MAPMS701
Project Management
Tools and Techniques
Course Instructor: Abdulnasir Abdulmelike
(Assistant Professor)
Chapter Outlines
Chapter One: Strategic Context of Project Management
Chapter Two: Project Selection
Chapter Three: Project Scope Planning and Schedule
Development Tools
Chapter Four: Cost Estimation
Chapter Outlines
Chapter Five: Risk Response Planning
Chapter Six: Earned Value Analysis
Chapter Seven: Project Quality Control
Chapter Eight: Monitoring, Evaluation, and Reporting
Chapter 1: Strategic Context of Project Management
Introduction
Strategic Project Management Issues
SPM as a Competitive Advantage
Project Portfolio Management
Introduction
• Project is a vehicle for the execution of
strategy.
• A high-level consideration of the role of
projects is appropriate, particularly to
demonstrate how they should fit with
other activities being undertaken
simultaneously.
Chaos Inc.
Introduction
• This strategic consideration has been missing
from the subject of project management in
the past, leaving the focus of attention on
detail issues.
• While these do need to be addressed they
should follow the priorities and issues raised
by the process of strategy.
• Thus, we need to understand strategy to apply
strategic project management.
Introduction
• Vision: summarizes where a business wants to go
• Mission: the reason for firms existence
• Goals and objectives: specify what innovations
the firm wishes to accomplish over the short and
long term
• Strategies: help to achieve those goals and
objectives
• Tactics: It is through tactical activities, that
strategic plans come to life
Introduction
• Strategic Management: the art and science of
formulating, implementing, and evaluating crossfunctional decisions that enable an organization to
achieve its objectives.
• Project: a temporary endeavor undertaken to create
a unique product or service.
• Project Management: a dynamic process that utilizes
the appropriate resources in a controlled and
structured manner to achieve some clearly defined
objectives identified as strategic needs.
Introduction
• Strategic Project Management: is the use of the
appropriate project management knowledge, skills,
tools, and techniques in the context of the
company’s goals and objectives, so that the project
deliverables will contribute to company value in a
way that can be measured.
• Simply defined SPM is the process of managing
complex projects by combining business strategy and
project management techniques.
Introduction
• A Project Management can be approached from a
conventional and strategic perspectives.
• Conventional PM focusses on finding solution for
the given constraint/s. There is a weak link
between organizational and project strategy.
• Strategic PM focusses on adding value to the
organization and maximizing performance by
aligning the organizational and project strategy.
Introduction
• Projects can be broadly classified as either 'direct
revenue-earning' or 'organizational change'.
• The first category would include completing a
consultancy assignment, a construction project or
generally any work usually carried out for a third
party for which you or your organization is paid.
• The second category would include changes to an
organization's IT system, a merger or a new business
start-up.
Introduction
Projects
Direct revenue-earning
Organizational
objectives
Project
objectives
Organizational change
Strategy
deployment
Strategy matrix
Strategic Project Management (SPM) Issues
• There are four key phases involved in the
management of strategic issues for a project.
• Identification Phase
• Assessment Phase
• Analysis of Action
• Implementation of Action
SPM Issues
SPM as a Competitive Advantage
• Competitive advantage: anything that a firm
does especially well compared to rival firms.
• In a global economic recession, simply having
ample cash on the firm’s balance sheet can
provide a major competitive advantage.
• Having less fixed assets than rival firms can also
provide major competitive advantages in a global
recession.
SPM as a Competitive Advantage
• Companies around the world have looked for ways to
achieve competitive advantage (through a traditional
project management approach, which was
operational in nature).
• Some innovative companies are practicing an
evolutionary process that will take them from an
operational approach to a strategic approach.
• Under this new direction, projects will be used as the
means to achieve business objectives that will
support the business strategy.
SPM as a Competitive Advantage
• Research studies have confirmed that projects
aligned with business strategy are the foundation of
competitive advantage and realize business
objectives faster.
Project Portfolio Management (PPM)
• Project portfolio refers to a group of projects
or programs.
• PPM is a key component of SPM.
• PPM refers to the use of the appropriate
management knowledge, skills, tools, and
techniques to maximize the alignment of the
Company’s project portfolio with the
Company’s goals and objectives.
Purposes of PPM
 To link all projects to the company’s strategy
 To balance the portfolio of projects the
company is undertaking
 To maximize the value of the portfolio
Process of PPM
End of Chapter 1
Chapter 2: Project Selection
Introduction
Stakeholder Analysis
Problem Tree Analysis
Economic Methods
Introduction
• Effective project selection is about evaluating the
potential value a project idea can return to an
organization, and then making deterministic choices
about which of the project ideas will be funded and
resourced.
• Project selection techniques are used to identify and
prioritize projects that best support attainment of
the business goals of an enterprise.
• The selection process is often complete before a PM
is appointed to the project.
Introduction
• The methods for selecting projects can be grouped
into two fundamental types;
• Nonnumeric: the sacred cow, operating or
competitive necessity, comparative benefits
• Numeric: Economic/financial, scoring method
The Sacred Cow
• The organization’s Chief Executive Officer
(CEO) or other senior executive either formally
or casually suggests a potential product or
service that the organization might offer to its
customers.
• Whatever the selection process, the
aforementioned project will be approved. It
becomes a “Sacred Cow”
The Operating/Competitive Necessity
• This method selects any project that is
necessary for continued operation of a group,
facility, or the firm itself.
• A “mandated” project obviously must be
selected.
• Example: a company facing flood in its plant
should initiate a project to build a protective
desk.
Comparative Benefits
• Many organizations have to select from a list of
projects that are complex, difficult to assess, and often
non comparable. However, rank-ordering a small
number of projects is not inherently difficult.
• But when the number of projects exceeds 15 or 20,
• Separate the projects into three subsets, “good,” “fair,” and
“poor,” using criteria.
• If there are more than seven or eight, divide the group into
two subsets, for instance, “good-plus” and “good-minus.”
Continue subdividing until no set has more than seven or
eight members.
• Now, rank-order the items in each subset. Arrange the
subsets in order of rank, and the entire list will be in order.
• Last, review the stack and shift any cards that seem out of
place until the classifications are satisfactory.
• The committee can make a composite ranking from the
individual lists any way it chooses.
Economic methods
• Most firms select projects on the basis
of their expected economic value to
the firm.
• The most widely used methods are:
• Payback period and
• Discounted cash flow (NPV)
Economic methods
Eg. if a project
requires an
investment of
$100,000 and is
expected to return
a net cash inflow
of $25,000 each
year, the payback
period can be
calculated as:
Project Cost
Payback Period 
Annual Cash Flow
$100,000
Payback Period 
4
$25,000
Payback Period
(uneven cash flows) =
A+
B
C
Where,
A is the last period number with a negative
cumulative cash flow;
B is the absolute value (i.e. value without negative
sign) of cumulative net cash flow at the end of the
period A; and
C is the total cash inflow during the period following
period A
Economic methods
NPV (project)  A0 
n

t 1
Ft
1
(1
+ kk+pt)t
t
Scoring Methods
• Scoring methods were developed to overcome
some of the disadvantages of the simple
financial profitability methods, especially their
focus on a single criterion.
• The simplest scoring approach, the
unweighted 0–1 factor method, lists multiple
criteria of significant interest to management.
Stakeholder Analysis
• Is a process of systematically gathering and
analyzing qualitative information to determine
whose interests should be taken in to account.
• The benefits of stakeholder analysis are:
• Knowing the interests of stakeholders
• Reducing potential negative impacts
• Managing potential issues that disrupt the
project
Problem Tree Analysis
• Is helpful to identify major problems and their
main causal relationships.
• The steps are:
• Identify the major problems that the
project will address
• Group problems by similarity of concerns
• Develop the problem tree
Problem Tree Analysis
EFFECT
CAUSE
Problem Tree Analysis (eg.)
Low income
High rate of infant
mortality
EFFECT
Low productivity of
workers
High rate of diseases
Lack of sufficient water
Deteriorated
water system
Insufficient
maintenance funds
Focal
problem
Fewer service
connections
Bureaucratic water
administration
CAUSE
Problem Tree Analysis (excercise)
• Dear students, try to gather information about
the education quality in Ethiopia and develop
a problem tree analysis.
End of Chapter 2
Chapter 3: Project Scope Planning and Schedule Development
Tools
The Project Scope Management
The Project Charter
The Scope Statement
The Work Breakdown Structure
Product Breakdown Structure
Schedule Development
The Project Scope Management
• Project Scope Management refers to the processes required
to ensure that the project includes only the work required to
complete the project successfully.
• It is primarily concerned with
1. Initiation - committing the organization to begin the next
phase of the project.
2. Scope Planning - developing a written scope statement as the
basis for future project decisions.
3. Scope Definition - subdividing the major project deliverables
into smaller, more manageable components.
4. Scope Verification - formalizing acceptance of the project
scope.
5. Scope Change Control - controlling changes to project scope
The Project Scope Management
 In the project context, the term “scope” may refer to:
• Product scope —the features and functions that are to be
included in a product or service.
 Project scope —the work that must be done in order to
deliver a product with the specified features and functions
 Completion of the product scope is measured against the
requirements while completion of the project scope is
measured against the plan.
 Both types of scope management must be well integrated to
ensure that the work of the project will result in delivery of
the specified product.
The Project Scope Planning
 Scope planning is a collaborative process between
the project manager, the project sponsor, and other
key stakeholders who can help shape the work that
must be completed in order to achieve the business
goals driving the need for a project.
 Scope planning involves identifying your goals,
objectives, tasks, resources, budget, and timeline.
 This chapter includes a number of high-impact tools
that can be used to assist with the process of scope
planning.
The Project Charter
• The project planning process begins with the
development of a project charter
• The project charter is a tool that formally
authorizes a project and serves as the contract
between the project manager and the
organization.
• While the elements of the project charter vary
from organization to organization, they should
always include a statement of work and the
business case for the project.
The Project Charter
• The PMBOK suggests the following additional
items also be included in a project charter:
The Project Charter
• Once the project charter is approved, the project is
considered officially authorized and a more detailed
project plan can begin.
• Issuing a project charter is a major decision because it
commits resources to support organizational goals. For
that reason, organizations tend to invest in generating
information that will help make educated charter
decisions.
The Scope Statement
• Is a written narrative of the goals, work,
and outcomes of a project.
• It defines the project and becomes the
basis for making decisions and decision
trade-offs during project planning and
execution.
• A good scope statement is necessary to
guide a project to successful completion.
The Scope Statement
• The scope statement is effective in
establishing the project baseline and
boundary conditions.
• The fundamental premise in developing a
scope statement is that the statement
must be as change resistant as possible.
The Scope Statement
Innovative Ways to Develop a ChangeResistant Scope Statement
• Reduce project complexity
• Design robust project outcomes
• Freeze the scope early
The Scope Statement
• The quality of a scope statement hinges
in many ways on the quality of the input
information. Specifically, the following
inputs carry great weight in developing a
scope statement that has value:
■ Business success factors
■ Project requirements
■ Project charter
■ Project SWOT analysis
Business success factors
• business success factors as the set of
quantifiable measures that describe the
successful achievement of a project’s business
results (successful achievement of the strategic
goals).
• It is important to minimize the number of
business success factors to the critical few—
three to six is an ideal number.
• During the early stages of a project, the factors
are used to align the project sponsor, executive
stakeholders, and the project team on what
project success will likely mean.
Project requirements
• One of the most important aspects of good project
planning and execution is a comprehensive, clear,
and valid set of requirements.
• A requirement states
• What a solution must do (functional
requirement) and
• How well it must do what it does (quality or
nonfunctional requirement).
Project requirements
Idea/Mind mapping
Affinity diagram
The Project SWOT Analysis
• The
project
SWOT
(strengths,
weaknesses, opportunities, threats)
analysis is a technique used by project
managers to develop project execution
positioning.
• Much of the information needed to
perform a SWOT analysis at the
project level can be collected
through tools described previously
[project charter, the project
business case, the project
requirements].
The Scope Statement
• The following elements constitute the scope
statement:
 Project title, revision number, date
 Business purpose
 Project goals
 Project work statements
 Primary deliverables
 Key milestones
 Constraints
 Project work exclusions
The Scope Statement
• The scope statement that we have described
is designed to be a cross-industry tool to
serve as many project audiences as possible.
• Product developers include a product
statement in the scope statement (after the
project goals section) as a regular practice.
• Others, such as those involved in
government
contract
projects
or
contractor/subcontractor
arrangements
prefer the use of a statement of work (SOW).
The Scope Statement
• A statement of work typically includes the following
information:
 Project purpose
 Objectives
 Location of work
 Period of performance
 Primary deliverables
 Deliverables
 Deliverables schedule
 Value of work performed
 Specifications and standards
 Method of measurement of acceptance
The Work Breakdown Structure
• A project work breakdown structure is an
outcome-oriented grouping of project
elements that organizes and defines the total
scope of the project.
• Work not in the WBS is outside the scope of
the project.
• When presented in a graphical format, it
becomes obvious why the WBS is often
described as a project tree diagram.
The Work Breakdown Structure
• Projects are planned, organized, and controlled
around the lowest level of the WBS or work
packages that are assigned to a project team
member for completion.
• The first thing before constructing a WBS is
collecting information about the project scope,
workflow, requirements and situations.
• Then, which method will you use to structure
your WBS? WBS by project life cycle, WBS by
system, or WBS by geographic area? need to be
addressed.
The Work Breakdown Structure
Tree diagram
Table of contents
Activity
Serve pizzas to
customers
Provide the place
Cook the food
Make the dough
Cook the sauce
Build the pizza
Serve customers
Others
Duration
Predecessor
The Work Breakdown Structure
• The steps in WBS are outlined as follows:
• Start by identifying the major construct of structure of the
WBS
• Divide the major WBS elements into smaller, more
manageable outcomes
• How will you represent your WBS? Using tree diagram
or…?
• Make sure the WBS is outcome oriented
• Be sure that the WBS includes all project work
• Make each work element relatively independent of others
on the same level
• Keep breaking the work down in to work elements until
you reach a level at which there is a method in your
organization capable of producing the element
• Produce a WBS that integrates work elements or separate
levels to the point that their aggregate is an equivalent of
the project completion
Product Breakdown Structure
• Like the project WBS, the PBS is a
visual aid that represents the
relationship between a product and
its components.
• However, the project WBS and the
PBS are used for different purposes.
• The main difference is that the PBS
focuses on the product, whereas the
WBS focuses on the work required to
create the product.
Schedule Development
• Project scheduling involves the planning of
timelines for completing the work identified and
establishing dates during which project resources
will be needed to perform the work.
• The process of schedule development involves:
• The integration of multiple aspects concerning
a project
• Including the estimated duration of tasks
• The constraints imposed by the availability of
resources and budget, and
• Expected due dates
Schedule Development
• The project schedule can be presented in various
ways.
• The schedule type is often driven by the
preferences and needs of the various project
players.
• A functional manager, for example, maybe
interested in a schedule type that show the
resource allocation requirements;
• The senior sponsor may be interested in a
schedule that shows only major project events
and milestones; and
• A project manager may need a detailed schedule
showing each WBS element.
Schedule Development
• The most widely used project schedule type
include;
• The Gantt chart
• Milestone chart
• CPM
• Critical chain schedule
• Etc…
The Gantt Chart
• Even though the Gantt was developed around
1917 and is the oldest formal scheduling tool, it is
still the most widely used tool.
• Having a Gantt chart helps ensure that project
participants have the necessary time allocated on
their calendars and are available to perform their
activities.
• The Gantt chart is an effective tool for smaller
and simpler projects, where there is less need to
show dependencies between activities.
• As the project size and complexity increase, the
Gantt chart becomes less applicable.
The Gantt Chart
The Milestone Chart
• A milestone is a point in time or event whose
importance lies in it being the climax point for
many converging activities.
• This tool shows milestones against a time scale in
order to signify key project events and to draw
stakeholder attention to them.
• Traditionally, the milestone chart has been used
to focus management on highly important events
whether projects are large or small.
The Critical Path Method
• CPM is a network diagram technique for
analyzing, planning, and scheduling projects.
• It provides a means of representing project
activities as nodes or arrows determining which
of them are “critical”…
• We can use either AON or AOA format to develop
the network diagram and later to determine the
critical path.
• A fine application of CPM can be found in
conjunction with the Gantt chart.
The Critical Chain Schedule
• CCS is a network diagram that strives for
accomplishment of drastically faster and more
reliable schedules.
• The most appropriate application of the CCS is
for a dedicated project team seeking a
significant reduction of the project cycle time
in a company with an outstanding
performance culture.
End of Chapter 3
Chapter 4: Cost Estimation
Introduction
The Project Cost Management
The Project Cost Estimation Methods
Introduction
• Cost is a resource sacrificed or foregone to
achieve a specific objective or something
given up in exchange and is usually measured
in monetary units.
• Project cost estimation is the process of
developing an approximation (estimate) of the
costs of the resources needed to complete
project activities.
Introduction
• Cost estimating involves developing an
approximation or estimate of the costs of all
the resources needed to complete a project.
• It implies the necessity of resource planning.
Introduction
• Cost estimates are used to
• Determine whether the project is
worth doing
• Help plan project financing/funding
• Provide the mechanism for managing cash
flow during the course of the project
• Give the project manager a framework for
allocating scarce resources as the project
progresses
Introduction
• Classifications of project costs
• Direct Vs. Indirect: direct costs are costs incurred for
direct involvement of people & materials. Indirect
costs include overhead, as well as selling and
administrative expenses.
• Recurring Vs. Nonrecurring: recurring costs are costs
such as labor and materials that are repeatedly
incurred throughout the project life cycle.
• Fixed Vs. Variable: fixed costs do not vary with usage.
• Normal Vs. Expedited: normal costs are incurred
when project tasks are completed according to the
original planned duration.
The Project Cost Management
• Includes processes involved in planning,
estimating, budgeting, financing, funding,
managing, and controlling costs so that the
project can be completed within the approved
budget.
• The project cost management process involves
planning cost management, estimating costs,
determining budgets and control costs.
The Project Cost Management
• Planning cost management: establish the
policies, procedures, and documentation for
planning, managing, expending, and controlling
project costs
• Estimating costs: an approximation of the
monetary resources needed to complete project
activities
• Determining budgets: aggregating the estimated
costs of individual activities or work packages to
establish an authorized cost baseline
• Control costs: monitoring the status of the
project to update the project costs and managing
changes to the cost baseline
The Project Cost Estimation Methods
• Here we will discuss the following methods:
• Expert judgment
• Analogous estimating
• Parametric estimating
• Bottom-up estimating
• Three-point estimating
• Vendor bid analysis
• Group decision-making techniques
The Project Cost Estimation Methods
Expert judgment
• Expert Judgement (EJ) is used extensively during the
generation of cost estimates.
• Cost estimators have to make numerous assumptions
and judgements about what they think a new product
will cost.
• Computerized cost models, in many ways, have
reduced the need for EJ but by no means have they, or
can they, replace it.
• The cost estimates produced from both algorithmic
and non-algorithmic cost models can be widely
inaccurate and require extensive use of judgement in
order to produce a meaningful result.
The Project Cost Estimation Methods
Analogous estimating
• An analogous estimate is the derivation of a
project cost estimate based on the actual cost
of a previous project or projects of similar size,
complexity, and scope.
• It is generally applied when there is a lack of
detailed information about the project.
• Typically, this is the case early in the project
life cycle.
The Project Cost Estimation Methods
Analogous estimating
The Project Cost Estimation Methods
Parametric estimating
• Parametric estimating is a more
accurate
technique
for estimating cost and duration
and uses the relationship
between variables to calculate
the cost or duration.
• Essentially,
a
parametric
estimate is determined by
identifying the unit cost or
duration and the number of
units required for the project or
activity.
The Project Cost Estimation Methods
Bottom-up estimating
• A bottom-up estimate relies on estimating the
cost of individual work items and then
aggregating them to obtain a total project
cost.
• Typically, a bottom-up estimate is developed
just before project execution, or even in
earlier phases if the required information
inputs are available.
• They are valued for their capacity to produce
estimates of good accuracy, which is higher
than that of any other estimating tools.
The Project Cost Estimation Methods
Three-point estimating
• A three-point estimate is a technique that
involves people that are professional in the
task.
• In a three-point estimation, three figures are
produced initially for every distribution that is
required, based on prior experience or bestguesses: most likely, optimistic and
pessimistic
The Project Cost Estimation Methods
Vendor bid analysis
• A vendor bid analysis helps to estimate using
bids and allowances for gaps in a bid scope.
• It is a technique used to figure out the cost of
a project by comparing the bids submitted by
many suppliers.
The Project Cost Estimation Methods
Group decision-making techniques
• Are some of the tools and techniques used in the
project management processes.
• Some decision techniques are:
• Unanimity: everyone must agree; there is a
shared consensus. Eg. Delphi method
• Majority: the decision must be agreed by more
than half of the participants.
• Plurality: is usually determined by a vote.
• Points allocation: each voter is given a number
of points and the voter allocates points to the
options.
• Dictatorship: one person makes the decision.
End of Chapter 4
Chapter 5: Risk Response Planning
Overview
Risk Response Strategies
Risk Response Cost-Benefit Analysis
Responding to Risks
Overview
Risk Response Strategies
End of Chapter 5