Project Definition:

A project is “a temporary endeavour undertaken to create a unique product, service,

or result.” Notice the following two key words within that definition:

Temporary: It has a defined start and finish date. Some projects seem to go on and on
forever, taking up space in the budget like an unwanted house pest. But eventually the
project must be concluded and there will be grief if there are alot of pests to exterminate.

Unique: It produces a product or service that is specific to that project. The product can
be similar, or even exactly like, another project, but they must be two distinct products.

All projects have the following four roles, even if some of them are assumed by the same
person:
1. Project Sponsor. One level above the project manager, this person is the
organizational contact for the project. They often deal with funding the project,
providing resources and support and are usually accountable for project success.
They can be internal or external to the organization carrying out the project.
2. Project Manager. The person that handles the day-to-day administration of the
project and project team, and is directly accountable for its success. Large projects
can be managed by a project management team.
3. Project Team. The person or people who perform the project’s technical work,
reporting to the project manager.
4. Stakeholders. A party that has an interest in the work being performed by the
project. This ranges from investors to affected parties to government regulators.

Phases of a Project
Consists of the five phases that every project goes
through:

1. Initiating. The tasks required to authorize, fund

and define the project, generally on the
organizational level (above the project). The
organization defines a business need the project is
meant to satisfy.
2. Planning. The project management team define
how the project will be carried out, who will do the
work, how long it will take, and so forth. The
planning phase should define the project in
sufficient detail that all stakeholder expectations are understood.

Project planning involves:

Defining Objectives
The definition must include what the project is comprised of, its main aim, what it
intends to accomplish, and what marks its closure
Explaining the Scope
The explanation provides details on what the project intends to solve and who will
benefit from the project
Scheduling Tasks
Each task is given a start date, an end date, and provides an estimate of how much
time a task would take to complete
 Generating Progress Reports
The document includes the work to be performed, deliverables, and the intended
outcome of the project

Project Planning Fundamentals

Project Planning refers to defining fundamentals such as the following:

Determination of Scope, Cost, and Resources

• The process of determining the scope, cost, and resources help estimate the
time required to complete the project, the number of people needed, and the skill
set required
• Work Breakdown Structure (WBS) helps this process by dividing the whole
task into smaller, manageable segments

3. Execution. The project work is completed and the end product or service is
achieved while secondary stakeholder requirements are satisfied.
4. Monitoring & Controlling. Concurrent to the project work (execution phase) the
project management team monitors and controls all aspects of the project –
schedule, cost, stakeholder requirements, etc. If any part causes problems,
changes to the project plan are made.
5. Closing. The project has completed its product or service, and the project must be
closed.
These phases are also called process groups, because each one contains a series of
processes, actions, and decisions that is specific to that group.

Note: They are not necessarily carried out in chronological order. You might find yourself
going back to the planning phase when project changes are required. Or if the project
funding changes, you could perform tasks from the Initiating process group simultaneously
with the Execution process group.

What is PMBOK Guide?

PMBOK Guide is the bible for Project Management. PMBOK stands for Project
Management Body of Knowledge. There are ten knowledge areas defined in PMBOK
Guide, which are as follows −

1. Project Integration Management. The stuff that doesn’t fit in any other category,
like developing the project management plan itself, making changes to the project,
etc.
2. Project Scope Management. Scope is the work that is included in the project. It
should be defined in the planning phase (i.e. the project management plan) and
changes should be well defined.
3. Project Schedule Management. Creating, monitoring and enforcing the project
schedule, milestones, and completion dates.
4. Project Cost Management. Estimating the project costs, and monitoring and
controlling them throughout the project.
5. Project Quality Management. Determining the quality standards that apply to the
project, and monitoring the quality of work produced.
6. Project Resource Management. Ascertaining the resource requirements of the
project, acquiring them, and developing them to ensure they produce the required
results.
7. Project Communications Management. Establishing the communication needs
of each stakeholder, and making sure they are involved to the required degree.
 8. Project Risk Management. Figuring out who the biggest alligators under the bed
are, and how to make sure you never see them.
9. Project Procurement Management. Hiring the outside consultants and
contractors necessary to get the job done, and managing them.
10. Project Stakeholder Management. Identifying each stakeholder and making sure
they’re satisfied.

The Project Management Plan

The project management plan is the central foundation of project management. It is a

document that gives the project manager their direction throughout the project, thereby
aiding in decision making and establishing to the stakeholders how the project will be
managed. But most importantly, it communicates to the project sponsor, who is usually the
project manager’s boss, how the project will be managed.

It should contain enough detail to define the project so that all stakeholders understand
how the project will be managed. When project changes occur (deadlines, budgets, etc.)
the project management plan should be updated. The project manager should always
have a current “plan.”

This plan should be available to all project stakeholders. But the project sponsor should
absolutely be familiar with it and understand how the project is being managed.

Within the project management plan are various sections which define the project and
should be updated when project changes occur:

• Scope Statement. Many projects encounter problems because it’s easy to insert
small tasks into the project, veer slightly off course, perform non-important tasks,
and the like. The scope statement should be detailed, including exclusions for
things that might be part of similar projects (for example, does the house include a
garage?). It should be set in stone and untouchable without a project change.
• Stakeholder list. All of the stakeholders in the project should be identified. But
beware, the biggest problems originate with the minor, seemingly insignificant
stakeholders that get glanced over because you hope you don’t ever have to talk to
them. This passivity will only ensure that you eventually will.
• Task List. To govern a project effectively, it must be carved up into tasks. Each
task will be assigned a duration (time) and budget (cost).
• Schedule. For small projects this could involve the specification of few project
milestones, ranging up to a full graphical project schedule. For larger projects, each
task is assigned a start and end date, and/or dependencies on other tasks (i.e. Task
B can’t start until Task A finishes). During the project, leaving the schedule simply
to gather dust is not acceptable. If the schedule is not being met, action is required
by the project manager. Even if the schedule will be “crashed,” meaning more
resources applied to get back on track, doing nothing is tantamount to letting the
schedule gather dust on the shelf and renders it meaningless.
• Cost/Budget. Each task has a cost associated with it. When the actual costs are
found to be higher (or lower), even before the task is complete, action should be
taken to recover and limit propagation effects to the rest of the project.
• Quality Standards. All industries have written quality standards that apply to the
products and services that are produced in that industry. Appropriate quality
standards should be written into the project management plan, and quality control
and quality assurance performed throughout the project.
 • Project Team. It is often a part of a strong project management plan, when the
project team is spelled out as well as their roles and responsibilities. Organizational
charts can provide overall perspective. Additionally, the project manager, project
sponsor, and other stakeholders on the organizational level could be identified.
• Vendors. Any sub consultants, subcontractors, and outside vendors should be
identified. Payment methods, unit prices, or standard contracts and the like can be
identified. Also, details on how they will be managed can be beneficial, such as
action to be taken when they are late, submit scope changes, etc.

The Other Documents

For larger projects there are additional documents that the project manager uses to
manage the project, and are appropriate for the project management plan:

• Project Charter
Optional for small projects, this document authorizes the project manager, outlines
funding status, and provides an overview of the project from the organizational point
of view.
• Status updates
Providing regular status updates during project execution is very important. The
frequency and amount of detail depends on the project.
• Stakeholder communications
The project manager must communicate with the project sponsor and project team
throughout the project. On top of that, almost all projects have stakeholders who
are either actively influencing the outcome, passively interested in the outcome, or
actively opposed to the outcome. Correspondence that can influence the project
success should be in writing, even email if possible. Keep a paper trail.
• Variance analysis
This involves the calculation of, as a minimum, the cost variance and schedule
variance (see Earned Value Analysis). It requires an estimate of the percent
complete of each task, and the resulting variance (cost or schedule) tells you how
far ahead or behind the project is.
• Project change documentation
When a change is made to the project management plan, it should be documented.
For small projects this could be as simple as an “update log” within the project
management plan. All project changes should be approved and signed off by the
project sponsor. Change can involve the schedule (deadlines), costs, quality
requirements, etc.
• Final Reporting
Final details of the product as-built, as-designed, or as-performed, and completion
certificates for vendors’ contracts. This tends to be underrated while at the same
time it tends to be highly visible to the project manager’s bosses.

The 4 Types of Project Organizational Structure

There are four types of project organizational structures, each of which has their own
unique set of influences on the management of the organization’s projects:

1. Functional
2. Project
3. Matrix
4. Composite
1. Functional
Most organizations are divided along functional lines, that is, each “division” is organized
by work type, such as engineering, production, or sales.

In the functional organizational structure,

projects are initiated and executed by the
divisional managers, who assume the
project manager duties in addition to their
regular functional roles. They are often
given secondary titles such as “Coordinator
of Project X.”

In this structure, project managers usually

don’t have lot of authority to obtain resources or to manage schedules and budgets. They
must obtain approvals to utilize resources from other departments, which can be a
complex undertaking. This is because the functional organization is designed to focus on
the provision of the divisional services rather than project deliverables.

2. Project-Oriented
On the other end of the scale is the project-oriented organization. These companies do most of their
work on a project basis and are therefore structured around projects. This includes construction
contractors, architectural firms, and consultants.

Project managers are usually full time in-

charge of the role, and for small projects they
might manage several projects at once.

In this structure project managers usually have

a great deal of independence and authority.
They are able to draw on resources with little
required approval.

In fact, most of these types of organizations

have some form of functional divisions which
are placeholders for resources that can be utilized by all projects. They are usually called
“departments.”

For example, at an engineering firm the geotechnical department is available as an expert

resource to all projects within the firm.

3. Matrix
Although the project-oriented and functional structures are at opposite ends of the
spectrum, it is possible to be located somewhere in between (a hybrid). In fact, most
organizations are along some level of the spectrum, utilizing a structure that gives project
managers a bit more authority without losing focus on the provision of functional services.

In the typical matrix structure, a project

manager is assigned from within one of the
functional departments in either a part time or
full time capacity. They are assigned project
team members from various departments,
who are released from their departmental duties (at least partially). Thus, a high priority
can be placed on the project while maintaining the functional division services.

4.Composite
Functional organizations and project-oriented organizations are at opposite ends of the
spectrum and matrix organizations fall somewhere in between. But it is possible to utilize
both structures at the same time. Therefore, there is a fourth option that requires mention,
the composite structure.
This occurs when a project structure and a
functional structure both report to a central
executive.

For example, a state government department

of transportation has a maintenance division
which seeks to maintain the level of service
of the state’s roads and bridges, and a capital
projects division which builds new roads and
bridges. The maintenance division and the
capital projects division are located side by side, reporting to the executive. This is a
composite organizational structure (A matrix structure would require new construction to
occur within one of the maintenance departments – the project manager would report to a
functional manager rather than the executive).

Most organizations lean one way or the other rather than using both structures, because of
the drastically different management styles necessary to perform each of the roles well.

Labour Cost Control/Management:

Labour cost is one of the major parts of the total cost of production. This cost may increase
due to unnecessary wastage of material, inefficient workers, idle time, unusual overtime
work and high labour turnover. Therefore, it’s the responsibility of management to control
labour cost by using effective techniques & methods to ensure maximum output of best
quality at lower cost by proper and full utilization of manpower.

Labour Cost Control is the methodology that makes use of system, techniques, procedure,
tools, to keep the labour cost of the product as minimal as possible. It also includes the
process of analysing and reporting the labour cost to higher management so that they can
make an informed decision and plan accordingly. It’s the system that is to be followed
regularly by the management to maximize quality output and minimize cost. This control
includes various forms, study, evaluation, and recording of the activities and performances
of the workers, calculating the correct amount of wages and distributing the same on time.
Cost control is the practice of identifying and eliminating the business expenses by
increasing the profits and it starts with preparing the budgeting process.

There are the following types of Labour Cost:

1. Direct Labour Cost

2. Indirect Labour Cost
3. Controllable Labour Cost
4. Uncontrollable Labour Cost
Following is the information required to control & managing labour cost:
1. Cost of labour recruitment
2. Training cost of workers
3. Labour turnover
4. Idle Time
5. Overtime
6. Shifts work
7. Labour efficiency
8. Number of workers
9. Wastage of material during production
10. Wages paid.

Steps of Cost Control:

Cost control involves the following step with certain aspects of management:

Planning:
Foremost a set of plans and targets is prepared in the form of budget, standards, and
estimates.

Communication:
The next step is to communicate the plan made in the first step to the one who is going to
execute the plan.

Motivation:
After the plan is executed, performance evaluation takes place in this stage. Costs are
calculated and details about achievements are collected.

Appraisal:
A comparison is made with the actual performances. Deficiencies if any are noted and
accordingly discussions are made to overcome such Deficiencies.

Decision making:
Finally, the reported differences and deficiencies are reported to the management for its
decision making. Accordingly, corrective actions are taken and a set of remedial measures
are taken.

Leadership in Project Management:

Importance of Leadership in Project Management
The role of leadership in project management encompasses a wide range of
activities, including effective planning, task coordination, overseeing projects, inspiring
team members, and making decisions vital to setting up a plan of action for project
implementation.

Leadership in project management is crucial to ensuring success. Besides boosting team

confidence and heightening efficiency, other key project manager leadership skills include:

Interpersonal Skills
Project leaders need interpersonal skills, such as questioning, listening, and speaking
skills, to initiate effective and persuasive interactions with team members.
Projects are most likely to fail if project managers do not have strong interpersonal skills.
Since much of your work as a project manager will require you to communicate with
stakeholders, you must develop exceptional interpersonal skills to lead from the front.

Generating Enthusiasm and Maintaining a Positive Attitude

Uplifting the energy of team members, and projecting an optimistic attitude, even in times
of crisis, are the most important project manager leadership skills. Project management
and leadership is all about giving teams the confidence that no matter how critical a
problem is, there will surely be a solution.

Honesty
Project manager leadership skills should embrace honesty when it comes to setting ethical
guidelines and promoting transparency in communication.

Honesty and integrity are two essential characteristics of leadership in project

management that project managers should adopt to boost trust among clients, members,
management, and other stakeholders.

Decision-Making
It is the project manager who gives the last word on necessary actions to streamline
processes and fix problems. Therefore, the project manager’s ability to make informed
decisions is a key role of leadership in project management.

Decision-making is one of the critical project manager leadership skills that have a direct
impact on the outcome of a project. All aspiring project management professionals should
master decision-making skills to succeed in their careers.

Quality Management:
Quality management is all about ensuring desired quality. Here, quality doesn’t
always mean perfection and high quality services, but maintaining consistency in quality
across projects. The quality to be maintained in a project is decided by the stakeholders,
owners and clients of the project. Quality standards are also defined based on
organizational values and standards. A quality management process is introduced in a
project towards quality planning, quality assurance and quality control.

Quality Characteristics to be maintained in Project Management

In a project, quality characteristics are defined by the stakeholders. Some of the most
common quality characteristics are performance, functionality, suitability, reliability,
consistency and more. The levels of quality in these terms are measured as per project
and organizational standards. Thus, quality management should be in place from the
beginning of a project till the end.

Quality management involves typically three phases –

Quality Planning,
Quality Assurance and
Quality Control.

Quality Planning: Here, the quality plan is created. Every plan should have a desired
objective or goal and quality plan is no exception. The goal of quality management should
be clearly communicated to all the stakeholders in a project. After the goal is defined, the
measures to ensure the level of standard should be worked out. How will the customers be
satisfied? What is the level of quality that the stakeholders are expecting? How to
determine if the quality measures will lead to project success? When all the answers to
these questions are in place, tasks should be delegated to respective team members and
quality plan is initiated.

Quality Assurance: This is a process that moves along with project throughout the
lifecycle. Quality assurance is all about evaluating if a project is moving towards delivering
quality services. If all the quality characteristics are in place the quality plan can
proceeding in an effective manner. When quality goals are not achieved or are not in the
process of getting achieved, necessary steps and corrective actions should be identified.
Ensuring corrective actions too falls in the phase of quality assurance.

Quality Control: Here, operational techniques are used in order to ensure quality
standards. Any time a problem arises relating to quality or if the quality plan is not
executed in the desired manner, corrective actions should be effective. Quality control
involves monitoring project results and delivery to check if they are meeting desired results
or not. If not then alternative actions should be implemented.
This is how, quality management is ensured in project management. By following the
quality management phases, projects are worked upon towards delivering desired results.
Thus it ensures quality standards that are defined and are a must in today’s project
management world.

Value Analysis:
Value analysis implies analysing existing products and evaluating them to improve their
functioning or reduce cost. A step-by-step plan helps assess different aspects of a product,
such as functions, alternative components, design, and costs. Value analysis includes
function analysis, during which a product is broken down into components that are
reviewed later.

Benefits of Value Analysis

As we’ve mentioned before, value analysis is crucial since it identifies possible problems
and suggests improvements that should be made in your company. This process helps:

• Reduce costs;
• Maintain high quality;
• Provide an opportunity to use new technologies;
• Eliminate waste;
• Encourage new ideas;
• Improve brand image;
• Improve design.

Steps Of Value Analysis

We can distinguish the five main steps of value analysis. So let’s jump in.

1. Gather information. During this step, the main aim of your team is to understand
the purpose of a project. Team members collect project data and concepts and try
to understand the project scope. They analyse budget, risks, costs, and other
issues, visit sites, and study various project documents.

2. Determine and analyse the function of a project. First of all, your team identifies
the primary and secondary functions of the project. Next, team members should
determine value-mismatched functions to improve them.
 3. Generate new ideas for improvement. This step is for team members to create
and develop improvement ideas. They should find alternatives so that the project
could perform the same functions.

4. Evaluate these ideas and develop them. Team members discuss each idea in
detail and identify the costs. They review all the possible risks and choose the most
relevant and suitable ideas. Once ideas that make sense are identified, it’s time to
work with them. Your value engineering team develops the options and passes
them back to the project team. These ideas should be thoroughly explained so that
project owners and stakeholders can understand them.

5. Present improvements. At this stage, the ideas are presented to stakeholders.

The best salesperson is responsible for the presentation.

Example #1
The production process of a lead pencil was analysed using the value analysis technique
to reduce cost. Wood and paint were found to be the two most expensive elements in
producing the pencil, which shared 37.5% of the pencil’s total cost.

A round-shaped design for the pencil was suggested instead of the hexagonal-shaped
design to reduce the manufacturing time and manufacturing cost. Normal paints were
suggested instead of glitter paints, which were expensive and additional care was required
to be taken while applying them on wood.

With the suggested design changes, the production cost of each pencil was reduced by
25%.

Example #2
A bank is incurring extra cost at a particular branch. At the same time, it is getting
complaints from customers about not adding a self-help desk. The value analysis team
evaluated all the bank processes, such as banking services, technology maintenance, staff
duties and roles, and relative costs.

It was discovered that the bank had employed two extra people than the required capacity
and yet could not address customer problems due to confusion in roles. The team
suggested introducing a help desk and employing the two extra employees at the desk to
guide and help the customers. In a year, the branch’s profit grew by 30% at the same cost
while receiving a positive response from its customers.

Contracting for Capital Projects

What is Procurement Contracting?
Procurement contracting is the process of building legally binding agreements between
contractors and suppliers in the course of managing a project. These contracts are needed
for projects to obtain needed materials, supplies and services.

Using contracts and procurement helps the buyer and the seller come to an agreement
about these materials, goods and services. A procurement contract is a legally binding
document between the buyer and the seller that not only defines the relations as it stands
in terms of the business, but also protects both of their interests.
Why is Procurement Contracting Important
Procurement contracting is important because it serves to maximize profits and keep
businesses soluble in a competitive marketplace. The procurement contract gives both
parties the chance to work together. It also helps the business diversify its resources to
work more effectively by outsourcing work to third parties that can do it more cost-
effectively.

Types of Procurement Contracts

When it comes to contracts, there is more than one way to make an agreement. These
different types of contracts in procurement offer a variety of risks for one party or the other,
and are suitable for construction projects where the scope is more or less certain from the
start. The main three types of procurement contracts are as follows:

Fixed-Price Contract: The fixed-price or lump-sum contract is when the amount paid for
the materials, goods or services is set at the time the contract is signed and doesn’t
change thereafter regardless of whether there are external or internal impacts that drive up
costs or delay the schedule. The advantage of this type of contract is that it clearly outlines
the roles and responsibilities of both parties in terms of what is to be delivered and how
much that will cost. These are the most common, straightforward and easy to manage the
type of contract.

Cost-Reimbursement Contract: A cost-reimbursement or cost-control contract is when

the buyer agrees to pay for materials and equipment as well as any indirect costs, such as
salaries and utilities, which are part of making the product or service. To make this worth it
for the buyer, they are awarded a fixed fee or percentage of the profit over the cost price.
This puts the majority of the risk on the shoulders of the seller. They will only get
reimbursed after expenses are verified. If the scope of the project changes, the seller
absorbs any additional costs. To make this worthwhile for the seller, they will build in
additional costs that keep adjustments to a minimum and improve their bottom line.

Time and Materials Contract: Time and materials contracts reimburse vendors for the
materials they use and pay for the time they spend on the project. This makes the vendor
act as if they were a third-party employee of the contractor. This contract works best when
the scope of the project is harder to define as the contract allows for some flexibility.
However, when using one of these contracts, the buyer will have to provide more oversight
to make sure that the project stays on schedule and doesn’t go over budget.

Strategic Asset Management

Strategic asset management is long-term planning & approach for maintenance and
operations. This plan could be 5, 10 or 15 years. In this plan, it is decided, what is the
objective of the company, where they want to reach, and what will be the role of asset
management in these next few years!

Strategic asset management helps in estimating future goals and it helps let you know
where you are and where you want to reach in the next 5-10 years.

What is Asset Management?

Asset management is a set of coordinated activities, involving the balancing of costs,
opportunities and risks against the desired performance of assets to achieve an
organization’s objectives.
Asset management is the art and science of making the right decisions and optimizing the
delivery of value. A common objective is to minimize the whole life cost of assets but there
may be other critical factors such as risk or business continuity to be considered
objectively in this decision making.

Benefits of Strategic Asset Management

1. Optimizing Asset Lifecycle

Several assets are not used to their full potential and the reason behind this is that they
are no managed properly. When assets are not managed in the right way asset life suffers.
But with strategic asset management software, managers can manage assets and
equipment efficiently and increase asset life.

With automated software, you can know when assets were purchased how much asset
productive life is left and it will alert you when asset life is about to be over. Furthermore, to
improve asset life, the role of maintenance, operation, and finances become very crucial.

2. Asset Maintenance
Maintenance is very significant when you are planning for a long-term goal. In strategic
asset management, maintenance is one of the main primaries' focuses it helps in reducing
overall downtime of assets and helpful in increasing uptime.

Most importantly, maintenance helps in making the asset more reliable. Furthermore, it
decreases maintenance costs as well.
To make an effective maintenance plan, your organization and managers must focus on
proactive maintenance. Proactive maintenance is a very critical part of maintenance for
your strategic asset management success.

According to the 2017 capterra blog, “Businesses, on average, spend 80% of their time
reacting to maintenance issues that arise rather than preventing them.”

3. Increasing Return on Asset (ROA)

If you are planning for the long term, it is significant that the asset takes less maintenance
and it is more productive so that the return on the asset increases. For that asset,
performance must be optimized by providing maintenance on time.

An automated software provides several indicators that help boost asset performance. For
enhancing ROA, strategic asset management focuses on current asset condition, how
long equipment is required for the specific purpose, asset optimization (given asset proper
maintenance on time).

4. Removing Ghost Assets

Ghost assets are those assets that are mentioned in the accounts book but physically they
are not available for use. It means that you are paying taxes for those assets which you
are not even using. Furthermore, it creates compliance issues as well.

If during an audit it is found that your assets do not match with physical assets then the
audit team will consider this as a fraud and you will be paying huge amounts of penalties.

However, strategic asset management software ensures that ghost asses do not exist in
the organization. And if there are then remove them from account records in the right
manner.

5. Regulatory Compliance
Compliance means you have to comply with the rules, regulations, and policies as per
your business industry. If an organization does not follow rules and violate the policies of
the industry then legal action can be taken against the organization.

Compliance can be divided into two categories internal and external. Rules that are made
by the organization fall into internal compliance and rules that are made by government
authorities need to be followed by organizations falling into the belonging industry.

Strategic asset management software ensures that organizations follow the rules and
regulations made by the organization as well as government companies. When an
organization does not follow the rules, this system alerts the manager about the same.

In the long term, this is one of the essential goals of organizations so that all the
transactions are clean and investors do not hesitate in investing in the organization.