About Project Management ( Part 4 )

Outsourcing

Outsourcing Project Work

Advantages of Outsourcing

• Cost reduction: Outsourcing can lead to significant cost savings, as it allows companies to leverage lower labor costs in other countries.
• Focus on Core Competencies: Outsourcing non-core activities allows companies to focus on their primary business functions.
• Access to Expertise: Outsourcing to specialized service providers can provide access to expertise that may not be readily available within the organization.
• Scalability: Outsourcing can facilitate scalability, as service providers can quickly increase or decrease resources as needed.
• Risk Management: Outsourcing can help manage risks associated with new or untested technologies or markets.

Disadvantages of Outsourcing

• Coordination breakdown: Communication and coordination challenges can arise when working with offshore teams, leading to misunderstandings and delays.
• Loss of Control: Outsourcing involves transferring control over certain aspects of the project to an external provider.

3. Conflict
4. Security issues: Outsourcing sensitive data or intellectual property to foreign countries may raise security concerns.
5. Political hot potato: Outsourcing can make a company a target for political or social unrest in the host country.

Request for Proposal (RFP)

Steps of Development of a Detailed RFP

1. Summary of needs and request for action
2. Statement of work (SOW) detailing the scope and major deliverables
3. Deliverable specifications/requirements, features, and tasks
4. Responsibilities—vendor and customer
5. Project schedule
6. Costs and payment schedule
7. Type of contract
8. Experience and staffing
9. Evaluation criteria

Best Practices in Outsourcing Project Work

• Well-defined requirements and procedures
• Extensive training and team-building activities
• Well-established conflict management processes in place
• Frequent review and status updates
• Co-location when needed
• Fair and incentive-laden contracts
• Long-term outsourcing relationships

Four Strategies for Communicating with Outsourcers

1. Recognize culture differences
2. Choose the right words
3. Confirm your requirements
4. Set deadlines

Advantages of a Long-Term Partnership

• Reduced administrative costs
• More efficient utilization of resources
• Improved communication
• Improved innovation
• Improved performance

Principled negotiation

• Emphasizes developing win/win solutions while protecting yourself against those who
  would take advantages of your forthrightness.
• Is based on four key points.
  • Separate the people from the problem
  • Focus on interests, not positions
  • Invent options for mutual gains
  • When possible, use objective criteria

Dealing with Unreasonable People

• When the other person begins to push, don’t push back.
• Ask questions instead of making statements.
• Invite criticism and advice instead of defending your ideas.
• Use silence as a response to an unreasonable proposal.
• Have a strong best alternative to a negotiated agreement (BATNA). A strong BATNA gives you the power to walk away and say, “No deal unless we work toward a win/win scenario.”

A Note on Managing Customer Relations

• Bad news travel faster and farther than good news.
• Project managers need to cultivate positive working relations with clients to preserve their reputations.
• Customer satisfaction is a function of the extent to which perceived performance (or outcome) exceeds expectations.
• The met-expectation model of customer satisfaction highlights the point that whether a client is dissatisfied or delighted with a project is not based on hard facts and objective data but on perceptions and expectations.
• Project managers must be skilled at managing customer expectations and perceptions.

Managing Customer Expectations

• Avoid the temptation to oversell the virtues of a project to win approval.
• Lower customer expectations by underselling projects.
• Work closely with the client organization to develop a well-defined project scope statement.
• Share significant risks or potential problems that might disrupt project execution.
• Keep customers abreast of project progress.
• Handle customer interactions, unexpected problems and setbacks with a competent and professional manner.
• Speak with one voice. ( Avoiding Visible Internal Disputes )

Procurement Management Process

• Planning purchases and acquisitions
• Planning contracting
• Requesting seller responses
• Selecting sellers
• Administering the contract
• Closing the contract

Fixed-Price Contracts

• The contractor agrees to perform all work specified in the contract at a fixed price.
• Fixed-price contracts are preferred by both owners and contractors when the scope of the project is well defined with predictable costs and low implementation risks.
• The disadvantage of a fixed-price contract for owners is that it is more difficult and more costly to prepare.
• The primary disadvantages of a fixed-price contract for contractors is that they run the risk of underestimating.
• Contracts with long lead times such as construction and production projects may include escalation provisions that protect the contractor against external cost increases in materials, labor rates, or overhead expenses.

Cost-Plus Contracts

• The contractor is reimbursed for all direct allowable costs (materials, labor, travel) plus an additional fee to cover overhead and profit.
• Unlike fixed-price contracts, cost-plus contracts put the burden of risk on the client. The contract does not indicate what the project is going to cost until the end of the project.
• The inherent weakness of cost-plus contracts has been compensated for by a variety of incentive clauses directed at providing incentives to contractors to control costs, maintain performance, and avoid schedule overruns.

Contract Change Control System

• Defines the process by which the contract may be modified.
• Includes
  • the paperwork
  • tracking systems
  • dispute resolution procedures
  • approval levels necessary for authorizing changes

Monitoring Progress

Structure of a Project Monitoring Information System

A project monitoring system involves

• Determining what data to collect
• Determining how, when, and who will collect the data
• Analysis of the data
• Reporting current progress

What Data Are Collected?

The data need to answer questions such as

• What is the current status of the project in terms of schedule and cost?
• How much will it cost to complete the project?
• When will the project be completed?
• Are there potential problems that need to be addressed now?
• What, who, and where are the causes for cost or schedule overruns?
• If there is a cost overrun midway in the project, can we forecast the overrun at completion?

Collecting Data and Analysis

• Will the data be collected by the project team, contractor, independent cost engineers, project manager?
• Will the data be derived electronically from some form of surrogate data?
• Should the reporting period be one hour, one day, one week, or what?
• Is there a central repository for the data collected and is someone responsible for its dissemination?

Reports and Reporting

• Who gets the progress reports?
• How will the reports be transmitted?
• When will the reports be distributed?

A common topic format for progress reports:

• Progress since last report

• Current status of project: 1.schedule, 2.cost, 3.scope

• Cumulative trends

• Problems and issues since last report: 1. Actions and resolutions of earlier problems 2. New variances and problems identified

• Corrective action planned

The Project Control Process

Control

Is the process of comparing actual performance against plan to identify deviations, evaluate possible alternative courses of actions, and take appropriate corrective action.

Project control steps for measuring and evaluating project performance

1. Setting a baseline plan
2. Measuring progress and performance
3. Comparing plan against actual
4. Taking action

Monitoring Time Performance

Typical tools used for communicating project schedule status

• Gantt chart (bar chart) is the most favored, used, and understandable. It is commonly referred to as a tracking Gantt chart.
• Control chart is used to plot the difference between the scheduled and actual times on the critical path at a given point on the project.
• Milestone schedules are often used to keep more distal stakeholders informed on the progress of a project.
  • Milestones are significant project events that mark major accomplishments.

Earned Value Management (EVM)

• Is a methodology that combines scope, schedule, and resource measurement to assess project performance and progress.
• Was pioneered by the U.S. Department of Defense (DoD) in the 1960s.
• Uses several acronyms and equations for analysis.
• Uses data developed from the work breakdown structure, project network, and schedule.
• Starts with the time-phased costs that provide the project budget baseline, which is called the planned budgeted value of the work scheduled (PV). Then comparisons can be made with actual and planned schedule and costs.

Term	Definition
EV	Earned value for a task is the budgeted value of the work accomplished. Work accomplished is often measured in terms of percentages (e.g., 25% complete) in which case, EV is simply percent complete times its original budget. [The older acronym for this value was BCWP—budgeted cost of the work performed.]
PV	The planned time-phased baseline of the value of the work scheduled. An approved cost estimate of the resources scheduled in a time-phased cumulative baseline [BCWS—budgeted cost of the work scheduled].
AC	Actual cost of the work completed. The sum of the costs incurred in accomplishing work [ACWP—actual cost of the work performed].
CV	Cost variance is the difference between the earned value and the actual costs for the work completed to date where CV = EV − AC.
SV	Schedule variance is the difference between the earned value and the baseline to date where SV = EV − PV.
BAC	Budgeted cost at completion. The total budgeted cost of the baseline or project cost accounts.
EAC	Estimated cost at completion
ETC	Estimated cost to complete remaining work
VAC	Cost variance at completion. VAC indicates expected actual over- or underrun cost at completion.

Developing an Integrated Cost/Schedule System

1. Define the work using a WBS.
   • Scope
   • Work package
   • Deliverables
   • Organization units
   • Resources
   • Budgets for each work package
2. Develop work and resource schedule.
   • Schedule resources to activities
   • Time-phase work packages into a network
3. Develop a time-phased budget using work packages included in an activity called the planned budgeted cost of the work scheduled (PV).
4. At the work package level, collect the actual costs for the work performed called the actual cost of the work completed (AC). Multiple percent complete with the original budget amount to be earned value (EV).
5. Compute the schedule variance (SV = EV – PV) and cost variance (CV = EV – AC).

Development of Project Baseline

Purposes of a Baseline (PV)

• To measure and report progress
• To estimate cash flow

Rules in Assigning Costs to the Baseline

• Costs are placed (time-phased) in the baseline exactly as managers expected them to be “earned.”
• Percent complete is the workhorse most commonly used. Someone familiar with each task estimates what percent of the task has been completed or how much of the task remains.

What Costs Are Included in Baselines?

• Baseline is the sum of the cost accounts and each cost account is the sum of the work packages in the cost account.
• Three direct costs are typically included in baselines—labor, equipment, and materials

Methods of Variance Analysis

Comparing earned value with

• The expected schedule value
• The actual costs

Assessing current status of a project requires three data elements

• Planned cost of the work scheduled (PV)
• Budgeted cost of the work completed (EV)
• Actual cost of the work completed (AC)

Computing schedule variance (SV) and cost variance (CV)

• A positive variance indicates a desirable condition, while a negative variance suggests problems or changes that have taken place.

Variances

Cost variance (CV) = EV – AC

• Tells us if the work accomplished costs more or less than was planned at any point over the life of the project.

Schedule variance (SV) = EV – PV

• Presents an overall assessment of all work packages in the project scheduled to date.
• Contains no critical path information.
• Measures progress in dollars rather than time units.

Variance at completion (VAC) = BAC – EAC

• Suggests whether the costs at completion of the project will differ from what was planned.

Developing a Status Report: A Hypothetical Example

Assumptions

• Each cost account has only one work package, and each cost account will be represented as an activity on the network.
• The project network early start times will serve as the basis for assigning the baseline values.
• From the moment work on an activity task begins, some actual costs will be incurred each period until the activity is completed.

Indexes to Monitor Progress

Performance Indexes

• Cost performance index (CPI) = EV/AC
  • Measures cost efficiency of the work accomplished to date
• Scheduling performance index (SPI) = EV/PV
  • Measures scheduling efficiency to date

Project Percent Complete Indexes

• Percent complete index budgeted costs (PCIB) = EV/BAC
• Percent complete index actual costs (PCIC) = AC/EAC
• Management reserve index (MRI) = CV/MR
  • Is popular in the construction industry
  • Reflects the amount of management reserves that has been absorbed by cost overruns.

Additional Earned Value Rules

Rules applied to short-duration activities and/or small-cost activities

• 0/100 rule: Assumes 100% of the budget is earned when the work package is completed.
• 50/50 rule: Allows 50% of the value of the work package budget to be earned when it is started and 50% to be earned when the package is completed.

Rule used gates before the total budgeted value of an activity can be claimed

• Percent complete with weighted monitoring gates: Uses subjective estimated percent complete in combination with hard, tangible monitoring points.

Forecasting Final Project Cost

Two methods used to revise estimates of future project costs

• Revised estimated cost at completion (EACre)
  • Allows experts in the field to change original baseline durations and costs because new information tells them the original estimates are not accurate.
• Forecasted total cost at completion (EACf)
  • Uses the actual costs to date plus an efficiency index (CPI=EV/AC) applied to the remaining project work.

Forecasting Models: EACre and EACf

• Revised estimated cost at completion (EACre) = AC + ETCre
  • AC = cumulative actual cost of work completed to date
  • ETCre = revised estimated cost to complete remaining work
• Forecasted total cost at completion (EACf)
  • = ETC + AC
  • = Work remaining / CPI + AC
  • = (BAC − EV)/(EV/AC) + AC

where:

• ETC = estimated cost to complete remaining work
• AC = cumulative actual cost of work completed to date
• CPI = cumulative cost index to date
• BAC = total budget of the baseline
• EV = cumulative budgeted cost of work completed to date

Another Forecasting Index

To Complete Performance Index (TCPI) = (BAC − EV) / (BAC − AC)

• Used as a supplement to the estimate at completion (EACf) computation.
• Measures the amount of value each remaining dollar in the budget must earn to stay within the budget.
• A ratio less than 1.00 indicates an ability to complete the project without using all of the remaining budget.

13.8 Other Control Issues

• Technical performance measurement is as important as measuring schedule and cost performance.
• Scope creep causes problems because the “minor refinements” eventually build to be major scope changes.
• Baseline changes should be allowed only if it is clear that the project will fail without the change, the project will be improved significantly with the change, or the customer wants it and will pay for it.
• Data acquisition is time consuming and costly.

Agile

Traditional versus Agile Methods

1. Traditional Project Management Approach
   • Concentrates on thorough, up front planning of the entire project.
   • Requires a high degree of predictability to be effective.
2. Agile Project Management (Agile PM)
   • Relies on iterative, incremental development (IID).
   • Is ideal for exploratory projects in which requirements need to be discovered and new technology tested.
   • Focuses on active collaboration between the project team and customers representatives, breaking projects into small, functional pieces and adapting to changing requirements.

A Set of 12 Guiding Principles for Agile PM

1. Our highest priority is to satisfy the customer through early and continuous delivery of valuable software.
2. Welcome changing requirements, even late in development.
3. Deliver working software frequently, from a couple of weeks to a couple of months, with a preference to the shorter timescale.
4. Business people and developers must work together daily throughout the project.
5. Build projects around motivated individuals. Give them the environment and support they need and trust them to get the job done.
6. The most efficient and effective method of conveying information to and within a development team is face-to-face conversation.
7. Working software is the primary measure of progress.
8. Agile processes promote sustainable development.
9. Continuous attention to technical excellence and good design enhances agility.
10. Simplicity—the art of maximizing the amount of work not done—is essential.
11. The best architectures, requirements, and designs emerge from self-organizing teams.
12. At regular intervals, the team reflects on how to become more effective, then turns and adjusts its behavior accordingly.

Agile PM

• Utilizes a rolling wave planning and scheduling project methodology.
• Is continuously developed through a series of incremental iterations over time.
  • Iterations are short time frames (“time boxes”).
  • The goal of each iteration is to develop a workable product that satisfies one or more desired product features to demonstrate to the customer and other key stakeholders.
  • At the end of each iteration, stakeholders and customers review progress and re-evaluate priorities to ensure alignment with customer needs and company goals.
  • Each new iteration subsumes the work of the previous iterations and adds new capabilities to the evolving product

Advantages of Iterative Development Process

• Continuous integration, verification, and validation of the evolving product.
• Frequent demonstration of progress to increase the likelihood that the end product will satisfy customer needs.
• Early detection of defects and problems.

Agile Principles

• Focus on customer value
• Iterative and incremental delivery
• Experimentation and adaptation
• Self-organization
• Servant leadership
• Continuous improvement

Agile PM in Action: Scrum

• Is a holistic approach to developing new products, where the whole team “tries to go the distance as a unit, passing the ball back and forth.”
• Begins with a high-level scope definition and ballpark time and cost estimates for the project.
• Use product features as deliverables.
  • A feature is defined as a piece of a product that delivers some useful functionality to a customer.
  • The project team tackles the highest-priority feasible feature first.
  • Priorities are re-evaluated after each iteration.
    • Iterations are called sprints and should last no longer than four weeks.
    • The goal of each sprint is to produce fully functional features.
  • Specific features are created according to four distinct phases: analysis, design, build, and test.

Key Roles and Responsibilities in the Scrum Process

Product Owner

• Acts on behalf of customers/end users to represent their interests.
• Works with the development team to refine features through stories and end users cases.
• Ensures that the development team focuses their efforts on developing a product that will fulfill the business objective of the project.

Development Team

• Is responsible for delivering the product.
• Is typically made up of five to nine people with cross-functional skill sets.

Scrum Master (Project Manager)

• Facilitates the scrum process and resolves impediments at the team and organization levels.
• Acts as buffer between the team and outside interference but not the leader of team (the team leads itself!)
• Helps the product owner with planning and try to keep the team energized.

Scrum Artifacts

1. Product Backlog
   • Definition: The Product Backlog is a prioritized list of all the features, requirements, enhancements, and bug fixes that might be needed for the product. It is essentially a “wish list” of everything the team could work on.
   • Ownership: Managed by the Product Owner, who ensures it reflects the product vision and priorities.
   • Scope: Covers the entire project or product lifecycle.
   • Content: Includes high-level features or user stories, detailed items, and technical improvements.
   • Dynamic Nature: Continuously evolves and adapts based on changing customer needs, feedback, and business priorities.
   • Purpose: Serves as the single source of truth for work to be done on the product.
2. Sprint Backlog
   • Definition: The Sprint Backlog is a subset of the Product Backlog, containing items that the team commits to completing during a specific sprint.
   • Ownership: Managed by the Development Team, as they are responsible for planning and delivering the work.
   • Scope: Focused on the current sprint, usually spanning 1-4 weeks.
   • Content: Includes selected Product Backlog items, detailed tasks to complete them, and technical work like bug fixes or improvements.
   • Static During Sprint: Unlike the Product Backlog, the Sprint Backlog is not supposed to change once the sprint starts (except in rare cases)

Extreme Programming(XP) and Kanban

Extreme Programming

- Is a more aggressive form of Scrum that organizes people to produce higher-quality software more efficiently.
- Considers change a natural, even desirable aspect of software development projects and should be planned for, instead of eliminated.
- Are test-driven development and paired programming.
- Is founded on five values: communication, simplicity, feedback, courage and respect.

Kanban

• Is a lean management methodology that has been adapted by Agile practitioners to help manage project work flow.
• Consists of a whiteboard divided into three columns: Planned, Work in Progress, and Done.
• Is based on the idea of a pull system—signaling when the team is ready for more work.
• Helps the team visualize the work flow on the project and focus their attention on the most critical work.

Applying Agile PM to Large Projects

Scaling

• Involves several teams working on different features at the same time.
• Needs to make sure that the different features being created work in harmony with each other—integration.

Staging

• Requires significant up-front planning to manage the interdependences of different features that will be developed.
• Involves developing protocols and defining roles for coordinating efforts and assuring compatibility

Limitations and Concerns

• Agile PM is not a simple methodology. Adoption tends to evolve over time.
• Many of the Agile principles, including self-organizing teams and intense collaboration, are incompatible with corporate cultures.
• Agile PM does not satisfy top management’s need for control.
• Agile skeptics warn that evolving requirements contribute to scope creep.
• Agile PM requires active customer involvement.

Hybrid Models

• Agile PM is used up front to resolve key scope questions and define requirements. Then traditional PM is applied to complete the project.
• Incremental, experimentation is used to resolve technical issues, allowing for a formal implementation plan.
• Many companies use hybrid models on large projects that combine waterfall and Agile methods.
• Teams use Agile techniques on plan-driven projects. Teams use shorter iterations and retrospectives to get critical customer feedback.
• Kanban methods are used by traditional teams to visualize work and identify bottlenecks in the project schedule.