Fpm4dev chapter 2

Chapter

2

Chapter Two Project Management Processes

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Project Management Processes Project management is a method for leading a team of capable people in planning and implementing a series of related activities that need to be accomplished on a specific date. Because of its coordinating nature, all these activities require a “process approach.�

Because development projects take on unexplored territory, assumptions about the project must be listed and evaluated, its risks assessed, and contingency plans developed. Project managers are required to closely monitoring budget, scope and schedule to deliver the project objectives at the expected quality. The complexity of development projects requires a different approach to managing the limited resources and the increasing demands of stakeholders. To manage this complexity, the project needs to be de-constructed into manageable, interrelated parts, or "processes." By separating the project into different management processes, the project manager has a better chance of controlling the outcomes of the project and managing challenges that can never be fully planned for or predicted.

A process is defined as a set of activities that must be performed to achieve a goal, in this case the project goal.

Managing a project requires a systematic approach to coordinating the different elements of a project. A systems approach includes a holistic view of the project environment, and an understanding that the project is made of a series of interacting components working to meet an objective or benefit.

A systems approach requires the identification of the components, or processes, that make up the entire project-management framework. This framework composes the basic structure required to properly manage a

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project and helps identify the elements needing close supervision and careful analysis.

There are nine management processes relevant to development projects. The processes are designed to help manage the different elements of a project, and different projects may require different things from each process. For example, a project that has identified cost as a critical success factor will spend more time and effort developing a cost-management plan.

One of the most critical roles of the project manager is the integration and coordination of these nine management processes. In many cases, coordination could result in trade-offs amongst the different competing expectations from stakeholders. The processes are all integrative, that is, they need to be managed in a combining and coordinating manner to bring their diverse elements into a whole.

The nine management processes occur during the entire project lifecycle, and each one requires a cyclical approach that consists of planning, doing, checking, and learning as components to ensure process quality.

The effort and detail required for each process depends entirely on the size, complexity and risk of a project. Large, highly complex projects will require specialized resources to manage each process, turning the role of project manager into the coordinator of these processes. For smaller and lesscomplex projects, the project manager, after making an analysis of the project risks and constraints, will decide which processes require more effort than others.

The project-management processes are interrelated to the projectmanagement phases during the project-management cycle. The project manager uses the nine processes as management tools to help in the initiation, planning, implementation, monitoring, adapting, and closing phases of the project. The idea behind having nine processes is to define the areas that are the main responsibility of the project manager, areas that he or she will need to plan, organize, lead, and control.

The nine project-management processes are divided into two groups: core processes and support processes.

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Core Processes Core processes help manage the four project constraints, the basis used to define a project success: on-time, on-budget, as requested by the funding contract, and within the scope and quality required by the beneficiaries.  Scope Management: managing the work required to accomplish the project objectives.  Schedule Management: managing the time scheduled for all project activities.  Budget Management: managing funds from donors according to the contract clauses.  Quality Management: ensuring that all project activities and actions follow a quality standard.

Supporting Processes: Supporting processes help in areas that facilitate the management of key components of the project and make it possible for the project to achieve its objectives.  Team Management: managing, developing and evaluating the project team.  Stakeholder Management: managing the relationships with the project stakeholders.  Information Management: managing the information produced by the project, as well as the information needed by the stakeholders.  Risk Management: managing the plans to respond to risk events based on risk-assessment.  Contract Management: managing the donor of financing contract, subgrants and procurement contracts.

There are other management areas that the project manager is not entirely responsible for, but are important he or she be involved in and have a good understanding of their policies and procedures. These include:

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 Financial Management, which deals with the overall management of the financial resources of the project and the organization.  Human Resource Management, which deals with the hiring and general development of the organization’s human resources.  Strategic Management, which deals with the long-term objectives of the organization to achieve its vision and mission.  Technology Management, which deals with the design, implementation, and operations of all information and communications technologies, such as access to the Internet.  General Administration, an area that supports the projects in procurement of goods and services, fleet management, building services, security, and other general services required by the organization and its projects to achieve their work.

The following diagram represents the relationships of these two process areas within project management.

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Core Processes

Schedule Management

Budget Management

Scope Management

Quality Management

Project Management Team Management

Contract Management

Stakeholder Management

Risk Management Information Management

Supporting Processes Figure 3. Project Management Processes

Depending on the scope, large and complex projects will require a more rigorous application of project-management processes than small projects.

The project manager assesses the project risks and constraints to determine the detail needed for each process. The effort is reflected in the Project Management Plan.

The Project Management Processes are overlapping activities that occur at varying levels of intensity throughout each phase of the project, from initiation to closing.

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Scope Management Scope management includes the processes involved in defining and controlling both the activities that make up the project and those required to complete the project successfully. The scope describes the boundaries of the project; it defines what the project will and will not deliver. This process also serves to ensure that the project has correctly identified the goals and objectives, and that those objectives have been documented and defined in terms of effective sets of indicators useful to monitor progress.

Managing scope is a critical element of project management, and probably the one that requires the most effort to keep it under control. It is typical for stakeholders to start adding activities to the project, without any control or understanding of the implications to the schedule, budget or quality.

Development projects define scope during the design phase with the use of a logical framework describing the logical structure of cause-and effectrelationships between activities and objectives.

In development-project management, there are actually two different scopes.

The first is the product (or result) scope, which is what the end result of the project will create. The product scope is what beneficiaries will focus on — what they are envisioning the project will create or deliver. The product scope describes the thing or service that will exist as a result of the project.

The project scope describes all the work needed to create the product scope.

It includes the work required to complete the project deliverable, including the work required to develop all the management plans, build the team, communicate with stakeholders, and other management activities not described in the product scope.

Scope Management Steps:  Plan the Scope: define the work and objectives to be achieved, along with what will be excluded from the project. This step includes the use of the logical framework and a work-breakdown structure.

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 Assign Scope Work: assign work to the project team, consultants and partners.  Verify the Scope: ensure that the work is done according to plans and quality specifications.  Adapt the Scope: make the changes necessary to adapt to that occur from changes in the environment and changes to priorities.  During this process, a scope-change management plan is created to help manage any changes to the project. This critical process will help project managers with scope creep, or uncontrolled changes to a project's scope with no regard for the schedule or budget. Requests for additional work may come from various stakeholders, causing the project manager to add activities without a corresponding increase to the time allotted for the project and the budget. Scope creep is one of the leading causes of project failure.

To manage scope creep, the project must establish a “scope-change control plan” that facilitates how, when, and why any new addition to the project is included by defining a process for assessing, authorizing, budgeting, scheduling and implementing any new activities. Another important element of scope management is the definition of what is not included in the project.

By defining what is out of scope, the project stakeholders have a better understanding of the project, which helps reduce frustrations due to unmet expectations.

During this process, the project manager develops a Work Breakdown Structure (WBS) using information obtained from the project design or project proposal. The WBS is a management technique used to break a project down into a hierarchy of work. This structure is used as an input to further define the time and budget variables of the project. The WBS is best done with the participation of the project team and some key stakeholders who can provide information about the nature of the activities required in the project.

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First level

Second level

Third level

Fourth level

Project Goal (impact)

Objective 1 (outcome) Result 1.1 (output)

Activity 1.1.1

Activity 1.1.2

Result 1.2 (output)

Activity 1.2.1

Activity 1.2.2

Objective 2 (outcome) Result 2.1 (output)

Activity 2.1.1

Activity 2.1.2

Result 2.2 (output)

Activity 2.2.1

Activity 2.2.2

Figure 4. The Work Breakdown Structure Adapted from “PMBOK® Guide”, by the Project Management Institute (PMI®), Fifth Edition, Project Management Institute, Inc; 2013, figure 5-13, p.129.

A Work Breakdown Structure (WBS) is a project-management technique for defining and organizing the total scope of a project using a hierarchical tree structure. The first two levels of the WBS define a set of planned outcomes that collectively and exclusively represent the entire project scope. At each subsequent level, the children of a parent node collectively and exclusively represent the entire scope of their parent node.

A well-designed WBS describes planned outcomes instead of planned actions. Outcomes are the desired ends of the project, and can be predicted accurately; actions comprise the project plan and may be difficult to predict accurately. A well-designed WBS makes it easy to assign any project activity to one, and only one, terminal element of the WBS. One of the most important WBS design principles is called the 100% Rule.

The Practice Standard for Work Breakdown Structures (Second Edition), published by the Project Management Institute (PMI) defines the 100% Rule as follows: "The 100% Rule...states that the WBS includes 100% of the work defined by the project scope and captures all deliverables – internal, external, interim – in terms of the work to be completed, including project management."

A good practice is to enumerate all the elements of the WBS. The numbers should follow the hierarchical structure, and they will assist in identifying all WBS elements.

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WBS Code 1 1.1 1.1.1 1.1.2 1.2 1.2.1 1.2.2 2 2.1 2.1.1 2.1.2 2.2 2.2.1 2.2.2

WBS Description Objective 1 Results 1.1 Activity 1.1.1 Activity 1.1.2 Results 1.2 Activity 1.2.1 Activity 1.2.2 Objective 2 Results 2.1 Activity 2.1.1 Activity 2.1.2 Results 2.2 Activity 2.2.1 Activity 2.2.2

Table 1. WBS Code

The depth of levels a WBS can be broken into follows the 8/80 guideline, which states that the lowest level of effort should not be smaller than 8 hours or larger than 80 hours. The purpose is to avoid work that is so granular or so vague that it's uncontrollable and useless.

The Logical Framework The project design usually includes a logical framework (Logframe), which comes in the form of a table with four columns and four rows. The first column is used to describe four different types of events that take place as a project is implemented: the project Activities, Results, Objectives and Goal.

The second column lists one or more Objectively Verifiable Indicators (OVIs) of these events. The third column describes the Means of Verification (MoV), where information is made available on the OVIs, and the fourth column lists the Assumptions of Risks in the project.

The Logical Framework is a management tool mainly used in the design, monitoring and evaluation of international development projects. It is also widely known as Goal Oriented Project Planning (GOPP) or Objectives

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Oriented Project Planning (OOPP).

It is important to understand that the WBS and the Logframe have some basic differences: the WBS is a technique that focuses on the breakdown of all project activities into a hierarchical structure that includes management activities not always identified in the Logframe; it should represent all the work the project will do.

The Logframe includes indicators at each level of the structure and assumptions that determine the feasibility at each level. Both tools go handin-hand to help the project manager monitor the outputs and outcomes of the project, as well as to ensure there is sufficient detail in the definition of activities.

Logframes are living documents and may change during the life of the project according to changes in the dynamic external environment and any alterations that need to be made to the outputs. The information contained is generated during the design of the project and is used to manage project implementation. The logical framework must show how progress towards the project purpose will be achieved.

Logframe level description  Project Final Goal (Project Impact) - The ultimate aim or purpose of the project, described in clear terms to reflect a measurable and defined improvement in human the conditions of a target group within an measured period of time. It is what the project intends to accomplish in the long term as a result of achieving the intermediate goals, e.g., improve the rural standard of living.  Objective (Project Outcomes) - The intended changes to systemic conditions or behaviors that must be achieved in order to accomplish the impact goal. Each objective is a necessary condition to achieving the impact goal. It is what the project intends to achieve among the target population groups, e.g., increases the production and sale of high-quality rice by small farmers.  Results (Project Outputs) - What the project intends to achieve in the short term as a result of the project activities, e.g., 1,000 people trained in a new project-management methodology.

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 Activities (Project Tasks) - What the project staff and target population are going to do, e.g., provide technical support to existing farmer groups. This is the "lowest" level in the sense that it occurs first and is completely dependent on project inputs.  Objectively Verifiable Indicators (OVI) - The performance indicators the project has identified to measure the results. The indicators present an operational description of the overall objective, project outcomes, and outputs in terms of the variable (What will change?) and target value (How much?), target groups/beneficiaries, place, and time. Performance indicators are the specific measures used to monitor this progress.  Means of Verification - This section defines how to verify the achievement of the indicators. It identifies the sources of data it will use, how the project will collect the data, and how often.  Assumptions - The conditions the project believes to be true. These include any number of external factors that can limit or keep the project from achieving the expected result.

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Logframe Matrix (a) Project Structure

(b) Indicators of Achievement

(c) Means of Verification

(1) Project Final Goal (Impact Goal) What are the wider objectives that the project will help achieve?

Longer-term program impact.

(2) Outcomes (Effect Objectives) What are the intended immediate effects of the project, what are the benefits, and to whom? What effect, improvements or changes will the project bring about?

(3) Outputs (Results) What outputs are to be produced in order to achieve the outcomes?

What are the quantitative measures or qualitative judgments used to determine whether these broad objectives have been achieved?

What are the quantitative measures or qualitative judgments by which achievement of the purpose can be judged?

What sources of information exist or can be provided to allow the goal to be measured?

What sources of information exist or can be provided to allow the outcome to be measured?

What external factors are necessary to contribute to the achievement of the goal?

What kind and quality of outputs and by when will they be produced?

(Quantity, Quality, Time)

What are the sources of information to verify the achievement of the outputs?

(4) Activities What activities must be achieved to accomplish the outputs?

(2) Outcomes (Effect Objectives)

What kind and quality of activities, and by when will they be produced?

What are the sources of information to verify the achievement of the activities?

What sources of information exist or can be

What are the factors not in control of the project which are liable to restrict the outputs achieving the outcomes?

What factors will restrict the activities from creating the outputs?

What are the quantitative measures or

(d) Important Risks and Assumptions

What external factors are necessary to

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What are the intended immediate effects of the project, what are the benefits, and to whom? What effect, improvements or changes will the project bring about?

(3) Outputs (Results) What outputs are to be produced in order to achieve the outcomes?

qualitative judgments by which achievement of the purpose can be judged?

provided to allow the outcome to be measured?

contribute to the achievement of the goal?

What kind and quality of outputs and by when will they be produced?

(Quantity, Quality, Time)

What are the sources of information to verify the achievement of the outputs?

What are the factors not in control of the project which are liable to restrict the outputs achieving the outcomes?

Table 2. Logframe matrix

The core of the Logical Framework is the "temporal logic model" that runs through the matrix. This takes the form of a series of connected propositions:  If the planned activities are implemented, and the assumptions hold, then the results will be delivered.  If the results are delivered, and the assumptions hold, then the objective will be achieved.  If the objective is achieved, and the assumptions hold, then the project's final goal will be achieved.

The following table describes the relationships in the temporal logic model:

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Event

OVI

Verification

Assumptions

Goal Then

Objective

If Then

Results

And

If Then

And

If

And

Activity

Figure 5. Temporal logic model

The logic model is the basis to design the project activities. It describes how each activity or activities, if completed and assumptions remain valid, will create the expected results. And how those results, if the assumptions hold true, will help achieve the project objectives. Changes in the assumptions can have a significant impact on the project, and it is a responsibility of the entire project team to constantly validate the assumptions and monitor any risks. Any changes in the original assumptions should be evaluated against the logical model to ensure the design is still valid and make the required changes if necessary.

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Schedule Management This process includes the actions required to ensure the timely completion of the project. Schedule management includes the development of a “project schedule” that lists all project activities created in the scope management process, with a time estimate to complete each activity. The project schedule is a communications tool that informs project stakeholders about the status of the project and gives information to project team members in the form of graphs and charts, illustrating when each activity must begin and end.

Schedule management steps:  Plan the Schedule: based on information from the WBS, a schedule is developed with help from key stakeholders that will determine the total project duration.  Work the Schedule: work on the activities based on the assigned start dates.  Monitor the Schedule: monitor events that will impact the schedule and come up with alternative solutions.  Update the Schedule: changes the schedule based on decisions that will either shorten or lengthen the duration.

The first step in schedule management is to estimate the amount of time that each one of the activities identified in the WBS would take to completed, the relationships between the activities, and the sequence in which they will occur. A network diagram is a tool used to graphically display the activity sequence and dependencies. The project schedule is also used to assign project staff their tasks.

Monitoring the schedule is an ongoing task: as each activity is performed, the project managers must review the progress made against the scheduled baseline and determine any schedule variances. The schedule management plan should include instructions on how to proceed when schedule variance occurs.

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Another element of schedule management is the process used to control schedule changes. Changes occur due to unplanned events not identified during the planning phase. Events such as festivities, social events or agricultural activities, and unpredictable events such as weather or political events, can disrupt any project schedule. Properly managed, the schedule is a tool that informs the project manager on the impact any delay in the activities can have on the overall project.

Schedule management includes reporting techniques to compare the project baseline with the actual dates and uses variance analysis to determine project progress. If the project is behind schedule, the project staff must determine the best options to bring the project back to schedule using methods such as making trade-offs to compress the schedule or fast tracking, which in either case involves incurring more parallel activities.

Gantt Chart A common method to diagram and present a schedule is by using a Gantt8 diagram listing all project activities from the WBS, including the length of duration of each activity represented with a bar. Additionally, the chart portrays the dependencies amongst activities. A Gantt chart is constructed with a horizontal axis representing the total time span of the project, broken down into increments (days, weeks, or months), and a vertical axis representing the tasks that make up the project. Horizontal bars of varying length represent the sequences, timing and time span for each task.

As the project progresses, secondary bars, arrowheads or darkened bars may be added to indicate completed tasks, or the portions of tasks that have been completed. A vertical line is used to represent the report date. The chart below shows a schedule in a Gantt diagram, where activity durations are shown as bars and the arrows show the dependencies among the activities or tasks.

8

Gantt charts were initially developed by Henry Laurence Gantt, an American mechanical engineer and management consultant who is most famous for developing the Gantt chart in the 1910s.

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Figure 6. Gantt Diagram

Steps to diagram a Gantt chart:  List all activities from the WBS organized by results and objectives in a logical sequence. This sequence should follow the order to deliver a result.  Give each activity a time estimate; these can be in hours or days.  For each activity, define its dependency on other activities.  Give each activity a start date; activities that have dependencies will have a start date calculated from the end of the previous activity.

The following figure shows an example of a simple Gantt diagram with three activities, all with a finish-to-start dependency. In this case, the sum of the duration of all activities gives the total duration for the result.

Activity

Days

Start

End

Result 1.1

15

01/01/12

16/01/12

Activity 1.1.1

5

01/01/12

06/01/12

Activity 1.1.2

5

06/01/12

11/01/12

Activity 1.1.3

5

11/01/12

16/01/12

Week 1

Week 2

Figure 7. Steps to develop a Gantt Chart

Week 3

Week 4

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Network Diagram Another tool to help develop the project schedule is the network diagram.

The diagram is a representation of the dependencies between all activities in a project. Depending on the nature of the project, the diagram can contain many paths. The path with the longest duration is called the critical path.

Activity 1.1.2 10 days

Start

Activity 1.1.4 5 days Activity 1.1.3 5 days

Activity 1.1.1 5 days Activity 1.2.1 5 days

Activity 1.1.5 5 days

End

Activity 1.2.2 10 days

Figure 8. Network Diagram and Critical Path Adapted from “PMBOK® Guide”, by the Project Management Institute (PMI®), Fifth Edition, Project Management Institute, Inc; 2013, figure 6-19, p.178.

In the above figure, there are three paths and the longest takes 30 days. The other paths have duration of 25 days each. The longest is the critical path because a delay in any activity in that path will cause a delay in the entire project. It's also the path where there are no lags between activities

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Budget Management Budget management processes are required to ensure that the project is completed within the approved budget. Budget is the area that receives great scrutiny during and after the project is completed. The ability of the project manager to administer financial resources is not only a measure of the organizations probity and compliance with contract or grant requirements, but also as a measure of its efficiency. Risks in this area have the highest impact on the project, the organization, and to the beneficiaries. Inadequate budget management can lead to misappropriation of funds, improper assignment of expenses, and financial losses that the organization may have to cover using their limited unrestricted funds.

Budget management steps:  Plan the Budget: this step includes the identification of all the costs that the project will incur and the approach to managing the budget.  Execute the Budget: authorizing expenditures.  Control the Budget: monitoring budget-performance according to plans.  Update the Budget: making necessary changes to the budget following clauses set by the contract or grant.

A leading cause for project failure is a poor estimation of the project budget.

It is not unusual that during the process to submit a proposal for funding - in its rush to meet the deadlines - the budget-creation process isn't carefully considered. This can lead to estimates that do not reflect the actual needs of the project. Estimating costs is both an art and a science. One of the techniques used during this process is the bottom-up estimate, which is a closer approximation to the project’s real needs and uses the Work Breakdown Structure (WBS) as a basis to estimate the value of each task or activity, adding up the values until a total budget is developed. With this technique, the project can determine the cost of each objective and the total project budget. A variation of this technique is the top-down estimate, which

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starts with a total budget and the activities are estimated until they reach the budget limit.

There are two methods to develop a project budget. The first is to develop the cost of all project activities, including all the materials, services, labor and other resources the activity will require. Adding all activities will result in the cost of the results and objectives of the project. Another approach is to only add the categories of costs in all activities. The result will provide a budget classified in accounting codes, such as salaries, material, transportation, fees, etc. The first approach is mostly used internally within the project to determine the final cost and progress of all project activities.

The second method is used by the organization and the funding agency to track the expenses of the budget in an accounting system.

Rough Order of Magnitude Estimate Developing a budget in different levels of detail is a common practice in project management. During the early phases of a project concept, the Rough Order of Magnitude (ROM) estimate can vary between -25 percent and 75 percent. During the proposal, the estimate can vary from -10 percent to 25 percent. And in the definitive budget, the one that is used during implementation, the ROM can range from -5 percent to 10 percent.

Level of Estimate

Range

Concept

-25% to +75%.

Proposal

-10% to +25%.

Definitive

-5% to +10%.

Estimating the cost of a project can be a difficult task, even if the project team is able to identify all the cost and has an accurate estimate. Those values will always change as the project makes progress. Fluctuations in price, vendors and inflation rates can cause significant variations from the original values estimated the original budget. The best approach is to assume that all costs will vary, and have contingency plans to adapt the project to reflect any budget changes due to differences in cost estimates.

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The S Curve Developing the budget requires an estimate of how expenses will occur during the life of the project. Using a simple spreadsheet, the project manager can develop the budget expenditures plan. The example below shows a budget expenditure plan of $200,000 over 10 months. The values come from the cost estimates of each activity on the WBS, and the time the activities will start and end from the project schedule.

WBS

M 1

M 2

M 3

M 4

M 5

M 6

M 7

M 8

M 9

M 10

Total Budget

Objective 1 Results 1.1

5000

$ 10,000

5000

Results 1.2

5000

5000

10000

5000

$ 30,000

5000

Results 1.3

4000

Objective 1.2 2000

4000

Results 1.2.2

2000

5000

10000

20000

1000

5000

20000

$ 37,000 $ 7,000

Results 1.2.3

5000

5000

Objective 1.3 Results 1.3.2

2000 $ 10,000

$ ‐

Results 1.2.1

Results 1.3.1

4000

$ 35,000 $ ‐

5000

5000

5000

5000

10000

$ 15,000 10000

10000

10000

$ 45,000

Results 1.3.3 5000 6000 $ 11,000 Totals $ 5,000 $ 9,000 $ 19,000 $ 25,000 $ 50,000 $ 36,000 $ 20,000 $ 19,000 $ 9,000 $ 8,000 $ 200,000

The result of this graph is an S Curve, called S because it has the shape of the letter S. The chart shows the relationship of the planned expenses during the life of the project. At the beginning and end of the project there are few expenses, while most of the bulk of expenses occur in the middle during project implementation.

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$200,000 $180,000 $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $‐ M 1

M 2

M 3

M 4

M 5

M 6

M 7

M 8

M 9

M 10

Figure 9. Curve S Adapted from “PMBOK® Guide”, by the Project Management Institute (PMI®), Fifth Edition, Project Management Institute, Inc; 2013, figure 7-9, p.214.

Not all projects have a clear S curve; depending on the nature of the activities and the schedule, the curve may have differences.

S Curve Analysis An important technique in budget management is to measures the actual amount of work the project has accomplished, regardless of the effort expended or the time elapsed. The analysis measures project progress by comparing the budget baseline with the actual costs and the value of progress made to date.

The value of this analysis is that it provides an early warning of performance problems before they become unmanageable. The analysis also helps communicate real progress and keeps the project team focused on achievement. The chart below shows an example of a project S curve analysis that compares the planned budget with the actual expenses and the

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value of progress made to date. This is a useful chart to monitor the deviation from plans and will help develop timely corrective actions. The example below tracks three sets of information in the fifth month of the project: the baseline budget, the actual expenses incurred by the project every month, and the value the project has earned through completed activities. $200,000 $180,000 $160,000 $140,000 $120,000 Plan

$100,000

Actual

$80,000

Value $60,000 $40,000 $20,000 $‐ M 1

M 2

M 3

M 4

M 5

M 6

M 7

M 8

M 9

M 10

Figure 10. Monitoring the Project Budget at Month 5 Adapted from “PMBOK® Guide”, by the Project Management Institute (PMI®), Fifth Edition, Project Management Institute, Inc; 2013, figure 7-12, p.219.

 Actual costs are the cost incurred by the project ($115,000)  Budget value is the value the project planned to achieve at the fifth month ($108,000)  Actual Value is the value the project actually earned in the fifth month ($95,000) In the example above, the project manager spent more money than planned and has delivered less value than planned. If the trend continues, the project will run out of money before delivering all project objectives.

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Controlling the budget requires the project manager to evaluate whether the project’s expenses are being executed according to the budget plan, and helps identify deviations and develop corrective actions. The method used to monitor the performance of the budget depends on the accounting system used by the organization to track expenses. Monitoring the budget is a critical responsibility of the project manager. Additional steps of budget management include the identification of all the resource requirements for services, consultants, materials, and equipment by getting a cost estimate of each resource, including human resources and the development of a budget baseline that will be used to track and report budget expenditures.

Outputs from this process include: a project budget, a budget management plan that defines the levels of authority for charging items to the budget, a budget-control plan that defines the process for revision to the budget, and budget updates.

Budget management should not be completely delegated. Estimates should be revised frequently against any changes in the conditions of the project, such as currency exchanges, inflation of prices, availability of goods and services, etc. Failure to revise can lead to work and expenditures that do not benefit the project.

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Quality Management Quality management is the process used to ensure that the project will satisfy the needs of the beneficiaries. Quality is defined as a commitment to deliver the project outputs and meet the expectations of the beneficiaries, which means that quality is ultimately defined by the beneficiary. Quality is not about delivering the most expensive materials or services; but rather, ensuring that the project outputs are relevant to the needs of the beneficiaries, that they are delivered in a timely manner, and that they are adequate to the conditions in which they have to be used. It is not about doing additional work if it does not add value or benefit to the beneficiaries, it’s about delivering according to the original project commitments.

Quality management steps:  Plan Quality: determine the quality standards for the project.  Assurance of Quality: ensure that quality is built into every element of the project.  Control Quality: monitor and audit quality.  Improve Quality: make improvements to the project that will increase quality levels.

The most popular tool used to determine quality assurance is the Shewhart9 Cycle. This cycle for quality assurance consists of four steps: Plan, Do, Check and Act. These steps are commonly abbreviated as PDCA. The PDCA Cycle is used in every activity of the project, and in every management process. For every activity or process, the project manager needs a plan, needs to act on the plan, check the results of the actions, and act based on the new learning or changes needed to improve the next cycle.

9

Walter Andrew Shewhart, Economic Control of Quality, American Society for Quality, 1980

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The PDCA cycle is designed as a dynamic model. The completion of one turn of the cycle flows into the beginning of the next. Following the spirit of continuous quality improvement, the process can always be reanalyzed and a new cycle can begin. This approach is based on the belief that knowledge and skills are limited, especially at the start of a project when key information may not be known or completely understood.

Plan Act

Do Check

Figure 11. The Shewart/Deming Cycle

The PDCA is an iterative four-step management method used for the control and continuous improvement of processes and deliverables (outputs) in the project.

During the quality-management process, the project manager develops a quality-management plan that identifies the quality standards relevant to the project. Standards can be set by the organization, the donor, or as part of the technical competence area the project is focusing, such as health or education.

The second process in quality management includes quality assurance, which implies the execution of the quality plan. This process includes quality audits performed by the project team during every project deliverable, and the reevaluation of quality standards and any assumptions made in the quality plan.

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Quality assurance focuses on prevention measures during the project implementation phase and checks to see that the project team, consultants or project partners are following the quality standards. In certain conditions, meeting quality standards could mean meeting legal and regulatory standards set by the local government or the donor agency.

The third process in quality management is quality control, where the project measures the results of the deliverables or outputs and checks to see if they meet the quality standards. The final process is quality improvements, making changes to the quality plan and identifying ways to improve quality and eliminate causes of unsatisfactory quality discovered during quality control.

Quality management outputs include a quality management plan, quality audit reports, and quality improvement plans. As such, quality also means maintaining the project constraints in balance, implementing the project by delivering all that the project was designed to deliver in the time allotted and under the approved budget.

The following chart explains the relationships amongst the different actions required for quality management.

Why?

Quality Process

What? When?

Procedures

Forms, checklist, templates Figure 11. Quality Management Pyramid

Who? How?

Where?

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 At the top of the pyramid is Quality Management; it defines the why we need quality and includes information about the goals, objectives and quality standards.  At the next level we have the process. It answers the questions on what to do and when to do it. The process is a detailed set of activities to manage quality.  The next level is procedures. It defines who will do it and how they will do it. It includes policies, roles and responsibilities and detailed instructions to carry out quality management.  The last level includes the forms, checklists, templates and other tools used to manage quality

Quality Charts A chart can significantly help identify problem areas. One of the charts used in quality management is called the Pareto Chart. This chart graphs the areas where quality problems exist and organizes them by frequency. The chart receives its name from the Pareto principle10, which states that 20 percent of the areas cause 80 percent of the quality problems.

The example below shows the quality results of baseline surveys conducted during a project. After plotting the different areas of problems, the chart identifies that only two areas caused 80 percent of all the quality issues. This information can help the project manager by fixing only those two areas, reducing the cost and effort of redoing the entire survey.

Problem

No signature

No address

Incomplete Data

Not a beneficiary

Other

Total

Frequency

45

35

10

7

3

100

Percentage

45%

80%

90%

97%

100%

Cumulative

45%

35%

10%

7%

3%

10

100%

Pareto Principle, also known as the 80–20 rule, states that for many events, roughly 80 percent of the effects come from 20 percent of the causes. Principle first observed by the Italian economist Vilfredo Pareto in 1906

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Percentage of errors

other

not a beneficiary

incomplete data

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

no address

50 45 40 35 30 25 20 15 10 5 0

no signature

Frequency

Pareto Chart

Baseline Survey Data Errors

Figure 12. Pareto Chart

Quality Matrix An effective method to ensure all project results (outputs) follow the expected quality characteristics is to use a Quality Matrix (QM). This matrix identifies the results (or deliverables) for each objective or process in the project and the relevant specifications of the deliverable, as well as the verification method and the criteria for accepting the deliverable. It also includes a space showing who is responsible and who approved the deliverable. The goal of the matrix is to ensure that each result of the project conforms to the designed characteristics, features or attributes, and that they are relevant, timely, and satisfy the implied needs or use. The example below shows a simple QM:

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WBS

Description of Results

1.1

PM Guide delivered

1.2

80% Participants pass the certification test

Expected Relevant result Specs. date Jun 22, Contains 2012 all curriculum with examples and a glossary August Course 6,2012 design and delivery methods for adult learners

Verification Process

Approval Criteria

Approve

Status

Review by team

Follows terms of Reference

Training Assistant

Completed

Certification grades

Student satisfactio n survey

Training Assistant

60% pass ratio

The Quality Matrix is an input to develop a more robust project-quality plan that includes processes to ensure quality is built into each project activity.

The matrix helps identify basic information that will help develop the specifications, metrics and verification process of each project result or deliverable. Whether the results is produced by the team or by a consultant, the quality plan should detail what is expected of the activity and the methods to measure; this is required to ensure the expected results can contribute to the achievement the project objectives.

For example, one result of the project is to have participants pass a certification test (outcome level). It is expected that about 80 percent will be able to pass in the first try. If more fail to pass, then the project needs to review the quality of the material, the delivery of the courses, the relevance of the text examples, and the time each student spent on the course. This is quality auditing; it identifies areas for improvement.

The matrix is a quick method to review where the project results stand on their deliverable and make quick decisions to correct future actions.

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Team Management During the definition of the project activities, a list is created that identifies the skills needed for the project. These range from highly technical, to administrative and support functions. The project team is, after all, the team responsible for the project, and the project manager needs to be clear on what skills are needed.

Steps during the team management process:  Team Identification: the process of identifying the skills and competencies required to carry out the project activities.  Team Building: organizing the team and building their capacity to perform during the project, which includes assigning roles and responsibilities.  Team Evaluation: evaluating the performance of the team, and dealing with conflict and people-issues.  Team Improvement: improving team performance and the use of motivational techniques.

Team management includes the processes required to make the most effective use of the people involved in the project. The first step is identifying the roles, responsibilities and reporting relationships. The second step is recruiting the people who will be assigned to the project. These can come from within the organization or be hired through the Human Resources function of the organization. The project manager needs to be heavily involved and participate in all interviews with possible candidates, as the success of the project will depend on the quality and commitment of the team.

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Team Skills Matrix A simple tool is the skills matrix, which lists all the skills the project will need. The project manager can then use this matrix to identify the people who will become part of the project. If there is a team already in place, the matrix can help identify gaps in skills and put in place a development plan.

Project Expertise Area Construction of water systems Education on health practices Monitoring reports Development of training material Development of Communication plans

Project Manager

Health Advisor

Health Manager

M&E Officer

W

P

W

W

A

E

E

W

P

P

A

W

A

E

W

W

W

A

P

E

Training Assistant

Health Assistant

W

P

W

A = Awareness W = Working Knowledge P = Proficiency E = Expert

Once people have been assigned to the team, the next step is to develop the team. Most projects do not have the luxury of time to fully develop a team, but the creation of a development plan that defines development strategies and goals can help the project manager build the right team and match the project activities with the right level of skills. Team development includes hard and soft skills. Hard skills include technical training to learn new methodologies or practices, and soft skills include time management, communications, facilitating, and negotiation skills.

Some organizations also include an induction process that describes the mission, norms, guidelines, culture, and other internal processes for new hires. This process helps new staff to navigate through the organization's policies and procedures. Another good method to help new staff is a formal mentorship, where a project member is assigned to assist a new member in navigating and understanding the organizational culture and procedures.

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Once the team has been identified, the project manager develops the project organization chart, which illustrates the structure that the project will use to manage the project team. The chart also helps identify the reporting relationships amongst the project team members, and how the project integrates with the organization. The chart below is an example of a project organization structure with its different reporting levels: Project Manager Advisor

IT Assistant

Training Assistant

Trainer Consultant

Project Assistant

IT Support

Communications

Course Designer

Staff

Logistics

Developer

Figure 13. The Project Organization Chart

Development projects, due to their complex nature, require a diverse mix of individuals who must be integrated into an effective project team. It should not be confused with bringing together a group of individuals to work on the team. The difference between a group and a team is measured by how its work dynamic impacts overall project performance. Gathering a number of individuals together in a group is easy, but it requires special skills, new attitudes, and a strong commitment in order to turn those individuals into an effective team.

A team approach is a distinctive way of working that harnesses the collective skills, strengths and energy of team members. Teamwork leads to synergy and improves the performance of everyone. A team is a group of people, but all groups do not qualify as teams. A team is a group of people who work interdependently, are committed to common goals, and produce high-quality results. Team management also includes team evaluation, which should not be done once a year or at the end of the project, but on an ongoing basis where feedback opportunities allow staff to compare their performance to expectations and identify ways to improve it.

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Team management is not limited to hiring and evaluating staff. It involves careful planning to ensure that the project has the right people at the right time doing the right things.

Responsibility Matrix An effective method to ensure all team members know their responsibilities is through the use of the Responsibilities Assignment Matrix (RAM). This matrix identifies the responsibilities for each activity and process in the project. The goal is to ensure that each activity in the project has a person responsible for it, and another person that authorizes the work. The example below shows a simple RAM: Team members Training M&E Specialist Officer

WBS

Project Manager

1.1.1

R

C

1.1.2

A

C

R

1.2.1

I

R

C

1.2.2

R

C

Director

Organization Finance Procurement Director Officer

A I

I I

C

I I

A

Adapted from “PMBOK® Guide”, by the Project Management Institute (PMI®), Fifth Edition, Project Management Institute, Inc; 2013, figure 9-5, p.261.

R =Responsible A = Accountable (authorizes) C = Consulted I = Informed

Not all people need to be involved in all activities; as long as there is one responsible and another accountable, the work will meet the basic controls to ensure is done as requested. A variation of the RACI matrix includes internal processes; for example, the responsibilities for the procurement process and the hiring process can be described in the same terms in the RACI: WBS Hiring of Team staff Reports to management Procurement

Project Manager R

Team members Training M&E Specialist Officer I

I

R A

Director A A

I

I

Organization Finance Procurement Director Officer

C

I

C

R

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of services Project Meetings

R

C

C

A

I

I

Adapted from “PMBOK® Guide”, by the Project Management Institute (PMI®), Fifth Edition, Project Management Institute, Inc; 2013, figure 9-5, p.261.

Stakeholder Management Stakeholder management typically garners the least amount of thought and planning in development projects, due to a limited understanding of and agreement on the identity of the stakeholders and their role in the project.

Stakeholders are all the people who have an interest in the project, and they are the most critical element in defining the success of a project.

Stakeholders include donors, beneficiaries, local governments, partner organizations, and anyone impacted by the project, including groups such as the local press, local institutions, and even watchdog organizations. Each project has a different list of stakeholders, all defined by the scope of work, the type of project, the geographic location, and the external environment in which the project will take place. Managing stakeholders is not an easy task; project managers need to continuously improve the way relationships between the project and the stakeholders are managed by taking a proactive approach geared toward building trust.

Steps in the stakeholder-management process:  Stakeholder Mapping: the process of mapping and analyzing stakeholders and developing stakeholder-management strategies.  Stakeholder Relationship building: implementing the strategies through communication and trust.  Stakeholder Evaluation: evaluating the results of stakeholdermanagement strategies.  Stakeholder Management Improvement: improving stakeholder management strategies to increase support to the project.

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Stakeholder Analysis is the technique used to identify the project stakeholders, understand their needs, and their level of interest in and influence on the project, and identify their fears and concerns about the project. The analysis leads to the development of a good understanding of the most important stakeholders; this in turns helps the development of a sound communication strategy that will help manage the relationships.

Stakeholder Matrix The identification of stakeholders is a process in which the management team, along with other individuals possessing experience in similar projects and issues, participate in a brainstorming process and create a list of all potential stakeholders. The list created is not static because, as the project progresses, new stakeholders may emerge while others who were initially identified will cease to be relevant.

Name of Stakeholder

Type of Interest

Level of interest

Type of Influence

Level of Influence

Program Director

Project Objectives on time

Low

Approval to start project

High

Project Beneficiaries

Education

Medium

Participation in project activities

Medium

Donor

Project goal

High

Funding

High

Strategies Keep director informed of all progress, changes and risks Keep satisfied with the results Engage closely

Stakeholder Map An important tool in identifying stakeholders is the stakeholder map11, which places each stakeholder in a matrix of influence versus interest. The map helps with the identification and categorization of the key project stakeholders, ranking them based on their degree of interest and influence in the project. By identifying stakeholders across the matrix, the project manager can develop specific strategies with each stakeholder group. The

Based on Mendelow's Power-interest grid (Aubrey L. Mendelow, Kent State University, Ohio 1991)

11

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High

B

B

A

Medium

B

C

C

Low

Influence

following chart shows a stakeholder map classifying the different combinations of levels of influence and interest.

D

D

C

Low

Medium

High

Interest Figure 14. The Stakeholder Map Adapted from “PMBOK® Guide”, by the Project Management Institute (PMI®), Fifth Edition, Project Management Institute, Inc; 2013, figure 13-4, p.396.

Based on the levels of interest and influence, we can categorize stakeholders in four groups: Group A (Level HH): Stakeholders who belong to this group need to be kept committed so that their interest is sustained and the project can take advantage of their influence and interest. Failure to do this can cause stakeholders to lose interest, with dire consequences to the project.

Group B (Levels HL, HM, and ML): The key to managing this group is to build more interest in the project by keeping them satisfied. This is a relationship that needs to be managed closely to avoid changes in

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perceptions about the project, especially when stakeholders could have a significant impact on the outcomes of the project.

Group C (Levels MM, MH, and LH): This group’s level of impact on the project is medium and needs occasional monitoring. Stakeholders who belong to this group require information to maintain the level of engagement on the project.

Group D (Levels LL and LM): Stakeholders who belong to this group need little attention. The best approach is to observe this group for any changes.

The level of influence and interest on the project can change during the life of the project. A group that was initially recognized as having low influence and low interest can change to have a large influence and interest in the project. The project manager needs to monitor these groups, as well as add or remove stakeholders from the list.

Stakeholder Group

Stakeholder Strategy

Group A

Keep committed, meet their expectations

Group B

Keep satisfied, increase their interest

Group C

Keep informed, maintain communications

Group D

Keep under observation, monitor changes

Stakeholder analysis can help the project manager understand the variety of stakeholders who have influence and an interest in the project. Stakeholder analysis provides information and some basic measures that can help uncover and remove barriers. This analysis allows the development of additional plans that could prove to be valuable for the project team, such as an “information-management plan” and a “risk-management plan”.

Stakeholder management also helps manage expectations. Each stakeholder has a different idea or expectation of what the project is; this is common at the start of the project when limited information about the project has been distributed. When beneficiaries are not involved in the planning, or consulted on their needs and expectations about the project, they can easily turn their back on the project. Without beneficiaries, the project doesn’t have a reason to continue.

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Project managers should spend the required effort and time to fully identify and understand the project stakeholders, especially when the project has to deal with a key stakeholder who has the influence to disrupt the project. By identifying the needs, concerns and issues of the stakeholders early in the process, the project manager has developed a knowledge that can be used to his advantage.

Insufficient involvement and infrequent communication with stakeholders is another leading cause of project failure. A project manager should never try to take stakeholders for granted, or assume that they will support the project unconditionally; a good stakeholder-management plan helps manage the politics that often arise with development projects. It helps win support, and eliminates a major source of project stress. The success or failure of the project is ultimately judged by stakeholders, not project managers.

Stakeholders have different levels of influence on a project, and their interest in the project also varies; that is why it is important to know all the project stakeholders and identify the best strategy to manage the relationships.

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Information Management Managing information is a process required to ensure the timely and appropriate generation, collection, dissemination, storage, and ultimate disposition of project information. Eighty percent of a project manager's time is spent communicating via reports, e-mail, telephone, meetings and presentations.

The steps in information management include:  Information Planning: the process of defining informational needs and the plans to manage project information.  Information Management: the process of collecting, analyzing and reporting project information.  Information Evaluation: evaluating the results of informationmanagement plans.  Information Improvement: improving the information-management processes.

The information-management plan is influenced by the type and needs of the project stakeholders. One type of report cannot be used to inform all stakeholders, because each has a different interest on the project.

Stakeholders have different needs for information, and they require information in different formats and channels. Even the frequency of communication is different. The first step of the plan is to define the type of information the stakeholders need from the project, determine when they need it, how the information will be distributed, and how to evaluate the relevance and effectiveness of the information.

The information-management plan contains a list or description of all the types of information the project manager needs to communicate. It identifies who will be responsible for collecting, editing and distributing the information. Donors have specific informational needs from the project manager and often provide formats that describe the content and timing of

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the information required. Distributing information is another element of information management; it goes beyond the act of sending information and includes steps to ensure that the information was received and understood by the intended recipients. This is important, especially when developing donor reports, or reports to comply with local laws or regulations.

Information management also includes an analysis or evaluation of the effectiveness and relevance of the information distributed. This step is useful when communication is used as a tool to build stakeholder support and relationships with beneficiaries, communities, and local NGOs. The project manager should define the communications principles guiding all communication efforts. Principles are the values and norms that govern the behavior of the people in charge of developing the communication messages. Having a successful information-management plan depends on developing a sound communication strategy. The goal of communication is the acceptance of the project’s message by the receiving audience. If the receiver understands the meaning of a message that asks for action, but fails to act, the goal of communication is not achieved. But if the receiver responds to the message by taking the appropriate action, the goal of the communication has been achieved.

Information Cycle As depicted in the diagram below, managing information consists of a continuous cycle that starts at defining project information needs (needs from the project and information needs from the stakeholders) and ends at evaluating the information-management plan, and incorporating improvements and changes to increase its efficiency. The cycle is continuous during the entire life of the project, with iterations that should occur during the project internal evaluations or other opportunities the project team has to review its management plans.

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Define Evaluate

Locate

Organize and Store

Use

Select

Collect

Report

Analyze Figure 15. The Information Management Cycle

The cycle includes the management of processes and systems that define, locate, select, collect, store, analyze, identify, acquire, create, organize, store, report, and use information. Its main purpose is to ensure that the right people get the right information at the right time.

Information Matrix The information matrix contains a description of all the informational needs of stakeholders. The matrix identifies the people who will be responsible for collecting, editing, and distributing the information; it also includes the types of formats and methods to present and deliver the information, the purpose, and the recipient of the information. As mentioned before, this matrix helps the project ensure that the right people get the right information at the right time. The matrix is a practical tool that ensures that decision can be made on time.

The following table shows an example of an information matrix:

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Name of Stakeholder Program Director Team staff Donor

Information Needed Progress reports Calendar of training events Financial reports

Format Official letter Oral and written Official format

Delivery Method By internal mail Face-to-face presentation E-mail

Responsible

Timing

Project Manager Technical Advisor

Every two months Every month

Project Manager

Every three months

Information, along with financial and human resources, is a key resource in managing any development project. As with the management of other resources, information needs to be managed as an integrated project resource. Development projects need to plan their current and future information needs, and effectively use and manage their associated technologies to support their efforts.

Information is at the core of the relief and development work, and it’s the main reason why the project manager has a responsibility to treat the information collected and generated as a valued resource. The project manager must ensure that the information is secure, accurate, relevant, and used appropriately. Improving access to information adds value to the information: the more a piece of information is used by the project, stakeholders, the general public or development partners, the more costeffective it becomes for the project to store and distribute it.

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Risk Management Risk management includes the processes concerned with identifying, analyzing, and responding to risk. The level of risk in a project is defined as something that may happen that, if it does, will have an adverse impact on the project. Risk management is the management of events that may or may not occur, and includes the preparation of plans to reduce the impact to the project. Because of the probabilistic and speculative nature of risk management, many project managers feel it is not necessary and prefer to deal with risk only when the resulting disruption occurs.

The four steps in risk management are:  Risk Planning: involves the identification and quantification of all risks, and the development of a response plan.  Risks Monitoring and Response: includes the activities to monitor risks and respond to risk events.  Risk Evaluation: involves the evaluation of the risk-management plan and response to actions taken by project staff.  Risk Plan Improvement: the actions to improve the risk plan and response mechanisms, as well as an update on the risk levels.

Risk identification includes the identification of all possible risks that may impact the project and documenting their characteristics. The project team members identify the potential risks using their own knowledge of the project, its environment, and similar projects done in the past. The projectrisk list is a project deliverable. The next step is the analysis of the project risks. Risk analysis assesses the importance of the identified risks and develops prioritized lists for further analysis or direct mitigation. The team assesses each identified risk for its probability of occurrence and its impact on project objectives. Part of risk management includes the revision of risk analysis during the project’s lifecycle. There are two types of risk analysis:

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 Quantitative risk analysis: a way of numerically estimating the probability that a project will meet its cost and time objectives.  Qualitative risk analysis: based on a simultaneous evaluation of the impact of all identified and quantified risks.

Risk-response planning focuses on the high-risk items evaluated in the risk analysis step. It identifies and assigns staff to take responsibility for each risk response. The project manager and the team identify which strategy is best for each risk, and then design specific actions to implement that strategy. Risk monitoring and control keeps track of identified risks, residual risks, and new risks. It also ensures the execution of risk response plans, and evaluates their effectiveness. Risk monitoring and control continues for the life of the project.

The list of project risks changes as the project matures: new risks develop, or anticipated risks disappear. As the project makes progress, the probability that risks will occur changes, but the potential impact increases; this has implications on the budget and other contingency plans developed by the team. At the start of a project, the probabilities for risk are high, but their impact is low. As the project makes progress, the probability decreases, but the impact increases. This relationship is shown in the graph below.

Initiation

Planning

Closing Monitoring and Evaluation

Risk Probability decreases overtime as the schedule advances

Risk Impact increases overtime as the project makes progress

Adaptation Impact Probability

Figure 16. The project risks during the project phases and lifetime12

12

Adapted from Project Management Tools by Kim Pries and Jon Quigley,

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Risk Matrix A Risk Matrix is a matrix used to define the various levels of risk as the product of the probability levels and impact levels to the project. The matrix is a mechanism to increase visibility of risks and assist decision-making. The matrix identifies all possible risks, and assesses each of them based on their level of probability and impact on the project. The product of probability and impact gives a classification to the risk that helps prioritize the actions on those risks that have a high probability and impact. The table below shows an example of a risk matrix. Each risk or impact is rated on a scale of 1 to 5, where 1 and 5 represent the minimum and maximum possible probability or impact of an occurrence of a risk.

#

Type of Risk

Description of Risk

R01

Technical

Use of new and untested technology

R02

Schedule

External dependencies with other projects

R03

Management

Team not properly trained in the new methodology

R04

Budget

Economic uncertainty.

Impact to the project May cause delays or extra costs and use of a more expensive but tested technology If external projects are delayed they will delay the project Poor use of the methodology may lead to confusion and duplication of efforts Probability of increase in inflation may increase costs of key project materials

I

P

CI

5

3

15

3

4

12

3

3

9

2

3

6

I = Impact P = Probability CI = Composite Index ( I x P)

Classification of Risks and Actions Once all risk have been identified and assessed, the project manager needs to identify which risks are worth spending time and effort. The following matrix helps identify the actions needed based on the risk composite index obtained.

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10

15

20

25

4

8

12

16

20

3

6

9

12

15

2

4

6

8

10

1

2

3

4

5

Medium Low

Probability

High

5

Low

Medium

High

Impact Figure 17. Risk classification matrix Adapted from “PMBOK® Guide”, by the Project Management Institute (PMI®), Fifth Edition, Project Management Institute, Inc; 2013, figure 11-10, p.331.

There are four basic strategies to manage risks:    

Avoidance (eliminate, withdraw from, or not become involved) Mitigate (optimize – reduce) Transfer (sharing – outsource or insure) Accept (retention and budget)

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Risk Composite Index level

Strategy

20-25

Avoidance

9-16

Mitigate

4-8

Transfer

1-3

Accept

Actions Immediate actions are required, risk should be treated as an issue and not depend on chance. This requires a budget and people responsible to take actions to avoid the risk. Examples include changes in schedules, approaches, and communications.

Reduce the impact to the project, start taking preventive actions such as contingency plans to use in the case the risks occurs.

This may mean new activities that have to be added to the WBS, along with a budget and a responsible. The goal is to reduce the impact to the project in case the risk occurs.

The project must find a way to share or transfer the risk to a third party, either by hiring an experienced company or consultant. If feasible, the project can buy insurance. The project manager should monitor the risk to analyze whether the probability or impact has changed.

The time and cost to avoid this risk are higher than the impact to the project. It is better to accept the risk.

The main purpose of risk management is to build an understanding of the potential problems that might occur on the project and how they might impede project success. By developing strategies to reduce the impact of potentially adverse events on the project, risk management should be seen as an investment the project is willing to make to reduce the impact of the risk on the project. There are costs associated with risk management, and these costs should not exceed the potential benefits.

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Contract Management Contract management deals with the processes to ensure the project follows the conditions, regulations, specifications and clauses that the donor or project financier has established. Additionally, contract management also deals with procurement contract management for the provision of goods and services the project will purchase from local or international vendors.

Contract management consists of four steps:  Contract Planning: includes the steps required to plan for the proper management of all contracts and identification of all critical clauses.  Contract Execution: includes the steps for ensuring the project complies with the contract terms and the processes to purchase goods and services.  Contract Monitoring: the constant review of the contract clauses and obligations the project must follow.  Contract Update: modifications to the contract as needed to reflect authorized changes or modifications.

Management of all project procurement is a key element during the project implementation. The procurement plan identifies the "what," "when" and "how many" of the goods and services are needed within the budgeted limits. It also identifies potential sources and the strategies the project will use to procure goods and services, done in conjunction with the organizations’ procurement function. Implementing the procurement plan is the process of developing procurement documents, such as the Request for Proposal (RFPs), and developing the selection criteria and contract terms. It also involves the process of soliciting the goods and services, obtaining quotes, bids, proposals, and offers. Selecting the vendor or source involves choosing from the potential suppliers, verifying their qualifications and capacity, and negotiating and awarding the contract.

Chapter 2 – Project Management Processes | 105

Most of the time spent in contract management is used on following the due diligence processes required to ensure the project obtains the goods and services under the required specifications. This is a process of systematically evaluating vendor information, identifying risks and issues related to the proposed transaction, and selecting the vendors that meet the requirements of the project. Sub-grant contract management occurs in many large projects where the donor requires that a substantial amount of the project funds are directed to local organizations. In this scenario the project and the organization is responsible for ensuring that the funds are utilized in accordance with applicable laws and regulations; therefore, the project must develop processes to monitor the sub-grants.

Monitoring the contract involves managing the relationship with the donor, sub-grantee and suppliers, monitoring contract performance, ensuring reports and payments are made on time, and goods and services are delivered under specifications. When all contract obligations have been achieved (or when they have not), the project will close the contract. Closing a contract includes the completion and settlement of the contract, resolution of open issues, final verification, and formal acceptance. If required by the donor, a contract audit is done to ensure the project has followed all the clauses, terms and conditions of the contract.

The contract-management process identifies the organizations procedures, donor restrictions, and the applicable host-country government regulations.

This process involves deciding how to award sub-grants, how to procure, when to procure, what to procure, and how much should be procured. The objective of this process is to ensure that the project gets what it needs without creating risk to the project and the organization. Risk can occur in the form of improper or inadequate controls to manage the contract relationships, especially the management of risks related to the appropriate use of donor funds to purchase the goods and services within the donor requirements, and to ensure that the goods and services meet the needs of the project and, ultimately, the needs of the beneficiaries.

Procurement Matrix The project-procurement matrix serves as a guide for the administration of all procurement of goods or services during the life of the project. The matrix is aligned with the WBS and the project schedule to ensure that all

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goods and services are available for the project when needed. This matrix identifies and defines the goods and services to be acquired, the types of contracts that will be used, the contract approval process, and the decision criteria.

WBS Code

Activity

2.1.1

Develop Online Course Guide

2.1.2

Develop Online Course

2.1.3

Purchase 200 Book Companions

2.1.4

Hire 4 Tutors

Procurement Hire consultant to develop a course guide based on the Terms of Reference Hire a web developer to build and test an online course with access control and grading capabilities Purchase 200 copies of the course book companions for all students Hire four tutors with the required experience and knowledge of delivering online courses

Type and mode

Estimated dates

Estimated Budget

Start

End

Services / Public bidding

06/01/2013

09/11/2013

$5,000

Services / Private bidding

09/21/2013

10/30/2013

$10,000

Goods / Public bidding

09/30/2013

10/30/2013

$20,000

Services / Direct Administrati on

10/10/2013

11/20/2013

$16,000

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Chapter 2 - Summary  The nine management processes occur during the entire project lifecycle, and each one of them requires a cyclical approach that consists of planning, doing, checking and learning as components to ensure process quality.  Core processes help manage the four project constraints, lead to specific objectives of the project, and are the basis to define a project success: on time, under budget, as requested by the funding contract and by the quality needed by the beneficiaries. These processes deal directly with the project constraints.  Supporting processes deal with the areas that facilitate the management of key components of the project and make it possible for the project to achieve its objectives. These include, team, stakeholder, information, risk and contract management.  Scope management includes the processes involved in defining and controlling all the activities that make up the project and that are required to complete the project successfully. During this process, the project manager develops a Work Breakdown Structure (WBS) using information from the Logframe and project proposal.  Schedule management includes the development of a “project schedule” that lists all project activities created in the scope management process with a time estimate to complete each activity.  Budget management processes are required to ensure that the project is completed within the approved budget. Budget is the area that receives great scrutiny during and after the project is completed.  Quality is not about delivering the most expensive materials or services; but rather, ensuring that the project outputs are relevant to the needs of the beneficiaries, and that they are delivered in a timely manner and are adequate to the conditions in which they have to be used.  Team management includes the processes required to make the most effective use of the people involved with the project.  Stakeholders are all the people who have an interest in the project; they are the most critical element in defining the success of a project. Project managers need to continuously improve the way in which the relationships between the project and the stakeholders are managed by taking a proactive approach geared towards building trust.  Managing information is a process required to ensure the timely and appropriate generation, collection, dissemination, storage, and ultimate

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disposition of project information. Eighty percent of a project manager's time is spent communicating via reports, e-mail, telephone, meetings, and presentations.  Risks management is the management of events that may or may not occur, and includes the preparation of plans to reduce impact to the project.  Contract management deals with the processes that ensure that the project follows the conditions, regulations, specifications, and clauses that the donor or project financier has established.