Management
Control of
Projects
Nature of Projects
• A project is a set of activities intended to
accomplish a specified end result of sufficient
importance to be of interest to management.
Projects include construction projects, the
production of a sizable unique product (such as
turbine), rearranging a plant, developing and
marketing a new product .
• A project begins when management has approved
the general nature of what is to be done and has
authorized the approximate amount of resources
that are to be spent in doing this work.
• The project ends when its objective has been
accomplished or it has been cancelled.
• Projects vary greatly.
Nature of Projects
Contrast With Ongoing Operations
Characteristics of projects that make the management control
of projects different from the management control of
ongoing activities :
• Single Objective
The project usually has a single objective
• Organization Structure
The project organization is superimposed on an ongoing
operation organization and its management control systems
is superimposed on the management control systems of that
organization.
• Focus on the project
Project control focuses on the project, whose objective is
to produce a satisfactory product, within a specified a
specified time period, and at an optimum cost
Nature of Projects
Contrast With Ongoing Operations
• Need for Trade Offs
Projects usually involve trade offs between scope,
schedule and cost.
• Less Reliable Standards
Performance standards tend to be less reliable for
projects than for ongoing organizations.
• Frequent Changes in Plans
Plans for projects tend to be changed frequently and
drastically.
• Different Rhythm
The rhythm of a project differs from that of ongoing
operations
Nature of Projects
Contrast With Ongoing Operations
• Greater Environmental Influence
Projects tend to be influenced more
by the external environment than is
the case with operations in a factory.
• Exceptions
In some projects, team members are
hired for the job, they are not
associated with functional
departments in an on going
organizations.
Projects in a research laboratory are
conducted on the premises rather
than in outside facilities.
The Control Environment
Project Organization Structure
• A project organization is a temporary organization.
• Team members may be employees of the sponsoring
organization, they may be hired for the purpose, or some
or all of them may be engaged under a contract with an
outside organization.
Matrix Organizations
• If members of the project team are employees of the
sponsoring organization they have two “bosses” : the
project manager and the manager of the functional
department to which they are permanently assigned.
• The project manager, therefore, has less authority over
personnel than the manager of a production department,
whose employees have an undivided loyalty to that
department.
The Control Environment
Project Organization Structure
Evolution of Organization Structure
• Different types of management personnel and
management methods may be appropriate at different
stages of the project.
Contractual Relationships
Contracts are of two general types: fixed price and cost
reimbursement.
Fixed Price Contracts
• The contractor agrees to complete the specified work by
a specified date at a specified price.
• The sponsor is responsible for auditing the quality and
quantity of the work to ensure that it is done as
specified
The Control Environment
Contractual Relationships
Cost Reimbursement Contracts
• The sponsor agrees to pay
reasonable costs plus a profit
(often with a “not to
exceed” upper limit)
• The sponsor has considerable
responsibility for the control
of costs and therefore needs
a management control
system and associated
control personnel.
The Control Environment
Contractual Relationships
Contrasts in Contract Types
Fixed Price Contracts
Cost Reimbursement
Contracts
• The contract is bid by or
proposed by the contractor
• The profit component,
• The contracts are
or fee, usually should
appropriate when the scope
be a fixed monetary
of the project can be
amount.
closely specified in advance
and when uncertainties are
low.
The Control Environment
Contractual Relationships
Variations
• In an incentive contract,
completion dates or cost targets,
or both, are defined in advance,
and the contractor is rewarded for
completing the project earlier
than the target date or for
incurring less than the target cost.
• Different contract types may be
used for different activities on the
project.
Project Planning
In the planning phase :
• Takes as a starting point the rough estimates
that were used as the basis for the decision
to undertake the project
• Refines estimates into detailed specifications
for the product, detailed schedules and a
cost budget
• Develops a management control system and
underlying task control systems and an
organization chart
Project Planning
Nature of the Project Plan
The final plan consists of three related parts :
a. The scope
States the specifications of each work package and the
name of the person or organization unit responsible
b. The schedule
States the estimated time required to complete each
work package and the interrelationships among work
packages, that is, which work package must be
completed before another can be started (network)
c. Cost
Stated in the project budget, usually called the control
budget.
Project Planning
Network Analysis
Several tools are available for
constructing the time schedule for
the project.
a. PERT (Program Evaluation and
Review Technique)
b. CPM (Critical Path Method)
Each technique has three basic steps :
• Estimating the time required for
each work package
• Identifying the interdependencies
among work packages
• Calculating the critical path
Project Planning
Critical Path
(X-A, A-B & B-C Indicate Critical Path)
A
Time (week)
2
5
B
X
4
A
3
Project Planning
Estimating Costs
• For practical reasons, cost estimates are often made at
a level of aggregation that incorporates several work
packages.
• Cost estimates for most projects tend to be less
accurate than those for manufactured goods, because
projects are less standardized.
Preparing the Control Budget
• The control budget is prepared close to the inception
of the work, allowing just enough time for approval by
decision makers
• The control budget is an important link between
planning and the control of performance.
Project Planning
Other Planning Activities
• During the planning phase,
other activities are
performed : material is
ordered, permits are
obtained, preliminary
interviews are conducted,
personnel are selected, and
so on.
• All these activities must be
controlled and integrated
into the overall effort.
Project Execution
Basically, both the sponsor and the project
manager are concerned with these
questions :
1. Is the project going to be finished by the
scheduled completion date ?
2. Is the completed work going to meet the
stated specifications ?.
3. Is the work going to be done within the
estimated cost ?.
Project Execution
Nature of Reports
Managers need three somewhat different types of reports :
trouble reports, progress reports and financial reports.
1. Trouble Reports
Report both on trouble that has already happened and
also anticipated future trouble
2. Progress Reports
Compare actual schedule and costs with planned
schedule and costs for the work done.
3. Financial Reports
Are accurate reports of projects cost that must be
prepared as a basis for progress payments if there is a
cost reimbursement contract, and a basis they usually
are necessary as a basis for financial accounting entries
Project Execution
Use of Reports
1. Trouble Reports
the manager has to decide which problems will get his
or her personal attention, which will be delegated to
someone else, and which will be disregarded on the
assumption that operating personnel will take the
necessary corrective action.
2. Progress Reports
The approach to analyzing progress reports is
“Management By Exception”. If progress in a
particular are is satisfactory, no attention needs to be
paid to the area.
Project Execution
Informal Sources of Information
• Written report usually are less important
than information that the manager gathers
from talking with people who actually do
the work, from members of his or her staff.
• From these sources, the managers learns of
potential problems and of circumstances
that may cause actual progress to deviate
from the plan.
• Nevertheless, formal reports are necessary.
Project Execution
Project Auditing
• In many projects, the audit of quality
must take place as the work is being
done.
• In general, auditing as the work
progresses is preferable, it may
uncover potential errors that can be
corrected before they become serious.
• Internal auditors have expanded their
function into what is called
operational auditing.
Project Evaluation
The evaluation of projects has two separate aspects :
1. An evaluation of performance in executing the project.
Carried out shortly after the project has been
completed
2. An evaluation of the results obtained from the project.
May not be feasible until several years later.
Evaluation for Performance
The evaluation of performance is executing the project has
two aspects :
1. An evaluation of project management
The purpose is to assist in decisions regarding project
managers, incl. rewards, promotions or reassignment
2. An evaluation of the process of managing the project.
The purpose is to discover better ways to conducted
future projects.
Project Evaluation
Evaluation of Results
• The success of a project cannot be
evaluated until enough time has
elapsed to permit measurement of its
actual benefits and costs.
• For many projects, evaluation of
results is complicated by the fact that
the expected benefits were not stated
in objective, measurable terms, and
the actual benefits also were not
measurable.
• The results of relatively few projects
are subjected to a formal evaluation
(often called a post completion audit)
Summary
 The most important difference
between the management
control on ongoing operations
and the management control of
projects is that the ongoing
operations continue definitely,
whereas a project ends.
The End