CEV633
ENGINEERING ECONOMICS
& PROJECT MANAGEMENT
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Course Outcome
Explain the principles of engineering economy and
project management in solving chemical
engineering/environmental problems (C6) ~ CO1
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Course Learning
Outcome
The student should be able to :
Describe concepts of a project plan
Explain the planning process
Generate the work breakdown structure.
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Employers ranked Communication skills, Desire to
Learn, Passion & Commitment, Team players and
Flexible/ Adaptable as Top 5 Qualities in Fresh
Graduates
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Introduction of Project Management
What Is a Project?
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Other definitions of a Project…
Specific, timely, usually multidisciplinary, and
always conflict ridden (Mantel et al.)
Series of activities or tasks , specific objectives,
defined start and end dates, funding limits,
consumes resources, multifunctional (Kerzner)
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Introduction of Project Management
What are the main characteristics of a project???
Unique purpose/ specific/ one time and contains
well-defined objectives
Temporary (have a definite start date and an
expected completion date)
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Other additional characteristics of a project:
Require resources, often from various areas
Should have a primary sponsor/customer/client
# The project sponsor usually provides the
direction and funding for the project
Involve uncertainty
Has unknown elements, which therefore create risk
Brings about change
Often multidisciplinary
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Other example of projects..
Building a new chemical plant
Writing up a thesis
Planning a birthday party for your mother
Sending an astronaut to the space
??
??
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Introduction of Project Management
What is NOT a project??
Something done as a routine (ongoing, repetitive
activities –lacking the ‘uniqueness’.
Rarely implies the implementation of something
new
Examples of non-project:
Attending classes every week
Renewing road tax every year
Company’s annual grand meeting
Shut down/ Turn around of a chemical plant
??
??
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Introduction of Project Management
Quiz-Are these projects?
Building a house
Lecturer giving lectures
Mowing the lawn
Planning a wedding
Setting up a business
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Introduction of Project Management
Mega projects may be defined as:
“Projects that cost more than US$1 billion (extremely large-scale investment) and
attract a lot of public attention because of substantial impacts on communities,
environment, and budgets” OR
“Initiatives that are physical, very expensive, and public“
Sometimes called “major program”
Require care in the project development process to reduce any possible optimism bias and
strategic misrepresentation
Examples of megaprojects include bridges, tunnels, highways, railways, airports, seaports,
power plants, dams, wastewater projects, Special Economic Zones (SEZ), oil and natural
gas extraction projects, public buildings, information technology systems, aerospace
projects, weapons systems, huge charity campaign.
"Mega" also implies the size of the task involved in developing, planning, and
managing projects of this magnitude.
Other projects that cost less than $1 billion are sometimes also called megaprojects, it
depends on the context. Example, projects less than 1 billion in a medium sized town
may be considered “mega”, this would not be necessarily be the case for a similar sized
project in a major world city.
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Examples of Mega projects:
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Program:
“A group of related projects managed in a
coordinated way to obtain benefits and control
not available from managing them individually.”
*PMI, A Guide to the Project Management Body of Knowledge (PMBOK® Guide) (2004), p. 16.
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Introduction of Project Management
Project Management
Management :
The process of Planning, Organizing, Controlling
and Measuring
Planning:
The most critical and gets the least amount of our time
**Beginning with the End in mind-Stephen Covey**
Organizing:
Orderly fashion (Contingent/Prerequisites)
Controlling:
Critical if were are to use our limited resources wisely
Measuring:
To determine if we accomplished the goal or met the target.
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Introduction of Project Management
Project management:
“The application of knowledge, skills, tools, and
techniques to project activities in order to
meet project requirements”
(PMI*,ProjectManagementBodyofKnowledge(PMBOK®Guide),2004)
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Project Management Framework
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Introduction of Project Management
Project Stakeholders
Stakeholders are the people involved in or
affected by project activities
Stakeholders include
the project’s sponsor/client and its project team
the project’s contractor and its project team
support staff
users
suppliers
opponents to the project
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Project Management vs. General Management
Basically, the two disciplines overlap with each
other.
General management also encompasses planning,
organizing, staffing, executing and controlling but
it is more applicable to operations of the on going
enterprise.
Project management principles are more specific
to implementation of a change, a project, which is
a unique and temporary with a finite start and
finish time and has all the attendant problems and
risks associated with it.
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Where is a project manager/ project management team
in an organization?
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All projects have 3 interrelated objectives:
Scope: Generate deliverables that satisfy the
client
Time: Finish on schedule
Cost : Meet the budget limit
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Uncertainties are bound to happen in any
project, which will threaten the pre-determined
scope, time and budget.
It is the project manager’s duty to balance
these three often competing goals.
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Introduction of Project Management
A must-have skill in PM: Negotiation skill..
Mutual discussions for the purpose of arriving at the terms of a
transaction or agreement
The nature of the role of a project manager makes it essential for
him/her to have good negotiation skills.
There are usually many stakeholders involved in a project and most
projects have team members from different departments.
This usually results in several different points of view which can
sometimes make it difficult to keep the project on track and within
the original scope.
Negotiation skills help a project manager by reaching an
agreement or a compromise of some kind on the issue that may be
causing a problem or delay.
Skilled negotiators have the ability to manage the situation so that
all parties involved feel as though they had a say that was taken
into consideration.
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Successful win-win negotiation often involves
taking a synergistic approach by searching for
the ‘third alternative’
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The Life Cycles of Projects
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Projects life cycle measures project completion as a
function of:
1. Time (schedule) or 2. Resources (budget)
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Introduction of Project Management
Project Selection
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.
Since projects in general require a substantial investment in terms
of money and resources, both of which are limited, it is of vital
importance that the projects that an organization selects provide
good returns on there sources and capital invested.
The proper selection of investment projects is crucial to the long-
run survival of every organization.
The major function of the selection process is to ensure that several
conditions are considered before a commitment is made to
undertake any project.
The selection process is often complete before a Project Manager is
appointed to the project.
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Two Critical Facts about Models!
Models do not make decisions – People do!
Models only aid decision making.
All models, however sophisticated, are only
partial representations of the reality are meant
to reflect.
Their limitations should be appreciated as they
are only prediction of what could happen and as
accurate as data they are based on.
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Important Criteria in Selecting a Model (cont.)
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
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Introduction of Project Management
Nonnumeric Models
Sacred Cow
Operating Necessity
Competitive Necessity
Product Line Extension
Comparative Benefit
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Concepts of a project plan
Project Management
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Concepts of a project plan
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Concepts of a project plan
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Concepts of a project plan
But……..
Beware of “Paralysis by Analysis”
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Concepts of a project plan
Again…we need to be clear why we are planning a
project…
The primary function of a project plan is to serve the
Project Manager and his team a detailed map of the route
from project start to finish.
To facilitate later accomplishment
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Concepts of a project plan
What is the content of a Project Plan?
Organization’s expected financial benefits that will
accrue
Strategic reasons for the project
Sufficient information that will tell the PM:
What remains to be done
When a certain task will be completed
What deliverables the output should include
What remaining resources needed (and who the vendors
are)
Etc.
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Concepts of a project plan
2 types of a complete Project Plan according to industrial
standards:
PMBOK Project Plan
•PRINCE2 Project Plan
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Concepts of a project plan
PMBOK Project Plan includes..
Project Charter
Project Plan Elements : Multiple elements concerning the
planning, execution and control of the project.
Work Breakdown Structure (WBS)
RACI Matrix a.k.a. Linear Responsibility Chart
Few other planning elements which also serves special
purposes.
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Concepts of a project plan
Project Charter:
An abridge version of the full project plan containing
summaries of the budget and schedule details.
Major project stakeholders must sign off the project
charter
Project sponsor
Client/user
Project Manager
Program Manager (if necessary)
Once agreed (signed), the charter (and the full project
plan) cannot be altered by any signer without acceptance
by othersPM will probably be overpowered
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Concepts of a project plan
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Concepts of a project plan
Project Charter (cont’):
Project Statement of Work
Created by the customer or sponsor
Gives the description of the project scope
Links the project to the strategic plan
Think of it as a high level “contract” between the sponsor
and the Project Manager
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Concepts of a project plan
Project Charter (cont’):
Formalize the project with the sponsor
Sections:
Project Overview
Project Approach
Project Objectives
Major Deliverables
Constraints
Risks and Feasibility
In one page
Most people, especially busy people, will not read more.
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Concepts of a project plan
Project Charter (cont’):
What goes into your Project Charter?
Title
Description
Who is the Project Manager? What is their authority?
What is the business need?
What is the justification?
What are the assigned resources?
Who are the stakeholders?
What are the known stakeholder requirements?
What are the deliverables?
What are the constraints?
What are the assumptions? 71
Concepts of a project plan
Project Charter Example: Web Site
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Concepts of a project plan
PMBOK Project Plan includes..
Project Charter
Project Plan Elements : Multiple elements concerning the
planning, execution and control of the project.
Work Breakdown Structure (WBS)
RACI Matrix a.k.a. Linear Responsibility Chart
Few other planning elements which also serves special
purposes.
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Concepts of a project plan
Project Plan Elements
The process of developing the project plan varies among
organizations, but any project plan must contain the
following elements:
Purpose – describes the Business Case for the project
includes the strategic reasons for the project, its expected
profitability and competitive effects, as well as the desired
scope and any other technical results.
Objectives- detailed description of the project’s scope, its
deliverables and outcomes
Overview- contains a brief description of the project and
its deliverables, together with a list of the major milestones
or significant events in the project schedule and any
constraints on the project scope
Schedules –A summary of the schedules and miltestones 75
Concepts of a project plan
Project Plan Elements (cont’)
Resource requirements – Estimates of project expenses,
both capital and operating, are included here.
Personnel and stakeholders- describes the stakeholders,
sponsor, project manager, and possibly some members of
the project team
Risk management-
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Concepts of a project plan
Project Plan Elements (cont’)
Evaluation Methods - every project should be evaluated
against standards and by methods established at the
project’s inception
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The planning process
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The planning process
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The planning process
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The planning process
Example:
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Concepts of a project plan
PMBOK Project Plan includes..
Project Charter
Project Plan Elements : Multiple elements concerning the
planning, execution and control of the project.
Work Breakdown Structure (WBS)
RACI Matrix a.k.a. Linear Responsibility Chart
Few other planning elements which also serves special
purposes.
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The Work Breakdown Structure (WBS)
A ‘hierarchical’ planning process
A systematic procedure
Most PM refers to WBS as the "foundation“ of project
planning.
The WBS represents a logical decomposition of the work
to be performed and focuses on how the product,
service, or result is naturally subdivided.
It is an outline of what work is to be performed.
Failing to identify all important tasks, is a primary
contributor to a failure of a project to achieve its cost and
time objectives.
Therefore, a primary purpose for developing a WBS is to
ensure that any task required to produce a deliverable is
not overlooked. 83
The Work Breakdown Structure (WBS)
A form to assist hierarchical planning
MODIFIED WBS
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The Work Breakdown Structure (WBS)
Other advantages of WBS in project planning
Helps more accurately and specifically define and
organise the scope of the total project.
To help with assigning responsibilities, resource
allocation, monitoring the project, and controlling
the project.
Allows the PM to double check all the deliverables‘
specifics with the stake holders and make sure there is
nothing missing or over lapping.
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The Work Breakdown Structure (WBS)
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The Work Breakdown Structure (WBS)
Defined by PBMOK
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The Work Breakdown Structure (WBS)
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The Work Breakdown Structure (WBS)
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The Work Breakdown Structure (WBS)
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The Work Breakdown Structure (WBS)
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The Work Breakdown Structure (WBS)
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The Work Breakdown Structure (WBS)
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The Work Breakdown Structure (WBS)
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The Work Breakdown Structure (WBS)
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The Work Breakdown Structure (WBS)
The WBS is an extremely valuable tool to the project
management methodology.
It can make or break a project.
It sets the foundation for the rest of the project planning.
A solid WBS helps ensure proper project baselines,
estimating, resource use, scheduling, risk analysis, and
procurement.
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The Work Breakdown Structure (WBS)
Figure below – A WBS as an output of MSP (Microsoft Project)
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The Work Breakdown Structure (WBS)
A WBS
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The Work Breakdown Structure (WBS)
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Concepts of a project plan
PMBOK Project Plan includes..
Project Charter
Project Plan Elements : Multiple elements concerning the
planning, execution and control of the project.
Work Breakdown Structure (WBS)
RACI Matrix a.k.a. Linear Responsibility Chart
Few other planning elements which also serves special
purposes.
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RACI Matrix
Responsible
Accountable
Consult
Inform
RACI Matrix helps organize the project team by clarifying
the responsibilities of the project team members
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RACI Matrix
RACI Matrix: Simple Example
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RACI Matrix
What is the difference between accountable and
responsible?
The Accountable person is the individual who is
ultimately answerable for the activity or decision. This
includes “yes” or “no” authority and veto power. Only one
Accountable person can be assigned to an action.
The Responsible person is the individual(s) who
actually complete the task. The Responsible person is
responsible for action/implementation. Responsibility
can be shared. The degree of responsibility is determined
by the individual with the “Accountability”.
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RACI Matrix
A whole-brain approach to Project Planning
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RACI Matrix
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RACI Matrix
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RACI Matrix
Advantages of using mind-map in Project Planning
Helps tap the creative potential of the entire project
team.
Helps increase both the quantity and quality of ideas
generated.
Helps generate enthusiasm, because project team
members tend to find mind mapping entertaining.
Often gets quieter team members more involved in
the process.
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RACI Matrix
Steps in mind-mapping for Project Planning
Step 1: Begin mind-mapping with statement of project ’s
objective/goal in the center.
Step 2: Create major tasks which branch-off from the
projects goal.
Step 3: Break major tasks further into more detailed task.
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RACI Matrix
Example:
Project objective: To improve a part-time evening MBA
program for working professionals (in a graduate
business school) – major tasks
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RACI Matrix
Example:
Project objective: To improve a part-time evening MBA program for
working professionals (in a graduate business school) - Major tasks
are further broken down into more detailed tasks.
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RACI Matrix
Example:
Project objective: To improve a part-time evening MBA program for
working professionals (in a graduate business school) - Major tasks
are further broken down into more detailed tasks.
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RACI Matrix
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RACI Matrix
Sample Mind-Mapping Approach for Creating a WBS
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RACI Matrix
Resulting WBS in Chart Form
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Risk Management
Generally , risk management includes 3 areas:
(1) Risk identification
(2) Risk analysis
(3) Response to risk into more detailed task.
Six subprocesses (steps) involved:
(1) Risk Management Planning
Develop a plan for risk management activities
(2) Risk Identification
To find those risks that might affect the project
(3) Qualitative Risk Analysis
Evaluate the serousness of the risk and the likelihood it will affect the
project
(4) Quantitative Risk Analysis
Develop measures for the probability of the risk and its impact on the
project
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Risk Management
Six subprocesses involved: (cont’)
(5) Risk Response Planning
To find ways of reducing negative impacts on the project as well as
enhancing positive impacts
(6) Risk Monitoring & Control
To maintain records of and evaluating the subprocesses above in order to
improve risk management.
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Risk Management
(1) Risk Management Planning
The steps 2 through 5 for any project must be designed
Care must be exercised to ensure that the necessary resources can
be applied in a timely and well-organized manner
Is a continuous process
(2) & (3) Risk Indentification and Qualitative Risk Analysis
These 2 steps in practice are often carried out together
As a risk in identified, an attempt to measure its timing,
likelihood, and impact is often made concurrently
Scenario Analysis Method
A well-known method for identifying serious risks.
It involves envisioning likely scenarios that may have major repercussions
on the organization and then identifying the possible resulting outcomes of
events
Creating best, most likely and worst case scenarios to measure impacts
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Risk Management
Scenario Analysis - example
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Risk Management
Risk Indentification and Qualitative Risk Analysis (cont’)
Failure Mode and Effect Analysis (FMEA)
List ways the project might potentially fail
List the consequences of each failure and evaluate its severity (S) (1-10)
List the causes of each failure and estimate their likelihood of occuring
(L) (1-10)
Estimate the ability to detect each failure identified (D) (1-10)
Calculate the Risk Priority Number (RPN) S x L x D
Sort the list of potential failures by their RPNs & consider ways for
reducing the risk associated with failures with high RPNs.
Example : FMEA for New Product Development Project at Pharmacuetical Company
Failure S L D RPN
Not effective 8 6 5 240
Not safe 8 4 5 160
Drug interacts with other drugs 6 3 8 144
Beat to market 7 3 2 42
Can't produce 6 4 4 96
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Risk Management
(4) Quantitative Risk Analysis (cont’)
Expected Value Method
When probability information is available or can be estimated, many risk
analysis techniques use the concept of expected value of an outcome- that
is, the value of an outcome multiplied by the probability of that outcome
occuring
Example : Decision Table (or payoff matrix) for Sample Problem
Probabilities 0.1 0.4 0.3 0.2 Expected
Alternatives State of Nature High Med. Low None Value
Fast 14 10 6 1 7.4
Average 10 12 9 5 9.5*
Slow 5 8 12 7 8.7
*Maximum
E (Fast) = 0.1(14) +0.4(10) + 0.3(6) + 0.2(1) = 7.4
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Risk Management
(4) Quantitative Risk Analysis (cont’)
Simulation Method
Simulation software has made the process user friendly and far simpler
than in the midtwentieth century
Has become one of the most powerful techniques for dealing with risks
that can be described in numeric terms
Example – Monte-Carlo simualtion software - see chapter 5 for details
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Risk Management
(5) Risk Responsing Planning
Involves decisions about which risks to prepare for and which to
ignore and simply accept as potential threats
The main preparation for a risk is the development of a risk
response plan
Contingency Plan
A backup for some emergency or unplanned event, often referred to colloquially
as “plan B”, and there may also need to be a plan C and a plan D as well for an
even deeper emergency
It includes person in charge, what resources are available to the person, location
of backup facilities, person to support person in charge in what manner & so on.
Logic Chart
Shows the flow of activities once a backup plan is initiated
Need to think through the critical steps that will need to be accomplished in a
crisis & provide an overview of the response events and recovery operations.
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Risk Management
(6) Risk Monitoring & Control
To maintain records for how all projects deal with risks
To provide an ongoing evaluation of current risk identification,
measurement, analysis, and response techniques.
To do the improvement of the organization’s risk management
activities
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THAT’S ALL FOR TODAY …..
THANK YOU….
Don’t take easy for your
EXERCISES…. Practice make it
perfect……
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