IFFICULT PROJECT: Andre A. Costin AMSTERDAM BOSTON HEIDELBERG LONDON OXFORD NEW YORK

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1 IFFICULT PROJECT: Andre A. Costin ELSEVIER AMSTERDAM BOSTON HEIDELBERG LONDON OXFORD NEW YORK PARIS * SAN DIEGO SAN FRANCISCO SINGAPORE SYDNEY TOKYO Butterworth-Heinmann is an imprint of Elsevier

2 Contents List of figures List of tables Foreword Preface XI xiv xvi xxi Chapter 1 Discovering a project 1 Four essential ingredients 1 Defining the project concept and associated rewards and risks 2 Approaches and pitfalls in forecasting market demand 7 Case study Part I (second part Chapter 3): A logistics review at ABC Corporation 10 Your assignment 11 Your fact-finding and initial analysis 12 Your final analysis and initial round of recommendations 13 The time space dimension revisited 14 Quantitative projections 14 Key recommendation 15 What actually happened? 15 Some afterthoughts 16 Supplementary questions 16 Chapter 2 Setting multi-year corporate strategy 17 The rationale for project phasing 18 Setting the project implementation strategy 20

3 vi Contents Developing the corporate strategy 22 Case study #1: Phasing strategy on a $3.6 billion construction program 25 Your assignment 27 Your analysis 28 Your recommendation 28 Case study #2: Defining the scope of strategic business initiatives 29 Your assignment 31 Our answer: Initiatives to resolve the strategic gaps 31 Supplementary questions 33 Chapter 3 Defining a project 34 The players and their roles: Project definition phase 35 v The players and their roles: Project implementation phase 40 Managing the technical definition process 42 Technical definition stages and deliverables 43 Work packaging and the WBS 44 Evaluating project worth 47 Risk assessment and risk mitigation 50 Assembling the project brief 53 Project optimization 55 Part II Case study: ABC Corporation Sequel to Part I in Chapter 1 57 Problem: Workload analysis 58 Problem: Preparing guidelines and assumptions 59 Problem: Preparing the profitability analysis 60 Solution: Workload analysis 60 Solution: Guidelines and assumptions 60 Guiding Principles 60 Working Assumptions 61 Solution: Profitability 63 What actually happened? 63 Chapter 4 Mobilizing the project 65 Shaping the plan of organization and mobilizing key staff members 66 Bringing in contract participants into the project team 74 Developing a project implementation plan 76 Developing urgent project implementation procedures 77 Case study: Mobilizing the $6 billion New Airport Project, Hong Kong 80 Problem #1: Defining mission, roles and responsibilities 81 Problem #2: Developing the scope management procedure 82

4 Contents vii Solution #1: Defining mission, roles and responsibilities (our long list) 83 Solution #2: Developing the scope management procedure 87 Chapter 5 Managing people 90 Issues in managing people on projects 91 A 5-point action plan for effective HR management on projects 94 Establishing an integrated corporate HR policy 96 Developing people-centered procedures for application in projects 97 Selecting candidates for project assignments 100 The need for a culture of learning in projects 101 Applying a culture of learning through management by objectives plus (MBO+) 103 Handling conflicts in projects 107 Case study problem #1: An HR management procedure 109 Solution: Procedure 4.1: Project Assignments 110 Case study problem #2: Multiple choice quiz 112 Solution to case study #2 113 Supplementary question 114 Chapter 6 Managing contracts 115 Alternative contracting approaches in projects 116 Trends in contracting practices 117 Issues in contract management 119 Principles of superb contracting 122 Developing the Procurement Plan 124 Structuring the terms and conditions of contract c, 129 Tender calls, evaluation, negotiation, and contract award 132 Managing contract delivery 134 Sustaining performance and minimizing claims from contractors 140 Case study context: Setting a Bundling Strategy 142 Problem #1: Selecting a Bundling Strategy 144 Solution to problem #1: Selecting a Bundling Strategy 146 Problem #2: Resolving a contractual performance issue 145 Solution to problem #2: Resolving a contractual performance issue 146 Chapter 7 Scheduling work 148 The classical Gantt chart 149 Three core attributes of contemporary scheduling 150 Overview of network scheduling ^ 151 Assembling subject matter knowledge 153 Constructing the network 154

5 viii Contents Schedule computations 155 The great value of network scheduling 157 Key issues in scheduling project work 161 Tips for effective scheduling 162 Plan of organizational responsibilities 163 Work package statements and master scheduling 163 Setting the overall project duration 165 Tracking and reviewing progress frequently 166 Resources mobilization and detailed scheduling 168 Replanning and rescheduling critical work 169 Adopting one standard software for scheduling 170 Issuing a procedure for managing schedules 172 Case study #1 problem: Converting a precedence diagram into a Gantt chart 174 f 1 Case study #2 problem: Scheduling a stores mechanization project 174 Case study #1 solution: Converting a precedence diagram into a Gantt chart 177 Case study #2 solution: Scheduling a stores mechanization project 177 Chapter 8 Managing costs 180 Principles and assumptions in managing project costs 181 Contributing players in managing costs 182 Defining the project cost estimates 183 Clarifying financial risks before finalizing the project budget 187 Setting the project control budget 189 Developing a financial proposal to investors 192 Setting up controls with corporate accounting 197 Maintaining an accurate current budget in the face of change 200 Authorizing contract commitments and funding of change orders 202 Managing incurred costs 205 Forecasting final cost and cost risk analysis 206 v Managing contingency 209 Setting up project cost reporting 210 Guidelines for controlling costs 212 Managing earned value 214 IT solutions in cost management 216 Case study: #1 problem: Estimating interest during construction on the BRP 219 Case study #2 problem: Setting up and interpreting a project cost report 220

6 Contents ix Case study #3 problem: Submitting an appropriation request for a contract award 221 Case study #4 problem: Forecasting the contingency requirement 221 Solution to Case study #1: Estimating interest during construction 224 Solution to Case study #2: Setting up and interpreting a project cost report 224 Solution to Case study #3: Submitting an appropriation request 224 Solution to Case study #4: Forecasting the contingency requirement 224 Chapter 9 Building quality and commissioning 233 Issues and opportunities in applying quality management on projects 235 Quality and safety commentary on the Channel Tunnel Project 237 Quality Management Concepts, Tools and a Quality Association 238 Statistical analysis and control 240 Assessing quality risks 247 Overview of quality standards 248 Defining a project quality plan (PQP) 250 Implementing the PQP 251 Effecting process and product improvements 252 Supplier and contractor QA clauses 255 IT tools to support PCM 255 Commissioning planning 256 Implementing^he commissioning process 257 Conducting quality reviews and audits 260 Case study #1 problem: Quality risk management on a Caribbean Project 261 Background information 261 Your assignment 262 Case study #2 problem: Setting up a quality early warning system 264 Case study #1 solution: Quality issues and options Coral Paradise Bay Project (Table 9.2) 266 Case study #2 solution: Setting up a quality early warning system 268 Chapter 10 Concluding remarks x 270 Why do you make a distinction between sponsors and organizations that deliver projects for sponsors? -270 What can a contract service provider do to help a sponsor manage his risks better? 272

7 x Contents In this book, aren't you proposing a very bureaucratic approach to setting corporate strategy? Is there a way to increase the competitiveness of the firm using the project management methodology? So it's all about speed in passing through the project life cycle, isn't it? Telling information, managed in a deliberative manner. So how do we come to identify this telling information? Your focus on telling information may be all well and good, but we also want to deliver the project applying generally recognized best practices, right? Can you suggest orientations and principles that should govern the delivery of any and all projects? You speak of the roles and responsibilities of managers involved in project delivery. Do you have any final thoughts regarding what one should look for? What can you propose for the company that wants to set everincreasing standards of excellence for itself and its staff in its management of projects? What are some of the concerns and pre-occupations of today's CEOs in project delivery? How can project management help meet the world's pressing needs? Final question looking into the future, how is life cycle project delivery going to evolve in the corporate world? Glossary Appendix A: Correspondence between the Z value and the probability of occurrence Appendix B: Alternative PERT- type distribution estimation formulas Bibliography Index

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