Importance of Project Management

Projects represent change and allow organizations to

effectively introduce new products, new
process, new programs
Project management offers a means for dealing with
dramatically reduced product cycle times
Projects are becoming globalized making them more
difficult to manage without a formal methodology
Project management helps cross-functional teams to
be more effective

Management of IT Projects
More than $250 billion is spent in the US each year on
approximately 175,000 information technology projects.
Only 26 percent of these projects are completed on time and
within budget.
The average cost for a development project for a large company
is more than $2 million.
Project management is an $850 million industry and is expected
to grow by as much as 20 percent per year.
Bounds, Gene. The Last Word on Project
Management IIE Solutions, November, 1998.

What Defines a Project?

How does a project

differ from a
program?

Project Management versus Process Management

Ultimately, the parallels between process and project
management give way to a fundamental difference:
process management seeks to eliminate variability
whereas project management must accept variability
because each project is unique.
Elton, J. & J. Roe. Bringing Discipline to Project
Review, March-April,

1998.

Management Harvard Business

Measures of Project Success

Was the movie

Titanic
a success?

DelayedOpeningsareaFactofLifeintheFoodservice,
HospitalityIndustry
Disney'sshipbuilderwassixmonthslateindeliveringitsnewcruiseships,
andthousandsofcustomerswhohadpurchasedticketswerestranded.
Evenwiththatexperience,theirsecondshipwasalsodeliveredwellafter
thepublishedschedules.UniversalStudiosinOrlando,Fla.hadbeen
buildinganewrestaurantandentertainmentcomplexformorethantwo
years.TheyadvertisedaDecemberopening,onlytoannounceinlate
Novemberthatitwouldbetwoorthreemonthslate.
Evenwhenfacilitiesdoopenclosetoschedule,theyarerarelyfinished
completelyandareoftenmissingkeycomponents.Whydothosethings
happen?Withallofthesophisticatedcomputersandprojectmanagement
software,whyaren'tprojectscompletedonschedule?
Frable,F.Nation'sRestaurantNews(April12,1999)

IT Project Outcomes
More than 200%
late

101-200% late

6%
16%

51-100% late

21-50% late

9%

29%

C ancelled

8%
6%

Less than 20%

late

26%

On-Time

Source: Standish Group Survey, 1999 (from a

survey of 800 business systems projects)

Why do Projects Fail?

Studies have shown that the following factors
contribute significantly to project failure:
Improper focus of the project management system
Fixation on first estimates
Wrong level of detail
Lack of understanding about project management tools; too much
reliance on project management software
Too many people
Poor communication
Rewarding the wrong actions

Why do IT Projects Fail?

Ill-defined or changing requirements
Poor project planning/management
Uncontrolled quality problems
Unrealistic expectations/inaccurate estimates
Naive adoption of new technology
Source: S. McConnell, Construx Software Builders, Inc.

Have You Ever Lost Sight of the

Project Goals?

QuickTime and a
Photo - JPEG decompressor
are needed to see this picture.

Not all Projects Are Alike

[in IT projects], if you ask people whats done and what remains to be
done there is nothing to see. In an IT project, you go from zero to 100
percent in the last second--unlike building a brick wall where you can see
when youre halfway done. Weve moved from physical to non-physical
deliverables.
J. Vowler (March, 2001)

Engineering projects = task-centric

IT projects = resource-centric

Shenhars Taxonomy of Project Types

Degreeof
Uncertainty/Risk
SuperHigh
Tech

High
Tech

Newshrink
wrapped
software

Medium
Tech
Low
Tech

ERP
implementation
inmultinational
firm
Advanced
radar
system

New
cellphone
Construction
Assembly
Projects

Autorepair
System
Projects

Array
Projects

SystemComplexity/Scope

High

Required Resources

Project Life Cycle

Phase 1

Formation &
Selection

Phase 2
Planning

Phase 3

Scheduling &
Control

Phase 4

Evaluation &
Termination

Time

Life Cycle Models: Pure Waterfall

Concept
Design
Requirements
Analysis
Architecture
Design
Detailed
Design
Coding &
Debugging
System
Testing

Source: S. McConnell
Rapid Development (Microsoft Press, 1996)

Life Cycle Models: Code & Fix

DESIGN

Design, Cost, Time Trade-offs

Required
Performance

Target

M
TI

LE
U
D
E
CH
S
(

Due Date

Budget
Constraint

Optimal Time-Cost
Trade-off

COST

Optional Scope Contracts

Since it is widely accepted that you can select
three of the four dimensions (or perhaps only
two), what to do?
Fixed Scope Contract

specifies

Optional Scope Contract

specifies

SCHEDULE, COST, SCOPE

SCHEDULE, COST, QUALITY

(general design guidelines may be indicated)

Importance of Project Selection

There are two ways for a business to succeed
at new products: doing projects right, and
doing the right projects.
Cooper, R.G., S. Edgett, & E. Kleinschmidt.
Research Technology Management, March-April, 2000.

Project Initiation & Selection

Critical factors
1) Competitive necessity
2) Market expansion
3) Operating requirement

Numerical Methods
1)
2)
3)
4)

Payback period
Net present value (NPV) or Discounted Cash Flow (DCF)
Internal rate of return (IRR)
Expected commercial value (ECV)

Project Portfolio
1) Diversify portfolio to minimize risk
2) Cash flow considerations
3) Resource constraints

Payback Period
Number of years needed for project to
repay its initial fixed investment
Example: Project costs $100,000 and is expected
to save company $20,000 per year
Payback Period = $100,000 / $20,000 = 5 years

Net Present Value (NPV)

Discounted Cash Flow (DCF)

Let Ft = net cash flow in period t (t = 0, 1,..., T)

F0 = initial cash investment in time t = 0

r = discount rate of return (hurdle rate)

T

NPV=
t=0

Ft
1+r t

Internal Rate of Return (IRR)

Find value of r such that NPV is equal to 0

Example (with T = 2):

Find r such that
F0+ F1 + F2 2 =0
1+r
1+r

DCF Project Example*

Phase I

Research and Product Development

$18 million annual research cost for 2 years
60% probability of success

Phase II

Market Development
Undertaken only if product development is successful
$10 million annual expenditure for 2 years to develop marketing and
distribution channels (net of any revenues earned in test marketing)

Phase III

Sales
Proceeds only if Phase I and II verify opportunity.
Production is subcontracted and all cash flows are after-tax and occur
at year's end.
The results of Phase II (available at the end of year 4) identify the
product's market potential as indicated below:

Product
Demand
High
M edium
Low

Product Life

Annual Net
Cash Inflow

Probability

20 years
10 years
Abandon Project

$24 million
$12 million
None

0.3
0.5
0.2

*Hodder, J. and H.E. Riggs. Pitfalls in Evaluating Risky Projects, Harvard

Business Review, Jan-Feb, 1985, pp. 128-136.

DCF Project Example (contd)

Year
1
2
3
4
5 - 14
15 - 24

Expected Cash Flow (in $ million)

-18
-18
0.6 (-10) = - 6
0.6 (-10) = - 6
.6 (0.3 x 24 + 0.5 x 12) = 7.92
.6 (0.3 x 24) = 4.32

What is the internal rate of return for this project?

DCF Example Continued

What if you can sell the product (assuming that both Research and
Product Development AND Market Development are successful) to a
third party? What are the risks AT THAT POINT IN TIME?

Assume that discount rate r2 is 5%

Probability
What is 20 years of cash inflow at $24M/year?
What is 10 years of cash inflow at $12M/year?

$299.09
$92.66

Expected value of product at Year 4:

$136.06

0.3
0.5

DCF Example Continued

Expected cash flows (with sale of product at end of year 4) are now:

Year 1
Year 2
Year 3
Year 4

Outflow
$
18.00
$
18.00
$
10.00
$
10.00

Inflow

136.06

$
$
$
$

Net
(18.00)
(18.00)
(10.00)
126.06

Probability
1
1
0.6
0.6

Expected
Cash Flow
$
(18.00)
$
(18.00)
$
(6.00)
$
75.63

What is the internal rate of return for this project?

Criticisms of NPV/DCF
1) Assumes that cash flow forecasts are accurate; ignores
the human bias effect
2) Fails to include effects of inflation in long term
projects
3) Ignores interaction with other proposed and ongoing
projects (minimize risk through diversification)
4) Use of a single discount rate for the entire project (risk
is typically reduced as the project evolves)

Expected Commercial Value (ECV)

Probability=pc

Probability=pt
Technical Success
DevelopNew
Product
Probability=1pt

Commercial Success
(with net benefit =
NPV)
LaunchNew
Product

Probability=1pc
Commercial
Failure (with net
benefit = 0)

Technical Failure

Risk class 1

Risk class 2

DCF Example Revisited

Product Demand
High

0.3
Probability=pt
Development
Succeeds
Research&
Product
Development

Market
Development

0.2

Probability=1pt
Development Fails

Discount rate r1

0.5

Product Demand
Medium

Product Demand
Low

Drop project

Discount rate r2

Ranking/Scoring Models
Profit abilit y/value
1) Increaseinprofitability?
2) Increaseinmarketshare?
3) Willaddknowledgetoorganizationthatcanbeleveragedbyotherprojects?
4) EstimatedNPV,ECV,etc.
Organizat ion'sStrat egy
1) Consistentwithorganization'smissionstatement?
2) Impactoncustomers?
Risk
1) Probabilityofresearchbeingsuccessful?
2) Probabilityofdevelopmentbeingsuccessful?
3) Probabilityofprocesssuccess?
4) Probabilityofcommercialsuccess?
5) Overallriskofproject
6) Adequatemarketdemand?
7) Competitorsinmarket
Organizat ionCosts
1) Isnewfacilityneeded?
2) Canusecurrentpersonnel?
3) Externalconsultantsneeded?
4) Newhiresneeded?
MiscellaneousFactors
1) Impactonenvironmentalstandards?
2) Impactonworkforcesafety?
3) Impactonquality?
4) Social/politicalimplications

Scoring Attributes
To convert various measurement scales to a (0, 1) range.
LINEAR SCALE: value of attribute i is vi xi = xiL
UL
EXPONENTIAL SCALE: value of attribute i is vi xi =1exp Lxi .
1exp LU
1.00
0.90

A ttribute Value

0.80
0.70
0.60
Linear Scale
Exponential Scale

0.50
0.40
0.30
0.20
0.10
0.00
1

4
Response

Ranking/Scoring Example

Attribute
1) Does project increase market share?

Attribute
Weight (wi)

Measurement Scale
unlikely

2) Is new facility needed?

3
yes

3) Are there safety concerns?

likely

likely

15%
10%

no
unsure

30%

no

4) Likelihood of successful technical development?

unlikely

likely

20%

5) Likelihood of successful commercial development?

unlikely

likely

25%

Ranking/ScoringExample(contd)

Attribute
Project A
Project B

Project
Score (V j)

#1

#2

#3

#4

#5

4
2

yes
no

likely
unsure

4
3

1
4

0.75
0.25

0.25
0.75

0
0.5

0.75
0.5

0
0.75

0.413
0.525

0.97
0.64

0.64
0.97

0.00
0.88

0.97
0.88

0.00
0.97

0.581
0.845

Linear Scale
Project A
Project B

Exponential Scale
Project A
Project B

Analyzing Project Portfolios: Bubble Diagram

ProbofCommercialSuccess
High

Zero

High

ExpectedNPV

Low

ExtentofProductChange

Analyzing Project Portfolios: Product vs Process

ExtentofProcessChange

Source: Clark and Wheelwright, 1992

Key Elements of Project Portfolio Selection Problem

1. Multi-period investment problem
2. Top management typically allocates funds to different
product lines (e.g., compact cars, high-end sedans)
3. Product lines sell in separate (but not necessarily
independent) market segments
4. Product line allocations are changed frequently
5. Conditions in each market segment are uncertain from
period to period due to competition and changing
customer preferences

Stage-Gate Approach
Initiation

Define

Design

Initiation
Project Review
Charter

Work Statement
Risk Assessment
Purchasing Plan
Change Mgt

Detail Design
Schedule & Budget
Contingency Plan
Product &
Performance Reviews

Improve

Installation Plan
Facility Prep
Training Plan
Implementation

Control

Production close-out
Lessons learned
Post-project audit

Source:PACCARInformationTechnologyDivision
Renton,WA

Project Selection Example

1

Y e a r (t)
2

Project A

($40)

$10

$20

$20

Project B
Budget
Limit (B t )

($65)

($25)

$50

$50

$120

$20

$40

$55

Phases of Project Management

n
n

Project formulation and selection

Project planning
u
u
u
u
u

Project scheduling
u
u
u
u

Summary statement
Work breakdown structure
Organization plan
risk management
Subcontracting and bidding process
Time and schedule
Project budget
Resource allocation
Equipment and material purchases

Monitoring and control

u
u
u

Cost control metrics

Change orders
Milestone reports

Project Planning
n

Summary Statement
u
u
u
u
u

Executive summary: mission and goals, constraints

Description and specifications of deliverables
Quality standards used (e.g., ISO)
Role of main contractor and subcontractors
Composition and responsibilities of project team

Organization Plan
u
u
u
u
u
u

Managerial responsibilities assigned; signature authority

Cross impact matrix (who works on what)
Relationship with functional departments
Project administration
Role of consultants
Communication procedures with organization, client, etc.

Importance of Project Planning

The 6P Rule of Project Management:
Prior Planning Prevents Poor Project
Performance
If you fail to plan, you will plan to fail
Anonymous

Work Breakdown Structure (WBS)

1) Specify the end-item deliverables
2) Subdivide the work, reducing the dollars and
complexity with each additional subdivision
3) Stop dividing when the tasks are manageable work
packages based on the following:
Skill group(s) involved
Managerial responsibility
Length of time
Value of task

Work Packages/Task Definition

The work packages (tasks or activities) that are defined
by the WBS must be:
Manageable
Independent
Integratable
Measurable

Design of a WBS
The usual mistake PMs make is to lay out too many tasks;
subdividing the major achievements into smaller and
smaller subtasks until the work breakdown structure
(WBS) is a to do list of one-hour chores. Its easy to get
caught up in the idea that a project plan should detail
everything everybody is going to do on the project. This
springs from the screwy logic that a project managers job
is to walk around with a checklist of 17,432 items and tick
each item off as people complete them.
The Hampton Group (1996)

Two-Level WBS

WBS level 1

WBS level 2

1.1Event
Planning

1.CharityAuction

1.2Item
Procurement

1.3Marketing

1.4.Corporate
Sponsorships

Three-Level WBS
1.CharityAuction

WBS level 1

WBS level 2

1.1Event
Planning

1.1.1HireAuctioneer

WBS level 3

1.2Item
Procurement

1.3Marketing

1.4Corporate
Sponsorships

1.2.1Silent
auctionitems

1.3.1Individual
ticketsales

1.2.2Liveauction
items

1.3.2Advertising

1.1.2.Rentspace
1.1.3Arrangefor
decorations

1.2.3Raffleitems
1.1.4Printcatalog

Estimating Task Durations (contd)

Benchmarking
Modular approach
Parametric techniques
Learning effects

Beta Distribution
Probabilitydensity
function
Completiontimeoftaskj

Time
OptimisticTimetoj
Expectedduration=

MostLikelyTime=tm

PessimisticTimetpj

Beta Distribution
For each task j, we must make three estimates:
toj most optimistic time

tpj most pessimistic time

tm
j most likely time
toj +tpj +4tm
j
Expecteddurationj=
6

tpj toj 2
2
Varianceoftaskj=j =
36

Estimating Task Durations: Painting a Room

Task: Paint 4 rooms, each is approximately 10 x 20. Use flat paint on walls,
semi-gloss paint on trim and woodwork. Each room has two doors and four
windows. You must apply masking tape before painting woodwork around the
doors and windows. Preparation consists of washing all walls and woodwork
(some sanding and other prep work will be needed). Only one coat of paint is
necessary to cover existing paint. All supplies will be provided at the start of the
task. Previous times on similar painting jobs are indicated in the table below.
hours
27
38
33
17
26
22
14
30
28
21
23
27
23
37
17
17

min
25
25
12
44
7
1
2
27
30
13
59
44
15
6
54
13

hours
31
19
26
30
25
24
32
32
13
42
22
32
32
27
26
21

min
52
15
27
27
21
28
58
1
43
45
57
15
31
15
11
52

What is your estimate of the average time you will

need? What is your estimate of the variance?

Estimating Task Durations with Incentives

Task: Consider the painting job that you have
just estimated. Now, however, there are
explicit incentives for meeting your estimated
times. If you finish painting the room before
your specified time, you will receive a $10
bonus payment. HOWEVER, if you finish
the painting job after your specified time, you
will be fined $1000.
Revised estimated time =

Estimating Task Durations with Incentives

Task: Consider the painting job that you have
just estimated. Now, however, there are
explicit incentives for meeting your estimated
times. If you finish painting the room before
your specified time, you will receive a $10
bonus payment. If you finish the painting job
after your specified time, there is no penalty.
Revised estimated time =

Role of Project Manager/Team

Client

Top
Management
Project Manager

Subcontractors
Project Team
Regulating
Organizations

Functional
Managers

Responsibilities of a Project Manager

To the organization and top management
Meet budget and resource constraints
Engage functional managers

To the project team

Provide timely and accurate feedback
Keep focus on project goals
Manage personnel changes

To the client
Communicate in timely and accurate manner
Provide information and control on changes/modifications
Maintain quality standards

To the subcontractors
Provide information on overall project status

Project Team
What is a project team?
A group of people committed to achieve a
common set of goals for which they hold
themselves mutually accountable

Characteristics of a project team

Diverse backgrounds/skills
Able to work together effectively/develop synergy
Usually small number of people
Have sense of accountability as a unit

Idesignuserinterfacestopleaseanaudienceofone.
Iwritethemforme.IfImhappy,Iknowsomecool
peoplewilllikeit.Designinguserinterfacesby
committeedoesnotworkverywell;theyneedtobe
coherent.Asforschedule,Imnotinterestedin
schedules;didanyonecarewhenWarandPeacecame
out?
Developer,MicrosoftCorporation
AsreportedbyMacCormackandHerman,HBRCase9600097:
MicrosoftOffice2000

Intra-team Communication
M = Number of project team members
L = Number of links between pairs of team members
If M =2, then L = 1

If M =3, then L = 3

Number of Intra-team Links

450

350
300
250
200
150
100
50

N = No. of Team Members

N(N1)
L=NumberofIntrateamLinks= N =
2
2

29

27

25

23

21

19

17

15

13

11

0
1

L = No. of Intra-team Links

400

Importance of Communication
On the occasion of a migration from the east, men discovered a
plain in the land of Shinar, and said to one another, Come, let
us build ourselves a city with a tower whose top shall reach the
heavens. The Lord said, Come, let us go down, and there
make such a babble of their language that they will not
understand one anothers speech. Thus, the Lord dispersed
them from there all over the earth, so that they had to stop
building the city.
Genesis 11: 1-8

Project Performance and Group Harmony

What is the relationship between the design of
multidisciplinary project teams and project success?
Two schools of thought:
1) Humanistic school -- groups that have positive
characteristics will perform well
2) Task oriented school -- positive group
characteristics detract from group performance

Project Performance and Group Harmony (contd)

Experiment conducted using MBA students at UW and
Seattle U using computer based simulation of pre-operational
testing phase of nuclear power plant*
Total of 14 project teams (2 - 4 person project teams) with a
total of 44 team members; compared high performance (low
cost) teams vs low performance (high cost) teams
Measured:

Group Harmony
Group Decision Making Effectiveness
Extent of Individuals Contributions to Group
Individual Attributes
*Brown, K., T.D. Klastorin, & J. Valluzzi. Project Management
Performance: A Comparison of Team Characteristics, IEEE Transactions on
Engineering Management, Vol 37, No. 2 (May, 1990), pp. 117-125.

Group Harmony: High vs Low Performing Groups

6.00
5.80

Group Harmony

5.60
5.40
5.20
5.00
4.80
4.60
4.40
4.20
4.00
1

Week
High Performance (low cost) Teams

Low Performance (high cost) Teams

Extent of Individual Contribution: High vs Low

Performing Groups

Extent of Individual Contributions

6.00
5.80
5.60
5.40
5.20
5.00
4.80
4.60
4.40
4.20
4.00
1

Week
High Performance (low cost) Teams

Low Performance (high cost) Teams

Decision Making Effectiveness: High vs Low

Performing Groups

Decision Making Efectiveness

6.00
5.50
5.00
4.50
4.00
3.50
3.00
1

Week
High Performance (low cost) Teams

Low Performance (high cost) Teams

Project Organization Types

Functional: Project is divided and assigned to appropriate functional
entities with the coordination of the project being carried out by
functional and high-level managers
Functional matrix: Person is designated to oversee the project
across different functional areas
Balanced matrix: Person is assigned to oversee the project and
interacts on equal basis with functional managers
Project matrix: A manager is assigned to oversee the project and is
responsible for the completion of the project
Project team: A manager is put in charge of a core group of
personnel from several functional areas who are assigned to the
project on a full-time basis

Project Organization Continuum

Functional Matrix

Functional
Organization

Projectfullymanaged
byfunctionalmanagers

ProjectMatrix

ProjectTeam
Balanced Matrix

Organization

Projectfullymanagedby
projectteammanager

A Business School as a Matrix Organization

Dean
Associate Dean for
Undergraduate
Program

Associate Dean for

MBA Programs

Director of
Doctoral Program

Accounting
Department Chair

Larry

Zelda

Diane

Marketing
Department Chair

Curly

Bob

Barby

Finance Department
Chair

Moe

Gloria

Leslie

Matrix Organizations & Project Success

Matrix

organizations emerged in 1960s as an

alternative to traditional means of project
teams

Became
Still

popular in 1970s and early 1980s

in use but have evolved into many different

forms

Basic question: Does organizational structure

impact probability of project success?

Organizational Structure & Project Success

Studies by Larson and Gobeli (1988, 1989)

Sent questionnaires to 855 randomly selected PMI members

Asked about organizational structure (which one best describes the primary
structure used to complete the project)
Perceptual measures of project success: successful, marginal, unsuccessful
with respect to :
1) Meeting schedule
2) Controlling cost
3) Technical performance
4) Overall performance
Respondents were asked to indicate the extent to which they agreed with
each of the following statements:
1) Project objectives were clearly defined
2) Project was complex
3) Project required no new technologies
4) Project had high priority within organization

Study Data
Classification of 547 respondents (64% response rate)
30% project managers or directors of project mgt programs
16% top management (president, vice president, etc.)
26% managers in functional areas (e.g., marketing)
18% specialists working on projects
Industries included in studies
14% pharmaceutical products
10% aerospace
10% computer and data processing products
others: telecommunications, medical instruments, glass products,
software development, petrochemical products, houseware goods
Organizational structures:
13% (71): Functional organizations
26% (142): Functional matrix
16.5% (90): Balanced matrix
28.5% (156): Project matrix
16% (87): Project team

ANOVA Results by Organizational Structure

N

Controlling
Cost
Ave (SD)

Meeting
S chedule
Ave (SD)

Technical
Performance
Ave (SD)

Overall
Results
Ave (SD)

Functional
Organization

71

1.76 (.83)

1.77 (.83)

2.30 (.77)

1.96 (.84)

Functional Matrix

142

1.91 (.77)

2.00 (.85)

2.37 (.73)

2.21 (.75)

Balanced Matrix

90

2.39 (.73)

2.15 (.82)

2.64 (.61)

2.52 (.61)

Project Matrix

156

2.64 (.76)

2.30 (.79)

2.67 (.57)

2.54 (.66)

Project Team

87

2.22 (.82)

2.32 (.80)

2.64 (.61)

2.52 (.70)

Total Sample

546

2.12 (.79)

2.14 (.83)

2.53 (.66)

2.38 (.70)

10.38*

6.94*

7.42*

11.45*

Organizational Structure

F-statistic
Scheffe Results
*Statistically significant at a p<0.01 level

A,B < C,D,E

E<D
A,B < C < D,E A,B < C,D,E

A,B < C,D,E

Summary of Results
Project structure significantly related to project success
New development projects that used traditional functional organization
had lowest level of success in controlling cost, meeting schedule,
achieving technical performance, and overall results
Projects using either a functional organization or a functional matrix had
a significantly lower success rate than the other three structures
Projects using either a project matrix or a project team were more
successful in meeting their schedules than the balanced matrix
Project matrix was better able to control costs than project team
Overall, the most successful projects used a balanced matrix, project
team, or--especially--project matrix

Subcontracting = Business Alliance

n

When you subcontract part (or all) of a

project, you are forming a business
alliance....

Intelligent Business Alliances: A business relationship for

mutual benefit between two or more parties with compatible
or complementary business interests and/or goals
Larraine Segil, Lared Presentations

Communication and Subcontractors

What types of communication mechanism(s) will be
used between company and subcontractor(s)?

WHAT a company
communicates.....

HOW a company
communicates.....

How is knowledge
transferred?

Personality Compatibility
Subcontractor
Personality

Corporate
Personality

Project

Individual
Personality

Subcontracting Issues
What part of project will be subcontracted?
n What type of bidding process will be used? What type of
contract?
n Should you use a separate RFB (Request for Bids) for
each task or use one RFB for all tasks?
n What is the impact on expected duration of project?
n Use a pre-qualification list?
n Incentives? Bonus for finishing early? Penalties for
finishing after stated due date?
What is impact of risk on expected project cost?
n

Basic Contract Types

n

Fixed Price Contract

u

Cost Plus Contract

u

Client pays a fixed price to the contractor irrespective of actual audited

cost of project

Client reimburses contractor for all audited costs of project (labor, plant,
& materials) plus additional fee (that may be fixed sum or percent of costs
incurred)

Units Contract
u

Client commits to a fixed price for a pre-specified unit of work; final

payment is based on number of units produced

Incentive (Risk Sharing) Contracts

General Form:
Payment to Subcontractor = Fixed Fee + (1 - B) (Project Cost)
where B = cost sharing rate
Cost Plus Contract
B=0

Fixed Price Contract

Linear & Signalling
Contracts

B=1

Why Use Incentive Contracts?

Expected Cost of Project = $100M
Two firms bid on subcontract
Firm 1

Firm 2

Fixed Fee (bid)

$5 M

$7 M

Project Cost

$105 M

$95 M

(inefficient producer)
What is result if Cost Plus Contract (B = 0) used?

Washington State Bid Code (WAC 236-48-093)

n

n
n
n

WAC 236-48-093: A contract shall be awarded to the lowest responsible and responsive
bidder based upon, but not limited to, the following criteria where applicable and only
that which can be reasonably determined:
1) The price and effect of term discounts...price may be determined by life cycle costing if
so indicated in the invitation to bid
2) The conformity of the goods and/or services bid with invitation for bid or request for
quotation specifications depicting the quality and the purposes for which they are
required.
3) The ability, capacity, and skill of the bidder to perform the contract or provide the
services required.
4) The character, integrity, reputation, judgement, experience, and efficiency of the
bidder.
5) Whether the bidder can perform the contract with the time specified.
6) The quality of performance on previous contracts for purchased goods or services.
7) The previous and existing compliance by the bidder with the laws relating to the
contract for goods and services.
8) Servicing resources, capability, and capacity.

Competitive Bidding: Low-Bid System

n

In the low-bid system, the owner wants the most

building for the least money, while the contractor
wants the least building for the most money. The
two sides are in basic conflict.
Steven Goldblatt
Department of Building Construction
University of Washington
The Seattle Times, Nov 1, 1987

Precedence Networks
Networks represent immediate precedence relationships
among tasks (also known as work packages or activities)
and milestones identified by the WBS
Milestones (tasks that take no time and cost $0 but indicate
significant events in the life of the project)
Two types of networks: Activity-on-Node (AON)
Activity-on-Arc (AOA)
All networks: must have only one (1) starting and one (1)
ending point

Precedence Networks: Activity-on-Node (AON)

Start

End

Precedence Diagramming
Standard precedence network (either AOA or AON) assumes that a successor
task cannot start until the predecessor(s) task(s) have been completed.
Alternative relationships can be specified in many software packages:
Finish-to-start (FS = ): Job B cannot start until days after Job A is
finished
Start-to-start (SS = ): Job B cannot start until days after Job A has
started
Finish-to-finish (FF = ): Job B cannot finish until days after Job A
is finished
Start-to-finish (SF = ): Job B cannot finish until days after Job A
has started

Critical Path Method (CPM): Basic Concepts

Task A
7 months

Task B
3 months

Start
End

Task C
11 months

Critical Path Method (CPM): Basic Concepts

ESA=0
LFA=8
ESStart=0
LFStart=0

ESB=7
LFB=11
Task A
7 months

Task B
3 months

ESEnd=11
LFEnd=11

Start

End

Task C
11 months
ESC=0
LFC=11

ESj = Earliest starting time for task (milestone) j

LFj = Latest finish time for task (milestone) j

AON Precedence Network: Microsoft Project

Task A
2

Task B
7d

Wed 12/20/00 Thu 12/28/00

3d

Fri 12/29/00

Tue 1/2/01

S tart
1

0d

End

Wed 12/20/00 Wed 12/20/00

Task C
4

11d

Wed 12/20/00 Wed 1/3/01

0d

Wed 1/3/01

Wed 1/3/01

Critical Path Method (CPM): Example 2

ES A=
LFA=

TaskA
14wks
ES START=0
LF START=0

START

ES B=
LFB=

TaskB
9wks
ES C=
LFC=

TaskC
20wks

ES F =
LFF =
ES D=
LFD=

TaskD
12wks

TaskF
9 wks

ES E=
LFE=

TaskE
6 wks

ES END=
LFEND=

END

Example 2: Network Paths

Path
1
2
3
4
5

Tasks
START-A-D-F-END
START-A-D-E-END
START-B-D-F-END
START-B-D-E-END
START-C-E-END

Expected
Duration (wks)
35
32
30
27
26

Example 2: CPM Calculations

EA R L IES T

LA T EST

Task or
Milestone

Duration
( ti )

S tart Time
(ES i)

Finish Time

S tart Time

Finish Time
(LFi)

START

0
14
9
20
12
6
9
0

0
0
0
0
14
26
26
35

0
14
9
20
26
32
35
35

0
0
5
9
14
29
26
35

0
14
14
29
26
35
35
35

A
B
C
D
E
F
END

Example 2: Calculating Total Slack (TSi)

Total Slack for task i = TSi = LFi - ESi - ti

Task or
Milestone

Duration
( ti )

Earliest
Start Time
(ES i)

START

0
14
9
20
12
6
9
0

0
0
0
0
14
26
26
35

A
B
C
D
E
F
END

Lastest
Finish Time
(LFi)
0
14
14
29
26
35
35
35

Total Slack
(TSi)

Critical
Task?

Yes

Yes

5
9

No
No

Yes

3
0

No
Yes

Yes

Slack (Float) Definitions (for task i)

Total Slack (TSi)

= LFi - ESi - ti

Free Slack (FSi)

= ESi,min - ESi - ti

where ESi,min = minimum early start time of all tasks that

immediately follow task i
= min (ESj for all task j Si)

Safety Slack (SSi)

= LFi - LFi,max - ti

where LFi,max = maximum late finish time of all tasks that

immediately precede task i
= min (LFj for all task j Pi)

Independent Slack (ISi)

= max (0, ESi,min - LFi,max - ti)

Example #2: LP Model

Decision variables: STARTj = start time for task j
END = ending time of project (END milestone)

Minimize END
subject to
STARTj FINISHi
STARTj 0

for all tasks i that immediately precede task j

for all tasks j in project

where FINISHi = STARTi + ti = STARTi + duration of task i

Example #2: Excel Solver Model

Gantt Chart
February
ID

Task Name

Start

Task A

Task B

Task C

Task D

Task E

Task F

Task G

Task H

10

Task J

11

End

March
21 24 27

April

10 13 16 19 22 25 28 31

May

12 15 18 21 24 27 30

12 15 18

3/1
Workers[5]
Workers[7]
Workers[3]
Workers[12]
Workers[2]
Workers
Workers[2]
Workers[5]
Workers[6]
5/10

Microsoft Project 4.0

Project Budgeting
The budget is the link between the functional units and the project
Should be presented in terms of measurable outputs
Budgeted tasks should relate to work packages in WBS and
organizational units responsible for their execution
Should clearly indicate project milestones
Establishes goals, schedules, and assigns resources (workers,
organizational units, etc.)
Should be viewed as a communication device
Serves as a baseline for progress monitoring & control
Update on rolling horizon basis
May be prepared for different levels of aggregation
(strategic,
tactical, short-range)

Project Budgeting (contd)

Top-down Budgeting: Aggregate measures (cost,
time) given by top management based on
strategic goals

and constraints

Bottom-up Budgeting: Specific measures aggregated

up from WBS tasks/costs and subcontractors

Issues in Project Budgets

How to include risk and uncertainty factors?
How to measure the quality of a project budget?
How often to update budget?
Other issues?

Critical Path Method (CPM): Example 2

ES A=0
LFA=14

TaskA
14wks
ES START=0
LF START=0

START

ES B=0
LFB=14

TaskB
9wks
ES C=0
LFC=29

TaskC
20wks

ES F =26
LFF =35
ES D=14
LFD=26

TaskD
12wks

TaskF
9 wks

ES E =26
LFE=35

TaskE
6 wks

ES END=35
LFEND=35

END

Project Budget Example

Task or
Milestone
START

A
B
C
D
E
F
END

Duration
(tj)
0
14
9
20
12
6
9
0

Early Start
Time (ESj)

No. of
No. of
Latest Start Resource A Resource B
Time (LSj)
work ers
work ers

Material
Costs

Direct Labor Labor +

Materials
Cost/wk

0
0

0
0

340

800

1,140

0
0
14
26

5
9
14
29

4
3
0
1

12
14
8
0

$
$
$
$

125
200
560

$
$
$
$

8,800
9,600
4,800
400

$
$
$
$

8,925
9,600
5,000
960

26
35

26
35

4
-

10
-

90

7,600
-

7,690
-

Cost for Resource A worker = $400/week

Cost for Resource B worker = $600/week

Project Budget Example (contd)

Early Start Times
Task
1
A
1140
B
8925
C
9600
D
E
F
Weekly Subtotals 19665
C umulative

19665

Week
2

10

11

12

800
8800
9600

800
8800
9600

800
8800
9600

800
8800
9600

800
8800
9600

800
8800
9600

800
8800
9600

800
8800
9600

800

800

800

9600

9600

9600

19200
38865

19200
58065

19200
77265

19200
96465

19200
115665

19200
134865

19200
154065

19200
173265

10400
183665

10400
194065

10400
204465

Week

Late Start Times

Task
A
B
C
D
E
F
Weekly Subtotals
C umulative

10

11

12

1140

800

800

800

800
8925

800
8800

800
8800

800
8800

800
8800
9600

800
8800
9600

800
8800
9600

800
8800
9600

1140
1140

800
1940

800
2740

800
3540

9725
13265

9600
22865

9600
32465

9600
42065

19200
61265

19200
80465

19200
99665

19200
118865

Cumulative Costs
450000
400000

300000

Range of
feasible budgets

250000
200000
150000
100000
50000

Week
Early Start Schedule

Late Start Schedule

33

31

29

27

25

23

21

19

17

15

13

11

0
1

Cumulative Cost

350000

Weekly Costs (Cash Flows)

25000

15000

10000

5000

Week
Early Start Schedule

Late Start Schedule

33

31

29

27

25

23

21

19

17

15

13

11

0
1

Weekly Costs

20000

Managing Cash Flows

Want to manage payments and receipts
Must deal with budget constraints on
project and organization requirements (e.g.,
payback period)
Organization profitability

Cash Flow Example

Make payment
of $5000

M1
TaskA
2mos

TaskD
8mos

Receive payment
of $3000

TaskC
4mos

START

END
TaskB
8mos

TaskE
3mos

M2

Receive payment
of $3000

Cash Flow Example: Solver Model

Material Management Issues

When to order materials? How much to order?
Example:
Single material needed for Task B (2 units) and Task E (30 units)
Fixed cost to place order = S
Cost of holding raw materials proportional to number of unit-weeks in
stock
Cost of holding finished product greater than the cost of holding raw
materials
Project can be delayed (beyond 17 weeks) at cost of $P per week

Material Management Example

LSA=0

LSB=4

LSC=12

TaskA
4wks

TaskB
8wks

TaskC
5wks

2units

Start
LSD=6

LSE=12

LSF=14

TaskD
6wks

TaskE
2wks

TaskF
3wks

30units

End

Lot-Sizing Decisions in Projects

To minimize holding costs, only place orders at Late Starting Times
Can never reduce holding costs by delaying project
Time
1

Demand:

Order option #1:

32

Order option #2:

10

11

12
30

30

Choose the option that minimizes inventory cost = order cost + holding
cost of raw materials

Time-Cost Tradeoffs

Time-Cost Tradeoff Example

A

Start

End

Task

Normal
Duration

A
B
C
D

7
6
15
10

M arginal Cost
to Crash One
Normal Cost
Week
$60
$85
$55
$120

$8
$5
$10
$4

Time-Cost Tradeoff Example (contd)

Project
Duration
(weeks)

Total Direct
Cost

Critical Path(s)

Task(s) Reduced

22
21

Start-A-C-End

$320

20

Start-A-C-End

$338

19

Start-A-C-End

$348

18

Start-A-C-End

A, B

$361

Start-A-C-End
Start-A-B-End
Start-A-B-End
Start-A-B-End
Start-A-B-End

$328

Linear Time-Cost Tradeoff

In theory, the normal or expected duration of a task can be reduced by
assigning additional resources to the task
Cost
Crash
Point

Crash
cost = Ccj

Slope (bj) = Increase in cost by

reducing task by one time unit

Normal
Point

Normal
cost = CN
j

Crash time =

tcj

Normal time

N
= tj

Time

Balancing Overhead & Direct Costs

Cost

Total Cost
Indirect
(overhead)
Costs

Direct
Costs

Crash
Time

Minimum Cost
Solution

Normal Time

Project
Duration

Time-Cost Tradeoff (Direct Costs Only)

Given Normal point with cost CNj and time tNj
c

c
and time tj

and Crash point with cost Cj

Ccj CNj
Assume constant marginal cost of crashing task j = bj= c N
tj tj
Decision Variables:

Sj = Starting time of task j

END = End time of project

tj = Duration of task j
Minimize Total Direct Cost = bjtj
j

Sj Si + ti

tcj tjtNj
END = Tmax
tj , Sj 0

for all tasks i Pj

for all tasks in project

General Time-Cost Tradeoffs

Minimize Total Costs = bjtj + I (END) + P L
j

where
I = indirect (overhead) cost/time period
P = penalty cost/time period if END is delayed beyond
deadline Tmax
L = number of time periods project is delayed beyond
deadline Tmax
QUESTION: HOW TO DEFINE L?

Software Project Schedules

Observe that for the programmer, as for the chef, the urgency of
the patron may govern the scheduled completion of the task, but it
cannot govern the actual completion. An omelet, promised in ten
minutes, may appear to be progressing nicely. But when it has not
set in ten minutes, the customer has two choices--wait or eat it
raw. Software customers have the same choices.
The cook has another choice; he can turn up the heat. The result is
often an omelet nothing can save--burned in one part, raw in
another.
F.P. Brooks, The Mythical Man-Month,
20, No 12 (Dec, 1974), pp.
44-52.

Datamation, Vol

Coordination Costs (Software Development Project)

n

n
n

Assume you want to develop program that will require (approximately) 50,000 lines of
PERL code
A typical programmer can write approximately 1500 lines of code per week
Coordination time is M (M-1)/2 weeks

No. of
Programmers
1
2
3
4
5
6
7
8
9
10
11

No. of
Weeks
Coding
33.33
16.67
11.11
8.33
6.67
5.56
4.76
4.17
3.70
3.33
3.03

No. of
Total
Coordination Number of
Weeks
Weeks
0
33.33
1
17.67
3
14.11
6
14.33
10
16.67
15
20.56
21
25.76
28
32.17
36
39.70
45
48.33
55
58.03

No. of Programmers (Cost)

12

10
8

6
4

2
0
0

10

20

30

40

Total Number of Weeks

50

60

70

Brooks Law

Adding manpower to a late

software project makes it later.
n

F.P. Brooks, The Mythical Man-Month,

Datamation, Vol 20, No 12 (Dec, 1974),
pp. 44-52.

Compressing New Product Development

Projects

TraditionalMethod
Design follows a sequential pattern where
information about the new product is slowly
accumulated in consecutive stages
Stage0

Stage1

StageN

New Product Development Process

OverlappedProductDesign
Allows downstream design stages to start before
preceding upstream stages have finalized their
specifications.
Stage0
Stage1
StageN

Issues and Tradeoffs

What are the tradeoffs when moving from a
traditional sequential product design process
to an overlapped product design process?
Increased uncertainty (that leads to additional
work)
Can add additional resources to tasks to reduce
duration--but costs are increased

Classic PERT Model Defined

Since task durations are now random variables, time of any
milestone (e.g., end of project) is now RV
Assume all tasks are statistically independent
Use values of j to identify expected critical path
Since time of event (e.g., ESk) is now sum of independent RVs,
central limit theorem specifies that ESk is approximately
normally distributed with mean E[ESk] and variance Var[ESk]
Expectedearlystarttimeoftaskk=EES k = max
s
where there exists s paths to task k

tasksjonpaths

Classic PERT Model (contd)

Thus, expected project duration is defined as:
ExpectProjectDuration=E[ES END ]=

tasksjonCP

VarianceofProjectDuration=Var[ES END ]=

tasksjonCP

2j

Using central limit theorem and standard normal distribution:

P ESENDTmax =P z

TmaxE ESEND
Var ESEND

PERT Example #1
TaskB
Programming
TaskE
Implementation

Start

TaskA
Requirements
Analysis

TaskC
Hardware
Acquisition

TaskF
Testing

End

TaskD
User
Training

Duration Estimates
Task
A
B
C
D
E
F
END

Description
Requirements Analysis
Programming
Hardware ac quisition
User training
Implementation
Testing
End of projec t

Predecessors
none
A
A
A
B, C
E
D, F

Optimistic
2
4
2
12
3
3
0

Pessimistic
14
12
13
18
7
7
0

Likely

Expected
Duration

Variance

6
7
8
14
5
4
0

6.67
7.33
7.83
14.33
5.00
4.33
0.00

4.00
1.78
3.36
1.00
0.44
0.44
0.00

PERT Example #1 (contd)

TaskB
Programming
TaskE
Implementation

Start

TaskA
Requirements
Analysis

TaskC
Hardware
Acquisition

TaskF
Testing

End

TaskD
User
Training

Task
B,C,D
E
F
End

Path
S tart-A
S tart-A-C
S tart-A-C-E
S tart-A-C-E-F-End

PERT Expected Duration =

PERT Variance =

Expected
Early Start
6.67
14.50
19.50
23.83
23.83
8.250

Variance

Due Date

Zi

4.00
7.36
7.81
8.25

6
15
20
25

-0.33
0.18
0.18
0.41

Expected CP

= {Start, A, C, E, F, End}

Pr(zi)
0.37
0.57
0.57
0.66

PERT Example #2
TaskA
A=4
2A=2

TaskC
C=10
C2=5

END

START
TaskB

TaskD

B=12

D=3

B2=4

2D=1

Example #3: Discrete Probabilities

Task A
(8.0)
Task D
(9.3)
Task B
(10.0)

S TART

END

Task C
(19.0)

Task A

Task B

Task C

Task D

Value

Prob

Value

Prob

Value

Prob

Value

Prob

0.333

0.2

0.2

0.3

0.333

12

0.8

15

0.2

12

0.7

0.333

25

0.6

Example #3 (contd)
Task A
Combination
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36

Value
7
7
7
7
7
7
7
7
7
7
7
7
8
8
8
8
8
8
8
8
8
8
8
8
9
9
9
9
9
9
9
9
9
9
9
9

Task B
Prob
0.333
0.333
0.333
0.333
0.333
0.333
0.333
0.333
0.333
0.333
0.333
0.333
0.333
0.333
0.333
0.333
0.333
0.333
0.333
0.333
0.333
0.333
0.333
0.333
0.333
0.333
0.333
0.333
0.333
0.333
0.333
0.333
0.333
0.333
0.333
0.333

Value
2
2
2
2
2
2
12
12
12
12
12
12
2
2
2
2
2
2
12
12
12
12
12
12
2
2
2
2
2
2
12
12
12
12
12
12

Task C
Prob
0.2
0.2
0.2
0.2
0.2
0.2
0.8
0.8
0.8
0.8
0.8
0.8
0.2
0.2
0.2
0.2
0.2
0.2
0.8
0.8
0.8
0.8
0.8
0.8
0.2
0.2
0.2
0.2
0.2
0.2
0.8
0.8
0.8
0.8
0.8
0.8

Value
5
5
15
15
25
25
5
5
15
15
25
25
5
5
15
15
25
25
5
5
15
15
25
25
5
5
15
15
25
25
5
5
15
15
25
25

Task D
Prob
0.2
0.2
0.2
0.2
0.6
0.6
0.2
0.2
0.2
0.2
0.6
0.6
0.2
0.2
0.2
0.2
0.6
0.6
0.2
0.2
0.2
0.2
0.6
0.6
0.2
0.2
0.2
0.2
0.6
0.6
0.2
0.2
0.2
0.2
0.6
0.6

Value
3
12
3
12
3
12
3
12
3
12
3
12
3
12
3
12
3
12
3
12
3
12
3
12
3
12
3
12
3
12
3
12
3
12
3
12

Prob
0.3
0.7
0.3
0.7
0.3
0.7
0.3
0.7
0.3
0.7
0.3
0.7
0.3
0.7
0.3
0.7
0.3
0.7
0.3
0.7
0.3
0.7
0.3
0.7
0.3
0.7
0.3
0.7
0.3
0.7
0.3
0.7
0.3
0.7
0.3
0.7

Critical

Prob of

Length

Path
A, D
A, D
C
A, D
C
C
B, D
B, D
B, D
B, D
C
C
A, D
A, D
C
A, D
C
C
B, D
B, D
B, D
B, D
C
C
A, D
A, D
C
A, D
C
C
B, D
B, D
B, D
B, D
C
C

CP
0.004
0.009
0.004
0.009
0.012
0.028
0.016
0.037
0.016
0.037
0.048
0.112
0.004
0.009
0.004
0.009
0.012
0.028
0.016
0.037
0.016
0.037
0.048
0.112
0.004
0.009
0.004
0.009
0.012
0.028
0.016
0.037
0.016
0.037
0.048
0.112

of CP
10
19
15
19
25
25
15
24
15
24
25
25
11
20
15
20
25
25
15
24
15
24
25
25
12
21
15
21
25
25
15
24
15
24
25
25

PATHS
A ,D

B, D

0.004
0.009
0.000
0.009
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.004
0.009
0.000
0.009
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.004
0.009
0.000
0.009
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000

0.000
0.000
0.000
0.000
0.000
0.000
0.016
0.037
0.016
0.037
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.016
0.037
0.016
0.037
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.016
0.037
0.016
0.037
0.000
0.000

0.000
0.000
0.004
0.000
0.012
0.028
0.000
0.000
0.000
0.000
0.048
0.112
0.000
0.000
0.004
0.000
0.012
0.028
0.000
0.000
0.000
0.000
0.048
0.112
0.000
0.000
0.004
0.000
0.012
0.028
0.000
0.000
0.000
0.000
0.048
0.112

6.8%

32.0%

61.1%

Example #3 (contd)
Length of
CP's
10
11
12
15
19
20
21
24
25

Cumulative
Prob
0.004
0.004
0.004
0.108
0.019
0.019
0.019
0.224
0.599

Prob
0.00
0.01
0.01
0.12
0.14
0.16
0.18
0.40
1.00

Criticality Indices
Task A

Task B

Task C

Task D

6.8%

32.0%

61.1%

38.8%

Expected Project Duration = 23.22

Monte-Carlo Simulation (PERT Example 1)

Task
A
B
C
D
E
F
END

Run
1
2
3
4
5
6
7

Task Duration
(Uniform Dist)
4.99
4.75
3.38
12.20
5.94
5.34
0.00

Project Duration
31.07
27.41
23.97
28.93
26.85
28.82
28.77

197
198
199
200

30.37
29.78
25.33
29.70

Ave
Var

27.13
16.777

Early
Start

Latest
Finish

Total
Slack

Expected
Duration

Variance

0
4.99
4.99
4.99
9.74
15.68
21.02

4.99
9.74
9.74
21.02
15.68
21.02
21.02

0.00
0.00
1.36
3.83
0.00
0.00
0.00

6.67
7.33
7.83
14.33
5.00
4.33
0.00

4.00
1.78
3.36
1.00
0.44
0.44
0.00

t(B)
1
0
1
0
1
0
0

t(C)
0
1
0
1
0
0
1

t(D)
0
0
0
0
0
1
0

t(E)
1
1
1
1
1
0
1

t(F)
1
1
1
1
1
0
1

1
0
0
1

0
0
0
0

1
1
1
1

1
1
1
1

42.0%

9.5%

90.5%

90.5%

0
1
1
0
48.5%

Project Makespan
95% Confidence interval
99% Confidence interval

Lower Limit
26.56
26.37

Upper Limit
27.72
27.90

Calculating Confidence Intervals

For a confidence interval, we can use the sample mean X
and the estimated standard error of the mean
sX= sn
where s is the sample standard deviation and n is the
number of trials
Using a normal approximation, a (1- ) twosided confidence interval is given by

+
X z

/2sX

New Product Development Projects

Lease
Mfg/Office
Space

Beta test fails (with

probability of 0.25)
and rework is needed

Design of
physical unit
Assemble prototype

Beta test
prototype

START
END
Identify/hire
staf

Electronics
design

Software

Beta test fails (with

probability of 0.25)
and rework is needed

New Product Development Projects (contd)

Lease
Mfg/Office
Space

Design of
physical unit

Prob = .75
Assemble prototype

START

END

Beta test
prototype
Prob = .25

Identify/hire
staf

Electronics
design

Beta test fails and

rework is needed
Software

Critical Chain and the Theory of Constraints (TOC)

Project Goal (according to Goldratt): Meet Project Due Date

Use deterministic CPM model with buffers to deal with any

uncertainties,
Place project buffer after last task to protect the customers
completion schedule,
Exploit constraining resources (make certain that resources are
fully utilized),
Avoid wasting time slack time by encouraging early task
completions,
Carefully monitor the status of the buffer(s) and communicate
this status to other project team members on a regular
basis, and
Make certain that the project team is 100 percent focused on
critical chain tasks

Project Buffer Defined

Project Buffer is placed at the end of the project to protect the
customers promised due date

TaskB
Programming
TaskE
Implementation

Start

TaskA
requirements
analysis

TaskC
Hardware
acquisition

TaskF
Testing

Project
Buffer

TaskD
User
User
training

PERT Example #1 Revisited with Project Buffer

End

Calculating Project Buffer Size

For those who want a scientific approach to sizing
buffers....
For tasks k on critical chain, we can calculate project buffer
using following formula that project will be completed
within worst-case duration estimates around 90 percent of
the time:

Buffer=

taskskoncriticalchain

tpk k 2

Implications of Project Uncertainty

Task A

END

START
Task B

Assume that the duration of both tasks A and B are described by a

normal distribution with a mean of 30 days
What is the probability that the project will be completed within 30
days?

Uncertainty and Worker Behavior

Consider a project with two tasks that must be completed serially
The duration of each task is described by a RV with values Ti (i = 1, 2)

Start

Task 1

Task 2

End

Values of T 1

Prob

Values of T 2

Prob

7
8
9

0.3
0.4
0.3
8.0

14
18

0.5
0.5
16

Parkinsons Law (Expanding Work)

Work expands so as to fill the time available for its
completion
Professor C.N. Parkinson (1957)
Set a deadline D = 24 days
So T(D) = project makespan (function of D) where
E[T(D)] = E(T1) + E(T2) + E[max(0, D - T1 - T2)]
Values of T 1
7
7
8
8
9
9

Prob
0.3
0.3
0.4
0.4
0.3
0.3

Values of T 2
14
18
14
18
14
18

Prob
0.5
0.5
0.5
0.5
0.5
0.5

E[T(D)] = 25 days

Project
Makespan
24
25
24
26
24
27

Prob
0.15
0.15
0.2
0.2
0.15
0.15

Procrastinating Worker
Set a deadline D = 24 days
E[T(D)] = E(T1) + E(T2) + E{max[0, D - T1 - E(T2)]}

Values of T 1
7
8
9

Prob
0.3
0.4
0.3
8

E[Delay] =
max[0, D - T1 - E(T2)]

E[Makespan]

1
0
0
0.3

24
24
25
24.30

Can show that E[T(D)] E[T(D)] D

What are the implications for project managers?

Schoenbergers Hypothesis
An increase in the variability of task durations will
increase the expected project duration.

Schoenbergers Hypothesis Illustrated

Task A

END

START

Task B

Duration of
Task A
12
14
16
14.0

Probability
0.1
0.8
0.1

Duration of
Task B

Probability

10
15

0.5
0.5

12.5

Schoenbergers Hypothesis Illustrated

Realization
1
2
3
4
5
6

Task A
Duration
12
14
16
12
14
16

Task B
Duration
10
10
10
15
15
15

Probability
0.05
0.4
0.05
0.05
0.4
0.05

Max (A, B)
12
14
16
15
15
16

Expected duration equals 14.55 days

Increasing the variance of Task A:
Duration of
Task A
12
14
16
14.0

Probability
0.3
0.4
0.3

Duration of
Task B
10
15

Probability
0.5
0.5

12.5

Results in an increased expected duration = 14.65 days

Risk Management
All projects involve some degree of risk
Need to identify all possible risks and outcomes
Need to identify person(s) responsible for managing
project risks
Identify actions to reduce likelihood that adverse
events will occur

Risk Analysis
Risk Exposure (RE) or Risk Impact =
(Probability of unexpected loss) x (size of loss)
Example: Additional features required by client
Loss: 3 weeks
Probability: 20 percent
Risk Exposure = (.20) (3 weeks) = .6 week

How to Manage Project Risks?

Preventive Actions
Actions taken in anticipation of adverse events
May require action before project actually begins
Examples?

Contingency Planning
What will you do if an adverse event does occur?
Trigger point invokes contingency plan
Frequently requires additional costs

Risk and Contracts

High

Low

Low

High

Degree of Risk
Contractor
Client
Fixed Price Contract

Cost Plus Contract

Elements
Cost Plus
can be
T&M
with
Firm price renegotiated Incentives with limits Incentives

Time &
materials

Tornado Diagram
Wage Rate
Direct Labor Hours
M aterial Units Needed

$1260
$1290

$1760
1760
$1700
$1720

$1265

$1680

$1310
1310
$1350

Early Completion Bonus

Material Unit Cost

$1690

$1350

Interest rates
Energy costs

$1640

$1380
$1400

Overhead
$1200

$1300

$1620
$1625

$1400

$1500

$1600

Project Cost ($000's)

$1700 $1800

Sensitivity Chart
Wage Rate
Direct Labor Hours
M aterial Units Needed
Early Completion Bonus
M aterial Unit Cost
Interest rates
Energy costs
Overhead

0.85
0.73
0.62
-0.45
0.42
0.28
0.19
0.10
-0.5

0.5

1.0

Rank Order Correlation with Total Project Cost

Van Allen Company

Task

Immediate
Predecessors

Start
A
B
C
D
E
F
G
H
I
End

Start
Start
B
A
A
C, D
C, D
G
E, G
F, H, I

Strike
(wks)

Time

Cost

Time

Cost

3
1
5
2
2
5
4
1
1
0

$60
$50
$70
$60
$50
$90
$60
$40
$50
-

5
5
10
7
6
11
6
5
4
0

$40
$30
$40
$40
$30
$60
$30
$20
$20
-

Prob

3
0.45
4
0.3
5
0.25
E[Strike Duration]

Expected
Duration
1.35
1.20
1.25
3.80

Resource Allocation & Leveling

Resource Leveling: Reschedule the noncritical
tasks to smooth resource requirements

Resource Allocation: Minimize project

duration to meet resource availability constraints

Resource Allocation & Leveling

Three types of resources:
1) Renewable resources: renew themselves
at the beginning of each time period (e.g.,
workers)
2) Non-Renewable resources: can be used at
any rate but constraint on total number
available
3) Doubly constrained resources: both
renewable and non-renewable

Resource Leveling
Task C
9 wks

Task A
3 wks

Task D
5 wks

S TART

Task G
5 wks

Task B
2 wks

END

Task E
3 wks

Task F
2 wks

Task
A
B
C
D
E
F
G

Workers
7
3
2
10
4
5
6

Duration (tj)
3
2
9
5
3
2
5

Early S tart
0
0
3
3
2
2
8

Late S tart
0
3
4
3
5
11
8

Resource Leveling: Early Start Schedule

Early Start Schedule

Number of Workers Needed

25
20
Task G
Task F
Task E
Task D
Task C
Task B
Task A

15

10
5
0
1

7
Week

10

11

12

13

Resource Leveling: Late Start Schedule

Late Start Schedule

Number of Workers Needed

18
16
14

Task G
Task F
Task E
Task D
Task C
Task B
Task A

12
10
8
6
4
2
0
1

7
Week

10

11

12

13

Resource Leveling: Microsoft Project

Dec 17, '00
T

Dec 24, '00

10

10

Dec 31, '00

10

10

10

10

10

Jan 7, '01

10

10

16

16

16

16

16

21

21

21

25

20

15

10

Workers

10

Overallocated:

Allocated:

Renewable Resource Allocation Example

(Single Resource Type)
3workers

6workers

TaskA
4 wks

TaskC
1 wk

TaskE
4 wks

START

TaskB
3 wks

TaskD
5 wks

5workers

8workers

7workers

Maximum number of workers available = R = 9 workers

END

Resource Allocation Example: Early Start Schedule

Task C:
6 workers

Task A:
3 workers
S tart

End
Task B:
5 workers

Task E:
7 workers

Task D:
8 workers

Week

10

11

12

No. of Workers/wk
Cumulative Workers
"Wasted" worker-wks

8
8
1

8
16
1

8
24
1

11
35
-

14
49
-

8
57
-

8
65
-

8
73
-

7
80
-

7
87
-

7
94
-

7
101
-

Maximum number of workers available = R = 9 workers

Resource Allocation Example: Late Start Schedule

Task A:
3 workers
S tart

Task C:
6 workers

End

Task B:
5 workers

Task E:
7 workers

Task D:
8 workers

Week

10

11

12

No. of Workers/wk
Cumulative Workers
"Wasted" worker-wks

5
5
-

5
10
-

5
15
-

11
26
-

11
37
-

11
48
-

11
59
-

14
73
-

7
80
2

7
87
2

7
94
2

7
101
2

Maximum number of workers available = R = 9 workers

Resource Allocation Heuristics

n

Some heuristics for assigning priorities to available tasks j, where

number of units of resource k used by task j

1) FCFS: Choose first available task

2) GRU: (Greatest) resource utilization =

n
n

Rkj denotes the

Rkj

Rkj tj

3) GRD: (Greatest) resource utilization x task duration = k

k
4) ROT: (Greatest) resource utilization/task duration = Rj /tj
k

5) MTS: (Greatest) number of total successors

6) SPT: Shortest processing time = min {tj}

7) MINSLK: Minimum (total) slack

8) LFS: Minimum (total) slack per successor

9) ACTIMj: (Greatest) time from start of task j to end of project = CP - LSj

10) ACTRESj: (max) (ACTIMj)

11) GENRESj: w ACTIMj + (1-w) ACTRESj where 0 w 1

Resource Allocation Problem #2

Start

Task A1
6 days

Task A2
4 days

Task B1
3 days

Task B2
5 days

Task C1
2 days

Task C2
5 days

Gold Crew

Purple Crew

End

How to schedule tasks to minimize project makespan?

Priority scheme: schedule tasks using total slack (i.e., tasks with
smaller total slack have higher priority)

Gold Crew

Purple
Crew

Task A 1

Task B1

Task C1
9

10

11

12

10

11

12

Task A 2
8

13

14

15

16

17

15

16

17

Task B2
13

14

18

19

20

Task C2
18

19

20

Resource Allocation Example (contd)

But, can we do better? Is there a better priority scheme?

Gold Crew

Purple
Crew

10

11

12

13

14

15

16

17

18

19

20

10

11

12

13

14

15

16

17

18

19

20

Microsoft Project Solution (Resource Leveling Option)

Solution by: Microsoft Project 2000

Critical Chain Project Management

Identify the critical chain: set of tasks that determine the overall
duration of the project
Use deterministic CPM model with buffers to deal with uncertainty
Remove padding from activity estimates (otherwise, slack will be
wasted). Estimate task durations at median.
Place project buffer after last task to protect customers completion
schedule
Exploit constraining resource(s)
Avoid wasting slack times by encouraging early task completions
Have project team focus 100% effort on critical tasks
Work to your plan and avoid tampering
Carefully monitor and communicate buffer status

Critical Chain Buffers

Project Buffer

: placed after last task in project to protect schedule

Feeding Buffers

: placed between a noncritical task and a critical task

when the noncritical task is an immediate predecessor of the critical task

Resource Buffers
resource type

: placed just before a critical task that uses a new

Critical Chain Illustrated

Feeding Buffers
Task C1
2 days

Task B1
3 days

Task A1
6 days

End

Start

Task C2
5 days

Resource Buffers

Task B2
5 days

Task A2
4 days

Non-Renewable Resources
12units

TaskB
5 wks
6units

8units

TaskA
6 wks

START

TaskD
2wks

END

TaskC
3 wks
10units

Task
A
B
C
D

Duration
6
5
3
2

No. of Nonrenewable
Resources Units
Needed
6
12
10
8

Early S tart
0
6
6
11

Late S tart
0
6
8
11

Non-Renewable Resources: Graphical Solution

Cumulative Resources
Supplied

40

Cumulative Resources

36
32

Cumulative Resources
Required

28
24
20
16
12
8
4
1

10

We eks

11

12

13

14

15

16

17

18

19

20

Resource Allocation Problem #3

Issue: When is it better to team two or more
workers versus letting them work separately?
Have 2 workers, Bob and Barb, and 4 tasks: A, B, C, D
Bob and Barb can work as a team, or they can work separately
When should workers be assigned to tasks? Which configuration
do you prefer?

How to Assign Project Teams?

A

Start

End
B

Configuration #1
Bob and Barb work jointly on all four tasks; assume that they can complete each
task in one-half the time needed if either did the tasks individually

Configuration #2
Bob and Barb work independently. Bob is assigned to tasks A and C; Barb is
assigned to tasks B and D

Bob and Barb: Configuration #1

TA SK A
Duration
6
5
4
Expected
duration

Prob
0.33
0.33
0.33
5.0

TA SK B
Duration
9
6

Prob

TA SK C
Duration

0.667
0.333

12
7

8.0

Prob

TA SK D
Duration

Prob

0.6
0.4

10
6

0.25
0.75

10.0

Configuration #1
Bob and Barb work jointly on all four tasks.
What is the expected project makespan?

7.0

Bob and Barb: Configuration #2

Bob and Barb work independently. Bob is assigned to tasks A and C; Barb is
assigned to tasks B and D

Realization #

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24

A
6
6
6
6
6
6
6
6
5
5
5
5
5
5
5
5
4
4
4
4
4
4
4
4

B
9
9
9
9
6
6
6
6
9
9
9
9
6
6
6
6
9
9
9
9
6
6
6
6

C
12
12
7
7
12
12
7
7
12
12
7
7
12
12
7
7
12
12
7
7
12
12
7
7

D
10
6
10
6
10
6
10
6
10
6
10
6
10
6
10
6
10
6
10
6
10
6
10
6

Bob
A +C

Barb
B+D

max
(A +C,
B+D)

18
18
13
13
18
18
13
13
17
17
12
12
17
17
12
12
16
16
11
11
16
16
11
11

19
15
19
15
16
12
16
12
19
15
19
15
16
12
16
12
19
15
19
15
16
12
16
12

19
18
19
15
18
18
16
13
19
17
19
15
17
17
16
12
19
16
19
15
16
16
16
12

Prob
0.03
0.10
0.02
0.07
0.02
0.05
0.01
0.03
0.03
0.10
0.02
0.07
0.02
0.05
0.01
0.03
0.03
0.10
0.02
0.07
0.02
0.05
0.01
0.03

Bob and Barb: Configuration #2

Bob and Barb work independently. Bob is assigned to tasks A and C; Barb is
assigned to tasks B and D

max (A +C,
B+D)
12
13
15
16
17
18
19

Prob
0.07
0.03
0.20
0.20
0.17
0.17
0.17

Cumulative
Prob
0.07
0.10
0.30
0.50
0.67
0.83
1.00

Expected Project Makespan: 16.42

Parallel Tasks with Random Durations

Task A
START

END

Task B

Assume that both Tasks A and B have possible durations:

8 days with probability = 0.5
10 days with probability = 0.5
What is expected duration of project? (Is it 9 days?)

Project Monitoring and Control

n

It is of the highest importance in

the art of detection to be able to
recognize, out of a number of acts,
which are incidental and which are
vital. Otherwise your energy and
attention must be dissipated instead
of being concentrated.
Sherlock Holmes

Status Reporting?
OnedaymyBossaskedmetosubmitastatus
reporttohimconcerningaprojectIwasworking
on.Iaskedhimiftomorrowwouldbesoonenough.
Hesaid,"IfIwantedittomorrow,Iwouldhave
waiteduntiltomorrowtoaskforit!"
Newbusinessmanager,HallmarkGreetingCards

Control System Issues

n

What are appropriate performance metrics?

What data should be used to estimate the value of each

performance metric?

How should data be collected? From which sources? At

what frequency?

How should data be analyzed to detect current and future

deviations?

How should results of the analysis be reported? To whom?

How often?

Controlling Project Risks

Keyissuestocontrolriskduringprojecct:
(1)whatisoptimalreviewfrequency,and
(2)whatareappropriatereviewacceptancelevels
ateachstage?
Bothovermanagedandundermanaged
developmentprocessesresultinlengthydesign
leadtimeandhighdevelopmentcosts.
Ahmadi&Wang.ManagingDevelopmentRiskin
ProductDesignProcesses,1999

Project Control & System Variation

Commoncausevariation:incontrolornormal
variation
Specialcausevariation:variationcausedbyforces
thatareoutsideofthesystem
According to Deming:
Treating common cause variation as if it were special cause variation
is called tampering
Tampering always degrades the performance of a system

Control System Example #1

n

Project plan: We estimate that a task

will take 4 weeks and require
n

1600 worker-hours

At the end of Week 1, 420 worker-hours

have been used

Is the task out of control?

Control System Example (contd)

Week 2: Task expenses = 460 worker-hours
Week
1
2

Planned Cost
(BCWS)
400
400

Actual Cost
420
460

Cumulative
Actual Cost
(ACWP)
420
880

470

Cost (in worker-hours)

460
450
440
430
420
410
400
390
380
370
1

Week

Is the task out of control?

Control System Example (contd)

Week 3: Task expenses = 500 worker-hrs
Week

Planned cost
(worker-hours)

Actual cost
(worker-hours)

Cumulative cost
(worker-hours)

1
2
3

400
400
400

420
460
500

420
880
1380

600

Worker-hours

500
400
300
200
100
0
1

Week

Is the task out of control?

Earned Value Analysis

Integrates cost, schedule, and work performed
Based on three metrics that are used as the basic
building blocks:

BCWS: Budgeted cost of work scheduled

ACWP: Actual cost of work performed
BCWP: Budgeted cost of work performed

Schedule Variance (SV)

Schedule Variance (SV) = difference between value of
work completed and value of scheduled work

Schedule Variance (SV) = Earned Value - Planned Value

= BCWP - BCWS

Cost Variance (CV)

Cost Variance (CV) = difference between value of
work completed and actual
expenditures

Cost Variance (CV) = Earned Value - Actual Cost

= BCWP - ACWP

Earned Values Metrics Illustrated

Worker-Hours

Present time

Planned Value
(BCWS)

Actual Cost
(ACWP)

BAC

Cost Variance
(CV)

Earned Value
(BCWP)

Schedule Variance
(SV)

Week 1

Week 2

Week 3

Week 4

Week 5

Week 6

Relative Measure: Schedule Index

ScheduleIndex

(SI )= BCWP
BCWS

If SI = 1,

then task is on schedule

If SI > 1,

then task is ahead of schedule

If SI < 1,

then task is behind schedule

Relative Measure: Cost Index

CostIndex (CI)= BCWP
ACWP
If CI = 1,

then work completed equals

payments (actual expenditures)

If CI > 1,

then work completed is ahead

of payments

If CI < 1,

then work completed is behind

payments (cost overrun)

Example #2
W E E K
1

10

Task A (36 worker-hrs)

6

10

Task B (36 worker-hrs)

12

12

12
Task C (56 worker-hrs)
10

10

12

12

12

Weekly
Scheduled
Worker-Hrs
Cumulative

20

22

22

10

12

12

12

Scheduled
Worker-Hrs
(BCWS)

12

18

38

60

82

92

104

116

128

Example #2 (contd)
Progress report at the end of week #5:
Cumulative Percent of Work Completed:
Week

Task A
Task B
Task C

15%

30%

40%

60%

80%

25%

65%

Not started yet

Worker-Hours Charged to Project:

Week

Task A
Task B
Task C

10
15

10
10

Not started yet

Example #2 (contd)
Progress report at the end of week #5:
W E E K
1

10

12

18

38

60

82

92

104

116

128

11

19

44

64

Earned Value
(BCWP)

5.4

10.8

14.4

30.6

52.2

Schedule
Variance (SV)

-0.6

-1.2

-3.6

-7.4

-7.8

Cost Variance
(CV)

0.4

-0.2

-4.6

-13.4

-11.8

Cumulative
Scheduled
Worker-Hrs
(BCWS)
Actual WorkerHrs Used
(ACWP)

Example #2 (contd)
140
BAC
120

BCWS

Performance Metric

100

80
Cost
Variance

S chedule
Variance

60
ACWP
40
BCWP
20

0
1

6
Week

10

Using a Fixed 20/80 Rule

Cumulative Percent of Work Completed:
Week

Task A
Task B
Task C

20%

20%

20%

20%
20%
Not started yet

20%
20%

W E E K
Cumulative
S cheduled
Worker-Hrs
(BCWS )
Actual WorkerHrs Used
(ACWP)
Earned Value
(BCWP)
S chedule
Variance (S V)
Cost Variance
(CV)

10

12

18

38

60

82

92

104

116

128

11

19

44

64

7.2

7.2

7.2

14.4

14.4

1.2

-4.8

-10.8

-23.6

-45.6

2.2

-3.8

-11.8

-29.6

-49.6

Using a Fixed 20/80 Rule

140

120

Cost (in Worker-hours)

100

80

BCWS
ACWP
60

40

BCWP
20

0
1

6
Wee k

10

Updating Forecasts: Pessimistic Viewpoint

Assumes that rate of cost overrun will continue
for life of project.

EstimateatCompletion (EAC) = ACWP BAC = 1 BAC .

BCWP
CI
= (64/52.2) 128 = 1.23 x 128 = 156.94 worker-hrs

Updating Forecasts: Optimistic Viewpoint

Assumes that cost overrun experienced to date
will cease and no further cost overruns will be
experienced for remainder of project life

EstimateatCompletion (EAC) =BAC CV =128+11.8=139.8worker hrs .

Multi-tasking with Multiple Projects

How to prioritize your work when you have multiple
projects and goals?
Consider two projects with and without multi-tasking
Project A

A-1

B-1

Project B

A-2

B-2

A-3

B-3

A-4

B-4

Due-Date Assignment with Dynamic Multiple Projects

Projects arrive dynamically (common situation for both
manufacturing and service organizations)
How to set completion (promise) date for new projects?
Firms may have complete control over due-dates or only partial
control (i.e., some due dates are set by external sources)
How to allocate resources among competing projects and tasks (so
that due dates can be realized)?
What are appropriate metrics for evaluating various rules?

What Does the Research Tell Us?

Study by Dumond and Mabert* investigated four due date assignment
rules and five scheduling heuristics
Simulated 250 projects that randomly arrive over 2000 days
average interarrival time = 8 days
6 - 49 tasks per project (average = 24); 1 - 3 resource types
average critical path = 31.4 days (range from 8 to 78 days)
Performance criteria: 1) mean completion time
2) mean project lateness
3) standard deviation of lateness
4) total tardiness of all projects
Partial and complete control on setting due dates
* Dumond, J. and V. Mabert. Evaluating Project Scheduling and Due Date Assignment Procedures:
An Experimental Analysis Management Science, Vol 34, No 1 (1988), pp 101-118.

Experimental Results
No one scheduling heuristic performs best across all due date
setting combinations
Mean completion times for all scheduling and due date rules not
significantly different
FCFS scheduling rules increase total tardiness
SPT-related rules do not work well in PM (SASP)
Best to use more detailed information to establish due dates

Project Management Maturity Models

Methodologies to assess your organizations current level of
PM capabilities
Based on extensive empirical research that defines best
practice database as well as plan for improving PM process
Process of improvement describes the PM process from
ineffective to optimized
Also known as Capability Maturity Models

PM Maturity Model Example*

1)

Ad-Hoc

The project management process is described as disorganized, and occasionally even

chaotic. Systems and processes are not defined. Project success depends on individual effort.
Chronic cost and schedule problems.

2)

Abbreviated: Some project management processes are established to track cost, schedule,
and performance. Underlying disciplines, however, are not well understood or consistently
followed. Project success is largely unpredictable and cost and schedule problems are the norm.

3)

Organized: Project management processes and systems are documented, standardized, and
integrated into an end-to-end process for the company. Project success is more predictable.
Cost and schedule performance is improved.

4) Managed: Detailed measures of the effectiveness of project management are collected and used
by management. The process is understood and controlled. Project success is more uniform.
Cost and schedule performance conforms to plan.

5) Adaptive:

Continuous improvement of the project management process is enabled by feedback

from the process and from piloting innovative ideas and technologies. Project success is the
norm. Cost and schedule performance is continuously improving.
* source: The Project Management Institute PM Network (July, 1997), Micro Frame Technologies, Inc. and
Project Management Technologies, Inc. (http://pm32.hypermart.net/)