Project Management Project and Programme Management Resources for Students Gower have teamed up with a major provider of project management training, ESI International, to bring you a range of project and programme resources to support your learning.com and: • Download white papers on topics as diverse as the project communication, project leadership, risk management and project troubleshooting. • View professional project webinars from some of the leading presenters on project management covering topics such as: risk management, troubled project recovery, portfolio management, business requirements, earned value management, performance-based service contracting. • Learn about the qualifications and development available from the PMI, Project Management Institute, the world’s largest non-profit professional association in project management. • Link to further resources, professional bodies, news sites and more.
These resources are designed to help you develop your learning on project management and start you on the road to professional qualifications or further development, once you have finished your degree or your current qualification.com Project Management Ninth Edition DENNIS LOCK © Dennis Lock 2007 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise without the prior permission of the publisher. Published by Gower Publishing Limited Gower House Croft Road Aldershot Hampshire GU11 3HR England Gower Publishing Company Suite 420 101 Cherry Street Burlington, VT 05401-4405 USA Dennis Lock has asserted his moral right under the Copyright, Designs and Patents Act, 1988, to be identified as the author of this work. British Library Cataloguing in Publication Data Lock, Dennis Project management.4'04 ISBN-13: 978-0-566-08772-1 (pbk) 978-0-566-08769-1 (hardback) Library of Congress Cataloging-in-Publication Data Lock, Dennis.
Project management / by Dennis Lock. Includes bibiliographical references and index.4'04--dc22 2006037664 Printed and bound in Great Britain by MPG Books Ltd. Bodmin, Cornwall Contents List of Figures xiii Acknowledgments xix Preface to Ninth Edition xxi Chapter 1 Introduction to Project Management 1 Brief history of project management 1 Different types of projects 5 Project life cycles and life histories 7 Customers, clients, contractors and end users 12 Associations representing the profession of project management 13 References and further reading 15 Chapter 2 Factors for Project Success or Failure 17 Success or failure factors in relation to the initial project definition 17 Factors for success or failure during the project fulfilment (execution) period 19 Triangle of objectives and trade-offs between cost, performance and time 21 Perceptions of project success or failure beyond the three primary objectives 24 Identifying and ranking the stakeholders 25 Benefits realization 26 References and further reading 27 Chapter 3 Defining the Project Task 29 Importance of initial project definition 29 Projects which are difficult or impossible to define 29 Feasibility studies to improve early project definition 32 Checklists 32 Enquiries and proposals for new projects 34 Defining the project scope 37 Contractor’s strategy and design specification 39 Specifications for internally funded projects 41 Developing and documenting the project specification 46 PROJECT MANAGEMENT Chapter 4 Estimating the Project Costs 49 Introduction to cost estimating 49 Classification of costs as direct or indirect 51 Estimating accuracy 51 Classification of estimates according to confidence 52 Estimating accuracy in relation to prices and profits 53 Version control of project cost estimates 54 Top-down or bottom-up? 55 Compiling the task list 55 Level of detail in project cost estimating 57 Estimating formats 57 Estimating manufacturing costs 61 Estimating project labour costs 63 Personal estimating characteristics 66 Estimates for material and equipment costs 67 Reviewing the cost estimates 68 References and further reading 69 Chapter 5 First Steps in Planning the Timescale 71 General introduction to project planning 71 What makes an ideal project plan? 75 Museum project: a case example 75 Distinction between planning and scheduling 81 References and further reading 81 Chapter 6 Financial Appraisal and the Business Plan 83 Project feasibility analysis 83 Different viewing platforms for the project investor and the project contractor 84 Introduction to project financial appraisal methods 86 Simple payback method 87 Discounted cash flow 89 How much confidence can we place in the data? 92 Project funding 95 References and further reading 97 Chapter 7 Risk 99 Introduction to project risk management 99 Identifying the possible risks 100 Risk appraisal and analysis 100 Risk register 104 vi CONTENTS Methods for dealing with risks 105 Insurance 107 Planning for a crisis 112 References and further reading 113 Chapter 8 Project Authorization 115 Introduction to project authorization 115 Project authorization criteria for the project owner 116 Authorization documents issued by the project owner 118 Project registration and numbering 120 Project authorization in a contracting organization 121 Authorizing work without a contract or customer’s order 123 References and further reading 125 Chapter 9 Project Organization Structures 127 Effective organization and communications 127 Organization charts 127 Emergence of project management in a developing company 129 Project matrix organizations 133 Project teams and task forces 137 Organization of central administration functions 139 Which type of project organization is best? 140 Organizations with more than one project manager 144 References and further reading 148 Chapter 10 Organization of Management Change and IT Projects 149 Special characteristics of management change projects 149 Case example: the Coverite plc office relocation project 150 PRINCE2™ 154 References and further reading 154 Chapter 11 Key People in the Organization 155 Project manager 155 Director of projects or programme manager 159 Project engineer 159 Project support office 161 References and further reading 162 Chapter 12 Work Breakdown and Coding 165 WBS concept 165 Coding systems 170 Benefits of a logical coding system 173 vii PROJECT MANAGEMENT Choosing a coding system 175 What happens when the customer says ‘You shall use my coding system!’? 176 References and further reading 177 Chapter 13 Completing the Breakdown Structures 179 Developing a project organization breakdown structure 180 Relationship between the project WBS and OBS 183 Introducing the cost breakdown structure 185 References and further reading 186 Chapter 14 Detailed Planning: An Introduction to Critical Path Networks 187 Gantt charts: their advantages and limitations 187 Background to critical path analysis 188 Different network notation systems 188 Critical path analysis using arrow diagrams 190 Critical path analysis using precedence notation 196 Case example: furniture project 199 More complex network notation 203 References and further reading 207 Chapter 15 Detailed Planning: Critical Path Networks in Practice 209 Developing the network logic 209 Level of detail in network planning 212 Interface events and activities 215 Milestones 215 Estimating task durations 216 Is the predicted timescale too long? 218 Case example: the museum project 218 A case for drawing networks from right to left 226 Network analysis as a management tool 227 References and further reading 228 Chapter 16 Principles of Resource Scheduling 229 What are resources and which of them can be scheduled? 229 Role of network analysis in resource scheduling 231 Resource scheduling case example: the garage project 231 Float (or slack) 240 Two fundamental priority rules for resource scheduling 245 Summary: the elements of a practicable schedule 247 References and further reading 248 viii CONTENTS Chapter 17 Scheduling People (and Other Reusable Resources) 249 Choosing which resources to schedule 249 Choice of resource units 251 Rate-constant and non rate-constant usage of resources 252 Specifying resource availability levels 253 Using different calendars for resource scheduling 254 Seven logical steps of project resource scheduling 256 References and further reading 257 Chapter 18 Scheduling Materials 259 Manufactured parts and materials scheduling compared with general project scheduling 259 Identifying and quantifying common parts for manufacturing projects 260 Case example: a filing cabinet project 261 Line of balance 264 Computer solutions for scheduling manufacturing materials 272 Using purchase control schedules to schedule equipment for capital projects 272 References and further reading 274 Chapter 19 Scheduling Cash Flows 275 Cash flow scheduling in general 275 Scheduling cash flows in different kinds of projects 276 Using project management software to schedule cash outflows 281 Using the computer to schedule cash inflows 283 Conclusion 283 Chapter 20 Computer Applications 285 Choosing suitable software 285 Special network logic required for computer applications 291 Preparing for the first computer schedule 292 Case example: the garage project 299 Data entry errors 303 Network plotting 306 Time analysis of the garage project network 306 Resource scheduling for the garage project 308 Standard and customized output reports 313 Updating the schedules and reports 316 Chapter 21 Managing Project Start-up 317 Preliminary organization of the project 317 Correspondence and other documents 318 ix PROJECT MANAGEMENT Engineering standards and procedures 322 Physical preparations and organization 323 Getting work started 325 Issuing detailed planning and work instructions 327 Chapter 22 Aspects of Commercial Management 331 Contracts 331 Purchase orders 334 Terms of trade used in international business (Incoterms 2000) 337 Pricing a contact proposal 338 Contract payment structures 340 Timing of payments 343 Financial viability of participating organizations 344 References and further reading 344 Chapter 23 Managing Procurement 345 Purchasing cycle 345 Roles in the purchasing organization for a large international project 346 Purchase specification: defining what has to be bought 349 Supplier selection 357 Purchase requisition and order 361 Expediting 364 Special timing of orders and deliveries 364 Purchase quantities 366 Purchase order amendments 367 Correlation between specification, enquiry, requisition and order numbers 367 Project or stock purchasing? 368 Marking and labelling goods before transit 369 Goods receipt 369 Stores administration 370 Vendors’ documents 372 Materials management as a shared or common service 373 References and further reading 374 Chapter 24 Managing Progress 375 Progress management as a closed-loop control system 376 ‘Management by’ styles 376 Updating schedules and records 379 Collecting progress information 380 Statistical checks 383 Managing the progress and quality of bought-in materials and equipment 383 x CONTENTS Managing subcontractors and agency employees 387 Routine priority allocation in manufacturing projects 389 When the news is bad 390 Corrective measures 391 Immediate action orders 392 Construction site organization and management 395 Project meetings 396 Progress reports 401 References and further reading 402 Chapter 25 Managing Changes 403 Impact of changes in relation to the project life cycle 403 Origin and classification of changes 403 Authorization arrangements 406 General administration 408 Estimating the true cost of a change 411 Forms and procedures 414 Version control for modified drawings and specifications 422 Emergency modifications 424 Chapter 26 Managing Project Costs 429 Principles of cost control 429 Controlling variable costs 430 Controlling fixed costs and overhead cost recovery 431 Additional cost control factors 433 Total cost approach 434 Checklist of cost management factors 436 Setting and resetting cost budgets 437 Cost collection methods 438 Audits and fraud prevention measures 442 Comparing actual costs against planned costs 443 References and further reading 443 Chapter 27 Earned-Value Analysis and Cost Reporting 445 Milestone analysis 445 Earned-value analysis 450 Earned-value analysis prediction reliability and implications 455 Evaluating cost performance for materials and bought-in equipment 457 Effect of project changes on earned-value analysis 458 Project ledger concept 459 Predicting profitability for a whole project 459 xi PROJECT MANAGEMENT Post mortem 464 References and further reading 464 Chapter 28 Managing Multiple Projects, Programmes and Portfolios 465 Project management or programme management? 465 Managing a portfolio of management change and IT projects 466 Multi-project resource scheduling 467 Project resource scheduling in the corporate context 473 References and further reading 474 Chapter 29 More Advanced or Less Frequently Used Techniques 475 Line of balance charts in construction projects 475 Dealing with network plans for large projects 477 PERT 478 Standard networks 480 Templates (standard network modules) 482 Chapter 30 Managing Project Closure 491 Reasons for closing a project 491 Formal project closure 492 Final project cost records 494 Disposal of surplus material stocks 494 Final project definition: the end of a continuous process 494 As-built condition of a manufacturing or capital engineering project 495 As-built condition of a multiple manufacturing project 497 As-built condition of a project that is interrupted before completion 498 Managing files and archives 500 Bibliography 503 Contents Comparison Between the Eighth and Ninth Editions 507 Index 511 xii List of Figures 1.