Practical Project Management
October 2006
Overview
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Introduction to Project Management
Project Management Context
Integration Management
Scope Management
Time Management
Cost Management
Quality Management
Human Resource Management
Communications Management
Risk Management
Procurement Management
2
Module 1: Introduction to
Project Management
Objectives
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Define what project is and describe project
management
Understand the history of project management
Understand the growing need for better project
management
Discuss key elements of the project management
framework
Discuss recent trends in project management
research and software products
3
Project Management Defined
Project management is the application of
knowledge, skills, tools, and techniques to
project activities in order to meet project
requirements
 A project is a temporary endeavor undertaken
to achieve a particular aim. Project
management knowledge and practices are
best described in terms of their component
processes
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4
History of Project Management
Some people argue that building the Egyptian
pyramids was a project, as was building the
Great Wall of China
 Most people consider the Manhattan Project
to be the first project to use “modern” project
management
 This three-year, $2 billion (in 1946 dollars)
project had a separate project manager and a
technical manager
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Project Management
Framework
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A set of processes, tools and templates,
designed to be used together to manage a
project through its lifecycle
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Define your project
Select a real-life project
 Define the project
 Discuss within group
 Select spokesperson
 Share with the rest
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Recent Trends in Research and
Software
7 Actions for Success: broaden views,
communicate in 3D, political operative, assert
yourself, be flexible, & sharpen social skills
 Five major challenges of today: global teams,
moving parts, development, partners, and
project portfolios
 Five levels of excellence: Level 1 is ad-hoc,
(2) planned, (3) managed, (4) integrated, and
(5) sustained
 Software: Microsoft Project
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Develop a framework
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Briefly outline your PM framework using the
real-life project previously described.
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Module 2: The Project
Management Context
Objectives
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Understand the systems view of project management
Explain the differences among functional, matrix, and project
organizational structures
Explain why stakeholder management and top management
commitment are critical for a project’s success
Understand the initiation, planning, execution, and closure
phases of the project life cycle
Understand effective project initiation, planning, execution,
control, and closing
Distinguish between project development and product
development
Discuss the unique attributes and diverse nature of
information technology projects
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List the skills and attributes of a good project manager
Systems View
Systems philosophy: View things as systems,
interacting components working within an
environment to fulfill some purpose
 Systems analysis: problem-solving approach
 Systems management: Address business,
technological, and organizational issues before
making changes to systems
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Formal Organizational Frames
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Structural frame: Focuses on roles and
responsibilities, coordination, and control.
Organization charts help define this frame.
Human resources frame: Focuses on providing
harmony between needs of the organization and
needs of people.
Political frame: Assumes organizations are
coalitions composed of varied individuals and
interest groups. Conflict and power are key issues.
Symbolic frame: Focuses on symbols and
meanings related to events. Culture is important. 12
Organizational Structures
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Organizational Structures
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Stakeholder and Top
Management Commitment
Top management can help project managers:
 Secure adequate resources.
 Get approval for unique project needs in a
timely manner.
 Receive cooperation from people throughout
the organization.
 Learn how to be better leaders.
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Project Life Cycle Phases
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Project Development vs
Product Development
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Discuss the similarities and differences of
project development versus product
development within your specific career. 5
minutes. Share with your peers.
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What makes a good project
manager?
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Discuss the skills and characteristics needed
to be a good and successful project manager.
10 minutes. Share with the rest of your peers.
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Module 3: Project
Integration Management
Objectives
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Describe an overall framework for project integration
management as it relates to the other project management
knowledge areas and the project life cycle
Understand the integrated change control process, planning
for and managing changes, and using a change control
system
Explain tools and techniques to assist in project plan
execution of integrated projects such as Gantt Charts, SCurves, and PERTs
Explain project plan execution, its relationship to project
planning, the factors related to successful results
Use guidelines and templates for developing plans and
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perform a stakeholder analysis
Project Integration
Management
Project Plan Development: taking the results
of other planning processes and putting them
into a consistent, coherent document—the
project plan
 Project Plan Execution: carrying out the
project plan
 Integrated Change Control: coordinating
changes across the entire project
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Integrated Change Control
Integrated change control involves
identifying, evaluating, and managing
changes throughout the project life cycle
 Three main objectives of change control:
 Influence the factors that create changes to
ensure they are beneficial
 Determine that a change has occurred
 Manage actual changes when and as they
occur
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Tools and Techniques
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Tools and Techniques
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Tools and Techniques
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Tools and Techniques
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Importance of Project
Planning the Execution
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Discuss the reason and importance of
preparing a plan before executing it using
cases specific to your area of responsibility.
10 minutes. Share with your peers.
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Stakeholder Analysis
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Documents important (often sensitive)
information about stakeholders such as
stakeholders’ names and organizations
 roles on the project
 unique facts about stakeholders
 level of influence and interest in the project
 suggestions for managing relationships
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Identify, Prioritize, Understand
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Stakeholder Analysis
conduct a brief stakeholder analysis
 categorize their relation and advocating of the
project
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Module 4: Project Scope
Management
Objectives
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Describe the strategic planning process, apply
different project selection methods, such as a net
present value analysis, a weighted scoring model,
and a balanced scorecard, and understand the
importance of creating a project charter
Explain the scope planning process and contents of
a scope statement
Discuss the scope definition process and construct a
work breakdown structure
Understand the importance of scope verification and
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scope change control
Strategic Planning Process
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Strategic Planning Process
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Scope Planning and Definition
Processes
Scope planning: Deciding how the scope
will be defined, verified, and controlled.
 Scope definition: Reviewing the project
charter and preliminary scope statement and
adding more information as requirements are
developed and change requests are approved.
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Scope Statement
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In your group, place the initial project to be
managed in the Scope Statement format. 10
minutes. Share with the rest of your peers.
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Work Breakdown Structure
(WBS)
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Using the same project as before and building
on previous activities, develop a WBS chart
with your group. 10 minutes. Share with the
rest of your peers.
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Basic Principles for Creating
WBSs
1. A unit of work should appear at only one place in the WBS.
2. The work content of a WBS item is the sum of the WBS items below it.
3. A WBS item is the responsibility of only one individual, even though many
people may be working on it.
4. The WBS must be consistent with the way in which work is actually going
to be performed; it should serve the project team first and other
purposes only if practical.
5. Project team members should be involved in developing the WBS to
ensure consistency and buy-in.
6. Each WBS item must be documented to ensure accurate understanding of
the scope of work included and not included in that item.
7. The WBS must be a flexible tool to accommodate inevitable changes while
properly maintaining control of the work content in the project according
to the scope statement.
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Scope Verification and Scope
Change Control
Suggestions for Reducing Incomplete and Changing
Requirements
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Develop and follow a requirements management process.
Use techniques such as prototyping, use case modeling.
Put requirements in writing and keep them current.
Create a requirements management database for
documenting and controlling requirements.
Conduct adequate testing throughout the project life cycle.
Review changes from a systems perspective.
Emphasize completion dates to help focus on what’s most
important.
Allocate resources specifically for handling change requests
and enhancements
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Module 5: Project Time
Management
Objectives
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Understand the importance of project schedules and good
project time management
Define activities as the basis for developing project schedules
Explain how various tools and techniques help project
managers perform activity duration estimating and schedule
development
Understand and use critical path analysis and critical chain
scheduling
Describe how to use several techniques for shortening
project schedules
Use a Gantt chart for schedule planning and tracking
schedule information
Discuss how reality checks and people issues are involved in
controlling and managing changes to the project schedule 37
Schedules and Time
Management
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Activity definition: Identifying the specific activities that the project
team members and stakeholders must perform to produce the project
deliverables.
Activity sequencing: Identifying and documenting the relationships
between project activities.
Activity resource estimating: Estimating how many resources a
project team should use to perform project activities.
Activity duration estimating: Estimating the number of work periods
that are needed to complete individual activities.
Schedule development: Analyzing activity sequences, activity resource
estimates, and activity duration estimates to create the project schedule.
Schedule control: Controlling and managing changes to the project
schedule.
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Scheduling and Time
Management
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Why are project schedules important? What
sort of schedule conflicts could with expect in
your specific project? 10 minutes. Share with
the rest of your peers.
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Activity Duration Estimating
After defining activities and determining their
sequence, the next step in time management
is duration estimating
 Duration includes the actual amount of time
worked on an activity plus elapsed time
 Effort is the number of workdays or work
hours required to complete a task. Effort
does not equal duration
 People doing the work should help create
estimates, and an expert should review them
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Schedule Development
Schedule development uses results of the
other time management processes to
determine the start and end date of the
project and its activities
 Ultimate goal is to create a realistic project
schedule that provides a basis for monitoring
project progress for the time dimension of the
project
 Important tools and techniques include Gantt
charts, PERT analysis, critical path analysis,
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and critical chain scheduling
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Critical Path Method
CPM is a project network analysis technique
used to predict total project duration
 A critical path for a project is the series of
activities that determines the earliest time by
which the project can be completed
 The critical path is the longest path through
the network diagram and has the least
amount of slack or float
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Finding the Critical Path
First develop a good project network diagram
 Add the durations for all activities on each
path through the project network diagram
 The longest path is the critical path
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Schedule Trade-offs
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Shorten a Project Schedule
Original
schedule
Shortened
duration thru
crashing
Overlapped
Tasks or fast
tracking 45
Critical Chain Scheduling
Critical chain scheduling is a method of
scheduling that takes limited resources into
account when creating a project schedule and
includes buffers to protect the project
completion date
 Critical chain scheduling assumes resources
do not multitask because it often delays task
completions and increases total durations
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Example of Critical Chain
Scheduling
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Scheduling using PERT
PERT weighted average formula:
optimistic time + 4X most likely time + pessimistic time
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 Example:
PERT weighted average =
8 workdays + 4 X 10 workdays + 24 workdays = 12 days
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where 8 = optimistic time, 10 = most likely time, and 24 = pessimistic time
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Scheduling
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Develop a schedule for your project using
some of the tools presented thus far. There is
no rule against combining techniques. If fact,
pulling the best from each may be
advantageous. 15 minutes. Share with the
rest of your peers.
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Controlling and Managing
Change
Review the draft schedule or estimated
completion date in the project charter.
 Prepare a more detailed schedule with the
project team.
 Make sure the schedule is realistic and
followed.
 Alert top management well in advance if
there are schedule problems.
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Managing Change
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Using the recently created schedules, assess
their reality. What things have been adjusted
to the schedule to help manage change? 10
minutes. Share with peers.
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Module 6: Project Cost
Management
Objectives
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Explain basic project cost management principles,
concepts, and terms
Understand the importance of good project cost
management
Explain cost estimating using definitive, budgetary,
and rough order of magnitude (ROM) estimates
Understand the processes involved in cost budgeting
and preparing a cost estimate
Understand the benefits of earned value
management and project portfolio management
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Cost management
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Resource planning: determining what resources and
quantities of them should be used
Cost estimating: developing an estimate of the costs
and resources needed to complete a project
Cost budgeting: allocating the overall cost estimate
to individual work items to establish a baseline for
measuring performance
Cost control: controlling changes to the project
budget
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Cost Management
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Why is good cost management important?
Why bother with it?
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Methods of Cost Estimating
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Earned Value Management
Earned Value - Planned Costs = Schedule
Variance (SV)
 Earned Value - Actual Costs = Cost Variance
(CV)
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Cost Control
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Project cost control includes
monitoring cost performance
 ensuring that only appropriate project changes
are included in a revised cost baseline
 informing project stakeholders of authorized
changes to the project that will affect costs
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Earned value management is an important
tool for cost control
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Project Portfolio Management
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Five levels for project portfolio management
Put all your projects in one database
 Prioritize the projects in your database
 Divide your projects into two or three budgets
based on type of investment
 Automate the repository
 Apply modern portfolio theory, including riskreturn tools that map project risk on a curve
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Cost Plan View
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Module 7: Project Quality
Management
Objectives
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Define project quality management
Describe quality planning and its relationship to
project scope management
Discuss the importance of quality assurance
Understand the importance of project quality
management
List the three outputs of the quality control process
Understand the tools and techniques for quality
control, such as Pareto analysis, statistical sampling,
Six Sigma, quality control charts, and testing
60
Quality Management Program
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Quality management planning and implementing
policies, procedures, and requirements.
Quality control ensuring that work is being
performed and that work is being checked prior to
its acceptance.
Quality assurance verifying that quality control tasks
are being performed.
Continuous quality improvement continually
pursuing improvement in the quality of the project
process.
Quality costs redoing a project item even when this
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increases the item's cost.
Quality Planning and Quality
Assurance
Quality Definitions
 Quality Materials
 Quality Events
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Importance of Quality Management
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Discuss the importance of quality
management and assurance. How may they
vary from project to project?
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Tools and Techniques for
Quality Control
Pareto Analysis
 Steps to identify the important causes using Pareto analysis
 Step 1: Form a table listing the causes and their frequency as
a percentage.
 Step 2: Arrange the rows in the decreasing order of
importance of the causes i.e. the most important cause first
 Step 3: Add a cumulative percentage column to the table
 Step 4: Plot with causes on x- and cumulative percentage on
y-axis
 Step 5: Join the above points to form a curve
 Step 6: Draw line at 80% on y-axis parallel to x-axis. Then
drop the line at the point of intersection with the curve on xaxis. This point on the x-axis separates the important causes
and trivial causes.
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Pareto Analysis Sample
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Six Sigma
It requires an organization-wide commitment
 Six Sigma organizations have the ability and
willingness to adopt contrary objectives, like
reducing errors and getting things done faster
 It is an operating philosophy that is customerfocused and strives to drive out waste, raise
levels of quality, and improve financial
performance at breakthrough levels
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Six Sigma
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Quality Control Chart
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Testing
Unit test
 Integration testing
 System testing
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A test plan is simply a high-level summary of
the areas (functionality, elements, regions,
etc.)
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Quality Control Plan
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What sort of tools would you use and what
will you be looking for when assessing quality
in a project?
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Module 8: Project Human
Resource Management
Objectives
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Discuss the importance of good human resource management on projects
Summarize key concepts for managing people by understanding the
theories of Abraham Maslow, Frederick Herzberg, David McClelland, and
Douglas McGregor on motivation, H. J. Thamhain and D. L. Wilemon on
influencing workers, and Stephen Covey on how people and teams can
become more effective
Discuss organizational planning and be able to create a project
organizational chart, responsibility assignment matrix, and resource
histogram
Understand important issues involved in project staff acquisition and
explain the concepts of resource assignments, resource loading, and
resource leveling
Assist in team development with training, team-building activities, and
reward systems
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Project Human Resources
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Human resource planning: Identifying and
documenting project roles, responsibilities, and
reporting relationships.
Acquiring the project team: Getting the needed
personnel assigned to and working on the project.
Developing the project team: Building individual
and group skills to enhance project performance.
Managing the project team: Tracking team
member performance, motivating team members,
providing timely feedback, resolving issues and
conflicts, and coordinating changes to help enhance
project performance.
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Keys to Managing People
Psychologists and management theorists have
devoted much research and thought to the
field of managing people at work
 Important areas related to project
management include
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motivation (intrinsic and extrinsic)
 influence and power
 effectiveness
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Abraham Maslow on
Motivation
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Herzberg’s Motivational and
Hygiene Factors
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McClelland’s Acquired-Needs
Achievement: People with a high need for
achievement seek to excel and thus tend to
avoid both low-risk and high-risk situations.
 Affiliation: Those with a high need for
affiliation need harmonious relationships with
other people and need to feel accepted by
other people.
 Power: A person's need for power can be
one of two types - personal and institutional.
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McGregor’s Theory X and
Theory Y
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Thamhain and Wilemon’s Ways to
Have Influence on Projects
1. Authority: the legitimate hierarchical right to issue orders
2. Assignment: the project manager's perceived ability to
influence a worker's later work assignments
3. Budget: the project manager's perceived ability to authorize
others' use of discretionary funds
4. Promotion: the ability to improve a worker's position
5. Money: the ability to increase a worker's pay and benefits
6. Penalty: the project manager's ability to cause punishment
7. Work challenge: the ability to assign work that capitalizes on
a worker's enjoyment of doing a particular task
8. Expertise: the project manager's perceived special knowledge
that others deem important
9. Friendship: the ability to establish friendly personal
relationships between the project manager and others
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Improving Effectiveness Covey’s 7 Habits
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Project managers can apply Covey’s 7 habits
to improve effectiveness on projects
Be proactive
 Begin with the end in mind
 Put first things first
 Think win/win
 Seek first to understand, then to be understood
 Synergize
 Sharpen the saw
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Creating a Motivating
Environment
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Discuss various instances where you have
been motivated and where you have
motivated others. Try to associate it to one or
more of the principles discussed in this
module.
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Organizational Planning
 Organizational
planning involves
identifying, documenting, and assigning
project roles, responsibilities, and
reporting relationships
 Outputs and processes include
 project
organizational charts
 work definition and assignment process
 responsibility assignment matrixes
 resource histograms
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Project Organizational Charts
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Work Definition and
Assignment Process
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Responsibility Assignment
Matrix
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Resource Histogram
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Project Staff Acquisition
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Staffing plans and good hiring procedures are
important in staff acquisition, as are
incentives for recruiting and retention
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Research shows that people leave their jobs
because they don’t make a difference, don’t
get proper recognition, aren’t learning
anything new, don’t like their coworkers, and
want to earn more money
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Resource Loading and Leveling
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Resource loading refers to the amount of
individual resources an existing project
schedule requires during specific time periods
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Resource leveling is a technique for resolving
resource conflicts by delaying tasks. The main
purpose of resource leveling is to create a
smoother distribution of resource usage and
reduce overallocation
86
Team Development Activities
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Different types of people
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Meyers-Briggs Type Indicator (MBTI)
 Extrovert/Introvert (E/I)
 Sensation/Intuition (S/N)
 Thinking/Feeling (T/F)
 Judgment/Perception (J/P)
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Social Styles Profile
Drivers
 Expressives
 Analyticals
 Amiables
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General Advice on Teams
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Be patient and kind with your team.
Fix the problem instead of blaming people.
Establish regular, effective meetings.
Allow time for teams to go through the basic team-building
stages.
Limit the size of work teams to three to seven members.
Plan some social activities to help project team members and
other stakeholders get to know each other better.
Stress team identity.
Nurture team members and encourage them to help each
other.
Take additional actions to work with virtual team members.
89
Module 9: Project
Communications Mgmt
Objectives
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Understand the importance of good communication on
projects and describe the major components of a
communications management plan
Discuss the elements of project communications planning,
including information distribution, performance reporting, and
administrative closure
Discuss various methods for project information distribution
and the advantages and disadvantages of each
List various methods for improving project communications,
such as managing conflicts, running effective meetings, using
e-mail effectively, and using templates
Understand individual communication needs and how to
determine the number of communications channels needed
for a project
90
Communications Management
Plan
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A description of a collection and filing structure for
gathering and storing various types of information
A distribution structure describing what information
goes to whom, when, and how
A format for communicating key project information
A project schedule for producing the information
Access methods for obtaining the information
A method for updating the communications
management plans as the project progresses and
develops
A stakeholder communications analysis
91
Project Communications
Management Processes
Communications planning: determining the
information and communications needs of the
stakeholders
 Information distribution: making needed
information available in a timely manner
 Performance reporting: collecting and
disseminating performance information
 Administrative closure: generating, gathering,
and disseminating information to formalize
phase or project completion
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Communications Planning
93
Information Distribution
Getting the right information to the right
people at the right time and in a useful
format is just as important as developing the
information in the first place
 Important considerations include

using technology to enhance information
distribution
 formal and informal methods for distributing
information
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94
Information Distribution
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Discuss various methods for project
information distribution and the advantages
and disadvantages of each.
95
Media Choice Table
96
Performance Reporting
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Performance reporting keeps stakeholders informed
about how resources are being used to achieve
project objectives
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Status reports describe where the project stands at a
specific point in time
Progress reports describe what the project team has
accomplished during a certain period of time
Project forecasting predicts future project status and
progress based on past information and trends
Status review meetings often include performance
reporting
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Administrative Closure
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A project or phase of a project requires
closure

Administrative closure produces
project archives
 formal acceptance
 lessons learned
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Suggestions for Improving
Project Communications
Manage conflicts effectively
 Develop better communication skills
 Run effective meetings
 Use e-mail effectively
 Use templates for project communications
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Conflict Handling Modes, in
Preference Order
Confrontation or problem-solving: directly
face a conflict
 Compromise: use a give-and-take approach
 Smoothing: de-emphasize areas of
differences and emphasize areas of
agreement
 Forcing: the win-lose approach
 Withdrawal: retreat or withdraw from an
actual or potential disagreement
100
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Running Effective Meetings
Determine if a meeting can be avoided
 Define the purpose and intended outcome of
the meeting
 Determine who should attend the meeting
 Provide an agenda to participants before the
meeting
 Prepare handouts, visual aids, and make
logistical arrangements ahead of time
 Run the meeting professionally
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 Build relationships
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Using E-Mail Effectively Tips
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Ensure it is an appropriate medium for what you
want to communicate
Be sure to send the e-mail to the right people
Use meaningful subjects
Limit the content to one main subject, and be as
clear and concise as possible
Limit the number and size of attachments
Delete e-mail you don’t need, and don’t open it if
you question the source
Make sure your virus software is up to date
Respond to and file e-mails quickly
Learn how to use important features
102
Using Templates for Project
Communications
Many people are afraid to ask for help
 Providing examples and templates for project
communications saves time and money
 Organizations can develop their own
templates, use some provided by outside
organizations, or use samples from textbooks
 Recall that research shows that companies
that excel in project management make
effective use of templates
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103
Communication Channels

Discuss various individual communication
needs and how to determine the number of
communications channels.
104
Module 10: Project Risk
Management
Objectives
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Understand what risk is and the importance of good project
risk management
Discuss the elements involved in risk management planning
Describe the risk identification process and tools and
techniques to help identify project risks
Discuss the qualitative risk analysis process and explain how
to calculate risk factors, use probability/impact matrixes, the
Top Ten Risk Item Tracking technique, and expert judgment
to rank risks
Explain the quantify risk analysis process and how to use
decision trees and simulation to quantitative risks
Discuss what is involved in risk monitoring and control
Explain the results of good project risk management
105
The Importance of Project Risk
Management
Project risk management is the art and
science of identifying, assigning, and
responding to risk throughout the life of a
project and in the best interests of meeting
project objectives
 Risk management is often overlooked on
projects, but it can help improve project
success by helping select good projects,
determining project scope, and developing
106
realistic estimates

Risk Management Planning
The main output of risk management
planning is a risk management plan
 The project team should review project
documents and understand the organization’s
and the sponsor’s approach to risk
 The level of detail will vary with the needs of
the project

107
Risk Management Planning
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Risk Identification
Risk identification is the process of
understanding what potential unsatisfactory
outcomes are associated with a particular
project
 Several risk identification tools and techniques
include

Brainstorming
 The Delphi technique
 Interviewing
 SWOT analysis

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Risk Identification
110
Activity – Identify Risks

Identify the risks using the project you have
been working on for each area of project
management covered thus far.
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Qualitative Risk Analysis

A risk analysis assesses the likelihood and
impact of identified risks to determine their
magnitude and priority. Risk quantification
tools and techniques include:
Probability/Impact matrixes
 The Top 10 Risk Item Tracking technique
 Expert judgment

112
Probability/Impact Matrices
113
Top 10 Risk Item Tracking
114
Quantitative Risk Analysis
Often follows qualitative risk analysis, but
both can be done together or separately
 Large, complex projects involving leading
edge technologies often require extensive
quantitative risk analysis
 Main techniques include

Simulation
 Decision tree analysis

115
Decision Trees and Expected
Monetary Value (EMV)
A decision tree is a diagramming method
used to help you select the best course of
action in situations in which future outcomes
are uncertain
 EMV is a type of decision tree where you
calculate the expected monetary value of a
decision based on its risk event probability
and monetary value

116
Decision Trees and Expected
Monetary Value (EMV)
117
Risk Response Planning
Risk avoidance: eliminating a specific threat
or risk, usually by eliminating its causes
 Risk acceptance: accepting the consequences
should a risk occur
 Risk transference: shifting the consequence
of a risk and responsibility for its
management to a third party
 Risk mitigation: reducing the impact of a risk
event by reducing the probability of its
occurrence

118
Risk Monitoring and Control
Monitoring risks involves knowing their status
 Controlling risks involves carrying out the risk
management plans as risks occur
 Workarounds are unplanned responses to risk
events that must be done when there are no
contingency plans
 The main outputs of risk monitoring and
control are corrective action, project change
requests, and updates to other plans

119
Good Project Risk
Management
Unlike crisis management, good project risk
management often goes unnoticed
 Well-run projects appear to be almost
effortless, but a lot of work goes into running
a project well
 Project managers should strive to make their
jobs look easy to reflect the results of wellrun projects

120
Module 11: Project
Procurement Management
Objectives







Understand the importance of project procurement
management and the increasing use of outsourcing for
information technology projects
Describe the procurement planning process, procurement
planning tools and techniques, types of contracts, and
statements of work
Discuss what is involved in solicitation planning and the
difference between a request for proposal and a request for
quote
Explain what occurs during the solicitation process
Describe the source selection process and different
approaches for evaluating proposals or selecting suppliers
Discuss the importance of good contract administration
121
Describe the contract close-out process
Procurement Management
Procurement means acquiring goods and/or
services from an outside source.
 We outsource for the following reasons:

To reduce both fixed and recurrent costs
 To allow the client organization to focus on its
core business
 To access skills and technologies
 To provide flexibility
 To increase accountability

122
Project Procurement
Management Processes






Procurement planning: determining what to procure
and when
Solicitation planning: documenting product
requirements and identifying potential sources
Solicitation: obtaining quotations, bids, offers, or
proposals as appropriate
Source selection: choosing from among potential
vendors
Contract administration: managing the relationship
with the vendor
Contract close-out: completion and settlement of the
contract
123
Project Procurement
Management Processes
124
Procurement Planning

Procurement planning involves identifying
which project needs can be best met by using
products or services outside the organization.
It includes deciding
whether to procure
 how to procure
 what to procure
 how much to procure
 when to procure

125
Make-or-buy analysis
Make or Buy Example: Assume you can lease an item you need for a
project for $150/day. To purchase the item, the investment cost is
$1,000, and the daily cost would be another $50/day. How long will it
take for the lease cost to be the same as the purchase cost? If you need
the item for 12 days, should you lease it or purchase it?
Set up an equation so the “make” is equal to the “buy.” In this example, use
the following equation. Let d be the number of days to use the item.
$150d = $1,000 + $50d
Solve for d as follows:
Subtract $50d from the right side of the equation to get
$100d = $1,000
Divide both sides of the equation by $100
d = 10 days
The lease cost is the same as the purchase cost at 10 days. If you need the
item for 12 days, it would be more economical to purchase it
126
Types of Contracts




Fixed-price or lump-sum: involve a fixed total
price for a well-defined product or service
Cost-reimbursable: involve payment to the seller
for direct and indirect costs
Time and material contracts: hybrid of both
fixed-price and cost-reimbursable, often used by
consultants
Unit price contracts: require the buyer to pay the
seller a predetermined amount per unit of service
127
Cost Reimbursable Contracts



Cost plus incentive fee (CPIF): the buyer pays
the seller for allowable performance costs plus a
predetermined fee and an incentive bonus
Cost plus fixed fee (CPFF): the buyer pays the
seller for allowable performance costs plus a fixed
fee payment usually based on a percentage of
estimated costs
Cost plus percentage of costs (CPPC): the
buyer pays the seller for allowable performance
costs plus a predetermined percentage based on
total costs
128
Contract Types Versus Risk
129
Statement of Work
A statement of work is a description of the
work required for the procurement
 Many contracts, or mutually binding
agreements, include SOWs
 A good SOW gives bidders a better
understanding of the buyer’s expectations

130
Statement of Work
131
Solicitation planning
Solicitation planning involves preparing several
documents:
 Request for Proposals: used to solicit
proposals from prospective sellers
 Requests for Quotes: used to solicit quotes
for well-defined procurements
 Invitations for bid or negotiation and initial
contractor responses are also part of
solicitation planning
132
Solicitation planning
Outline for a Request for Proposal:
I. Purpose of RFP
II. Organization’s Background
III. Basic Requirements
IV. Hardware and Software Environment
V. Description of RFP Process
VI. Statement of Work and Schedule Information
VII. Possible Appendices
A.
Current System Overview
B.
System Requirements
C.
Volume and Size Data
D.
Required Contents of Vendor’s Response to RFP
E.
Sample Contract
133
Solicitation
Solicitation involves obtaining proposals or
bids from prospective sellers
 Organizations can advertise to procure goods
and services in several ways

approaching the preferred vendor
 approaching several potential vendors
 advertising to anyone interested


A bidders’ conference can help clarify the
buyer’s expectations
134
Source selection
Source selection involves:
 evaluating bidders’ proposals
 choosing the best one
 negotiating the contract
 awarding the contract
It is helpful to prepare formal evaluation
procedures for selecting vendors. Buyers
often create a “short list.”
135
Sample Proposal Evaluation
Sheet
136
Detailed Criteria for Selecting
Suppliers
137
Contract Administration
Contract administration ensures that the
seller’s performance meets contractual
requirements
 Contracts are legal relationships, so it is
important that legal and contracting
professionals be involved in writing and
administering contracts
 Many project managers ignore contractual
issues, which can result in serious problems

138
Suggestions on Change
Control for Contracts
Changes to any part of the project need to be
reviewed, approved, and documented by the
same people in the same way that the
original part of the plan was approved
 Evaluation of any change should include an
impact analysis. How will the change affect
the scope, time, cost, and quality of the
goods or services being provided?
 Changes must be documented in writing.
Project team members should also document
all important meetings and telephone calls 139

Contract Close-out

Contract close-out includes
product verification to determine if all work was
completed correctly and satisfactorily
 administrative activities to update records to
reflect final results
 archiving information for future use


Procurement audits identify lessons learned in
the procurement process
140
Review / Summary
141