EUT443 – Engineering Management Chapter 1 The World of Project Management

EUT443 – Engineering Management WHAT IS A PROJECT?

EUT443 – Engineering Management Why the emphasis on project management? Many tasks do not fit neatly into business- as-usual. Need to assign responsibility and authority for achievement of organizational goals.

EUT443 – Engineering Management Characteristics of Projects Unique Specific Deliverable Specific Due Date S.M.A.R.T. Objective(s) Scope / Boundary

EUT443 – Engineering Management Other Common Characteristics of Projects Multidisciplinary Complex Conflict Part of Programs Resources Limitation

EUT443 – Engineering Management PMI Definition “A temporary endeavor undertaken to create a unique product or service” Project Management Institute, 2000

EUT443 – Engineering Management PROJECT MANAGEMENT VS. GENERAL MANAGEMENT

EUT443 – Engineering Management Why Projects? It allows you to better structure and organize the tasks that need to be performed Well developed approaches and tools are available for managing projects Easy-to-use software is available for scheduling and budgeting projects Experience has shown that the work/job can be done faster, cheaper, and better when managed as a project

EUT443 – Engineering Management Skill Requirements for Effective Project Management Conflict Resolution Creativity and Flexibility Ability to Adjust to Change Good Planning Negotiation –win-win versus win-lose

EUT443 – Engineering Management WHAT IS MANAGED? THE THREE GOALS OF A PROJECT

EUT443 – Engineering Management Figure 1-1: Performance, Cost, and Time Project Targets

EUT443 – Engineering Management Project Goals Performance (Outcomes/Quality) deliverables and quality exactly what needs to be accomplished at what quality level Time doing it quickly or on schedule Cost doing it cheaply or on budget

EUT443 – Engineering Management Project Goals Which goal is more important: time, cost, or outcomes? Who decides which goal is more important? Why is it important for the Project Manager (PM) to know which goal is more important?

EUT443 – Engineering Management THE LIFE CYCLES OF PROJECTS

EUT443 – Engineering Management Figure 1-2 The Project Life Cycle

EUT443 – Engineering Management Common Project Life Cycle Slow Start –manager is selected –team is assembled –initial resources are allocated –work program is organized Quick Momentum –work progresses –momentum builds Slow Finish –many loose ends to tie up

EUT443 – Engineering Management Figure 1-3 An Alternate Project Life Cycle

EUT443 – Engineering Management Figure 1-4 Resources & Project Life Cycle Start Time Finish Resources ConceptPlanning Execution Wrap-up Required Resources

EUT443 – Engineering Management Implications of Project Life Cycle Project life cycle shape will affect the timing of resource and funding needs Understanding the general project life cycle may help the stakeholders better understand and accept the current status of the project Understanding the general project life cycle may also help the PM make better goal tradeoff decisions at particular times during the project

EUT443 – Engineering Management SELECTING PROJECTS

EUT443 – Engineering Management Project Selection Project selection is the process of evaluating individual projects or groups of projects, and then choosing to implement some set of them so that the objectives of the parent organization will be achieved Managers often use decision-aiding models to extract the relevant issues of a problem from the details in which the problem is embedded Models represent the problem’s structure and can be useful in selecting and evaluating projects

EUT443 – Engineering Management Criteria For Project Selection Realism - reality of manager’s decision Capability- able to simulate different scenarios and optimize the decision Flexibility - provide valid results within the range of conditions Ease of Use - reasonably convenient, easy execution, and easily understood Cost - Data gathering and modeling costs should be low relative to the cost of the project Easy Computerization - must be easy and convenient to gather, store and manipulate data in the model

EUT443 – Engineering Management Nonnumeric Selection Methods Sacred Cow (president’s pet project) –Do you want to keep your job? –Examples Operating or Competitive Necessity –You must do this project to stay in business –Examples Comparative Benefits –Examine +/- of each potential project –Examples

EUT443 – Engineering Management Figure 1-5 The Q-Sort Method

EUT443 – Engineering Management Numeric Selection Methods Scoring Methods –unweighted 0-1 factor method –weighted factor scoring method Financial Assessment Methods –payback period –discounted cash flow

EUT443 – Engineering Management The Weighted Scoring Model where S i = the total score of the i th project s ij = the score of the i th project on the j th criterion w j = the weight or importance of the j th criterion

EUT443 – Engineering Management Factor Scoring Method Example: 3 projects; 4 factors; 1-5 scale (5=best) Factor ProjectA ProjectB ProjectC Cost Risk Suitable Skills Total Score:

EUT443 – Engineering Management Weighted Factor Scoring Method Example: 3 projects; 4 factors; 1-5 scale (5=best) Factor Wt. ProjectA ProjectB ProjectC Cost Risk Suitable Skills Wtd. Score:

EUT443 – Engineering Management Payback Period Expected project costs are $700,000 Expected returns are $200,000 per year How long is the payback period?

EUT443 – Engineering Management Discounted Cash Flow Net Present Value where I 0 = the initial investment F t = the net cash flow in period t k = the required rate of return or hurdle rate

EUT443 – Engineering Management Discounted Cash Flow Initial cost = $700,000; 4-year annual cash flow = $200,000; required rate of return = 15% NPV = -700, ,000/(1.15) ,000/(1.15) ,000/(1.15) ,000/(1.15) 4 NPV = -700, , , , ,351 NPV = $-129,004 Should they do this project?

EUT443 – Engineering Management Discounted Cash Flow If NPV > 0, the investment would add value to the firm/organization, thus project is accepted. If NPV < 0, the investment would substract value from the firm/organization, thus project is rejected. If NPV = 0, the investment neither gain nor lose value for the firm/organization, decision is made on other criteria.

EUT443 – Engineering Management Confronting Uncertainty – The Management of Risk

EUT443 – Engineering Management What uncertainties are encountered in project management? Time required to complete a project Availability of key resources Cost of resources Timing of solutions to technological problems Actions taken by competitors

EUT443 – Engineering Management Can uncertainty surrounding projects ever be eliminated? No, but it can be managed

EUT443 – Engineering Management Risk Analysis Estimate probabilities or distributions associated with key parameters Develop analytic or simulation model Analyze distribution of outcomes generated by model

EUT443 – Engineering Management Risk Analysis with Crystal Ball Assumption Cells Distribution Gallery Forecast Cells

EUT443 – Engineering Management THE PROJECT PORTFOLIO PROCESS

EUT443 – Engineering Management The Project Portfolio Process Step 1: Establish a Project Council Step 2: Identify Project Categories and Criteria Step 3: Collect Project Data Step 4: Assess Resource Availability Step 5: Reduce the Project and Criteria Set Step 6: Prioritize the Projects within Categories Step 7: Select the Projects to be Funded and Held in Reserve Step 8: Implement the Process

EUT443 – Engineering Management The Aggregate Project Plan

EUT443 – Engineering Management Figure 1-12 An Example Aggregate Project Plan

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