
6.

Distribute the report to the project manager and project team for their response

7. Follow up to see if the recommendations

have been implemented

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The Project Audit Life Cycle

Like the project itself, the audit has a life cycle

composed of an orderly progression of well-defined events:

Project audit initiation Project baseline definition Establishing an audit database Preliminary analysis of the project Audit report preparation Project audit termination

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Essentials of an Audit/ Evaluation

For an audit/evaluation to be conducted with skill and precision, and to be generally accepted by senior management, the client and the project team, several conditions must be met:
1.
2. 3.

The audit team must be properly selected

All records and files must be accessible Free contact with project members must be preserved All of these essentials deserve further discussion

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Audit/Evaluation Team
The choice of the audit/evaluation team is critical to

the success of the entire process

The size of the team will generally be a function of

the size and complexity of the project

For a small project, one person can often handle all

the tasks of an audit, but for a large project, the team may require representatives from several areas

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The Audit/Evaluation Team

Typical areas that may furnish audit team members are: The project itself The accounting/controlling department Technical specialty areas The customer The marketing department Purchasing/asset management Human resources Legal/contract administration department

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Audit/Evaluation Team
The main role of the audit/evaluation team is to conduct

a thorough and complete examination of the project or some prespecified aspect of the project
The team must determine which items should be brought

to managements attention
The team is responsible for constructive observations

and advice based on the training and experience of its members

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Access to Information
In order for the audit/evaluation team to be effective, it

must have free access to all information relevant to the project

Most of the information needed will come from the

project teams records or from various departments such as accounting, personnel, and purchasing
Some of the most valuable information comes from

documents that predate the project

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Access to Information
Examples of documents that predate the project: Customer Requirements (i.e. RFP Process) Minutes of project selection meetings Minutes of senior management committees that decided to pursue a specific area of technical interest Priorities must be set to ensure that important analyses

are undertaken before those of lesser importance

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Access to Project Team and Others

Several rules that should be followed when contacting

project team and other stakeholders

Avoid misunderstandings between the audit/evaluation team and project team members

Project team should always be made aware of in-progress audit

Avoid Critical Comments Constructive suggestions where appropriate

Avoid Off-Hand Comments No shooting from the hip Avoid excess comment that could be misinterpreted
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Access to Project Team and Others

At times, information may be given to audit evaluation

team members in confidence

Discreet attempts should be made to confirm such

information through non-confidential sources

If it cannot be confirmed, it should not be used The auditor/evaluator must protect the sources of

confidential information

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Measurement
Measurement is an integral part of the audit/evaluation

process
Performance against planned budget and schedule

usually poses no major measurement problems

Measuring the actual expenditure against the planned

budget is harder and depends on an in-depth understanding of the procedures used by the accounting department

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Measurement
Big Challenge: determine what revenues should be

assigned to a project
All cost/revenue allocation decisions must be made when

the various projects are initiated

When the battles are fought up front, the equity of

cost/revenue allocations ceases to be so serious an issue

As long as allocations are made by a formula, major

conflict is avoided-or at least mitigated

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Auditor/Evaluator
Above all else, the auditor/evaluator needs

permission to enter the system

If the auditor maintains a calm, relaxed attitude,

the project team generally begins to extend limited trust

The first step is to allow the auditor qualified

access to information about the project

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Advice for the Auditor/Evaluator

Deal professionally with information gathered, neither

ignoring nor stressing the projects shortcomings

Recognize and reinforce aspects of the projects

strengths
Trust is earned during an audit, even with negative

findings
Trust-building is a slow and delicate process that is

easily lost

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Break!
Next Up:
Project

Termination

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Project Termination Conditions

A project can be said to be terminated when work on the substance of the project has ceased or slowed to the point that further progress is no longer possible

There are four fundamentally different ways to close out a project:

Extinction 2. Addition 3. Integration 4. Starvation
1.
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Project Termination Factors

1. Low Probability of Success: Technical Objectives Commercial Viability ROI Achieved 2. No Solution Engineering Design Lasting Process 3. Intellectual Property Issues
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Project Extinction
All (substantive) activity ceases
Stopped: Successful

Met goals Unsuccessful Failed tests Superceded External event

Extinction by Murder Political assassination; projecticide Merger redundancy

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Project Addition
Project becomes a part of organization New functionality Protected status disappears eventually Transfer of assets People Equipment Addition of responsibilities Budgets Practices and procedures P & L

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Project Integration
Most common form of termination and also the

most complex
Project Outcome:

Becomes Part of Acquiring Organization Requires Redistribution of Residual Resources

Equipment Capital Improvements Follow-on Support

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Project Starvation
Budget Decrement Reallocation of Resources Away from Project

Business Conditions Political Considerations

Active without Activity

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When to Terminate a Project

Some questions to ask when considering termination:

Has the project been obviated by technical advances? Is the output of the project still cost-effective?

Is it time to integrate or add the project as a part of regular operations?

Are there better alternative uses for the funds, time and personnel devoted to the project? Has a change in the environment altered the need for the projects output?
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When to Terminate a Project

Reasons projects fail:

Project organization was not required

Non-Projects and Pseudo-Projects

Insufficient support from senior management Wrong person as project manager Poor (or insufficient) planning Lack of Critical Success Factors

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The Termination Process

Components of the termination process Whether or not to terminate

Goal/Objective-based or Qualification factors Carry out termination procedures Should have been planned at start Should be done in an orderly manner Procedures vary by firm & project type
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If terminating:

Project Termination Decision Tree

Internal Info Systems

Decision Database(s)

External Info Systems

Termination Rules
Uncertain

Continue Project

Keep

Termination Decision?
Terminate

Sensitivity Analysis

Termination Procedures
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Project Termination Areas

Project Closeout

Organization

Financial

Purchasing

Site

Closeout Mtg Plans Personnel

Payables Receivables Budget Report

Contracts Supplier Comm Final Payments

Close Facilities
Dispose Equip/Mat'l

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The Implementation Process

Duties of the termination manager

(not always the PM!):

Complete all remaining work Notification to & acceptance by client Complete documentation (accurately!) Final payments Redistribute assets Legal review Archive files & records (legal reqmnts) Follow-on support arrangements
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The Final Report - A Project History

Historical recap Project biography

The Good, the Bad, and the Ugly

Previous documents

Project plan Audit(s) Change orders

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The Final Report

Focus areas:
1. Project performance 2. Administrative performance 3. Organizational structure 4. Project and administrative teams 5. Techniques of project management

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The Final Report

Focus area recommendations are minimum Lessons learned

Benchmarks Killers

Goal: Future project management improvement

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Bonus Considerations
On-Campus Students:

Discussion participation the last two lectures

Off-Campus Students:

Personal Project Plan

Short paper summarizing what you consider to be the major points of project management Your personal PMBOK that you could see yourself applying as a project manager Due by e-mail before requesting the Final Exam

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Final Examination
Monday, 07 May, 7:009:00 PM, CB 110 Bring Engineering Notebook, calculator, & PENCIL Format: Multiple Choice Select the BEST answer Dont take too long avoid looking them up Short Answer & Short Calculation No need to show your work completely Answer all parts for full credit Charts & Networks Plan for several minutes to study & solve Read carefully
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