l1GT Planning and Controlling rojects Dossier 03 SCITECH I ~NEBS \ r I l I F' l 1\ • Management I " DOSSIER 03 PLANNING AND CONTROLLING PROJECTS Planning and Controlling Projects ! - I!' ,-' ACKNOWLEDGEMENTS This publication was developed by Scitech Educational in partnership with NEBS Management Project management: Diana Thomas (NEBS Management) Don McLeod (Scitech Educational) Series editor: Darren O'Conor Authors: William Aitken, Darren O'Conor Dossier 03: Planning and Controlling Projects A Scitech Educational publication Distributed by Scitech-DIOL ISBN 948672 67 © Copyright Scitech Educational Ltd, 2000 Every effort has been made to ensure that the information contained in this publication is true and correct at the time of going to press However, NEBS Management and Scitech Educational products and services are subject to continuous improvement and the right is reserved to change products from time to time Neither NEBS Management nor Scitech Educational can accept liability for loss or damage resulting from the use of information in this publication Under no circumstances may any part of this publication be reproduced, stored in a retrieval system or transmitted in any form or by any means, whether electronic, electrostatic, magnetic tape, mechanical, photocopying or otherwise without express permission in writing from the publisher Published by: Scitech Educational Ltd 15 - 17 The St John Business Centre St Peter's Road Margate Kent CT9 1TE Tel: +44 (0)1843231494 Fax: +44 (0)1843 231485 Website: www.universal-manager.co.uk http://www.scitechdiol.co.uk www.universal-manager.co.uk Planning and Controlling Projects CONTENTS PLANNING AND CONTROLLING PROJECTS • • • • • • • • www.universal-manager.co.uk Preface Learning Profile 03-1 Contract Management 03-2 Planning and Scheduling 33 03-3 Implementation and Control 67 03-4 Evaluation 103 Appendices Commentary on Activities Glossary Useful Resources NEBS Management Diploma 121 129 135 137 Index 139 Planning and Controlling Projects THE UNIVERSAL MANAGER SERIES Books 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 Risk Management Delivering Successful Projects Planning and Controlling Projects The Learning Organization Managing for Knowledge Obtaining and Retaining Customers Human Resource Planning Business Planning Financial Performance Managing Quality Business Relationships Managing for High Performance Managing Harmoniously 21 st Century Communication Managing for Sustainability Computer-based Resources Management Assignments (CD-ROM) Personal Developing Planning Toolkit (at www.universal-manager.co.uk) Learning Styles Toolkit (at www.universal-manager.co.uk) www.universal-manager.co.uk Planning and Controlling Projects II PREFACE Today, the concept of project management enjoys greater visibility and credibility than ever before The tools and techniques of the discipline have spread far beyond the industry sectors that developed them, and are now just as likely to be employed within a bank or hospital as in a construction or manufacturing company Project management textbooks and software packages are available in abundance, and there is no shortage of training and consultancy for organizations and individuals who want to learn how it should be done There is however a downside to this increasing awareness and buy-in to project management principles Every sector, every textbook and every software programme seems to have its own unique take on project management divergence can be found even on fundamental matters such as the definition of key terms (project, programme, design, build, etc.) Round up half a dozen project managers from different backgrounds, leave them to talk for a few minutes, and before long you will have utter confusion It is not simply that terminologies vary Even more problematic is that project managers tend to 'specialize' in what they consider to be the essential aspect of project management - for most this is planning, but many focus on the front end definition of a project before detailed planning begins, while others may concentrate on the political realm (relationship building, maintaining a high profile, and so on) The Universal Manager series attempts to take a balanced view of the total discipline in two dossiers: I'- I'- 02 03 Delivering Successful Projects Planning and Controlling Projects This dossier, Planning and Controlling Projects, examines the 'harder' skills which come into play after project start-up: contracting; planning and scheduling; monitoring, review and evaluation Key techniques discussed here include the Critical Path Method, resource allocation, earned value analysis and various financial evaluation tests Its companion, Delivering Successful Projects, concentrates on what might be considered the 'softer' project management skills: initiating and scoping projects, establishing feasibility, building the project team and dealing with the key players It also explores the evolution of project management theory from post-war US Department of Defence developments, to the more recent concepts of 'lean thinking' and 'modified design' www.universal-manager.co.uk Planning and Controlling Projects Overall, we hope that both dossiers provide a clear and even-handed view of the theories, processes, tools and techniques which together make up project management The material in both has been designed for study by practising and aspiring project managers, with an emphasis on encouraging the transfer of learning to the workplace As well as providing a wealth of information for the general reader, Planning and Controlling Projects will support candidates working towards the NEBS Management Diploma and the Management S/NVQ at Level If you are working towards either qualification, your approved centre will provide guidance on how your study of Planning and Controlling Projects fits in with the overall programme Appendix of this dossier contains information about the NEBS Management Diploma ',\ www.universal-manager.co.uk Planning and Controlling Projects II LEARNING PROFILE Topics included in this dossier are listed below Use them to make a quick judgement about the level of your current knowledge and understanding, and to highlight the sections of the dossier which will be most useful to you KEY Low Mid You have never or not recently studied this topic, nor recently applied the concepts at work You have a broad understanding of the concepts or some experience of working with them, but are not confident about your current level of knowledge High You are familiar with the concepts and their theoretical underpinning You could confidently apply the concepts in any work context (1) Contract Management ,.- The shared interest of client and contractor ,.- The advantages and disadvantages of competitive tendering - Considerations organizations should bear in mind when bidding for contracts ,.- Various types of contractual arrangement and the contexts in which they are most suitable ,.- Standard contents and clauses of project contracts ,.- How purchasing is managed on projects (2) Planning and Scheduling ,.- The purpose and construction of the Work Breakdown Structure (WBS) and Product Breakdown Structure (PBS) ,.- Techniques for costing project work ,.- How Gantt and bar charts are used in project planning and scheduling ,.- The purpose, practice and conventions of network analysis ,.- How to plot a critical path by both the Activity on Arrow and Activity on Node method ,.- The definition and significance of the following terms in Critical Path Analysis (CPA): precedence, dependency, dummy activities, split parallel activities, float, slack ,.- How the critical path method may be used to find ways of reducing project time ,.- How to analyse and present project resource requirements www.universal-manager.co.uk Low Mid High 0 0 0 0 0 0 0 0 0 0 0 0 0 0 [] 0 0 0 0 0 u 0 Planning and Controlling Projects (3) Implementation and Control ,.- How project plans are translated into strategic and operational information ,.- Various methods for communicating and reporting on project progress How project management software can enhance project '.control '.- How to specify and introduce the right project management software '.- The impact of Information and Communications Technology (ICT) on project management ,.- How ICT can be harnessed to benefit projects ,.- Various project monitoring techniques and how these should be connected to reviews of project performance and plans ,.- How costs are controlled on projects (including the technique of Earned Value Analysis) Some arguments for and against exception reporting '.,.- The significance of change management procedures on projects ,.- Techniques for identifying and addressing project problems and opportunities (4) Evaluation r.- How to perform the principle financial evaluation methods (including Payback Time, Return on Investment, Net Present Value, Discounted Cashflow) '.- The purpose and construction of the Spend curve, Cumulative Cashflow diagram, Net Present Value table and Discounted Cashflow table - The purpose and application of non-financial evaluation methods including impact assessment Low Mid High 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 www.universal-manager.co.uk Contract Management 03-1 www.universal-manager.co.uk CONTRACT MANAGEMENT 03-1-1 Tendering and Bidding 13 03-1-2 Contracts 18 03-1-3 Purchasing 27 Planning and Controlling Projects Industrial Relations Management of the workforce, including, but not limited to, statutory responsibilities and duties, negotiating terms and conditions of pay and employment, union and non-union relations, and manpower planning Information Communication Technology (ICT) Collective term for all automated systems used to transmit data: includes mobile telephones, the Internet, e-mail, video conferencing, digital television, etc Information Technology (IT) Usually computer based technology for the collection, storage, processing and presentation of data Integration Co-ordinating and controlling people, resources, processes and functions which may be dispersed geographically, functionally, temporally or hierarchically Law The legal duties, rights and processes which govern in a project situation There are several different categories of law The most important include national legal systems, such as the criminal law, but particularly company and commercial law, employment laws, contract law, health and safety and other regulatory requirements such as planning law, data protection, sexual and racial discrimination building regulations, etc Leadership Organizing, planning, controlling and directing resources Motivating the project team Management Accounting Allocating costs correctly to provide a clear view of current and forecast financial performance Marketing and Sales Matching the capacity of an organization with the needs/desires of its client base to bring about the maximum possible advantage for both parties, then getting someone to buy the product or service being offered by the company Management Development Staff planning, recruitment, development, training and assessment Mobilization The initiation of project work typically involves bringing together project personnel and securing equipment and facilities The term 'Project Start-Up' is often used to cover the same period 130 www.universal-manager.co.uk Planning and Controlling Projects Negotiation Attempting to achieve your own desired outcome from a transaction, while leaving all other parties equally satisfied at the subsequent outcome Operations and Technical Management Management of the physical resources (usually labour, equipment and materials) required for design and production of a product or service Organization Design Design of the most appropriate organizational structure for a project Performance Measurement Measurement of a project's progress in relation to planned cost and schedule, sometimes using the calculation of Earned Value Planning Creation of a project plan which details the project purpose, objectives, strategy, standards, key players, task breakdown, resource allocation, schedule and milestones Portfolio A group of projects managed by the same organization, team or individual, which are not necessarily aligned towards the same strategic objective Post Project Appraisal Usually carried out once a project's outputs or end results are in use Chief purpose is to provide feedback in order to identify key lessons learned which can benefit future projects Procurement Can include: an investment appraisal of the options available; procurement or acquisition strategy; preparation of contract documentation; acquisition; selection of suppliers; administration of contracts; and storage, inspection, expediting and handling of materials and equipment Programme A group of projects which together contribute to the achievement of the same strategic objective Programme Management Management of a suite of strategically aligned projects Project A non-routine piece of work undertaken to deliver: c.- A beneficial result c.- Of a specified quality c.- Within defined time and cost constraints c.- And which contains an element of risk www.untversal-rnanaqer.co.uk 131 Planning and Contr~lIing Projects Project Appraisal Calculating the viability of the project - will include financial, environmental, health & safety and performance appraisals Project Environment All external influences which may be brought to bear on a project Project Life Cycle The sequence of phases through which a project will pass from conception to completion Project Management Planning, organization, monitoring and control of all aspects of a project, plus the motivation of all involved to achieve the project objectives safely and within agreed time, cost and performance criteria Project Strategy High level, comprehensive definition of how a project will be developed and managed Project Success/Failure Criteria APM identifies three different types of criteria: c.- Those of the project sponsor or client Time, budget, and specification c.- Profitability c.- Quality Assuring that required standards of performance are attained Includes: defining a Quality policy; establishing a system for Quality management; Quality Assurance (QA) which defines procedural and documentation requirements; and Quality Control (QC) - the process of measuring whether a pre-defined level of performance has indeed been achieved Risk Analysis and Measurement Risk Maoagement is the process of identification, assessment, analysis and management of all project risks Safety Determining standards and methods to minimize the likelihood of accident or damage to people and equipment Ensuring that these standards are respected in operation, and reviewing them to ensure their continued validity Scheduling Selecting and applying the most appropriate techniques to create a timetable for delivery of project outputs on time and to specification 132 www.universal-manaqer.co.uk Planning and Controlling Projects Sub-project A work package for which responsibility has been delegated to someone other than the leader of the overall project Systems and Procedures These detail the standard methods, practices and processes for handling frequently occurring events within the project Systems Management Prime activities are Systems Analysis, Systems Design and Engineering and Systems Development Team Building Assembling the right project team, and creating a co-operative environment Value Analysis Application of a similar series of techniques to an existing product, process or organization Value Engineering Application of a series of proven techniques during the concept and design stages of a project Value Management A structured means of improving business effectiveness in line with strategic goals: may incorporate techniques such as Value Engineering and Value Analysis Work Definition The definition of project work and organization is achieved through the use of a Work Breakdown Structure (WBS) and an Organization Breakdown Structure (OBS) Work Package A component of the project: a piece of work contributing to project objectives, and which may be coupled with other work packages www.universal-manager.co.uk 133 Planning and Controlling Projects 134 www.universal-manager.co.uk Planning and Controlling Projects APPENDIX USEFUL RESOURCES W H Aitken (1997/98), Project Management & Operations Research, South Bank University London D HAllen (1991), Economic Evaluation of Projects, Institution of Chemical Engineers N M L Barnes (1990), Financial Control, Thomas telford Publications R Buttrick (1997), The Project Workout, Pitman Publishing J Chalmers (1997), Managing Projects, How To Books C Chapman & SWard (1998), Project Risk Management, Wiley R K Corrie (1990), Project Evaluation, Thomas Telford Publications Project Magazine, produced by the Association for Project Management B Curtis, SWard & G Chapman (1991), Roles, Responsibilities and Risks in Management Contracting, Construction Industry Research and Information Association M A Cusumano & K Nobeoka (1998), Thinking Beyond Lean, The Free Press S Ghoshal & C A Bartlett (1998), The Individualized Corporation, William Heinemann Publications R L Kliem & I S Ludin (1992), The People Side of Project Management, Gower B P Lientz & K P Rea (1998), Project Management for the 21st Century, Academic Press D Lock (1998), Project Management, Gower K Lockyer & J Gordon (1991), Critical Path Analysis and Other Project Network Techniques, Pitman P W G Morris (1997), The Management of Projects, Thomas Telford G Reiss (1996), Programme Management Demystified, E & F N Spon J R Turner (1993), The Handbook of Project-based Management, McGraw-HilI C D J Waters (1989), A Practical Introduction to Management Science, Addison-Wesley www.unlversal-manaqer.co.uk 135 Planning and Controlling Projects • WEBSITES Association for Project Management www.apm.org.uk Project Management Resources pmblvd.com www.ccta.gov.uk/prince www.pug.mcmail.com/pip/about-prince.html www.universal-manager.co.uk Planning and Controlling Projects APPENDIX NEBS Management Diploma NEBS Management is the Awarding Body for specialist management qualifications - committed to developing qualifications which meet the needs of today's managers at all levels across industry The NEBS Management Diploma is a broad management development programme aimed at practising and aspiring middle managers It offers a comprehensive, integrated programme of personal and organizational development Content During the Diploma programme, a candidate will: (.(.- r Establish a Personal Development Plan Study theory and practice in the following key management areas: (.Managing Human Resources (.Financial Management Organizational Activities and Change Management Skills Produce a specialist Management Report Compile an Individual Development Portfolio Flexibility The NEBS Management Diploma requires a minimum of 240 hours of study but can be completed on a full-time or part-time basis as appropriate Many programmes will offer a mix of direct training, open learning and practical workbased activity In connection with the Universal Manager series, the Diploma therefore offers the facility for learning in a variety of media including paperbased material, on-line resources and taught elements Assessment Assessment of performance takes a rounded view of the capability demonstrated by the candidate in assignments and specialist tasks, in the management report and portfolio, and in interview www.universal-manager.co.uk Planning and Controlling Projects Enrolment The usual entry requirements are: At least two years' relevant management experience PLUS a NEBS Management Certificate, a Management S/NVa at Level or the equivalent qualification There are many Accredited Centres approved to offer the Diploma programme in the UK and abroad Call NEBS Management on 0171 2943053 for details of your nearest Centre 138 www.universal-manager.co.uk Planning and Controlling Projects II INDEX A Activity on Arrow method 7, 43 56 Activity on Node method 7, 43, 63-6 arbitration 25, 123 Association of Consulting Engineers (ACE) 26 authorization, for change 99 ball park estimate 38 bar charts 7, 40-2, 60-3, 75, 77, 87-8, 90 bid analysis 30 brainstorming 34 British Standards 51, 64 buying-in to contracts 10 C case studies 69, 83, 112-13, 114 cash flow 8, 105, 108-14 change, managing 95-101,127,129 check point review 72 chemical plant construction industry (example) 39 clients/sponsors contracts with 12-13, 16, 20-4 desire for shortest possible timeframe 40 internal rate of return 114 obligations 123 payments 109 response to problems 100 review meetings and reports 72,75 commissioning 124 communication 71-6,84-5, 129 comparative estimate 38 competition 13, 17,20,40,99 Competitive Intelligence (CI) 17 concurrency 49 confidentiality 25, 123, 127 conflicting interests 10-11, 129 confrontational approach 89 construction 22, 26, 29, 40-1, 105, 111, 124 contingency 125 contracts management 7,9-32 standard 26, 121-3 conventions 45-6, 50-1, 64 copyright 25 correspondence 75-6 cost efficiency 13, 40 cost plus fixed fee (CPFF) contracts 21-2 costs budget management 20, 36-7, 70, 72, 90-5 capital expenditure 110 contract types 20-2 controlling see budget management subhdg above costing projects 7, 13 14,36,37-9, 124-5 currency 125 escalation 25 estimates 37-9 examples of cost items 124-5 financial evaluation 104-15 increased to save time 57 www.universal-manager.co.uk life cycle costing 30 minimizing 21 overrun 10, 100 transportation 29 see also purchasing Critical Path Analysis (CPA) 7, 42-58, 63-6, 68, 70, 77, 87, 125-7 cumulative cash flow diagram 110-11 Curtis, Ward and Chapman 10 o data collection 86 databases 84 decision-taking 72 defence/military projects, USA 10, 43 definitions 25, 121-3, 129-33 definitive estimate 38 dependency 45-7, 125 depreciation 106, 109 design see specification discounting 106,111-14,127-8 Dossier 02 'Delivering Successful Projects' 10, 120 Drucker's theory of Management by Objectives 94 dummy activities 44, 46-8,64 E e-mail 83 Earned Value Analysis 8, 92-3 economic assessment 117-18 efficiency 59 end users 73 engineering 22, 26, 29, 63 environmental controls 30 issues and risks 10, 96, 118 equivalence concept 106-7 estimates see costs; feasibility evaluation 8, 103 20 event 45 exception reporting 93 experts 73, 83 Exxon 69 F feasibility estimate 38, 95, 101, 104 feedback 73, 88 filing 76 fixed price (FP) contract 19, 20-2 float 53 7, 61, 66 fly before buy approach 96, 104 force majeure 25, 122 front end definition 11 139 Planning and Controlling Projects G Gantt charts 7, 40-2, 60-3, 68, 77, 90, 125, 126 gates 73, 104 Ghosh, Sand CA Bartlett 83 grants/loans 109 graphic presentation of information see bar charts; Critical Path Analysis (CPA); Gantt charts; histograms; pie charts; S-curve H histograms 60-2, 90 hybrid contracts 22 I impact assessment 118-19 independent reviews 73 inflation 125 Information and Communications Technology (ICT) 8, 16,76-85, 130 Information Technology see IT infrastructure 117 Innate software 78 innovation 13 Institution of Chemical Engineers 26 Institution of Civil Engineers 26 insurance 25,29,121,122 intellectual property 25, 123 interest rate 106 internal rate of return (IRR) 114-15 internet 82, 84, 119 intranet 82 issues 99-100 IT effect of likely future developments on project 16 see also Information and Communications Technology (ICT); software; websites J Japanese automotive industry 23 K knowledge bank (in-house) 84, 109 L labour see manpower late delivery 100 law and legal processes categories of law 130 contracts 11-12, 18, 24-5, 28, 30 legislative change 96 purchase orders 28, 30 learning profile 7-8 liability 25, 121 licensing 25 Lientz, BP and KP Rea 82 loading (human resource allocation) 58-9 loans/grants 109 Lock, D 78 Lucas software 78 M McKinsey Management Consultancy 83 macro and micro climates 16 management of change 95-101 quality of 59 by walkabout 89-90 140 see also project managers Management by Objectives (MBO) 94 manpower 57-9, 73,100,124,125 Mantix software 78 manufacturing 105 market intelligence 14 market research 35 meetings 71-4 Microsoft Project software 78 milestones 11, 45, 71, 87, 88, 91, 93 military requirements, and project management 10, 43 minimum attractive rate of return (MARR) 112 monitoring 8, 24, 44, 68, 85-95 Morris, PWG 10, 23 motivation 70 motor industry 23 N net present value (NPV) 111-13, 115, 128 network diagrams 42 o objectives 16, 94, 104, 120 operational assessment 117 opportunities 99-101 overheads 124 p paperwork 71 parallel activities 46, 48-9, 57 partnering arrangements 23-4, 27 payback time 105, 115, 128 payment arrangements 19-22,24,29, 121 performance bond 123 contract specifications 25, 122 measurement and control 59, 131 personal learning profile see learning profile PERT (Program Evaluation and Review Technique) 43, 45, 77 PEST model 119 PESTLE model 119 phasing 104 pie charts 90 piloting 73 planning and scheduling 7, 34-66, 68 Polaris Missile programme 43 politics (internal and external) 10, 96, 100 precedence 45 procurement see purchasing Product Breakdown Structure (PBS) 7, 36 production 109 profits 21, 109 project definitions 131-2 detailed plan 70 duration 45, 50-8, 64-6 execution plan 69-70 identifying problems 8, 88 implementation and control 67-1 01, 127 life cycle 12 monitoring see monitoring progress reports 8, 75, 85-90 schedule 85-6 summary plan 69 www.universal-manaqer.co.uk Planning and Controlling Projects project managers discretion of 70 reports and correspondence 75-6, 88-9 requirements of 24, 71 see also management prototypes see fly before buy purchase order 27-8, 30 purchasing 27-32, 108 Q quality of management 59 protecting 27,29,30, 132 review 72, 89 sacrificed 21, 93 specification 22 quotations 29 R rate of return 104-5, 112-15 regulatory legislation 96 reimbursable contract 19 Reiss, G 69, 78 relationships 35, 40 reports 75, 86-9 research and development projects 22 resources analysis of 56-7,58-63 changes and opportunities 101 histogram 63 scheduling of 44 sharing 84 see also manpower responsibilities definition of 24 matrix 70 retail industry 23 return on investment (ROI) 105-6, 115 reviews 24, 94 risk assessment and management of 12, 69-70, 75, 99-101,104,117-20 budget management 20-1 contractual responsibilities 122 procurement 29 sharing 23-5 technical and environmental 10 testing new programmes 73 specification contract 10, 22, 24, 123 evaluation of specify stage 104, 115 requisition order 29 variations 95, 100 spend curve see S-curve staff meetings 73 staffing see manpower stage payments 109 stakeholder 96 status review 72 STEEP model 119 STEP model 119 storage and retrieval system 76 strategy 8, 16 subcontractors 25, 122, 124 T target price contract 19, 23 taxation 105, 109, 113 team members access to experts 83 conflicts 100 and filing system 76 provision of information to 70, 72, 127 reporting 88-9 technical and commercial bid analysis 30 technical evaluation 10, 116-17 technology 16, 82, 101, 119 tendering and bidding for contracts 13-17, 20-2, 30, 99, 121 termination arrangements 24, 122 Timeline software 78 timescales before profit 105-14 deadlines 22, 24 planning 39-58, 63-6 review 72, 90 see also milestones Total Package Procurement (TPP) (US) 10 training 80-1, 117 transportation costs 29 U uncertainty 96 V variations (managing change) in project/contract 95-9, S S-curve 90-1, 110 safety 30, 132 schedule 85-6, 132 scoping 14, 100 self assessment 7-8 sensitivity analysis 120 slack 50,56 slippage 88 software checklist for purchasing 78-9 networkable (multi-user) 78, 82-5 piloting 73 programmes for project management 8, 41, 61, 66, 122 W websites, competitors' 17 WHTB (what has to be done) brainstorming sessions 34 Work Breakdown Structure (WBS) 7, 35, 68 77-82 resource analysis 61 spreadsheets 112-13 standardized reports 75 www.universal-manager.co.uk 141 Planning and Controlling Projects 142 www.universal-manager.co.uk Planning and Controlling Projects www.universal-manager.co.uk 143 Planning and Controlling Projects 144 www.universal-manager.co.uk ... www.universal-manager.co.uk Planning and Controlling Projects CONTENTS PLANNING AND CONTROLLING PROJECTS • • • • • • • • www.universal-manager.co.uk Preface Learning Profile 03- 1 Contract Management 03- 2 Planning and. ..I " DOSSIER 03 PLANNING AND CONTROLLING PROJECTS Planning and Controlling Projects ! - I!' ,-' ACKNOWLEDGEMENTS This publication was developed... Contract Management 03- 1 www.universal-manager.co.uk CONTRACT MANAGEMENT 03- 1-1 Tendering and Bidding 13 03- 1-2 Contracts 18 03- 1-3 Purchasing 27 Planning and Controlling Projects • 03- 1 CONTRACT MANAGEMENT