Chapter 7: Project Cost Management

Project cost management includes the processes required to ensure that a project team completes a project within an approved budget. There are three processes for project cost management such as cost estimating, cost budgeting, and cost control.

Cost estimating is to develop an approximation or estimate of the costs of the resources needed to complete a project. A cost management plan is a document that describes how the organization will manage cost variance on the project. Four typical problems with IT cost estimates can be classified as estimates are done too quickly, lack of estimating experience, human beings are biased toward underestimation, and management desires accuracy.

There are three basic types of cost estimates: rough order of magnitude (ROM) estimate – provides an estimate of what a project will cost, budgetary estimate – to allocate money into an organization’s budget, definitive estimate – provides an accurate estimate of project costs.

The basic tools and techniques for cost estimates can be divide into three types: analogous or top-down estimates – use the actual cost of a previous, similar project as the basis for estimating the cost of the current project, bottom-up estimates – estimating individual work items or activities and summing them to get a project total, parametric modeling – uses project characteristics (parameters) in a mathematical model to estimate project costs.

Cost budgeting is to allocate the overall cost estimate to individual work items to establish a baseline for measuring performance. It involves allocating the project cost estimate to individual work items over time. The main goal of this process is to produce a cost baseline for measuring project performance and project funding requirements. A cost baseline is a time-phased budget that project managers use to measure and monitor cost performance.

Cost control is to control changes to the project budget. It includes monitoring cost performance, ensuring that only appropriate project changes are included in a revised cost baseline, and informing project stakeholders of authorized changes to the project that will affect costs.

Earn value management (EVM) is a project performance measurement technique that integrates scope, time, and cost data. A baseline is the original project plan plus approved changes. EVM involves calculating three values for each activity or summary activity from a project’s WBS such as planned value (PV), actual cost (AC), and earned value (EV).

There are five levels for project portfolio management such as put all projects in one database, prioritize the projects in database, divide projects into two or three budgets based on type of investment, automate the repository, and apply modern portfolio theory, including risk-return tools that map project risk on a curve.

Chapter 6: Project Time Management

Project time management can be defined as the processes required to ensure timely completion of a project. There are six main processes involved in project time management such as activity definition, activity sequencing, activity resource estimating, activity duration estimating, schedule development, and schedule control.

Activity definition is to identify the specific activities that the project team members and stakeholders must perform to produce the project deliverables. The goal of this process is to ensure that the project team has complete understanding of all the work they must do as part of the project scope so they can start scheduling the work.

Activity sequencing is to identify and document the relationships between project activities. It reviews the activity list and attributes, project scope statement, milestone list, and approved change requests to determine the relationships between activities. It also involves evaluating the reasons for dependencies and the different types of dependencies such as mandatory dependencies, discretionary dependencies, and external dependencies. The format of network diagram that preferred technique for showing activity sequencing is activity-on-arrow (AOA) approach or the arrow diagramming method (ADM) – activities are represented by arrows and connected at points called nodes to illustrate the sequence of activities. The precedence diagramming method (PDM) is a network diagramming technique in which boxes represent activities.

Activity resource estimating is to estimate how many resources people, equipment, and materials a project team should use to perform project activities. A resource breakdown structure is a hierarchical structure that identifies the project’s resources by category and type.

Activity duration estimating is to estimate the number of the work periods that are needed to complete individual activities. 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 and not normally equal duration. A three-point estimate is an estimate that includes an optimistic, most likely, and pessimistic estimate. It is required for performing PERT estimates and Monte Carlo simulations.

Schedule development is to analyze activity sequences, activity resource estimates, and activity duration estimates to create the project schedule. It uses the results of all the preceding project time management processes to determine the start and end dates of the project. The ultimate goal of this process is to create realistic project schedule that provides a basis for monitoring project progress for the time dimension of the project. There are several tools and techniques assist in this process: Gantt chart – a common tool for displaying project schedule information, Critical path analysis – a very important tool for developing and controlling project schedules, Critical chain scheduling – a technique that focuses on limited resources when creating a project schedule, PERT analysis – a means for considering schedule risk on projects.

Schedule control is to control and manage changes to the project schedule. The goal of schedule control is to know the status of the schedule, influence the factors that cause schedule changes, determine that the schedule has changed, and manage changes when they occur.

Chapter 5: Project Scope Management

Project scope management can be defined as the processes involved in defining and controlling what is or is not included in a project. There are five main processes involved in project scope management such as scope planning, scope definition, creating the WBS, scope verification and scope control.

Scope planning is to decide how the scope will be defined, verified, controlled, and how the WBS will be created. The project’s size, complexity, importance, and other factors will affect how much effort is spent on scope planning. The scope management plan is a document that includes descriptions of how the team will prepare the project scope statement, create the WBS, verify completion of the project deliverables, and control requests for changes to the project scope.

Scope definition is to review the project charter and preliminary scope statement created during the initiation process and adding more information as requirements are developed and change requests are approved. Good scope definition is very important to project success because it helps improve the accuracy of time, cost, and resource estimates, it defines a baseline for performance measurement and project control, and it aides in communicating clear work responsibilities.

Creating the WBS is to subdivide the major project deliverables into smaller and more manageable components. A WBS is a deliverable-oriented grouping of the work involved in a project that defines the total scope of the project. WBS is a foundation document in project management because it provides the basis for planning and managing project schedules, costs, resources, and changes. There are five approaches to develop WBS such as using guidelines, the analogy approach, the top-down approach, the bottom-up approach, and the mind-mapping approach.

Scope verification is to formalize acceptance of the completed project scope by the stakeholders. This acceptance is often achieved by a customer inspection and then sign-off on key deliverables.

Scope control is to control changes to project scope. The main purpose for this process is to influence the factors that cause scope changes, assure changes are processed according to procedures developed as part of integrated change control, and manage changes when they occur. Variance is the difference process between planned and actual performance.

There are several suggestions for improving user input such as develop a good project selection process, have users on the project team, have regular meetings with defined agendas, deliver something to project users and sponsors on a regular basis, do not promise to deliver what cannot be delivered in a particular time-frame, and co-locate users with developers.

Besides, there are several suggestions in reducing incomplete and changing requirements such as develop and follow a requirements management process, employ techniques like prototyping, use case modeling, and Joint Application Design to understand user requirements thoroughly, put all requirements in writing and keep them current and readily available, create a requirements management database for documenting and controlling requirements, provide adequate testing to verify that the project’s perform as expected, and use a process for reviewing requested requirements changes from a systems perspective, emphasize completion dates, and allocate resources specifically for handling change requests.

Chapter 4: Project Integration Management

There are seven processes under project integration management which are develop project charter, develop the preliminary project scope statement, develop the project management plan, direct and manage project execution, monitor and control the project work, perform integrated change control, and close the project. Develop the project charter is working with stakeholders to create the document that formally authorizes a project – the charter. A project charter is a document that formally recognizes the existence of a project and provides direction on the project’s objectives and management. Develop the preliminary project scope statement is working with stakeholders, especially users of the project’s products, services, or results, to develop the high-level scope requirements and create a preliminary project scope statement. A scope statement is a document used to develop and confirm a common understanding of the project scope. It’s important for preventing scope creep (the tendency for scope to keep getting bigger). Develop the project management plan is coordinating all planning efforts to create a consistent, coherent document – the project management plan. A project management plan is a document used to coordinate all project planning documents and help guide a project’s execution and control. Direct and manage project execution is carrying out the project management plan by performing the activities included in it. The majority of time and money is usually spent on execution. Monitor and control the project work is overseeing project work to meet the performance objectives of the project. Monitoring project work includes collecting, measuring, and disseminating performance information. Two important outputs include recommended corrective and preventive actions. Perform integrated change control is coordinating changes that affect the project’s deliverables and organizational process assets. A change control system is a formal, documented process that describes when and how official project documents may be changed. Close the project is finalizing all the project activities to formally close the project. The main outputs include administrative closure procedures, contract closure procedures, final products, services, or results, and organizational process asset updates.

The planning process for selecting information technology projects can be classified into four stages such as information technology strategy planning, business area planning, project planning, and resource allocation. Information technology strategy planning is to tie information technology strategy to mission and vision of organization and identify key business areas. Business area analysis is document key business processes that could benefit from information technology. Project planning is defining potential projects; define project scope, benefits, and constraints. Resource allocation is to select information technology projects, and assigns resources.

Methods of selecting projects can be divided into five common techniques such as focusing on broad organizational needs (needs, funds, and will), categorizing information technology projects (problems, opportunity, and directive), performing net present value or other financial analyses (return on investment and payback analysis), using a weighted scoring model (a systematic process for selecting projects), and implementing a balanced scorecard (select and manage projects that align with business strategy).

Chapter 3: The Project Management Process Groups

There are five processes under project management process groups which are initiating, planning, executing, monitoring and controlling and closing. Initiating is defining and authorizing a project or project phase. The main goal of project initiation is to recognize and start new project. Planning is devising and maintaining a workable scheme to ensure that the project addresses the organization’s needs. The main purpose for project planning is to guide execution. Executing is coordinating people and other resources to carry out the various plans and produce the products, services, or results of the project or phase. Project executing is taking the actions necessary to ensure that activities in the project plan are completed. Monitoring and controlling is regularly measuring and monitoring progress to ensure that the project team meets the project objectives. Project monitoring and controlling is to monitor deviation from the plan, and taking corrective action match progress with the plan. Closing is formalizing acceptance of the project or project phase and ending it efficiently. Project closing is to gain stakeholder and customer acceptance of the final products and services.

The relationships among project management process groups and knowledge area can be classified as follows: project integration management – initiating (develop project charter, develop preliminary project scope statement), planning (develop project management plan), executing (direct manage project execution), monitoring and controlling (monitor and control project work, integrated change control), closing (close project). Project scope management – planning (scope planning, scope definition, create WBS), monitoring and controlling (scope verification, scope control). Project time management – planning (activity definition, activity sequencing, activity resource estimating, activity duration estimating, schedule development), monitoring and controlling (schedule control). Project cost management – planning (cost estimating, cost budgeting), monitoring and controlling (cost control). Project quality management – planning (quality planning), executing (perform quality assurance), monitoring and controlling (perform quality control). Project human resource management – planning (human resource planning), executing (acquire project team, develop project team), monitoring and controlling (manage project team). Project communications management – planning (communications planning), executing (information distribution), monitoring and controlling (performance reporting, manage stakeholders). Project risk management – planning (risk management planning, risk identification, qualitative risk analysis, quantitative risk analysis, risk response planning), monitoring and controlling (risk monitoring and control). Project procurement management – planning (plan purchases and acquisitions, plan contracting), executing (request seller, responses, select sellers), monitoring and controlling (contract administration), closing (contact closure).

Chapter 2: The Project Management and Information Technology Context

Systems approach can be defined as a holistic and analytical approach to solving complex problems by using systems philosophy, systems analysis and systems management. Systems philosophy focus on whole model of thinking for the system, meanwhile systems analysis is more on problem solving approach. Systems management addresses the business, technological and organizational issues before certain changes ca be done to the systems.

The three sphere model for systems management is useful in order to selecting and managing projects successful by considering business, organization and technology issues and their effects entire systems. Business issues is focusing on business prospect or financial management for the system, meanwhile organization issues cover the need and satisfaction from inside company or firm or organization and target user for the system. Technology issues are more about technology usage for the system by using software and hardware. In order to, ensure the project success; project managers must integrate these issues into their planning.

There are four frames of organization such as structural frame, human resources frame, political frame and symbolic frame. Structural frame is very rational and focuses on coordination and control. It can be described how the organization is structured and focuses on different groups’ roles and responsibilities to meet the goals and policies set by top management. Human resources frame focuses on producing harmony between the needs of the organization and the needs of the people. Political frame addresses organizational and personal politics. This is the form of competition or coalitions among groups or individuals for power and leadership in decision making. Symbolic frame focuses on symbols and meanings that related to the company’s culture or event.

Organizational structures can be classified into three types such as functional, project and matrix. Functional organization structure is the hierarchy that focuses on basic function or specialist in the organization or firm to report to CEO. Meanwhile, project organization structure is the hierarchy that focuses on program managers for each project will report to CEO. Besides, matrix organizational structure where the hierarchy can be presented by the middle ground between functional and project, and will report to both a functional manager and one or more project managers. This type of structure can be strong, weak, or balanced, based on the amount of control exerted by the project managers.

The important of top management commitment for successful management is to control all the project activities within organization; they have authority in making decision to represent the whole firm or organization after meeting with their main board. Therefore, top management commitment is crucial to project managers because a project manager must have sufficient resources to develop the project, by having top management commitment the project can not be distracted by other thing. In addition, they needs an approval for unique project in timely manner, so he need top management commitment to meets specific needs in the project. Furthermore, they must get full attention and cooperation from other part of organization, top management can help them to deal with political issues and encourage functional manager to cooperate. Moreover, they need someone to control and guide them on leadership issues, senior manager should advise and encourage new project managers to take classes to develop their skills, allocate time and fund.

Traditional project life cycle phases include concept, development, implementation, and close-out phase. The first two phases focus on planning and known as project feasibility. The last two phases focus on delivering the actual work and known as project acquisition.

There are two types of life cycle for system development projects which are predictive and adaptive life cycle. Predictive life cycle means the schedule and cost can predicted, meanwhile project can be articulated. On the other hand, adaptive software development life cycle where requirements cannot be expressed, mission driven project and component based, also using time-based cycles to meet target dates.

Chapter 1: Introduction to Project Management

There are triple constraints of project management such as scope, time and cost where a project manager must meet these three elements or goals to achieve a successful project management. The scope element may refer to the limited or required task to be perform in the project; meanwhile time element may focus on duration or estimate time in completing the project and cost element emphasize on budget or expenditure of the project. The important things here are these elements or goals relate each others, in order to change one element, other element need to change together.

Project management knowledge areas explain about the key competencies that project managers must develop. These knowledge areas are divided into three parts: Four core knowledge that lead to specific project objectives such as scope, time, cost, quality. Project quality management ensures that the project will satisfy the needs of the project. Four facilitating knowledge are the processes through which the project objectives are achieved such as human resource, communication, risk, and procurement. Project human resource management means making effective use of people in project. Project communications management means involves generating, collecting, disseminating, and storing project information. Project risk management includes identifying, analyzing, and responding to risks related to the project. Project procurement management involves acquiring or procuring goods and services for a project from outside the performing organization. One knowledge area for project integration management as an over searching function that affects and is affected by all of the other knowledge areas.

Project portfolio management is where organizations group manages projects and programs as a portfolio of investments that contribute to the entire enterprise’s success. Portfolio management addresses strategic goals which emphasize long-term goals for an organization. Meanwhile, project management addresses tactical goals that are generally more specific and short-term goals.

There are suggested skills for project managers such as the project management body of knowledge, application area knowledge, standard, and regulations, project environment knowledge, general management knowledge and skills, and soft skills or human relations skills. The most important skills and competencies for project managers such as people skills, leadership, listening, integrity, ethical behavior, consistent, strong at building trust, verbal communication, strong at building teams, conflict resolution, conflict management, critical thinking, problem solving, and understands, balances priorities. All of these skills needed in various situations for instance in large projects or high uncertainty projects, or very novel projects.