ENGG461: Week 2

Project Integration and Scope Mgmt.

(Source: PMBOK Guide, 5th Edition; p. 60)

Project Life Cycle Recap

(Source: Gray and Larson; p. 7)

(Source: PMBOK Guide, 5th Edition; p. 38)

/ Opportunity to add value

(Source: PMBOK Guide, 5th Edition; p. 39)

Front-end Effort?

Need identification

End-product concept embodiment

Project evaluation and selection
Pre-feasibility/feasibility studies
Economic/financial evaluation

Project Charter

Project Scope Statement

Initial project plans

Conceptual Development?

Identify client needs or problem to be solved

Check project and end-product validity and
feasibility

Evaluate alternative approaches to meeting the
need or dealing with the problem

Define project objectives and constraints
 Project definition: objectives; scope; deliverables; milestones

Request for proposal ?

Learning Objectives

develop a project charter and illustrate their use

analyse and suggest potential solutions to certain
problems encountered during project execution

Identify (establish) scope for an engineering
project and develop a work breakdown structure at
an appropriate level of detail

analyse and determine if the scope of work on the
project has changed and determine methods to
accommodate such changes

Project Integration Management

Develop the project charter: compile a document that authorises the
project or a project phase

Develop the project management plan: develop the initial high level
framework for integrating and incorporating all subsidiary project plans

Direct and manage the project execution: provide the overall direction and
guidance for performing the project work to ensure that the planned
project outcomes are delivered

Monitor and control project work: endeavour to maintain the project
performance targets, by way of monitoring progress while dealing with
variations.

Perform integrated change control: track and review all changes
requested and incorporated into the project and evaluate their effect on
the desired project outcomes

Close project or phase: ensure orderly completion of all project activities

Project Charter?

The document that authorises the project:

Source: http://www.nmbsolutions.ca/blog/project-charter-%E2%80%93-more-just-document

Project vs. Product Scope

Project scope: what needs to be done to accomplish
project goals (i.e. deliverables: end-product; process;
service; or solution/result)
 also, what needs not to be done (sets the boundary!) scope creep!

Product scope: features and functions that

characterise the product, service or solution/result
 governed by technical requirements, limits and exclusions (set the
specifications)
 End-product a new building; a new bridge; a renovated facility; an
upgraded IT system in operation; restructured organisation
 Project the processes that go together to materialise the end
product (building; bridge; IT system etc.)

Scope Management (PMBOK)

Collecting requirements: gather stakeholder expectations
on the project and product deliverables

Define scope: describe in detail the project and product
expectations

Create WBS: draw a hierarchical pictorial illustration of work
that needs to be completed to deliver on project and
product expectations

Verify scope: obtain formal acceptance on the work to be
completed, by all key (relevant) stakeholders

Control scope: endeavour to maintain the agreed project
and product scope by way of consistent monitoring of work
performance against the scope baseline.

Scope Elements (Check List?)

(PMBOK)

Product scope descriptions

Product acceptance criteria

Project deliverables

Project exclusions

Project constraints

Project assumptions
412

Scope Statement: Example

(Source: Gray and Larson; p. 105)

Stakeholder Identification

(Source: PMBOK Guide, 5th Edition; p.30)

Project Priority Matrix

Work Breakdown Structure (WBS)

A hierarchical outline (map) that identifies the
products and work elements involved in a project

Defines the relationship of the final deliverable
(the project) to its sub-deliverables, and in turn,
their relationships to work packages

Best suited for design and build projects that have
tangible outcomes rather than process-oriented
projects
(Source: Gray and Larson, 2011)

Work Breakdown Structure

(Source: Gray and Larson, 2011)

How WBS Helps the Project Manager

Facilitates evaluation of cost, time, and technical
performance of the organization on a project

Provides management with information appropriate
to each organizational level

Helps in the development of the organization
breakdown structure (OBS). which assigns project
responsibilities to organizational units and individuals

Helps manage plan, schedule, and budget

Defines communication channels and assists
in coordinating the various project elements
(Source: Gray and Larson, 2011)

Work Packages
A work package is the lowest level of the WBS.
It is output-oriented in that it:
1.

Defines work (what).

2.

Identifies time to complete a work package (how long).

3.

Identifies a time-phased budget to complete

a work package (cost).

4.

Identifies resources needed to complete

a work package (how much).

5.

Identifies a person responsible for units of work (who).

6.

Identifies monitoring points (milestones)

for measuring success.
(Source: Gray and Larson, 2011)

Integrating the WBS with the Organization

Organizational Breakdown Structure (OBS)

Depicts how the firm is organized to discharge its work
responsibility for a project.
Provides a framework to summarize organization

work unit performance

Identifies organization units responsible for work

packages
Ties the organizational units to cost control accounts

(Source: Gray and Larson, 2011)

Integration of
WBS and OBS

(Source: Gray and Larson, 2011)

Coding the WBS for the Information System

WBS Coding System

Defines:
Levels and elements of the WBS
Organization elements
Work packages
Budget and cost information
Allows reports to be consolidated at
any level in the organization structure

(Source: Gray and Larson, 2011)

WBS Coding

(Source: Gray and Larson, 2011)

Responsibility Matrices
Responsibility Matrix (RM)
Also called a linear responsibility chart.
Summarizes the tasks to be accomplished and who is
responsible for what on the project.
Lists project activities and participants
Clarifies critical interfaces between units and individuals that need

coordination
Provide an means for all participants to view their responsibilities

and agree on their assignments

Clarifies the extent or type of authority that can be exercised by

each participant

(Source: Gray and Larson, 2011)

Responsibility Matrix for a Market Research Project

(Source: Gray and Larson, 2011)

Responsibility Matrix for the Conveyor Belt Project

(Source: Gray and Larson, 2011)

Project Evaluation and Selection

Strategic fit: how well the candidate project(s) align
and/or ad value to the existing portfolio of
projects/businesses

Technical feasibility: whether the know-how and
capabilities are sufficient to delivery results (product
functions, service levels etc.) or solve the problem

Economic value:
Single project: economic value/viability (benefits/costs; IRR)
Multiple projects: relative merit (incremental benefit-cost
ratio; discounted cash flow; pay-back period, IRR. ROI)

The role of West Link/M7? Sydney orbital

The role of Dombarton-Maldon rail link? South
Sydney Freight Corridor

Is the proposed solution to this problem
technically feasible?

Do we have the technical knowhow to solve this
problem?

At what cost and within what timeframe we can
acquire new technology/knowhow?

What are the monetary and non-monetary benefits
of the end product/service relative to costs?

Evaluation Models

Checklist model
 Uses a list of questions to review potential projects and to determine
their acceptance or rejection (shortlisting/screening)
 Fails to answer the relative importance or value of a potential project
and doesnt to allow for comparison with other potential projects

Multi-weighted scoring model

 Uses several weighted qualitative and/or quantitative selection criteria
to evaluate project proposals (shortlisting/screening)
 Allows for comparison of projects with other potential projects

Economic models
 Uses quantitative methods: payback, net present value (NPV), internal
rate of return (IRR) to evaluate the financial attractiveness/viability
 All benefits and costs should be expressed in monetary terms?

Check Lists

(Source: Gray and Larson, 2011)

Check Lists (cont.)

Topic

Question

Organization culture

Is our organization culture right for this type of project?

Resources

Will internal resources be available for this project?

Approach

Will we build or buy?

Schedule

How long will this project take?

Schedule

Is the time line realistic?

Training/resources

Will staff training be required?

Finance/portfolio

What is the estimated cost of the project?

Portfolio

Is this a new initiative or part of an existing initiative?

Portfolio

How does this project interact with current projects?

Technology

Is the technology available or new?

(Source: Gray and Larson, 2011)

Weighted scoring models

Weightings

Scores

IT Projects at Frontier Airlines (Source: Gray and Larson, 2011)

Economic Evaluation

Considers Benefits vs. Costs

positive and negative benefits; investment costs

Uses two generic approaches

Benefits/Costs: Ratio

Benefits Costs: Difference

May or may not take time value of money into

account (however, in most cases it does!)

Methods (many available):

Benefit/Cost Ratio; Pay-back Period; Present Worth;
Future Worth; Annual Worth; Internal Rate of Return

Cash-flow diagrams
Cash inflows [+]

time
Salvage
disposal
Operating &
Initial Capital Maintenance
Cost
Costs

Replacement
Costs

Income

Cash outflows [-]

Time value of money?

Inflation!

Opportunity cost!

Discounting (net present value)

time

NPV = Sum of all cash flows discounted to the

present point in time?

Single sum

P
F

n(i)

Formulae for Economic Evaluation

Present sum and uniform series

P
A

n(i)

Formulae for Economic Evaluation

Uniform series and a future sum

F

n(i)

Formulae for Economic Evaluation

Benefit-cost Ratio/Profitability index

Single Project:
Benefits/Costs > 1 (desired)
Benefits/Costs = 1 (acceptable; political reasons?)
Benefits/Costs < 1 (rejected)

Multiple Projects:
Incremental Benefit/Cost Analysis
Short-list alternatives with Benefit/Cost >1
Pair-wise comparison of relative benefits/costs

Benefits/Costs > 1 select higher cost option

Benefits/Costs = 1 (indifferent; political reasons?)

Benefits/Costs < 1 (select lower cost option)
https://www.youtube.com/watch?v=REA6UNAnMF4

Simple Pay-back Period Method

The time (number of years) taken to
recover/recoup initial investment

Simple (non-discounted) Payback Period Method
Measures the time the project will take to recover
the project investment
Uses more desirable shorter paybacks
Emphasizes cash flows, a key factor in business

Limitations of the Simple Payback Period Method:

Ignores the time value of money.
Assumes cash inflows for the investment period only
Does not consider profitability.

(Source: Gray and Larson, 2011)

Discounted Cash-flow/NPV Method

The Net Present Value (NPV) Model
Uses managements minimum desired rate-of-return
(discount rate) to compute the present value of all net cash
inflows.

Positive NPV: project meets minimum desired rate
of return and is eligible for further consideration.

Negative NPV: project is rejected.

(Source: Gray and Larson, 2011)

https://www.youtube.com/watch?v=qAhV3xG0i8s

Internal Rate of Return (IRR) Method

The rate of interest (discount rate) at which the
benefits and costs are equal (break even)

Can be applied to both Benefit/Cost ratio and the
Benefits Costs Methods (e.g. PW)

May need to use trial and
error/interpolation/extrapolation, if manual solved
https://www.youtube.com/watch?v=i8BTMqZgqbQ

Project Portfolio Matrix Dimensions

Bread-and-butter Projects
 Involve evolutionary improvements
to current products and services.

Pearls
 Represent revolutionary commercial
opportunities using proven technical
advances.

Oysters
 Involve technological breakthroughs
with high commercial payoffs.

White Elephants
 Showed promise at one time
but are no longer viable.

Project Portfolio Matrix

Summary

Early decisions have a big impact

Good decisions can cost time and money to make

The appropriate amount of Front End Effort
depends on cost of wrong decisions compared to
cost of getting more information

Tools and techniques are there to support decision
making (only!)Excel has built in functions/macros
for all (or most of the) techniques/formulae