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Project Management

Ninth Edition

DENNIS LOCK

Contents

List of Figures Acknowledgments Preface to Ninth Edition

xiii xix xxi

Chapter 1

Introduction to Project Management


Brief history of project management Different types of projects Project life cycles and life histories Customers, clients, contractors and end users Associations representing the profession of project management References and further reading

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1 5 7 12 13 15

Chapter 2

Factors for Project Success or Failure


Success or failure factors in relation to the initial project definition Triangle of objectives and trade-offs between cost, performance and time Identifying and ranking the stakeholders Benefits realization References and further reading

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17 21 25 26 27

Factors for success or failure during the project fulfilment (execution) period 19 Perceptions of project success or failure beyond the three primary objectives 24

Chapter 3

Defining the Project Task


Importance of initial project definition Projects which are difficult or impossible to define Feasibility studies to improve early project definition Checklists Enquiries and proposals for new projects Defining the project scope Contractors strategy and design specification Specifications for internally funded projects Developing and documenting the project specification

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29 29 32 32 34 37 39 41 46

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Chapter 4

Estimating the Project Costs


Introduction to cost estimating Classification of costs as direct or indirect Estimating accuracy Classification of estimates according to confidence Estimating accuracy in relation to prices and profits Version control of project cost estimates Top-down or bottom-up? Compiling the task list Level of detail in project cost estimating Estimating formats Estimating manufacturing costs Estimating project labour costs Personal estimating characteristics Estimates for material and equipment costs Reviewing the cost estimates References and further reading

49
49 51 51 52 53 54 55 55 57 57 61 63 66 67 68 69

Chapter 5

First Steps in Planning the Timescale


General introduction to project planning What makes an ideal project plan? Museum project: a case example Distinction between planning and scheduling References and further reading

71
71 75 75 81 81

Chapter 6

Financial Appraisal and the Business Plan


Project feasibility analysis Different viewing platforms for the project investor and the project contractor Introduction to project financial appraisal methods Simple payback method Discounted cash flow How much confidence can we place in the data? Project funding References and further reading

83
83 84 86 87 89 92 95 97

Chapter 7
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Risk
Introduction to project risk management Identifying the possible risks Risk appraisal and analysis Risk register

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99 100 100 104

contents

Methods for dealing with risks Insurance Planning for a crisis References and further reading

105 107 112 113

Chapter 8

Project Authorization
Introduction to project authorization Project authorization criteria for the project owner Authorization documents issued by the project owner Project registration and numbering Project authorization in a contracting organization Authorizing work without a contract or customers order References and further reading

115
115 116 118 120 121 123 125

Chapter 9

Project Organization Structures


Effective organization and communications Organization charts Emergence of project management in a developing company Project matrix organizations Project teams and task forces Organization of central administration functions Which type of project organization is best? Organizations with more than one project manager References and further reading

127
127 127 129 133 137 139 140 144 148

Chapter 10 Organization of Management Change and IT Projects


Special characteristics of management change projects Case example: the Coverite plc office relocation project PRINCE2 References and further reading

149
149 150 154 154

Chapter 11 Key People in the Organization


Project manager Director of projects or programme manager Project engineer Project support office References and further reading

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155 159 159 161 162

Chapter 12 Work Breakdown and Coding


WBS concept Coding systems Benefits of a logical coding system

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165 170 173 vii

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Choosing a coding system What happens when the customer says You shall use my coding system!? References and further reading

175 176 177

Chapter 13 Completing the Breakdown Structures


Developing a project organization breakdown structure Relationship between the project WBS and OBS Introducing the cost breakdown structure References and further reading

179
180 183 185 186

Chapter 14 Detailed Planning: An Introduction to Critical Path Networks


Gantt charts: their advantages and limitations Background to critical path analysis Different network notation systems Critical path analysis using arrow diagrams Critical path analysis using precedence notation Case example: furniture project More complex network notation References and further reading

187
187 188 188 190 196 199 203 207

Chapter 15 Detailed Planning: Critical Path Networks in Practice


Developing the network logic Level of detail in network planning Interface events and activities Milestones Estimating task durations Is the predicted timescale too long? Case example: the museum project A case for drawing networks from right to left Network analysis as a management tool References and further reading

209
209 212 215 215 216 218 218 226 227 228

Chapter 16 Principles of Resource Scheduling


What are resources and which of them can be scheduled? Role of network analysis in resource scheduling Resource scheduling case example: the garage project Float (or slack) Two fundamental priority rules for resource scheduling Summary: the elements of a practicable schedule References and further reading

229
229 231 231 240 245 247 248

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contents

Chapter 17 Scheduling People (and Other Reusable Resources)


Choosing which resources to schedule Choice of resource units Rate-constant and non rate-constant usage of resources Specifying resource availability levels Using different calendars for resource scheduling Seven logical steps of project resource scheduling References and further reading

249
249 251 252 253 254 256 257

Chapter 18 Scheduling Materials


Manufactured parts and materials scheduling compared with general project scheduling Identifying and quantifying common parts for manufacturing projects Case example: a filing cabinet project Line of balance Computer solutions for scheduling manufacturing materials References and further reading

259
259 260 261 264 272 274

Using purchase control schedules to schedule equipment for capital projects 272

Chapter 19 Scheduling Cash Flows


Cash flow scheduling in general Scheduling cash flows in different kinds of projects Using project management software to schedule cash outflows Using the computer to schedule cash inflows Conclusion

275
275 276 281 283 283

Chapter 20 Computer Applications


Choosing suitable software Special network logic required for computer applications Preparing for the first computer schedule Case example: the garage project Data entry errors Network plotting Time analysis of the garage project network Resource scheduling for the garage project Standard and customized output reports Updating the schedules and reports

285
285 291 292 299 303 306 306 308 313 316

Chapter 21 Managing Project Start-up


Preliminary organization of the project Correspondence and other documents

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317 318

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Engineering standards and procedures Physical preparations and organization Getting work started Issuing detailed planning and work instructions

322 323 325 327

Chapter 22 Aspects of Commercial Management


Contracts Purchase orders Terms of trade used in international business (Incoterms 2000) Pricing a contact proposal Contract payment structures Timing of payments Financial viability of participating organizations References and further reading

331
331 334 337 338 340 343 344 344

Chapter 23 Managing Procurement


Purchasing cycle Roles in the purchasing organization for a large international project Purchase specification: defining what has to be bought Supplier selection Purchase requisition and order Expediting Special timing of orders and deliveries Purchase quantities Purchase order amendments Correlation between specification, enquiry, requisition and order numbers Project or stock purchasing? Marking and labelling goods before transit Goods receipt Stores administration Vendors documents Materials management as a shared or common service References and further reading

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345 346 349 357 361 364 364 366 367 367 368 369 369 370 372 373 374

Chapter 24 Managing Progress


 Progress management as a closed-loop control system Management by styles Updating schedules and records Collecting progress information Statistical checks Managing the progress and quality of bought-in materials and equipment

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376 376 379 380 383 383

contents

Managing subcontractors and agency employees Routine priority allocation in manufacturing projects When the news is bad Corrective measures Immediate action orders Construction site organization and management Project meetings Progress reports References and further reading

387 389 390 391 392 395 396 401 402

Chapter 25 Managing Changes


Impact of changes in relation to the project life cycle Origin and classification of changes Authorization arrangements General administration Estimating the true cost of a change Forms and procedures Version control for modified drawings and specifications Emergency modifications

403
403 403 406 408 411 414 422 424

Chapter 26 Managing Project Costs


Principles of cost control Controlling variable costs Controlling fixed costs and overhead cost recovery Additional cost control factors Total cost approach Checklist of cost management factors Setting and resetting cost budgets Cost collection methods Audits and fraud prevention measures Comparing actual costs against planned costs References and further reading

429
429 430 431 433 434 436 437 438 442 443 443

Chapter 27 Earned-Value Analysis and Cost Reporting


Milestone analysis Earned-value analysis Earned-value analysis prediction reliability and implications Evaluating cost performance for materials and bought-in equipment Effect of project changes on earned-value analysis Project ledger concept Predicting profitability for a whole project

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445 450 455 457 458 459 459 xi

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Post mortem References and further reading

464 464

Chapter 28 Managing Multiple Projects, Programmes and Portfolios


Project management or programme management? Managing a portfolio of management change and IT projects Multi-project resource scheduling Project resource scheduling in the corporate context References and further reading

465
465 466 467 473 474

Chapter 29 More Advanced or Less Frequently Used Techniques


Line of balance charts in construction projects Dealing with network plans for large projects PERT Standard networks Templates (standard network modules)

475
475 477 478 480 482

Chapter 30
Bibliography

Managing Project Closure


Reasons for closing a project Formal project closure Final project cost records Disposal of surplus material stocks Final project definition: the end of a continuous process As-built condition of a manufacturing or capital engineering project As-built condition of a multiple manufacturing project As-built condition of a project that is interrupted before completion Managing files and archives

491
491 492 494 494 494 495 497 498 500 503 507 511

Contents Comparison Between the Eighth and Ninth Editions Index

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List of Figures

1.1 1.2 1.3 1.4 1.5 1.6 2.1 2.2 2.3 3.1 3.2 3.3 3.4 4.1 4.2 4.3 4.4 4.5 5.1 5.2 5.3 5.4 5.5 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 7.1

Whistle-stop journey through project management history Four project types Project life cycle More comprehensive example of a project life history Demonstration of how the chapters in this book broadly follow a project life history Examples of project relationships Perceptions of success or failure during a project life history Barness original triangle of objectives and some derivatives Matrix of stakeholders objectives Definition of a large project from initial concept to completion Part of a project definition checklist Initial task checklist for a management change project An action plan for screening and progressing sales enquiries Typical summary layout of a project cost estimate Project cost estimate arranged by the work breakdown structure Useful format for general cost estimating Format for estimating the costs of materials and bought-out equipment on larger projects General purpose format for indicating the price of a small project Project planning environment Checklist for an ideal plan (shown checked early in the project life cycle) Museum project: Gantt chart Museum project: linked Gantt chart with date cursor set at week 15 Museum project: checklist comparing diary and linked Gantt chart plans Luxury service apartments project: cost/benefit patterns Boiler replacement project: payback calculation Boiler replacement project: payback graphs Table of discount factors for calculating net present values Boiler replacement project: net present value calculation Tollbridge project: net present value calculation Histogram and probability curve from Monte Carlo Analysis Chart comparing project cost and benefits after Monte Carlo analysis Ishikawa fishbone diagram

2 5 8 9 12 13 18 21 26 30 334 356 38 50 58 59 60 61 72 76 78 79 80 85 88 88 89 90 92 94 95 101

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7.2 7.3 7.4 7.5 7.6 7.7 8.1 8.2 8.3 8.4 8.5 9.1 9.2 9.3 9.4 9.5 9.6 9.7 9.8 9.9 9.10 9.11 10.1 11.1 11.2 12.1 12.2 12.3 12.4 12.5 12.6 12.7 12.8 12.9 13.1 13.2 13.3 13.4 13.5 13.6 14.1 14.2 14.3 14.4 14.5 14.6 14.7 xiv

Part of a failure, mode and effect matrix (FMEA) Matrix for qualitative risk classification Qualitative risk assessment matrix Part of a failure, mode effect and criticality analysis matrix (FMECA) Format of a risk register (or risk log) Risk and insurance in project management Example contents of a project initiation document (PID) Project register Works order example for a manufacturing project Project authorization form used by a mining engineering company Typical project engineering cost/time relationship Organigram conventions Example of a manufacturing organization Project cycle Functional matrix for a single project in a manufacturing company Matrix organization for several simultaneous manufacturing projects Matrix organization for mining, petrochemical or construction projects Project team organization Project team v balanced matrix Hybrid organization Project with more than one project manager Joint venture organization Coverite plc: development of the relocation project organization Possible management roles in a matrix organization Possible management roles in a multi-team organization Simplified WBS for an automobile project WBS for a national charity fundraising week Part of the first three WBS levels for a very large mining project Work breakdown for a project to build a new railway Two alternative WBS patterns for a large wedding project WBS and coding structure for a radiocommunications project Detail from the work breakdown for the radiocommunications project Project coding system used by a heavy engineering company Project coding system used by a mining engineering company Organigram of Cuttit Ltd Lawnmower project: OBS Lawnmower project: upper WBS levels Lawnmower project: WBS in relation to the OBS (with cost account examples) Lawnmower project: analysis of a cost account code (chosen at random) WBS meets OBS and CBS Main elements of arrow logic Tree project using arrow notation Example of arrow network time analysis Three different methods for showing times on arrow networks An activity in precedence notation Tree project using precedence notation Example of precedence time analysis

102 102 103 104 105 107 119 120 122 123 124 128 132 133 134 135 136 138 144 145 146 147 151 161 162 166 167 168 169 170 172 172 174 175 182 182 183 184 185 186 191 192 193 195 196 198 199

list of figures

14.8 14.9 14.10 14.11 14.12 14.13 14.14 15.1 15.2 15.3 15.4 15.5 15.6 15.7 15.8 15.9 16.1 16.2 16.3 16.4 16.5 16.6 16.7 17.1 17.2 17.3 18.1 18.2 18.3 18.4 18.5 18.6 18.7 18.8 18.9 18.10 18.11 18.12 18.13 19.1 19.2 19.3 19.4 19.5 19.6 20.1 20.2

Furniture project: task list 200 Furniture project: activity-on-arrow network diagram 201 Furniture project: precedence network diagram 202 Furniture project: time analysis 203 Overlapping activities in arrow and precedence networks 204 Constraint options in precedence networks 206 Using dummies to clarify cluttered logic 206 Common error in arrow networks 211 Level of detail in a purchasing sequence 214 Network interfaces 215 Museum project: first precedence diagram 219 Museum project: time analysis of the initial network diagram 220 Museum project: network with crashed times 222 Museum project: time analysis after crash actions 223 Museum project: network crashed and fast-tracked 225 Museum project: time analysis after crashing and fast-tracking 226 Garage project: network diagram 23435 Garage project: task list and time analysis 236 Garage project: bar chart and resource histogram aggregation 237 Garage project: bar chart and resource histogram resource-limited 239 Garage project: bar chart and resource histogram time-limited 241 Garage project: float analysis of activity G1016 (1016) 242 Time-limited versus resource-limited rules for resource scheduling 245 Rate constant and variable resource usage for a project task 253 The complexity of project resource scheduling 256 Seven logical steps to a practical project resource schedule 257 Filing cabinet project: exploded view of the product 261 Filing cabinet project: simple parts list 262 Filing cabinet project: family tree 264 Filing cabinet project: parts list arranged in subassemblies 265 Filing cabinet project: delivery data 265 Filing cabinet project: family tree redrawn for line of balance 266 Filing cabinet project: calculation of lead times for parts 267 Filing cabinet project: delivery commitment graph 268 Filing cabinet project: calculation for line of balance at day 4 269 Filing cabinet project: line of balance at day 4 270 Filing cabinet project: line of balance completed for day 4 271 Front page headings for a purchase control schedule 272 Complete purchase control schedule 274 Essential elements of a project cash outflow schedule 276 Project cash flow schedule for an outdoor concert 277 Essential elements of a project net cash flow schedule 278 Cash outflow schedule for a construction project 279 Net cash flow schedule for a construction project 280 Network detail needed to schedule purchase commitments and cash outflows 282 Suggested procedure for buying project management software 287 Checklist for choosing project management software 28889 xv

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20.3 20.4 20.5 20.6 20.7 20.8 20.9 20.10 20.11 20.12 21.1 21.2 21.3 21.4 22.1 22.2 23.1 23.2 23.3 23.4 23.5 23.6 23.7 23.8 23.9 23.10 23.11 24.1 24.2 24.3 24.4 24.5 24.6 24.7 24.8 25.1 25.2 25.3 25.4 25.5 25.6 25.7 25.8 25.9 25.10 26.1 26.2 xvi

Suggested procedure for implementing new project management software Garage project: precedence network diagram Garage project: cost estimates Garage project: data errors Garage project: summary network plotted by 4c Garage project: time analysis using Microsoft Project 2000 Garage project: time-limited resource histograms using Primavera Garage project: resource-limited resource histograms using Primavera Garage project: cost report using Primavera Garage project: useful cost and resource summary Linear responsibility matrix Document distribution matrix Standard project start-up network Possible column headings for a drawing schedule Elements of a typical purchase order Relationship between payment terms and the control needed Value of purchasing in project management Purchasing cycle Elements of a purchasing organization for a large international project Stages in the purchase of equipment for a large international project Purchase specification: front sheet Purchase specification: second sheet Purchase specification: continuation sheet Purchase enquiry request Common arrangement for inviting and considering bids Bid summary example Purchase requisition A familiar sign: but will this project start and finish on time? Control loop Materials shortage list format Combined work-to list and progress questionnaire Inspection and expediting report Immediate action order Construction site organization Combined meeting agenda and action sheet Cost of a given change in relation to project life cycle phases Some origins of project changes Decision tree for change requests General-purpose change register Car project: estimated modification cost Project variation order Engineering change request Production permit or concession Engineering query note Inspection report Project cost elements in the context of cost control Typical project cost/time patterns and the impact of fixed costs

293 300 302 305 307 309 311 312 314 315 319 320 326 329 335 341 346 346 347 35052 354 355 356 358 360 362 363 375 376 378 381 385 393 396 399 404 405 408 410 412 416 418 419 421 423 430 432

list of figures

26.3 26.4 27.1 27.2 27.3 27.4 27.5 27.6 28.1 28.2 29.1 29.2 29.3 29.4 29.5 29.6 29.7 29.8 29.9 29.10 29.11 29.12 29.13 29.14 30.1 30.2

Three ways of recording the cost of project materials Weekly timesheet Comparison of actual costs against a time-scaled budget Project cost and achievement comparison using milestones Data for a milestone chart Earned-value analysis for an engineering department Cost/profit prediction graph Tabulated project cost report Programme of projects in a large contracting company Managing a multi-project model Five-house project: Gantt chart Five-house project: line of balance chart Eighty-house project: line of balance chart Rolling wave planning Breaking down a large project plan into subnetworks Transfer line project: early example of standard network module (template) Transfer line project: procurement and machining template Templating case example: template library principle Templating case example: standard start template TCSAA and template B Templating case example: template D and standard finish template TCSFF Templating case example: template library browser Templating case example: network diagram Templating case example: network fragment Templating case example: Gantt chart produced by 4c Project closure notice with checklist Build schedule sheet

439 441 446 448 449 454 461 463 466 470 476 476 477 478 479 483 484 485 486 487 488 488 488 489 493 499

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