w
w
s
er
om
.c
Unit One
Preferably tutors should use examples from their own experience as questions and
discussions will be much easier to handle. However, examples are introduced in relation to
models and exercises in order to clarify the purpose of the issues.
The items dealt with in the first sessions are characterised by being of a fundamental
character and they are quite comprehensive. However, candidates need to be introduced to
basic concepts in order to establish a frame for understanding work with and management of
projects. For some candidates these sessions will mainly serve to systematise existing
knowledge and maybe put it into a new perspective; for others they will offer a range of new
concepts to learn about and relate to. However, the concepts dealt with in the initial sessions
will form a foundation and remain relevant throughout the programme.
One A
Project Concepts
Projects are often defined as autonomous activities within a regulated organisational context.
It is useful to discuss the implications of this aspect of autonomy for candidates’ projects.
What kind of autonomy will their project and Project Team enjoy? What degree of autonomy
is desirable for them and for their organisation? Advantages and disadvantages of an
autonomous status? What can be achieved and what cannot be achieved?
Definition of projects as opposed to day-to-day work can include the following statements:
·
a project is a process leading to a specific result achieved within a specific timeframe and
with specified amounts of resources
·
a project involves more than work activities; it also includes organisation, environment,
staffing, resources, finances, management and other things
·
a project is characterised by being temporary; it always has a certain starting point and a
fixed end date
·
a project is characterised by being unique; it will always imply unknown aspects and take
unpredictable turns. Thus, a project cannot be rehearsed
Examples used for illustration and discussion can include the following. Are they projects?
·
·
·
·
·
·
construction of a house
setting up an arts exhibition
preparing an evening meal for the family
redecoration of the offices
producing the company’s annual accounts
visiting the post office
Some tasks will have characteristics of projects but still be day-to-day work. There will often
be examples of ‘neither-nor’ or ‘both-and’ situations. Discussions on such examples may
enhance the understanding of project characteristics.
The Origin of Projects
We all take projects and hence all the related concepts of project management, Project
Teams, etc. for granted today. Most people would agree that project management is here to
stay and even that it is going to expand rapidly in the future. Many highly skilled people are
creating a career for themselves based on project management. To an increasing number of
© UCLES 2003
ap
eP
m
e
tr
.X
w
Notes, Comments and Exercises for Unit One
9
people, project management thinking has affected their way of perceiving problems, solutions,
ways of handling issues, etc. As a way of organising work and a method for describing
structured tasks which will lead us to innovative technology solutions, help us construct
buildings, bridges and homes, develop new products and gain new insights and knowledge,
project management is something relatively new. But do we know why project management
arose to be what it is today? What was and what is the background for committing such a
wealth of resources to develop project management and all its aspects? What initiatives were
originally taken to develop project management and why?
Exercise
Together, candidates could establish their own way of perceiving the history of project
management and describe the background of their own profession – thus getting a clearer
vision of how to handle their tasks as Project Managers.
The following quotation can be used as inspiration for discussions:
“Everything that we do occurs now. Although we speak about the past and the future, and live
in the ideas of the past and future, we exist in the present. We belong to a history that runs in
a continuous changing present. This means that history is something that happens in the
present, and this means that what we call history has to do with how we live in the
present...Consider what happens when you drop a pebble in a still pool and a wave begins to
expand. The expanding wave-front occurs wherever it is, it is a continuous ‘now’. If you select
a couple of points on the wave-front you can invent an origin for it, but the wave-front itself
exists now. Similarly we can invent an origin for the universe from observations we make
now...Whenever we want to explain the origin of something, we make a computation
according to the coherences of the past. We propose what happened such that this is so. We
propose a history.“
(Humberto Maturana at the Society for Organizational Learning Members’ Meeting, Amherst,
Massachusetts, June 1998. )
One B
Project Life Cycle
The project life cycle implies that projects are born and projects die. What kind of conditions
and which individuals facilitate the birth of the candidates’ projects? What factors, traditions
and which individuals determine the death of their projects? What could make the project life
a happy one?
Envisaging the project life cycle for a specific project can make candidates think about their
project in very concrete terms, especially if activities as well as expected outcomes of each
phase are stated. These outcome statements can be a very useful base for establishing
operational objectives to aim at throughout the project.
Using relatively small and non-complex projects as examples can facilitate candidates’
understanding of the substance of the message.
Example
A project with the purpose of establishing whether development of a long-term business
partnership between institutions A and B is viable is carried out by institution A. The project is
seen as a preparatory and clarifying phase to a potentially large and long lasting international
partnership project, the institutions being situated in different parts of the world. Thus, even if
the project in question is a small project, a thorough planning is made. The example also
serves to illustrate that an initial phase of a large project can be selected and be defined as a
full project.
The Project Manager described the following life cycle for the project (this was done upon
initial identification of institution B as potential partner):
© UCLES 2003
10
Phase
Identification
Appraisal
Definition/
Detailed planning
Approval
Implementation
Handover/
Operation
Main Activities
Expected outcome
Interviews with potential partners
and identification of joint
business opportunities in the
relevant geographic area.
Assessment of Institution B’s
attitude and approach towards
entering into a partnership.
Investigation of joint business
opportunities.
Planning of activities, allocation
of staff, internal budgeting.
Identification of most prospective
partner institution. Outline of joint
business area.
Presentation and adjustments, if
relevant, of project
implementation plan and budget.
Exchange of visits between the
two institutions. Development of
joint business plan.
Compilation of project closure
report and accounts statement.
Evaluation and internal company
presentation of findings and
recommendations.
A project plan reflected in a Gantt
chart showing implementation
activities, staffing and estimated
cost.
Project approval on the basis of
activity planning and budget.
Partner agreement on future cooperation intentions. Proposed
joint business plan submitted to
company management.
Responsibility for further action
handed over to company
management. Approval of project
report and accounts.
Describing the life cycle for a specific project with very concrete messages about activities
and expected results for each phase can help the Project Manager to think in operational
terms when planning activities. It can also be useful in the presentation towards company
management, conveying the impression that the project has been carefully considered at an
initial stage.
Exercise
Candidates spend approximately ten minutes to individually apply the envisaged life cycle to
their own project idea indicating activities and approximate duration of each phase. Discuss
some examples. Suggestions will probably vary a lot in abstraction and the discussion must
be directed to illustrate that it can be done quite specifically.
Allow another ten minutes for individual adjustments plus application of expected results for
each phase. Discuss examples again and leave the final version to individual home work or
group work.
One C
The Balance of Time, Cost, Quality of Results
The balance between the central components in a project; time, cost and quality of results, is
often illustrated by a triangle. This is due to the fact that they are interrelated; they each have
direct influence on the others.
Projects are always associated with constraints on one or more of these factors. The figure
below can be envisaged like a strange shaped tube of toothpaste and it then becomes
© UCLES 2003
11
evident that if one corner is squeezed by constraints, the pressure on the other corners will
increase.
Time
Quality of results
Cost
Exercise
· discuss examples of projects in which the time component must be given the highest
priority
· discuss examples of projects in which quality of results be given the highest priority
· discuss examples of projects in which the cost components must be given the highest
priority
· discuss in general the implication for the other two factors if further constraints are
imposed on each one after project planning and approval
· is it always important to agree the priorities with project sponsor or client?
· what can happen if you don’t?
· candidates should apply prioritising of the three factors to their own outline project, e.g. by
recognising the consequences of not achieving each of the three components ( delay,
overspending, poor results)
One D
‘Helicopter Thinking’
Candidates need to reflect on the core links between their project objectives and the
objectives of their home organisation. The helicopter mind exercise may help them to identify
these links, thus enabling them to identify their own role and the role and relevance of their
project in a larger context. It may also be useful for thinking in broader terms about solutions.
Whether thinking moves upward to the abstract or downwards to the specific is determined by
the questions asked. Thus, ‘why?’ moves up and ‘how?’ moves down. Core project issues
can be discussed within the helicopter thinking framework. In the example below, identifying
project scope is discussed:
WHY? To establish a project identity within the home organisation
↑
WHY? To define project borders, i.e. identify the limits of the project and its borderline
relations to the home organisation
↑
TASK Identifying project scope
↓
HOW? Study contractual terms from the client, identify resources available
↓
HOW? Interview project sponsor and line managers
When the ‘why?’ questions have been answered it is possible to move down from these
answers with ‘how?’ questions and explore alternative solutions:
TASK To establish a project identity within the home organisation
↓
HOW? Identify distinctions between the project and the routine activities of the home
organisation
↓
HOW? Identify the experimental and innovative aspects of the project when compared to the
home organisation
© UCLES 2003
12
One E
Stakeholders can be defined as anyone who has a direct or indirect interest in the project or
who is directly or indirectly involved in the project.
Thus, stakeholders can include the following:
·
·
·
·
·
·
the delivery organisation carrying out the project
the client or customer who has asked for the project
the recipients of the project result whom may not be the same as the customer or client
the Project Team members who work on the project
sub-suppliers to the delivery organisation
local, national or international authorities from whom the project may need approval
Exercise
·
·
·
·
·
·
·
·
identify stakeholders for a specific project
what is the role of the individual stakeholders
what are their interests
which of them will inevitably have influence on the project
which of them should be encouraged to play an active role
what are their responsibilities
who need special attention
where are the potential conflicts between stakeholders
One F
A general understanding of what Project Manager roles and responsibilities imply includes the
following:
·
·
·
·
·
·
·
carries out decisions about the project and makes sure that appropriate results are
achieved by the end of the project
is the key person to whom anyone involved in the project relates, directly or indirectly
monitors project progress and takes steps to ensure progress as desired
monitors developments in project environment and conditions and takes steps to adjust
project plans accordingly
manages the Project Team
reports to the project sponsor and negotiates changes and conditions with the sponsor
foresees occurring obstacles and takes preventive action
For identification of Project Manager, qualities the following issues can be discussed:
·
·
·
·
·
·
·
·
technical skills
knowledge
experience
influence
communication skills
leadership
interest
loyalty
© UCLES 2003
13
Exercise
Develop the list of Project Manager roles and responsibilities further with the other candidates
and add to the list of Project Manager qualities.
Ask candidates to prioritise the importance of the listed Project Manager qualities for each of
the items in the list of roles and responsibilities. Discuss the priorities.
One G
The Logical Framework Approach (also abbreviated as LogFrame or LFA) is a globally
recognised set of tools for analysing and planning projects, especially by development banks
and donors.
LFA does not necessarily relate directly to a CDPM programme. However, for many people
with some knowledge about ‘the world of projects’, LFA is conceived as synonymous with
Project Management. Thus, it can be relevant to introduce the LFA as one method among
others.
The method can be used to shed light on what the actual problem and its causes are in a
specific situation. This part is particularly useful when many stakeholders together should
identify a project. Furthermore, it can be used for planning activities to change the situation.
Like any fixed model or method it has its limitations, specifically when looking at the ability to
take occurring changes and conditions into account, once the planning has been made.
The web-page www.undp.org/seed/unso/capacity/documents/lfafinal.pdf gives a brief but
comprehensive introduction to the method.
Conducting a full LFA for candidates’ projects will be very comprehensive and time
consuming. However, an introduction to the method and reference to further information
about it can be valuable for some candidates.
A Very Brief Introduction
The main steps of the LFA method are:
·
·
·
·
situation analysis
strategy analysis
Project Planning Matrix
implementation
© UCLES 2003
(define problem and objective tree)
(define the ‘how’s and the ‘what’s)
(organise information)
(carry out project activities)
14
Frame for Project Planning Matrix
Objectively Verifiable
Indicators
Means of Verification
Description of
goals/overall
objectives to
which the
project will
contribute
Indication of what
should be achieved in
order that the project
will contribute
satisfactorily to goals/
overall objectives
Sources of information and
methods which will be used to
establish whether overall
objectives have been
achieved.
E.g. a specific planned report,
survey, financial status or
other source of information
which will measure the
achieved situation
(Government Survey 2003,
Faculty Annual Report 2003,
Company Financial Accounts
2003, etc.)
Statement of
project purpose,
and the
objectives which
the project will
achieve
Description of end-ofproject status; what will
have been achieved
when the project has
been carried out
Assumptions about
overall conditions for
carrying out the
project which,
together with
achievement of
project purpose, will
permit a planned
contribution to the
overall objectives
Assumptions about
Sources of information and
methods which will be used to conditions which
need to be fulfilled in
establish whether expected
order that the
results have been achieved.
expected project
E.g. status reports by Project
Manager or by team members results will achieve
responsible for specific activity the project purpose
areas.
Description of
Statement of Scope
outputs/
and Range for
expected results achievements
from activities
that will achieve
the project
purpose
Assumptions
Sources of information and
methods which will be used to
establish whether the project
purpose and objectives have
been achieved.
E.g. specific reports such as
Project Hand Over
Documentation, Technical
Specification List etc.
2
3
4
Description of
inputs/tasks/
activities which
will be carried
out to achieve
the expected
results
© UCLES 2003
etc.
List of project activities
including time plan,
required resources and
budget
What will be measured and
how will it be done
15
General
preconditions for the
project
In the course programme, the matrix can be useful for making relationships between overall
objectives, project purpose, expected results and planned activities more transparent. This
will require the tutor to become familiar with the preceding steps.
Manuals for funds applications from a number of donor agencies will provide further details
and worked examples of the method. They can be relevant for candidates dealing with donor
supported projects for which they have to make an application but are not generally relevant
in this course programme.
One H
Exercise
The table below can be used to check the level at which identified goals, objectives etc.
should be placed.
Overall objective
Something out of reach of the project itself but to which the project will
contribute.
Project purpose
What the project itself will achieve and its contribution to the overall
objectives
Outcome
Statements
Expected outcome of each of the six phases in the project cycle which will
fulfil the project purpose
Outcome,
Identify.
Operational
Objectives
Deliverables/
results with
success criteria
applied
Outcome,
Appraisal
Outcome,
Definition
Outcome,
Approval
Outcome, Outcome,
Implement Hand-over
A number of objectives or milestones which need to be achieved in order
that the outcome statements are fulfilled
1
1
1
1
1
1
2
.
.
2
.
..
.
.
2
.
.
.
2
.
.
.
2
2
.
.
.
3
4
5
.
The concrete and tangible results by which achievement of the individual
operational objectives is indicated. Success criteria describe the extent,
volume, quality of the deliverables assuming a 100 % success, preferably
in measurable terms. Success criteria should reflect customer priorities for
functionality, reliability, maintenance level etc.
1
1
1
1
1
1
2
.
.
2
.
..
.
.
2
.
.
.
2
.
.
.
2
2
.
.
.
3
4
5
.
© UCLES 2003
16
One I
Success criteria for deliverables are important. The client’s and/or recipient’s and/or sponsor’s
expectations must be identified in order to establish specifications and appropriate level of
quality.
Exercise
Each deliverable with applied success criteria should be examined to determine whether it is
in line with recipient’s expectations and demands. The examination criteria can be related to
prioritised aspects such as:
·
·
·
·
·
·
performance
usability
functionality
maintenance
reliability
others
Candidates should apply measurable indicators for each aspect where relevant. This can be
done individually for each deliverable and will be of great importance once the project is being
implemented. The quality must be monitored.
One J
In order to facilitate an external reader’s understanding of the assignment and make
allowance for a focus on the contents, a few basic rules should be adhered to:
·
·
·
·
·
list of contents indicating page numbers
adequate margins and spacing
not too many different fonts and sizes in the typing
division of text into paragraphs with appropriate headlines
spell check and grammar check
One K
The figures below can be used to illustrate how projects relate to the organisation:
A.
Home
Organisation
Project
Project
Project
Potential positions of projects in relation to the home organisation
© UCLES 2003
17
B.
Line Dept.
Line Dept.
Line Dept.
Line Dept.
Project
Project
Project
Potential position of projects in relation to home organisation structure
One L
When the project purpose and objectives have been clearly identified the Project Manager
must take a decision on the resources and materials needed to achieve the objectives. He
must define the areas of expertise needed, the amount of labour and necessary supply of
specific services or materials
Example: Office Decoration Project
Item/Source
Specialist on work
place functionality
Architect’s
expertise
Decoration
specialist
Carpenter
Painter
Manpower for
removals
Curtains
Supplementary
furniture
Logistics and
co-ordination
function
Project
Manager
Company
Internal
X
X
Company
External
(X)
X
X
X
X
X
X
(X)
X
The table illustrates the investigations of a Project Manager and/or a Project Sponsor to
identify the mixture of competencies needed for successful implementation of the project and
the most probable distribution of competencies/tasks on individual Project Team members.
From the table it can be seen that, there will often be issues to be discussed and decided
when recruiting human resources. For instance, the Project Manager might be recruited from
an external company – in case a specialist cannot be identified within the home organisation,
or if specialists are not available for the project implementation phase, or if it is deemed
beneficial for the project outcome that an external specialist is in charge of the project.
© UCLES 2003
18
Upon identification of necessary skills and resources, the Project Manager must establish a
Project Team to identify the specific persons and companies to be involved, ensuring the
competence and availability of each of them for the tasks in question.
In cases where resources are identified internally but may also be required from external
sources, consideration should be given to the question of optimising and balancing the
projects as well as other organisational priorities.
A Project Manager is usually in a good position if he has a strong background in the
professional area in which the project resides. He will then have to decide how much of the
professional work he himself should undertake and how much he should delegate to other
professionals in order that he can concentrate sufficiently on the management and
supervision of the project.
Exercise
Candidates should map their own professional experience with the type of project they have
in mind. Is it their professional area or will they have to rely on other team members’
expertise? With regard to the background, they should in broad terms consider what kind of
Project Team they will need, especially in terms of key functions.
© UCLES 2003
19
Notes, comments and exercises for Unit Two
Two A
Project risks are factors which can be modified by the project, by preventing them or
minimising the probability that they will happen or by lessening the impact once they occur.
Project conditions cannot be influenced by the project. They constitute the project
environment framework which must be taken into consideration when planning and
implementing the project.
Exercise
Mind-openers are useful. They often represent challenges to people because of their
everyday nature and simplicity.
This exercise aims at developing the skill to distinguish between conditions and risks.
Identify conditions and risks in the following situations while keeping in mind that conditions
are factors which cannot be influenced by the project and risks are factors which can be
influenced (but you still have to consider cost-effectiveness, quality and time aspects of
intervention, i.e. trying to prevent or to minimise the risk):
·
·
·
·
·
·
·
baking bread
driving a car
growing old
receiving an e-mail with a warning of a new and devastating virus on the internet
running classes in project management
tacit knowledge – in your home and in your organisation
etc.
Groups of project management candidates could add other similar situations and items to the
list – and investigate how risks in everyday situations are handled routinely, or without
thinking. Very often, risks are not talked about. However, a large volume of tacit
understanding between people in an organisation will make them act to prevent or to
minimise the impacts of risks. Thus, the exercise will also contribute to bringing forward tacit
knowledge – which is important to project management.
Risk analyses are important tools for an interpretation of the Project Manager’s approach to
the project and of his approach to the task as Project Manager. Risk analyses will reveal a
Project Manager’s personality, experience, degree of familiarity with the traditions of his home
organisation, etc.
This might be illustrated by letting candidates identify risks on the same project and discuss
the differences between the results of their analyses.
Most risks are negotiable. Risks against operational objectives link closely to project activities
and will primarily be discussed between the Project Manager and the Project Team.
Contingency budgets and fall-back plans most often affect project finance and/or project
duration. Risks against operational objectives will imply potential adjustments of activities and
budget.
It is possible to identify numerous risks in all kinds of projects. However, the following issues
could be discussed when identifying risks in candidate projects:
·
·
·
·
do the risks comply with the project home organisation’s tradition for perceiving threats?
who should monitor the risks and why?
what kind of reporting on risks should take place? How often?
could other measures be taken into consideration which would eliminate the risk at the
planning stage, e.g. by introducing lag time?
© UCLES 2003
28
·
how will risks affect the relationship with the Project Client? The Project Sponsor?
Two B
Risks against the overall objective for the project will lie at an overall level. Project related
risks against overall objectives are mainly constituted by fundamental issues such as a
inappropriate definition of project purpose. If this is the case in such a manner that
achievement of the project will eventually work against the overall objectives for a project, it
could be said that the project constitutes a risk against the overall objective.
Risks against Project Purpose are strategic risks which link closely to the overall strategies of
the Project Client and the home organisation of the Project Manager. They will primarily be
issues to be discussed between the Project Manager and the Project Sponsor. Risks against
project purpose will imply project change and project budget reviews.
Model for Identifying Risks Against Achieving Project Purpose
Project
Purpose
Risks identified/
scenarios
illustrating
threats against
project purpose
Expected
indicators of
risks occurring
Project Manager
actions relating
to indicators
Project Sponsor
comments
Risks against the operational objectives of the project are at a more concrete level and clearly
demand consideration by the Project Manager, who is responsible for achieving the defined
operational objectives.
A very simple schedule to account for risks identified against achievement of operational
objectives - whether or not the above exercises and methods have been used by candidates
for their individual projects could be:
Operational
Objective
Risk identified Probability of
occurrence
Impact of
occurrence
Preventive
Estimated
action/Fall-back cost
plan
It should be noted that when candidates have identified risks for a project they should check
the following:
·
·
·
when identifying risks against achievement of operational objectives, make sure that risks
of the type ‘ the objective will not be achieved’ are broken down into foreseen reasons for
not achieving the objective as these will represent the actual risks to deal with
when identifying preventive action or fall-back plans, make sure that suggestions like
‘avoid that the risk will occur’ are specified as measures to meet the risk occurrence
candidates who identify risks which are more like general conditions should include these
in the project planning and in the list of operational objectives in Assignment One Part
One
Two C
When risks against operational objectives have been identified and preventive actions / fallback plans have been defined, it may be worthwhile to consider the aspect of secondary
© UCLES 2003
29
risks. These can be defined as risks against the fall-back plan, i.e. doing the same exercise
again at the next level. However, such analyses can assume the character of Chinese boxes
in which the final or guaranteed truth about how to handle the issues will never be revealed
and it can develop into an immensely complex analysis. The main point is that candidates are
aware that even a plan to countermeasure risks can be threatened by risks.
Risk Monitoring and Responsibility
When risks are identified it can be useful to envisage in concrete terms how monitoring of
approaching risks should be taken care of. Candidates may develop their own ‘risk
surveillance system’ depending on the type of risks identified. A simple model with the
purpose of giving appropriate consideration to the issue could be:
Risk description
Responsible for
occurrence
Responsible for
monitoring
Responsible for
action
Perceiving risks and operational aspects of risks is an intellectual challenge which takes time
and effort. In many cases, it will be beneficial to introduce and work with simple work tasks in
order to clarify the concept of risk and the personal aspects involved. Thus, the following
could be discussed:
Using the examples from Two A above and leaving out the conditions, what are the actual
risks involved?
Remember to take into consideration the existing competencies of the performer which are
risk-modifying factors. There are two levels:
Level One
Candidates should imagine themselves in a situation or handling an item from the list in Two
A – individually. They should identify the risks involved while imagining themselves as
managing the situation or handling the item.
Level Two
On the basis of the results achieved at Level one, the candidates should discuss their
identified risks in groups and present an agreed list as a guideline for each case.
Identified risks could then be listed and examined in relation to probability and impact of the
risk should it occur. A simple method to deal with this is to use the grading High, Medium and
Low. For each identified risk it should then be carefully considered how likely it is that it will
occur and what the impact will be if it does.
© UCLES 2003
30
Risk identified
Probability
H
H
H
M
M
M
L
L
Impact
H
M
L
H
M
L
H
M
L
L
Based on the experience with this exercise, candidates should examine their own projects in
relation to risks against achievement of operational objectives identified for each phase.
The above model can form the basis for reflections and decisions on preventive actions, fallback plans and contingency budgets.
Quantitative Assessment of Probability and Impact
Quantitative risk assessment is an element in project budget planning. When assessing risk
probability and risk impact the result for the Project Manager will develop statements/material
which can be used for reviewing and optimising project budgets.
Project management will have four options when deciding how to handle risks:
1. Acceptance of risk
This implies that project management has decided against changing project planning because
of the risk. The reasons might be that it is not possible to identify any acceptable actions to
overcome the risk or that project management is prepared to face the risk when or if it will
appear.
2. Avoidance of risk
In order to avoid the risk, project management will change project planning in a way which will
eliminate the risk or find alternative measures to achieve objectives despite the risk
3. Transference of risk
Project management seeks to transfer the responsibility for risk occurrence and risk impact to
organisations outside the project.
4. Mitigation of risk
Project management will seek to keep the probability and impact of the risk to an acceptable
level.
For assessing both risk probability and risk impact – and for assessing optional actions
against these, a Weighted Value can be applied. This tool is purely quantitative, although it is
most often based on subjective estimate. Thus, common sense and good judgement are
required as basic instruments.
In order to achieve Weighted Values, risk probabilities must be expressed in estimated
percentages. 100% probability indicates something which will surely happen – no risk is
involved. All percentages below 100 are relevant. Furthermore, the impact of the risk
occurring must be budgeted.
© UCLES 2003
31
Example
A risk probability of occurrence is estimated to be 70% - the factor to be used in the Weighted
Value, then, is 0.7.
In case the risk occurs, the impact is estimated to cost USD 30,000.
The Weighted Value will be 0.7 X USD 30,000 = USD 21,000
This figure has to be included in the project risk or contingency budget.
Two D
Contingency costs can be defined as costs incurred by dealing with risks either in the form of
setting up preventive actions or by activities carried out once a risk has influenced the course
of the project.
A rule of thumb could be that calculation of contingency costs should be made for any
identified risk which is categorised as having a probability of occurrence as high or medium.
This requires a fall-back plan/contingency plan which must be specified sufficiently to make a
cost estimate. Calculation of contingency costs can be done in relation to the risk analysis
and assessment, or it can be done separately in relation to the budget for the individual
activities. In any case, a contingency amount, which will cover the most probable actions to
countermeasure impact of risks, must be included in the project budget for approval.
When the project budget is approved upon the detailed planning and budgeting, clear
agreements about conditions for release of contingency amounts must be made. Does the
Project Manager have the authority to spend the contingency budget without further
approval? Should each incident of incurred costs in relation to the contingency budget be
approved? Should they be approved by the sponsor or the client, etc.?
Exercise
Identify risks for which a contingency budget should be made in one or more example
candidate projects. Through group discussions, develop useful models for calculation of
costs. The following issues for discussion can be included:
· need for supplementary manpower – how much and what for
· need for expert assistance – how much and what for
· need for additional time – what is the cost impact
· etc.
© UCLES 2003
32
Two E
A budget is a guess about financial income and expenses. It should be pointed out to
candidates that project budgets are several things and that they should be aware which type
of budget they are dealing with. The candidates should be aware of at least the following:
1. The client’s budget, i.e. the price the client must pay for delivery of the project.
A customer or client will usually make a contract with the delivery organisation specifying
what will be delivered and at what price. Usually the price is based on a proposal by the
delivery organisation and subsequent negotiations between the two parties.
E.g. a simple budget in a contract or an agreement could be:
Project Phase 1
Fee
Materials and equipment
Travel expenses
Total Phase 1
250.00
132.00
70.00
Project Phase 2
Fee
Materials and equipment
Total Phase 2
385.00
181.00
452.00
566.00
Overall total
1.018.00
For the Project Manager, this budget figure can be seen as a turnover which the project
will create for the organisation.
2. The delivery organisation’s budget, i.e. a balance of income and expenses.
The above mentioned contract budget figure will usually reflect calculations by the
delivery organisation. In most cases the figure will comprise the delivery organisation’s
costs of delivering the project and a profit.
© UCLES 2003
33
E.g. a summary budget sheet developed by the organisation could be:
Phase 1
Income
Expenses
Fee
Salary expenses
250.00
Materials and equipm.
Travel expenses
Insurance
132.00
70.00
Balance
145.00
105.00
120.00
70.00
7.00
12.00
0
- 7.00
Total Phase 1
Phase 2
110.00
Income
Expenses
Fee income
Salary expenses
Consultant fees exp.
385.00
Materials end equipm.
Insurance
181.00
Balance
170.00
60.00
155.00
165.00
8.00
16.000
- 8.00
Total Phase 2
163.00
Overall total
273.00
For the Project Manager, this budget figure can be seen as the expected profit (or loss)
values that the project will generate for the organisation.
Usually the basis for such a budget will be developed with expenses as the starting point
for calculating profits and totals.
3. The Project Manager’s budget, i.e. the approved expenses for carrying out the project.
In the above case it can be summarised to the following:
Phase 1
Salaries, own staff
Travel costs
Material and equipm.
Total Phase 1
145.00
120.00
70.00
Phase 2
Salaries, own staff
Salaries, external
Material and equipm.
Total Phase 2
170.00
60.00
165.00
335.00
395.00
Overall total
730.00
For the Project Manager this budget is the approved limit of expenses for carrying out
the project. Any savings on this budget will imply an extra profit for the company and
overspending of the budget will imply a reduction of company profit on the project.
© UCLES 2003
34
Once budgets are formalised they are not really budgets but agreements.
The different types of budget can each be produced with varying exactness at different stages
of the planning. The more detailed knowledge about the project is acquired, the more exact
the budget can be made.
In the CDPM, candidates are requested to deal with budgets at three stages:
·
·
·
in the project statement they should make an initial cost estimate which should just be a
ball park figure, a very rough estimate
in Assignment One Part Two they should make an actual budget estimate in categories
in Assignment Two Part Two they should make a detailed budget for approval, based on
activity planning and allocation of resources
In each case, they need to be fully aware if they are handling the first, second or third type of
budget .
Two F
In the appraisal phase the budget need not be detailed but serves as an indicator for
assessment of whether the project is financially viable. For this purpose the budget should
preferably include an expenses budget as well as the client’s price.
To make a reasonable precise and plausible impression, the budget estimate should be
divided into categories.
In a simple example, using the above figures again, the following model can be used:
Item
Man hours, own
staff, Phase 1
Man hours, own
staff, Phase 2
Man days,
external, Phase 2
Transport
Accommodation
Materials Phase 1
Materials Phase 2
Insurance
Number
Cost per unit Total cost
Client price Balance
of units
500
290
145.00
250.00
105.00
680
250
170.00
300.00
130.00
15
4.00
60.00
85.00
25.00
20
20
2.00
1.50
40.00
30.00
120.00
165.00
15.00
40.00
30.00
132.00
181.00
0
0
0
12.00
16.00
-15.00
745.00
1.018.00
273.00
Total
An overall summary budget like the above will need to be supported by detailed calculations
and estimates.
© UCLES 2003
35
In general, one would usually expect that if the project budget shows a good positive balance
it will be OK and if it shows a negative balance it will not.
Discuss with candidates possible reasons for accepting a negative budget balance, maybe
even a considerable one.
In the case of a negative balance candidates should include information about the
background for this and the sources of income.
Two G
Health and Safety regulations should be considered requirements of the project. They are not
risk factors.
Distribution of Health and Safety responsibilities between the project organisation and the
client is an important issue which should be clarified in any project.
As an activity in the teaching session, candidates could explore traditions in their home
organisations for contracting Health and Safety risks with clients and present these for
discussion.
Health and Safety is mostly concerned with preventing accidents from happening – and
ultimately reducing the impact in case they happen despite all efforts to counteract
unfortunate factors. Health and Safety regulations are about risks, but it is important for the
Project Manager to bear in mind that these risks have been described in general elsewhere in
the organisation. Likewise, the national and international legislation will influence the
behaviour of the project staff in general. In international projects, it is worthwhile investigating
which national legislation will prevail under the project contract. As an example, all EU
development projects operate under Belgian law since the headquarters of the European
Union agencies are legally situated in Brussels.
Health and Safety regulations prescribe preventive actions. The Project Manager will have to
select from a set of criteria what kind of preventive actions will be relevant to introduce in the
project, given the conditions, the environment, the overall project policies of the home
organisation and the composition of the Project Team. Too many preventive actions will
probably imply a delay of project implementation and could prevent the Project Team from
focusing on project progress. Too few and poorly selected preventive actions might cause
feelings of insecurity among the Project Team and will imply an unreasonably large number of
ad hoc decisions to be taken by Project Management.
Exercise
Candidates could develop a list of criteria for selecting and including preventive actions in the
project in general.
Most importantly, they would have to distinguish between what is taken care of by other units
of the home organisation and what is be to done by the project organisation itself. What can
be transferred to other units, including the H&S organisation, and what will have to remain
close to the project representatives?
The criteria should also include assessment of H&S competencies in the project organisation
and efficient exploitation of these resources.
Besides setting up rules for Project Team behaviour and taking technical measures to avoid
accidents, preventive action could include reassignment of people to other project tasks,
training of Project Team members and redesign of project activities.
© UCLES 2003
36
Two H
At this stage of the project, it seems relevant to review the process and the planned outcomes
with the Project Sponsor. The attitude in the home organisation towards the project might
have changed during the initial planning process. Management might have identified items to
be included in the project or may have changed priorities.
Since detailed planning of the project, including recruitment of Project Team staff is
approaching, it is vital for the Project Manager to have a solid impression of the current
relations between the project and the home organisation.
Furthermore, a project file will have to be established. This file will have to fulfil at least two
major criteria:
·
·
it will have to be in accordance with the administrative traditions of the home organisation
– unless a different agreement is reached with the Project Sponsor and Administrative
Managers
it will have to be an operational tool for the Project Manager, the Project Team and other
relevant parties
When preparing himself for the project, the Project Manager should consider his personal
objectives when performing the task as Project Manager. What critical issues can be
identified in general? How are these critical issues communicated to the Project Sponsor and
the Project Team in order to seek clarity of objectives and in order to set a standard for open
discussions on personal competencies among the Project Team members? What kind of
ethical issues should be addressed in the project and contribute to the work standard of the
Project Team? Which innovative aspects are important for project success and for promotion
of the project within the home organisation? Which critical links to management groups of the
home organisation should be observed?
© UCLES 2003
37