Construction and Engineering
Project Management
03 – Project needs and objectives
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Table of Contents Module 3
❑ Where do projects originate from?
❑ Needs that may impact the project
❑ From Needs to Objectives to Requirements
❑ SMART project objectives
❑ Measurable project objectives
❑ Project Requirements
❑ Project Selection
❑ Progressive Elaboration
❑ What can go wrong
❑ Exercise
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Where do projects originate from?
❑ Market demand: - Develop a new shopping centre.
❑ Organizational need:- Renovate company Head Office.
❑ Customer request: - RFP/RFQ/Tender to build a dam.
❑ Technological advances:– Upgrade existing building to be more energy efficient.
❑ Legal requirement:- Rehabilitating historical building to meet health and safety code.
❑ Ecological impact:- Construction of a wastewater treatment plant.
❑ Social need:- The installation of Iso board ceiling and distribution of Compact
Florescent Lamps (CFLs) to 700 low income homes in Cosmo City.
.
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Needs that may impact the project
❑ Performing Organization ❑ Management and control
❑ Information ❑ Health, safety, security, and
environment
❑ Customer / Owner / Sponsor
❑ Quality
❑ Communications
❑ Performance
❑ Training
❑ People with special needs
❑ Subcontractor / Labour
❑ Local community
❑ Project-specific
❑ Logistical
❑ Statutory
❑ Financing
Different parties may have different needs
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From Needs to Objectives to Requirements
Objectives:
❑ Something towards which work is to be directed in order to achieve a purpose.
❑ Can include scope, schedule, cost, quality or performance.
❑ Should be defined as SMART.
Project
More Detail Objective
Needs
Project Project
Objective Requirement
Company
Strategic Needs
Objectives
Needs
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SMART project objectives
S Specific Significant
M Measurable Meaningful
A Agreed upon Attainable Achievable Acceptable
R Realistic Relevant Results-focused
T Time-bound Timely Tangible Track able
▪ Budget/cost objectives ▪ Contractual objectives
▪ Schedule objectives ▪ Safety objectives
▪ Quality objectives ▪ Environmental objectives
▪ Risk Management objectives
Example of an objective:-
To reduce the level of water consumption in the shops, restaurants & toilets of the Menlyn
Retail Park by 15% before 2020/12/31 at a cost not higher than $1,500,000.
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Measurable project objectives
Why are measurable project objectives needed?
❑ To determine if the project’s objectives have been achieved (acceptance criteria).
❑ To determine if the project’s objectives can still / not be achieved.
❑ To determine If there is still a business need for the project.
❑ To determine if project is supporting the program, portfolio or organization’s strategic objectives.
❑ To identify and manage project risk.
❑ To identify and address changing or conflicting objectives.
❑ To guide the project team in executing the project tasks.
❑ As the basis for detailed project planning (WBS, baselines, management plans)
❑ Etc.
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Project Requirements
Requirements may relate to:
• Contract • Storage
• Stakeholder • Financial / Funding
• Quality • Health, Safety, Security or
Environment
• Regulatory
• Infrastructure
• Reporting
• Start-up
• Resource
• Etc.
A requirement is a condition or capability that is necessary to be present in a product, service, or result to satisfy a
business need.
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Requirement examples
❑ Accessibility ❑ Serviceability
❑ 24x7 facility reliability ❑ Sustainability
❑ Adaptability ❑ Survivability
❑ Building pressurization control
❑ Energy and water efficiency
❑ Functionality
❑ Maintainability
❑ Reliability
❑ Scalability
❑ Security / Safety
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Project Selection
Guides organizations to decide between alternative projects by identifying or calculating
measurable differences between the projects.
❑ Feasibility study
❑ Benefit Cost Ratio (BCR)
❑ Net Present Value (NPV)
❑ Payback Period.
❑ Scoring models.
❑ Risk.
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❑ Benefit Cost Ratio (BCR)
BCR = Benefits / Costs
Example: You have to select one of the following three possible projects:
Project A = Estimated cost $ 250 000; Estimated benefit $ 300 000
Project B = Estimated cost $ 125 000; Estimated benefit $ 175 000
Project C = Estimated cost $ 100 000; Estimated benefit $ 145 000
Project Cost $ Benefit $ BCR Selection
A 250000 300000 1.2 3
B 125000 175000 1.4 2
C 100000 145000 1.45 1
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Net Present Value (NPV)
NPV = PV (benefits) – PV (costs) where PV = FV / (1 + i)ⁿ
(PV = Present Value; FV = Future Value; i = cost of capital (10%) and ⁿ = time periods)
Example: You have to select one of the following three possible projects:
Project A = Estimated cost $ 250 000; Estimated benefit $ 300 000 ($ 250 000 in year 1, $ 25 000 in
year 2 and $ 25 000 in year 3)
Project B = Estimated cost $ 125 000; Estimated benefit $ 175 000 ($ 35 000 in year 1,
$ 50 000 in year 2 and $ 90 000 in year 3)
Project C = Estimated cost $ 100 000; Estimated benefit $ 145 000 ($ 25 000 in year 1,
$ 45 000 in year 2 and $ 75 000 in year 3)
Take note: 1. the benefits are obtained at the end of the respective years.
2. The cost of capital is 10%
1.1 1.21 1.33
Project Cost $ Benefit $ Year 1 Year 2 Year 3 PV 1 PV2 PV3 Total PV NPV Select
A 250000 300000 250000 25000 25000 227273 20661 18797 266731 16731 1
B 125000 175000 35000 50000 90000 31818 41322 67669 140810 15810 3
C 100000 145000 25000 45000 75000 22727 37190 56391 116308 16308 2
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Payback period:- How long will it take before we have recovered our costs and start making a profit?
Example: You have to select one of the following three possible projects:
Project A = Estimated cost $ 250 000; Estimated benefit $ 300 000 ($ 175 000 in year 1, $ 75 000 in
year 2 and $ 50 000 in year 3)
Project B = Estimated cost $ 125 000; Estimated benefit $ 175 000 ($ 125 000 in year 1,
$ 25 000 in year 2 and $ 25 000 in year 3)
Project C = Estimated cost $ 100 000; Estimated benefit $ 145 000 ($ 25 000 in year 1,
$ 45 000 in year 2 and $ 75 000 in year 3)
Payback amount Remaining
Project Cost $ Benefit $ Year 1 Year 2 Year 3 Net 1 Net 2 Net 3 Payback Select
A 250000 300000 175000 75000 50000 -75000 0 50000 2 years 2
B 125000 175000 125000 25000 25000 0 25000 50000 1 years 1
C 100000 145000 25000 45000 75000 -75000 -30000 45000 3 years 3
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Project Selection
Scoring models.:- selecting the project based on the score it received when measured against pre-determined criteria.
❑ A weighted scoring model is a tool that provides a systematic process for selecting projects based on:
▪ Identifying criteria important to the project selection process
▪ Assigning weights (percentages) to each criterion so they add up to 100%
▪ Assigning scores to each criterion for each project.
▪ Multiplying the scores by the weights and get the total weighted scores
❑ The higher the weighted score, the better
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Progressive Elaboration
❑ Move toward the final project plan in incremental steps.
❑ Continuously improving and detailing the plan based on more detailed and specific information and more accurate estimates.
❑ Manage the project to a greater level of detail as it evolves through successive iterations.
Project start
High Level planning and estimates
Unpack with more detail
Final detail planning
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What can go wrong
❑ Some critical project needs not identified.
❑ Objectives not defined in a measurable manner.
❑ All accepted needs not supported by “SMART” objectives.
❑ All objectives not supported by requirements.
❑ Objectives or requirements included that were not needed by stakeholders.
❑ Metrics not defined to measure project success.
❑ Wrong metrics defined and wrongfully interpreted.
❑ Project selection process did not identify the best project.
❑ Project selection process overpowered by a key stakeholder.
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Exercise 03 – Project Selection
In your own words:
1. Formulate an example of a smart objective for your project.
2. Describe why it is important to identify clear project objectives and ensure that they are understood by the
project stakeholders.
3. Describe what progressive elaboration is and how it is used on projects.
Evaluation guide:
1. Did they understand & address the question? (max 50 marks).
2. Did they contribute new insights from own experience? (max 50 marks).
Time Allowed: A
1. Prepare 15 minutes
2. Present 5 minutes
3. Evaluate 1 minute
C B
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