21ME651- PROJECT MANAGEMENT

Module 4
Performing Projects

Introduction to Project Supply Chain Management

A supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer
request. In project management, this request can be made by the project team in order to acquire
some specific product or service required for completing various stages of the project. The
request also can be made by the customer whom the project team serves. As a result, supply
chain operations require managerial processes that span functional areas within individual
organizations and link trading partners and customers across organizational boundaries.
Project supply chain management can be defined as a system approach to managing the entire
flows of physical products, information, and funds from suppliers and producers, through
resellers, and finally the project organization for creating customer satisfaction

SCM Components
 Make-or-buy decisions-which are “decisions made regarding the external purchase or internal
manufacture of a product.”
• Contract types- contact types and compare their advantages and disadvantages in case a buy
decision is warranted.
• Collaboration and cooperation-As different firms take care of their own interests, it is essential
to coordinate their project activities to ensure the deliverables are produced as scheduled.
• System integration—concerning the tradeoffs among project goals such as time, cost, and
quality

SCM Decisions
Some of the major project supply chain management decisions are:
• Distribution network configuration
• Inventory control in a supply chain
• Logistics
• Supply contracts
• Distribution strategies
• Supply chain integration and strategic partnering
• Outsourcing and procurement strategies
• Product design
• Information technology and decision-support systems

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These decisions often involve quantitative analysis. All of these decisions can play an important
role in managing a complex project. The implication is that project managers must be aware of
these methodologies for ensuring project completion in a timely and cost-effective way.

Plan Procurement Management

Plan procurement management is “the process of documenting project procurement decisions,
specifying the approach, and identifying potential sellers. It identifies those project needs that
can be met by acquiring products or services from outside suppliers, determines what to purchase
or acquire, and determines when and how to do so. On some projects, a portion of the services or
materials may be sourced from another company; on other projects, the bulk or even all of the
work may be performed by an external company. A client company needs to plan for purchasing
and acquisition, whether it is for part or all of a project. The needs of the parent organization
should be considered as well as those of the project when deciding how to acquire necessary
items because it may be better for the parent organization to buy an item rather than to rent it for
the current project and then rent it again for a future project.
To effectively plan for purchasing and acquisition of materials and services, a project team
typically finishes most of the project planning so they understand what the true project needs are.
At a minimum, the project team requires a project scope statement, which is “the description of
the project scope, major deliverables, assumptions, and constraints.” Once the requirements are
identified, a project manager should be able to determine whether or not to buy, what to buy, and
the quantity to buy.

Outputs of Planning
One primary output of this planning is a procurement management plan, which is a “managed
component of the project management plan that describes how a project team will acquire goods
and services from outside the performing organization.” The procurement management plan can
include guidance for types of contracts to be used, risk management issues, and how to select
potential suppliers. This plan guides the client company’s efforts through all activities dealing
with the acquisition of all the necessary materials and services to complete the project. Another
major output is the procurement statement of work, which “describes the procurement item in
sufficient detail to allow prospective sellers to determine if they are capable of providing the
products, services, or results.” This document should ensure that both the contractor and client
companies understand the work that is being requested in the same clear manner, for example,
offering information such as specifications, quantity desired, quality levels, performance data,
work requirements, and other requirements.

Make-or-Buy Decisions
Project procurement can be considered from the view of the buyer–seller interface. This interface
exists at all levels of any project supply chain and between businesses internal to and external to
the project organization. Depending on the application areas, the seller can be called a supplier,
supplier’s supplier, or contractor. Depending on the buyer’s position in the project acquisition

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cycle, the buyer can be called a customer, a service requestor, or a purchaser. The seller can be
viewed during the contract life cycle first as a bidder and then as the contracted supplier or
vendor.

REASONS TO BUY OR SELL

The make-or-buy decision is not trivial. It involves intricate issues such as a project
organization’s competitive analysis and demand analysis. The project team also needs to
evaluate the advantages and disadvantages of outsourcing from the viewpoint of time, cost, and
performance control. The analysis should also include both direct and indirect costs so that the
final decision is based on equal comparisons. The project personnel evaluate alternative suppliers
and provide current, accurate, and complete data that are relevant to the buy alternative.

Most firms begin conducting a strategic outsourcing analysis by identifying their major strengths
and then building on them. A firm’s competitive advantage is often defined as lower cost,
product differentiation (better quality), and/or responsiveness (fast delivery). To project teams,
these are of different levels of importance, depending on the wishes of the customer and the
progress the project is making at the moment. Project time-cost analysis often helps generate
insights about making efficient procurement decisions. For example, a noncritical activity may
be outsourced with a focus on minimizing cost but not necessarily receiving the fastest delivery.
However, during different stages of a project, a noncritical task can become a critical task, which
raises the importance of timing. Factors like this can hold quite different implications for a make-
or-buy decision in difference phases of project execution. While make-or-buy investigations
usually begin with a cost analysis, various qualitative factors frequently portend more far-
reaching consequences than does the cost analysis. A thorough investigation is clearly
complicated by the dynamics and uncertainties of various project activities.

OUTSOURCING ISSUES
While outsourcing has gained in popularity, there are potential issues related to outsourcing.
Some of these are relatively important with regard to the goal of projects.
• Loss of time control for completing project activities
• Lack of cost control for outsourced activities

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• Gradual loss of special skills for doing some specific activities

• Loss of project focus and a potential conflict of interest
• Ineffective management as a result of complicated business interactions
• Loss of confidentiality and double outsourcing when a third party is used.
Project procurement strategies can differ from corporate procurement strategies because of
constraints, availability of critical resources, and specific project requirements. After making the
make-or-buy decision, the project team proceeds to the next step of project outsourcing for
selecting the right supplier and negotiating the contract. The outputs of procurement planning
also include documents and criteria for selecting a supplier, if a buy decision has been made.
When multiple suppliers are available, selection standards such as total cost of ownership and
risk also need to be developed.
When a buy decision is made, the client company is attempting to create a situation in which
prospective contractor companies have the capability and motivation to provide useful and
complete proposals that are easy to evaluate and to determine which best suits the client
company’s needs. The client company typically uses procurement documents, which are “the
documents utilized in bid and proposal activities, which include buyer’s invitation for bid (IFB),
invitation for negotiation (IFN), request for information (RFI), request for quotation (RFQ),
request for proposal (RFP) and seller’s responses.”
Request for Information (RFI) is “a type of procurement document whereby the buyer requests a
potential seller to provide various pieces of information related to the product or service or seller
capability.” An RFI is used to learn about the potential sellers and/or the products or services.
• Request for Quotation (RFQ) is “a type of procurement document used to request price
quotations from prospective sellers of common or standard products or services.” An RFQ is
used to compare prices from various vendors of standards items.
• Request for Proposal (RFP) is “a type of procurement document used to solicit proposals from
prospective sellers of products and services.” An RFP is often used to compare different
approaches for nonstandard items.

Contract
A contract is “a mutually binding agreement that obligates the seller to provide the specified
product or service and obligates the buyer to pay for it.” A contract establishes a legal
relationship between parties, and it is subject to remedy in the court system. The project
organization can be a seller in dealing with the project owner or customer and a buyer in a more
prevalent procurement setting. In many project management scenarios, the project manager must
be aware of how a wide range of contracts is developed and executed. A procurement contract is
awarded to each selected seller. The contract can be in the form of simple purchase order or a
complex document. The major components in a contract document generally include the
following:
 Statement of work
• Schedule baseline
• Period of performance

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• Roles and responsibility

• Pricing • Payment terms
• Place of delivery
• Limitation of liability
• Incentives
• Penalties

Contract Types
Contracts differ by type with regard to how the risk is distributed and how the project is
performed. The seven most common types of project procurement contracts are as follows:

Fixed-Price Contracts

A fixed-price contract is “an agreement that sets the fee that will be paid for a defined scope of
work regardless of the cost or effort to deliver it.” The most common variations of fixed-price
contracts are firm-fixed-price (FFP), fixed-price-incentive-fee (FPIFD), and fixed-price-
economic-price-adjustment (FP-EPA).

FIRM-FIXED-PRICE (FFP) CONTRACTS are “a type of fixed-price contract where the buyer
pays the seller a set amount as defined in the contract, regardless of the seller’s cost.” Any cost
increase due to adverse performance is the responsibility of the seller, who is obligated to
complete the effort. A simple form of a firm-fixed-price contract is a procurement order for a
specified item to be delivered by a certain date for a specified price.

FIXED-PRICE-INCENTIVE-FEE (FPIF) CONTRACTS are “a type of contract where the buyer

pays the seller a set amount as defined by the contract, and the seller can earn an additional

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amount if the seller meets defined performance criteria. An example is a contract for rebuilding a
bridge for a fixed price of $1,250,000 with an incentive of an extra $3,000 for every day it is
complete before the scheduled date of September 15. The buyer would like to have use of the
bridge sooner, and the seller would like to earn a higher fee, so both have an incentive to finish
the project early. Performance incentives can also include bonuses for better quality, more
features, or anything else that the buyer wishes to maximize and is willing to pay for.

FIXED-PRICE-ECONOMIC-PRICE-ADJUSTMENT (FP-EPA) CONTRACTS are “fixedprice

contracts, but with a special provision allowing for final adjustments to the contract price due to
changed conditions such as inflation changes, or cost increases (or decreases) for specific
commodities.”An example is a contract that states the contractor will receive $400,000 to supply
all of the gravel for a project, but the price may be adjusted based upon market price for gravel at
the dates when it is delivered. Fixed-price contracts provide low risk for the buyer, since the
buyer does not pay more than the fixed price regardless of how much the project actually costs
the seller.

Cost-Reimbursable Contracts

Cost-reimbursable contracts are “a type of contract involving payment to the seller for the
seller’s actual costs, plus a fee typically representing the seller’s profit.” The three variations of
commonly used cost-reimbursement contracts are cost-plus-fixed-fee, costplus-award-fee, and
cost-plus-incentive-fee.

COST-PLUS-FIXED-FEE (CPFF) CONTRACTS are “a type of cost-reimbursable contract

where the buyer reimburses the seller for the seller’s allowable costs (allowable costs are defined
by the contract) plus a fixed amount of profit (fee).” An example is a research project where all
scientist hours spent on the project are paid along with a fee of $5,000 regardless of how many
hours the scientist spent.

COST-PLUS-AWARD-FEE (CPFF) CONTRACTS are “a category of contract that involves

payments to the seller for all legitimate costs incurred for completed work, plus an award fee
representing seller profit.” An example is a development contract that pays the contractor
$3,000,000 plus puts in escrow an award fee pool of $210,000 and an executive in the
customer’s organization has sole discretion of how much of the award fee pool is given based
upon customer satisfaction criteria.

COST-PLUS-INCENTIVE-FEE (CPIF) CONTRACTS are “a type of cost-reimbursable contract

where the buyer reimburses the seller for the seller’s allowable costs (allowable costs are defined
by the contract) and the seller earns a profit if it meets defined performance criteria.” These
criteria can be for schedule, cost, and/or performance. An example of a schedule criterion is a
contract for constructing a college dormitory that calls for completion by August 15 so it is ready
for the fall semester. A cost criteria example is the buyer of a small house negotiating a total
project cost of $150,000. A performance criteria example is when an auto company enters a

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contract with a supplier to develop a battery that can get 55 miles per gallon in a 3,000-pound
car. In each of these cases, the contract can call for the seller to receive a bonus if it does better
than the agreed-upon target and/or a penalty if it does worse. Both the buyer and the seller can
benefit if performance criteria are met.

Time and Material (T&M) Contracts: Time and material contracts are “a type of contract that
is a hybrid contractual arrangement containing aspects of both cost-reimbursement and fixed-
price contracts.” In this type of contract, the unit rate for each hour of labor or pound of material
is set in the contract as in a fixed-price contract. However, the amount of work is not set, so the
value of the contract can grow like a cost-reimbursement contract. The seller simply charges for
what is done to produce the product or service in the contract. This can be problematic if the time
scheduled for production is greatly underestimated. The following items are frequently
considered when selecting the right type of contract:

Overall degree of cost and schedule risk

• Type and complexity of requirements
• Extent of price competition
• Cost and price analysis
• Urgency of the requirements
• Performance period
• Contractor’s responsibility
• Contractor’s accounting system
• Extent of subcontracting

Control Procurements
Control procurements is the “process of managing procurement relationships, monitoring
contract performance, and making changes and corrections as appropriate.” Both buyers and
sellers administer contracts to make sure that the obligations set forth in the contract are met and
to make sure neither has any legal liability. Both must perform according to the contract terms.
The seller creates performance reports, and the buyer reviews these reports to ensure that the
performance of the seller satisfies the obligations of the contract.

Project Partnering and Collaboration

Companies are constantly in need of outsourcing or contracting significant segments of project
work to other companies. The trend for the future suggests that more and more projects will
involve working with people from different organizations. Research also finds that through
strategic partnering, companies are more likely to access advanced technology, share risks, and
improve project-based performance and relative competitiveness. This section extends the
previous discussion of project procurement and contracting by focusing specifically on issues
surrounding working with different suppliers to complete a project. The term partnering is used
to describe this process. Partnering is a method for transforming contractual arrangements into a
cohesive, collaborative project team with a single set of goals and established procedures for

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resolving disputes in a timely and cost-efficient manner. The single set of goals takes care of the
customer requirements and the entire project instead of each individual organization.

Project progress and Results

The word determine has multiple meanings. While each offers a slightly different
perspective, collectively, they help a project manager understand what she needs to do to ensure
that her project is progressing adequately and will yield the intended results in the end.
Determine can mean:

 To give direction to or decide the course of

 To be the cause of, to influence, or to regulate
 To limit in scope
 To reach a decision

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 To come to a conclusion or resolution

Balanced Scorecard Approach

To successfully accomplish all five aspects of project determination, a project manager can
think in terms of a balanced scorecard approach to her project. The concept behind a
balanced scorecard is that an organization needs to be evaluated along customer, internal
business, financial, and growth and innovation perspectives. The Balanced Scorecard (BSC)
approach is a strategic management framework that helps organizations translate their vision
and strategy into actionable objectives and performance metrics across four key perspectives:
financial, customer, internal processes, and learning and growth. The figure shows a project
balanced scorecard approach to project determination.

 Financial Perspective: This perspective focuses on the financial objectives that are
critical to the success of the organization. It includes metrics such as revenue growth,
profitability, return on investment (ROI), and cost reduction. The financial
perspective ensures that the organization's strategic objectives are linked to tangible
financial outcomes.
 Customer Perspective: The customer perspective measures how the organization is
perceived by its customers and stakeholders. Metrics in this perspective include
customer satisfaction scores, market share, customer retention rates, and customer
acquisition metrics. It helps ensure that the organization is meeting or exceeding
customer expectations and creating value for its customers.
 Internal Processes Perspective: This perspective examines the internal operational
processes that are critical to delivering value to customers and achieving financial
objectives. Metrics in this perspective may include process efficiency, quality levels,
cycle times, innovation metrics, and compliance metrics. It focuses on improving key
processes to enhance overall organizational performance.
 Learning and Growth Perspective: The learning and growth perspective focuses on
the organization's ability to innovate, improve, and learn from its experiences.
Metrics in this perspective include employee capabilities, knowledge management
initiatives, training and development investments, and organizational culture metrics.
It ensures that the organization is continuously developing its people, systems, and
culture to support long-term success.

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When a project manager seeks to monitor and control a project, the different aspects are often
interrelated, and their impacts on each other need to be considered

Internal Project Issues

While all aspects of a project are important and interrelated when determining progress and
results, a logical starting place is the project work that needs to be accomplished. Closely
related are the risks that may impede the work and adequate communication. Collectively,
these form the project’s internal issues. These issues can be envisioned as the project’s nerve
center. Problems in any of them travel to all other project areas just as nerves in a body carry
information throughout. When dealing with this project nerve center, project managers direct
and manage project work; monitor and control the project work; perform integrated change
control; control project risks; and manage and control communications.

a. Direct and Manage Project Work

Directing and managing project work is “the process of leading and performing the work
defined in the project management plan and implementing approved changes to achieve
the project’s objectives.” 2 When project managers authorize project work, they should
empower others to the extent possible, yet control them to the extent necessary. It should
be clear who is allowed to authorize each portion of work to commence. The project
management plan identifies work to be accomplished, but the project manager or his or
her appointee must tell someone when it is time to perform the work. Often, spending
limits are intertwined with work authorization.
When directing project work, tradeoffs are often present both between the project and
other work and within the project itself. Organizations often have many projects and a
variety of other work that must all be accomplished. Some work is of higher priority than
other work. A project manager needs to understand where her work fits in the priority. If
her project is relatively low in priority, she may have trouble getting people to perform
their activities very quickly. In a case like that, the project manager and sponsor should
have open communications so the sponsor can either help the project manager secure the
resources needed and/or understand that the project could be late through no fault of the
project manager.

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b. Monitor and Control Project Work

Monitoring and controlling project work includes “the processes of tracking, reviewing,
and reporting the progress to meet the performance objectives defined in the project
plan.” To monitor means to “collect project performance data with respect to a plan,
produce performance measures, and report and disseminate performance information.”
Control means “comparing actual performance with planned performance, analyzing
variances, assessing trends to effect process improvements, evaluating possible
alternatives, and recommending appropriate corrective action when needed.” A variance
is “a quantifiable deviation, departure, or divergence away from a known baseline or
expected value.” What all of this means is that a smart project manager keeps an eye on
many things that can indicate how well the project is doing and is prepared to act if
necessary to get the project back on track. The most difficult part of monitoring and
controlling is figuring out what metrics to keep, what to measure, and how to report the
results to various decision makers as necessary. . Monitoring and controlling activities
occur in parallel with project execution. Monitoring and controlling are a continuous,
overarching part of an entire project’s life cycle, from project initiation through project
closing. Since the purpose of monitoring and controlling project work is to be able to take
corrective action, these activities need to be timely.
c. Perform integrated change control
Perform integrated change control is “the process of reviewing all change requests,
approving changes, and managing changes to deliverables, organizational process assets,
project documents, and project management plan; and communicating their disposition.”
Change control is “a process whereby modifications to documents, deliverables, or
baselines associated with the project are identified, documented, approved, or rejected.”
Change control includes considering the impact of any change, deciding whether to agree
to the change, and then documenting and managing that change. Proposed changes are
documented in a change request. The decision to approve the proposed change then needs
to be made by the correct person or group. Generally, if the change requires a change in
the project charter (or contract for an external project), then the sponsor and/or customer
decide. If the change does not rise to that level, often a project manager is empowered to
make the decision. Some organizations use a change control board which is “a formally
chartered group responsible for reviewing, evaluating, approving, delaying, or rejecting
changes to the project, and for recording and communicating such decisions.” The change
control board is often composed of the project manager, sponsor, core team, and perhaps
other key stakeholders. Since some changes have far-reaching impacts, it is often wise to
include people with different knowledge and skills on the change review board. Change
is a reality on virtually all projects. While we cannot predict or plan what changes will
occur, we can plan for how we will deal with those changes. Some projects are easier
than others to plan, especially the later parts of the project. If the planning team can plan
most details at the outset, change control may be the primary method they use for
handling change. On other projects, where it is difficult to plan the later part in detail

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until results from the early parts of the project are known, change control is still used, but
it is not enough.
d. Monitoring and Controlling Project Risk
During project planning, the project team normally develops a risk management plan that
is used to guide risk monitoring and controlling activities. They also normally create a
risk register to record each identified risk, its priority, potential causes, and potential
responses. The risk management plan and risk register are used to monitor and control
project risks, and to resolve them when they occur. Control risks is “the process of
implementing risk response plans, tracking identified risks, monitoring residual risks,
identifying new risks, and evaluating risk process effectiveness throughout the project.
Project managers know it is wise to consider multiple responses to a given risk.
Two categories of project management methods can help to deal with previously
unidentified risks. First, the project team in planning may recognize that unknown risks
may surface, and they may add contingency reserve of time, budget, and/or other
resources to cover these unknowns. Good project practice suggests a need for this. The
amount of cost and budget reserves that are included can vary extensively based upon the
customer’s perception of risk and the type of project that is involved. Competitive
pressures often dictate a lower limit on reserves than project managers may prefer. The
second category of project management methods includes a number of good practices
that project managers often utilize anyway. These practices can be classified according to
whether the project team has full, partial, or no control over the events.

e. Manage Communications
Manage communications is “the process of creating, distributing, storing, retrieving, and
the ultimate disposition of project information in accordance with the communications
management plan.” To successfully communicate the right project information to the
right stakeholders, in the right format, at the right time, several things must happen. First,
all of this needs to be in the project communications management plan, Then, while the
project is underway, the project manager and team need to determine any additional

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information needs not already uncovered, establish an information retrieval and

distribution system, collect information on executed work and work in progress, and then
report progress to all stakeholders.
f. Control Communications
Control communications is “the process of monitoring and controlling communications
throughout the entire project life cycle to ensure the information needs of the project
stakeholders are met. The project manager and core team often discuss whether the
communications are following the plan, how effective they are, and how to improve their
effectiveness.

Customer Issues
The second major perspective included in a balanced scorecard approach to project control is the
customer. Customers want the deliverables of the project. They want the results to be useful
(quality).

a. Perform Quality Assurance: performing quality assurance is “the process of auditing

the quality requirements and the results of quality control measurements to ensure
appropriate quality standards and operational definitions are used.” This implies that a
project manager both ensures that work is performed correctly and that key stakeholders
are convinced that the work is performed correctly. Project stakeholders form their
opinions regarding quality of a project both by how the work is performed and by how
the deliverables meet standards. Many activities that form this broad interpretation of
quality assurance are related to other project management processes. Two areas that are
specific to project quality assurance are conducting quality audits and improving project
processes.
AUDITS: A quality audit is “a structured, independent process to determine if project
activities comply with organizational and project policies, processes and procedures.”
For an audit to be successful, the intent must be to improve the manner in which work is
accomplished and not to punish people. With this in mind, an audit can begin with a
review of the official documentation of how a process should be performed. The auditors
then often interview the workers and have them explain (or better yet, demonstrate) how
they perform the work. Records are investigated to see if the documentation is complete
and current.
PROCESS IMPROVEMENT: A process is “a systematic series of activities directed
toward causing an end result such that one or more inputs will be acted upon to create
one or more outputs.” Processes can be measured for both efficiency and effectiveness.
Efficiency is the ratio of outputs to inputs. A more efficient process uses fewer inputs to
create the same number of outputs. This could equate to less work hours or less money
spent to create the same project deliverable. Effectiveness is the extent to which a process
is creating the desired deliverables. A more effective process is one that creates

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higherquality deliverables and that better pleases the stakeholders. Process improvement
can deal with both efficiency and effectiveness.

b. Control Quality: Quality assurance deals with using correct policies and convincing
stakeholders that the project team is capable of producing good output. Quality control
(the current subject), on the other hand, deals with comparing specific project
measurements with stakeholders standards. The purposes of quality control on projects
are to reduce the number of defects and inefficiencies, as well as to improve the project
process and outputs.
Quality control consists of:
• Monitoring the project to ensure that everything is proceeding according to plan
• Identifying when things are different enough from the plan to warrant preventive or
corrective actions
• Repairing defects
• Determining and eliminating root causes of problems
• Providing specific measurements for quality assurance
• Providing recommendations for corrective and preventive actions
• Implementing approved changes as directed by the project’s integrated change control
system.

Financial Issues

Cost control is obviously a financial issue. Cost, schedule, and scope are often so closely
intertwined that they are monitored and controlled at the same time, and changes in one impact
the others. Because of the close interrelationships between them, cost, schedule, and scope are
envisioned here as financial issues.

a. Control Scope: Control scope is “the process of monitoring the status of the project and
product scope and managing changes to the scope baseline.” Ideally, project managers
and teams practice scope control in a proactive manner. They attempt to understand what
might cause changes to either the product scope (the features of the project deliverables)
or the project scope (the work that must be done to create the deliverables). Once a
project team discovers something that may cause a need to change the scope, their first
effort is typically to head it off. It is easiest if the stakeholders can still be satisfied and
project objectives can be met by not changing the scope. However, many times it is
necessary to make a scope change. A scope change is “any change to the project scope. A
scope change almost always requires an adjustment to the project cost or schedule.” For
this reason, proposed scope changes are processed through the integrated change control
system to determine what impact each might have on other aspects of the project.
b. Control Schedule and Costs: Schedule and cost control are very similar in concept to
control in other knowledge areas. The project manager should start with the approved
cost and schedule baseline. Next, the current status of the schedule and cost should be

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determined. If the schedule or budget has changed by at least a pre-agreed amount,

changes should be formally recommended and managed through the integrated change
control system to ensure that any impacts on other areas are taken into account. Cost
control often has one additional consideration—that is, ensuring that no more money is
spent than the amount authorized. This may force other changes on the project, such as
delaying the schedule or reducing part of the project scope. Very often, the project
manager must work with his or her company’s finance department or CFO to get the
proper data on accounts payable, accounts receivable, and other information.
c. Earned Value Management for Controlling Schedule and Costs: Earned value
management is “a methodology that combines scope, schedule, and resource
measurements to assess project performance and progress.” Earned value allows a project
team to understand their project’s progress in terms of cost and schedule as well as to
make predictions concerning the project’s schedule and cost control until the project’s
conclusion. Earned value is used as a decision-making tool. The project manager can
quickly assess how the project is doing according to the baseline plan and whether the
project will end without major cost and/or schedule impacts. The earned value data allow
a project manager to decide on the status of his or her project at a given point in time.
When interpreting earned value management, cost and schedule must be considered
independently. A project can be either ahead or behind the planned schedule and either
over or under the planned budget. Secondly, all earned value terms deal with one of two
time frames. Each represents either current status as of the last date that project data were
gathered or a prediction for the end of the project.

Finishing the Project -Terminate Projects Early

All projects continue until successful conclusion, with all deliverables meeting
specifications and pleasing customers. Sometimes, a project is terminated before its
normal completion. Early termination can be by mutual agreement between the contractor
and buyer, because one of the parties has defaulted (for cause), or for convenience of the
buyer.
a. Mutual agreements: On some projects, by close-out, not all of the deliverables are
yet completed. Remaining deliverables need to be integrated into another project,
stopped altogether, or continued as a lesser project or a further phase of the finishing
project. If both parties agree to stop the project before its planned completion, a
negotiated settlement may take place. If some of the deliverables or documentation is
not completed, the project manager may need to negotiate with the customer. Perhaps
the customer would rather have most of the capability now rather than all of it later.
The project team may have made a larger-than-expected breakthrough in one area and
can negotiate with the customer to deliver more in that area and less in another.
Ideally both parties agree what deliverables or partial deliverables go to the buyer,
what compensation goes to the seller, and any outstanding issues are resolved. If

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agreement cannot be reached by direct negotiations, either courts or alternative

dispute resolution can be used to reach a settlement.
b. Terminations for default: Terminations for default often result from a problem with
the project’s cost, schedule, or performance. A buyer can also decide to terminate a
project early because he or she has lost confidence in the contractor who is
performing the project. Good project management practices consistently applied
throughout the project can lessen the chance of early termination for cause by
managing stakeholder expectations and by delivering what customers want on spec,
on time, and on budget.
c. Terminations for convenience of buyer: Projects can also be cancelled for the
convenience of the buyer. This can happen through no fault of the contractor.
Sometimes, the buyer faces unexpected difficulties or changing priorities. If a
customer’s needs change, it might decide that the resources assigned to a project
could be more profitably applied to a different project. If a customer decides to
terminate a project for convenience, it invokes a contract clause. This clause normally
stipulates that the contractor is reimbursed for the money it has spent up to that point
and the customer takes ownership of the deliverables in whatever form they currently
exist.
If a decision is made to terminate a project early, the project manager owes it to his or
her team to communicate quickly and honestly. Care must be taken to ensure that no
unjust blame is placed. It is absolutely unethical to have reputations and careers suffer
for a termination where the impacted party was not at fault.

Close Project
Closing a project entails finalizing all activities needed to finish the project. Customers are asked
both to accept the project deliverables and to provide feedback. Lessons learned are captured and
shared. Contracts are closed. Participants are reassigned and rewarded. Reports are created and
archived. Success is celebrated, and the project team ensures that customers receive the ongoing
support they need to successfully use the project deliverables.

a. Write Transition Plan: A project manager may decide to create a transition plan to help
the customer successfully use the project deliverables. Project transition plans are a sort
of instruction manual on how the customer should use the project deliverables once the
project team has completed its work. A transition plan helps to ensure:
 Quality problems are avoided during the transition.
 The project deliverables transition into their service or operational role.
 The needed maintenance, upgrades, and training take place.
b. Knowledge Management: Knowledge management should occur throughout the project
life. Project customers, whether internal or external to a company, can provide valuable
feedback concerning both the project process and results. Lessons learned are the useful
knowledge gained by project team members as they perform a project and then reflect on

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both the process of doing the work and the results that transpired. Lessons can include
what worked well that the project team members think should be copied and/or adapted
for use on future work. Lessons can also include areas for which a different method may
yield better results. . Lessons can also be captured at milestones and at the end of a
project. The first step in capturing project-end lessons learned is for the project manager
to send an e-mail asking the participants to identify major project issues. Then, the actual
meeting begins with each participant writing his or her top issues on a flip chart or other
work space where everyone can see them. Once all participants have listed their top
issues, the entire group can vote on the top 5. Then the project manager can go through
one top issue at a time by asking leading questions to determine what went wrong and
how it might be avoided in future projects. A method must be established for
documenting and sharing the lessons. More organizations effectively collect lessons
learned than effectively disseminate and use them. Coding each lesson by type of project,
stage in project life cycle, issue it concerns, and so on helps future project teams when
they search for new lessons to apply. Many organizations find that it is helpful to have a
limited number of categories and have each lesson stored according to the category in
which it best fits.
c. Create the Closeout Report: Many organizations have formal procedures for closeout
reports and archiving project records. The closeout report usually includes a summary
status of the project that can be gleaned from progress reports. The closeout report also
normally includes lessons learned. Finally, the closeout report often contains a review of
the project’s original justification. Did the project accomplish what it was originally
approved to do? This is an important question because many projects change along the
line. The exact timing, costs, and deliverables may have changed, but did the project still
accomplish its goals? Finally, the project manager needs to ensure that the records are in
a workable format and stored in a manner that will allow others in the organization access
for lessons learned, financial audits, or other uses.

Post-Project Activities:
a. Reassign Workers: Project managers owe the members of their team timely updates for
their personnel records, honest recommendations, and help securing their next
assignments, and rapid notification of any issues. Wise project managers know it is not
just ethical to treat their members well; if a project manager develops a reputation for
taking good care of team members, it becomes much easier to recruit team members for
future projects. Helping good workers secure follow-on work is one of the most
important things a project manager must do near the end of a project. Many of these
workers will be eager to work again for that project manager and will tell others of their
good experience.
b. Celebrate Success and Reward Participants: The successful conclusion of a project
should be celebrated for many reasons. Perhaps one way to understand the many reasons
is to utilize a play on the very word celebrate

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 21ME651- PROJECT MANAGEMENT

 Challenge
 Energize
 Limit
 Exert
 Believe
 Recognize
 Acknowledge
 Transition
 Ease Stress

When people are reminded of their recent accomplishments, they realize they just met a large
challenge and are motivated to undertake new challenges. The team members are frequently
energized to finish the last few administrative chores so they are done. By recognizing their
accomplishments, they are now ready to say “the project is over; we will limit any additional
work on this project.” The team members exert themselves to finish the last few items.
Celebrations can persuade members to believe they can do just a bit more than they might
otherwise think is possible. Celebrations are excellent times to recognize and acknowledge both
effort and results.

c. Provide Ongoing Support: Ultimately, a project manager wants to ensure that

customers can effectively use the project deliverables. This may include providing
ongoing support in the forms of training, change management, and/or other services. A
transition plan can guide this support. Project managers want to create useful project
deliverables on time and on budget. They want to turn those deliverables over to capable,
satisfied customers who will directly provide more project work in the future and who
will enthusiastically tell others how pleased they are.
d. Ensure Project Benefits Are Realized: Many organizations insist that project managers
follow up with customers weeks or months after the project deliverables are in use. One
of the most important measures of project success is how well the customers are able to
use the deliverables created by the project. When considering the full impact of the
project results, project managers are encouraged to consider use by direct customers and
other stakeholders (people), and also how they contribute to the other parts of the triple
bottom line—profit for the parent company and sustainability of the planet.

Ms. Annapoorna K, Asst Prof, Dept. of ME, RNSIT