Project Procurement Management
Procurement means acquiring goods and or services from an outside source. Other terms include purchasing and outsourcing
Many companies prefer to do outsourcing while some other companies not prefer outsourcing. Some company so outsourcing because:
To reduce both fixed and recurrent costs
To allow the client organization to focus on its core business
To access skills and technologies
To provide flexibility
To increase accountability
A contract is a mutually binding agreement that obligates the seller to provide the specified products or services and obligates the buyer to pay for them. Contracts can clarify responsibilities and sharpen focus on key deliverables of a project. Because contracts are legally binding, there is more accountability for delivering the work as stated in the contract.
Project procurement management: acquiring goods and services for a project from outside the performing organization
Planning purchases and acquisitions: determining what to procure, when, and how
Planning contracting: describing requirements for the products or services desired from the procurement and identifying potential sources or sellers (contractors, suppliers, or providers who provide goods and services to other organizations)
Requesting seller responses: obtaining information, quotes, bids, offers, or proposals from sellers, as appropriate
Selecting sellers: choosing from among potential suppliers through a process of evaluating potential sellers and negotiating the contract
Administering the contract: managing the relationship with the selected seller
Closing the contract: completing and settling each contract, including resolving any open items
A statement of work is a description of the work required for the procurement
If a SOW is used as part of a contract to describe only the work required for that particular contract, it is called a contract statement of work.
Project Risk Management
Positive risks are risks that result in good things happening; sometimes called opportunities.
A general definition of project risk is an uncertainty that can have a negative or positive effect on meeting project objectives.
The goal of project risk management is to minimize potential negative risks while maximizing potential positive risks.
• Risk utility or risk tolerance is the amount of satisfaction or pleasure received from a potential payoff
– Utility rises at a decreasing rate for a person who is risk-averse
– Those who are risk-seeking have a higher tolerance for risk and their satisfaction increases when more payoff is at stake
– The risk-neutral approach achieves a balance between risk and payoff
1. Risk Management Planning - How to manage risk management activities
2. Risk Identification - identify risks and document their characteristics
3. Qualitative Risk Analysis - prioritize by assessing probability of occurance and impact
4. Quantitative Risk Analysis - numerically analyzing the impact
5. Risk Response Planning -develope actions to reduce threat and enhance opportunities
6. Risk Montitoring and Control - tracking, monitoring risks, executing risk response plan and evaluating their effectiveness throughout project life cycle.
Each process occurs at least once in every project and occurs in one or more phases.
• Uncertain event
• Impacts at least one project objective (time, cost, scope, quality)
• Can have positive or negative impact
• One or more causes (e.g. delay in getting permit, insufficient manpower, dependency on external vendor)
Project Communication plan.
Every project should have project communication plan: document that guides project communication.
Project Communication plan content: stakeholder communication requirement, information including: format, content and level of detail, also people who will receive the information, methods for conveying the information, frequency of communication, escalation procedure for resolving issues, a glossary of common terminology.
Short, frequent meeting are often very effective in IT projects. Stand up meeting force people to focus on what they really need to communicate.
This chapter includes various methods for improving project communications such as managing conflict, running effective meeting, using e-mail and other technologies effectively
Project human resource management
Project human resource management is making the used of people more effective in the project. Processes include: Human resource planning, acquiring the project team, developing the project team, managing the project team.
Important areas related to project management include: motivation theories, influence and power, effectiveness.
Ways to have influence on project:
1- Authority: right to issue order.
2- Assignment: ability to influence a worker’s later works assignment.
4- Promotion: improve worker position.
5- Money: ability to increase worker payment.
6- Penalty: to punish.
7- Work challenge: work that capitalizes on worker’s enjoyment.
Human resource planning: involve identifying and documenting project roles, responsibilities, and reporting relationships. Outputs include:
Project organizational charts, staffing management plan, responsibility assignment matrixes, and resource histogram.
Project Quality Management.
Project quality management ensures that the project will satisfy the needs for which it was undertaken. The process include:
- Quality planning: identify which quality standards are relevant to the project and how to satisfy them.
- Quality assurance: periodically evaluating overall project performance to ensure the project will satisfy the relevant quality standards.
- Quality control: monitoring specific project results to ensure that they comply with the relevant quality standards.
Design of experiments: is a quality planning technique that helps identify which variable have the most influence on the overall outcome of a process.
Important scope aspects of IT project that affect quality include functionality and features, systems outputs, performance, and reliability and maintainability.
Quality assurance include all of the activities relate to satisfying the relevant quality standards for a project. The goal is continuous quality improvement.
Several tools used to in quality planning can also be used to quality assurance such as Benchmarking and quality Audit.
Quality Control: although one of the main goals of quality control is to improve quality, the main outcome of this process is acceptance decisions, rework, and process adjustment.
There are seven Basic Tools of Quality: cause and effect diagrams, control charts, Run charts, Scatter diagrams, Histograms, Pareto charts, and Flowcharts.
Six Sigma is used to improve quality, decrease cost, and better meet customer needs. Project that use Six Sigma principles for quality control normally follow five phase improvement process called DMAIC:
- Define: the opportunity/problem
- Measure: define measure, then collect, compile, and display data.
- Analyze: scrutinize process details to find improvement opportunities.
- Improve: generate solutions and ideas for improving the problem
- Control: verify the stability of the improvements and the predictability of the solution.
Project Cost Management
Cost is one of the triple constraints, so the project cost management is the processes required to ensure that a project team completes a project within an approved budget. There are three project cost management processes:
1- Cost estimating: estimate the cost of the resource needed to complete a project. The main outputs of the cost estimating process are activity cost estimates and supporting details, request changes, and updates to the cost management plan.
2- Cost budgeting: allocating the overall cost estimate to individual work items to establish a baseline for measuring performance. The main outputs of the cost budgeting process are cost baseline, project funding requirement, request changes, and updates to the cost management plan.
3- Cost control: control changes to the project budget. The main outputs of the cost control process are performance measurements, forecast completion information, request changes, recommended corrective actions, and updates to the project management plan, cost estimate. Cost baseline, and organizational process assets.
Basic principles of cost management:
- Profit: revenues minus expenditures. To increase profits, a company can increase revenue, decrease expenses, or try to do both.
- Profit margin: the ratio of revenues to profits.
- Life cycle costing: allow us to see a big picture view of the cost of project throughout its life cycle. This help to develop an accurate projection of a project’s financial cost and benefits. It considers the total cost of ownership, or development plus support cost, for a project.
- Cash flow analysis: a method for determining the estimated annual costs and benefits for a project and the resulting annual cash flow. Project managers must conduct cash flow analysis to determine net present value.
- Tangible cost or benefit: cost or benefit that an organization can easily measure in dollars.
- Intangible cost or benefit: cost or benefit that an organization that difficult to measure in dollars.
- Direct costs: are cost that can be directly related to producing the products and services of the project. We can attribute direct costs directly to certain project.
- Indirect costs: costs that are not directly related to producing the products and services of the project, but are indirectly related to performing the project.
- Sunk cost: money that has been spent in the past. Consider it gone, like a sunken ship that can never be returned.
- Learning curve theory: when many items are produced repetitively, the unit cost of those items decrease in regular pattern as more units are produced.
- Reserves: dollars included in a cost estimate to mitigate cost risk by allowing for future situations that are difficult to predict. Contingency reserve for future situations may be partially planned. Management reserves for future situation that is unpredictable.
Cost management plan is a document that describes how the organization will mange cost variance on the project.
One of the main outputs of project cost management is a cost estimate.
There are three basic types of estimates:
1- Rough Order of Magnitude (ROM) estimate: provide an estimate of what project will cost.
2- Budgetary estimate: used to allocate money into an organization’s budget.
3- Definitive estimate: provide an accurate estimate of project costs.
Cost budgeting: involve allocating the project cost estimate to individual work items over time. Cost budgeting requires WBS. An important goal is to produce a cost baseline.
Cost Control includes: monitoring cost performance, ensuring that only appropriate project changes are included in a revised cost baseline.
Earned Value Management (EVM) is a project performance measurement technique that integrates scope, time, and cost data.
CHAPTER 6: PROJECT TIME MANAGEMENT.
From this chapter we can understand the importance of project schedules and good project time management. We cannot stop time so we must manage the project according to the time given and plan.
This chapter also defines activities as the basis for developing project schedules.
Project Time Management process include
- Activity definition: to identify the specific activities that the stakeholders must perform.
- Activity sequencing: to document the relationship between project activities.
From the activity sequencing we can create a network diagrams which display the logical relationship among project activities.
- Activity resources estimating: to estimate how many resource should use.
- Activity duration estimating: to estimate the number of time to complete the activities.
- Schedule development: to analys Activity sequencing, Activity resources estimating, and Activity duration estimating to create project schedule.
Important tools and techniques include Gantt chart, critical path, critical chain scheduling, and PERT analysis.
- Schedule control: to control and manage changes to the project schedule.
Important tools and techniques include progress report, schedule change control system, and variance analysis.