Project Management in The Information Age

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NYU – School of Professional Studies

Dr. Chiji Ohayia, PMP, CSM

Instructor

February 3, 2022

Week 2

Project Scope

Project Management in the Information Age
MASY1-GC1250-200

RECAP

LAST SESSION

1.1

WHAT IS PROJECT MANAGEMENT

(Why Project Management)?

What is a Project?

According to the Project Management Institute (PMI) a project is:

“A temporary endeavor undertaken to create a unique product, service, or result.”*

Project

Temporary because there is a start and end date

Unique because it is a one-time endeavor

* Adopted from PMBOK® Guide 6th Edition

What is a Project?

Project
unique, one-time operational activity or effort
Examples
constructing houses, factories, shopping malls, athletic stadiums or arenas
developing military weapons systems, aircrafts, new ships
launching satellite systems
constructing oil pipelines
developing and implementing new computer systems
planning concert, football games, or basketball tournaments
introducing new products into market

Simple Organization
Few Individuals
Two or three activities

Small Projects

Projects Come in all sizes!

Weekend Projects

Planning a Trip

Highway Construction

Simple Organization
Many Individuals
Many activities

Medium Projects

Complex Organization
Individuals organized as teams
Divided into stages and/or phases

Large Projects

The Project Management Institute (PMI) defines project management as the application of knowledge, skills, tools, and techniques to project activities in order to meet or exceed stakeholder needs and expectations.

Knowledge

Skills

Tools

Techniques

Applies

Project

Management

What is Project Management?

Business Opportunity

Business Problem

Project

Deliverables

Achieve

Objective

Expand on the definition of Project Management from Module 1.

Time: TBD

Training Notes

Put up Slide – What is Project Management?
The Project Management Institute (PMI) in the Project Management Body of Knowledge (PMBOK) define Project Management as: “… the applications of knowledge, skills, tools and techniques to project activities to meet project requirements”
Project management processes and techniques are used to coordinate resources to achieve predictable results. However, it should be understood up front that project management is not totally a science, and there is never a guarantee of success.
Project Management is a curious combination of art and science. The artistry refers to the leadership role or the people component. The science consists of the tools and techniques that form the underpinnings of the entire process.
Because projects involve people, there is always complexity and uncertainty that cannot be absolutely controlled. So, project management is also partly an art that requires flexibility and creativity to being successful as well.
It is a science because it relies on proven and repeatable processes and techniques to achieve project success.
It is an art because it has a lot to do with managing and relating to people. Therefore the Project Manager also must rely on people management, good judgment, interpersonal skills and personal intuition.
The project management process begins with first defining the project and building the work plan.
Project Management is concerned with getting the project done in as effective manner as possible; meaning On Time, Within Budget, According to Specifications and Satisfaction to clients or Stakeholders.

When not to use Project Management

When people analyze the situation, develop a solution before thoroughly understanding the problem
Solution Jumping – when try to provide an answer without understanding the question.

The Project Charter

The project charter is the project’s “license to do business.”
It should come from someone outside the project itself with funding-access, resource-assignment, and decision-making authority sufficient to support the project.
This person is usually known as the project sponsor.

Why Have a Project Charter?

Primary purpose: to get approval to proceed with the project and obtain sufficient approval for resources to move to the next phase of the project.
Communicate to stakeholders and other interested parties the mission and objectives of the project.
Communicate to the project team what they are expected to accomplish.

Project Charter Components

Project Mission
Project Scope
Project Objectives
Project Assumptions
Project Constraints
Milestones
Project Risks
Stakeholders
Signature Page Granting Authority to Proceed

In some organizations, the project charter is an evolving document. Many of the components listed will change as the project moves into the project definition phase.

PROJECT LIFE CYCLE

Predictive Life Cycles

Predict project activities in advance

Track, monitor and control them

Develop, maintain detailed processes and documentation

Ideally, go through phases in sequence once and only once! (also known as the “waterfall” approach)

Project Management Life Cycle

Typical Activities During Each Phase

Controlling

Refine WBS

Perform network analysis

Develop schedules

Develop plans

Execution

Implement control process

Control project with earned value

Life-Cycle Phases of a Project

Project management consists of a set of activities to ensure that the right projects are performed in the right way. The major process groups in PMI model are:

Initiation

Financial analysis

Analyze strategic goals

Rank projects

Choose projects to pursue

Planning

Gather data

Analyze require-ments

Develop charter

Develop WBS

Organize project team

Scope verification

Technical audit

Financial audit

Contract close-out

Close-out

Objective

Introduce participants to a model of a typical project life cycle

Time: 6 minutes

Training Notes

Put up Slide - Project Life Cycle Model.
The four phases– Planning, Controlling, Execution, and Close-out – make up the life cycle of most projects.
Explain that the initiation phase is usually not included in the life cycle because many companies don’t regard a project as such until after the initiation or decision to pursue the project has been made.
During the initiation phase, the need is identified. An appropriate response to the need is determined and described. The major deliverables and participating work groups are identified.
During the planning phase, the project solution is further developed.
During the controlling phase, the project plan is further refined to reflect current condition of the project.
During the execution phase, the defined work performed.
During the close-out phase, the emphasis on verifying that the project will satisfy the required objective.

Note

Detail discussions of the phases is outside the scope of this project, however, we will highlight specific items as appropriate . These are covered extensively in the SmartSolutions Project Management Workshop Class.

Project Lifecycle - Waterfall

Effort

Time

Initiation

Getting Started

Planning

Organizing & Preparing

Implementing

Implementing the Work

Closing

Finishing the Work

Project Lifecycle - Agile

Sprint 1

Sprint 2

Sprint 3

Sprint 4

Sprint 5

Initiation

Getting Started

Planning

Organizing & Preparing

Implementing

Implementing the Work

Closing

Finishing the Work

Effort

Time

Incremental / Iterative Life Cycles

Sketch out the future, but only predict the next phase or set of activities

Fill in the rest as you go along

Accept some uncertainty

Don’t try to conform to an initial plan – leverage experience and allow plans to evolve!

Agile Life Cycles

An alternative, “adaptive” approach:

Tolerate uncertainty in project scope

Don’t predict – rely on an “empirical” approach!

Leverage “self-managed” teams

Cut back on process and documentation

Used more and more in IT projects

Gaining acceptance for other project types

PROJECT KNOWLEDGE AREAS

Process Groups and Knowledge Areas

Project Management Body of Knowledge (PMBOK®)

Project Life Cycle
5 process groups
10 knowledge areas

Project management process group – “a logical grouping of the project management inputs, tools and techniques, and outputs.” PMBOK® Guide

PMBOK® Process Groups

Initiating— “define a project or a new phase by obtaining authorization”

Planning— “establish the project scope, refine objectives and define actions to attain objectives”

Executing— “complete the work defined to satisfy project specifications”

Monitoring and controlling— “track, review, and regulate progress and performance, identify changes required, and initiate changes”

Closing— “finalize all activities to formally close project of phase”

PMBOK®’s 10 Knowledge Areas

Integration management - “processes and activities to identify, define, combine, unify, and coordinate the various processes and project management activities”

Scope management - “processes to ensure that the project includes all the work required, and only the work required, to complete the project successfully”

Schedule management - “processes to manage timely completion of the project”

PMBOK® Knowledge Areas

Cost management – “processes involved in planning, estimating, budgeting, financing, funding, managing, and controlling costs so that the project can be completed within the approved budget”

Quality management - “processes and activities of the performing organization that determine quality policies, objectives, and responsibilities so that the project will satisfy the needs for which it was undertaken”

Resource management - “processes that organize, manage, and lead the project team”

PMBOK® Knowledge Areas

Communications management - “processes to ensure timely and appropriate planning, collection, creation, distribution, storage, retrieval, management, control, monitoring, and ultimate disposition of project information”

Risk management - “processes of conducting risk management planning, identification, analysis, response planning, and control…to increase the likelihood and impact of positive events and decrease the likelihood and impact of negative events in the project”

PMBOK® Knowledge Areas

Procurement management - “processes to purchase or acquire products, services, or results from outside the project team”

Stakeholder management - “processes to identify the people, groups, or organizations, that could impact or be impacted by the project, analyze their expectations and impact, and develop strategies for engaging them and managing conflicting interests”

SESSION 2

Scope
Project Proposal
Business Case

PROJECT SCOPE

Define Scope

Reasons to Define Scope
How to Define Scope
List deliverables and acceptance criteria
Establish project boundaries
Create a project work statement
Defining Scope in Agile Projects

Define scope – the process of translation stakeholder needs and requirements into detailed specifications of the project outcomes & products

Reasons to Define Scope

All other planning is based on the project scope
Needed to preventing scope creep

If we provide this, will it solve your problem?

How to Define Scope

List project deliverables
Determine acceptance criteria
Establish project boundaries
In scope vs. Out of scope
Understand constraints
Create a Scope Definition

Scope Statement

© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

9-*

Project Scope

Scope statement
a document that provides an understanding, justification, and expected result of a project
Statement of work
written description of objectives of a project
Work breakdown structure
breaks down a project into components, subcomponents, activities, and tasks

What is Project Scope Management?

Scope refers to all the work involved in creating the products of the project and the processes used to create them
A deliverable is a product produced as part of a project, such as hardware or software, planning documents, or meeting minutes
Project scope management includes the processes involved in defining and controlling what is or is not included in a project

Project Scope Management Processes

Scope planning: deciding how the scope will be defined, verified, and controlled
Scope definition: reviewing the project charter and preliminary scope statement and adding more information as requirements are developed and change requests are approved
Creating the WBS: subdividing the major project deliverables into smaller, more manageable components
Scope verification: formalizing acceptance of the project scope
Scope control: controlling changes to project scope

Scope Verification

It is very difficult to create a good scope statement and WBS for a project
It is even more difficult to verify project scope and minimize scope changes
Scope verification involves formal acceptance of the completed project scope by the stakeholders
Acceptance is often achieved by a customer inspection and then sign-off on key deliverables

Scope Control

Scope control involves controlling changes to the project scope
Goals of scope control are to:
Influence the factors that cause scope changes
Assure changes are processed according to procedures developed as part of integrated change control
Manage changes when they occur
Variance is the difference between planned and actual performance

Best Practices for Avoiding Scope Problems

1. Keep the scope realistic: Don’t make projects so large that they can’t be completed; break large projects down into a series of smaller ones

2. Involve users in project scope management: Assign key users to the project team and give them ownership of requirements definition and scope verification

Change Control Board Issues

1. The cost of the change
The impact on the schedule
The impact on other competing constraints
The value added for the client
Any additional risks
The potential impact on other projects

Understanding Scope Changes

Regardless of what people think, scope changes, if approved, will result in:

Increase in the schedule

An increase in the cost baseline

Possibly unhappy stakeholders

Scope Change and a Business Need

There must exist a valid business purpose for a scope change. This includes the following factors at a minimum:

An assessment of the customers’ needs and the added value that the scope change will provide

An assessment of the market needs including the time required to make the scope change, the payback period, return on investment, and whether the final product selling price will be overpriced for the market.

An assessment on the impact on the length of the product life cycle

An assessment on the competition’s ability to imitate the scope change

Is there a product liability associated with the scope change and can it impact our image?

Rationale for Not Approving a Scope Change

Typical rationalization for termination or not approving a scope change includes:

The cost of the scope change is excessive and the final cost of the deliverable may make us noncompetitive

The return on investment may occur too late

The competition is too stiff and not worth the risks

There are insurmountable obstacles and technical complexity

There are legal and regulatory uncertainties

The scope change may violate the company’s policy on nondisclosure, secrecy and confidentiality agreements

Change Management

You cannot manage your customer without management of your project management process.

When your customer initiates a change request, you must be able to predict immediately the impact on schedule , cost and technical performance.

Cost of Corrections

$25

$100

$1000

BREAK!!!

5 Mins.

PROJECT PROPOSAL

Chapter Concepts

Building relationships with customers and partners
Proposal marketing strategies
Decision making to develop a proposal
Creating winning proposals
The proposal preparation process
Elements that may be included in a proposal
Pricing considerations
Customer evaluation of proposals
Types of contracts between the customer and the contractor
Measuring the success of proposal efforts

Chapter Concepts

This chapter covers the development of proposals by interested contractors in response to a customer’s request for proposal. When the customer decides which contractor to engage to perform the project, the customer and the contractor sign an agreement (contract).
For some projects, there is neither a request for proposal nor an actual formal proposal. Rather, after the need is identified, the project moves right into the planning and performing phases of the project life cycle. Examples include a project that one or two individuals do by themselves, such as remodeling a basement into a family room, or a project carried out by a volunteer group, such as organizing a fundraising event.
Based upon the information from this chapter, students will become familiar with:
Building relationships with customers and partners
Proposal marketing strategies
Decision making to develop a proposal
Creating winning proposals
The proposal preparation process
Elements that may be included in a proposal
Pricing considerations
Customer evaluation of proposals
Types of contracts between the customer and the contractor
Measuring the success of proposal efforts

Building Relationships
with Customers and Partners

Foundation for successful funding and opportunities
Requires good listening and constant learning
Frequent and regular contact; express appreciation for the client’s time
Trust is key and ethics are imperative
First impression is important
Problem solving and credibility grows with good performance
Partner with several key individuals in an organization

Building Relationships with Customers and Partners

Generally speaking, customers (clients) and partner organizations prefer to work with people they know and trust.

Relationships establish the foundation for successful funding and contract opportunities.
Relationship building requires being proactive and engaged.
It requires face-to-face contacts; it cannot be done as effectively through e-mail or phone conversations.
Relationship building requires being a good listener and a good learner. When you are with clients, ask questions and listen. Make the client feel good. Empathize with their issues, whether they are business or personal.
Contacts with potential clients should be frequent and regular– not just when there is a current opportunity for funding or just before they will be issuing a RFP. During contacts, do not focus on discussing potential contract opportunities.
After meeting with a client, always express your appreciation and thank them for making the time to meet with you.
Establishing and building trust is key to developing effective and successful relationships with clients and partners. One way to foster this is to be reliable and responsive.
Ethical behavior in dealing with clients and partners is also imperative for building trust.
The first impression you make on a client is pivotal to developing a continuing and fruitful relationship.
Clients want to work with people who can solve problems, not with those who merely identify them.
Build credibility based on good performance.
Always put the client first. Clients want to be confident that any projects they undertake with the contractor will be successful, will involve a good working relationship with the contractor, and will help the clients achieve their business goals.
It is advisable not to rely on a good relationship with just one individual in a client or partner organization, but rather to build relationships with several key people in a client or partner organization, since key individuals may leave the organization while others become more influential.

Pre-RFP/Proposal Marketing

Begin developing the relationship before RFP is prepared
Can help client identify needs
Better position to win the contract
Develop a more clearly focused response to RFP
Pre-RFP and pre-proposal efforts are business development
No cost to the customer
Help build the relationship
Unsolicited proposals and uncompetitive contracts
Result of identified needs and problem solving
Eliminates preparation of an RFP and soliciting process

Pre-RFP/Proposal Marketing

Contractors whose business depends on creating winning proposals in response to business or government RFPs should not wait until formal RFP solicitations are announced by customers before starting to develop proposals.
Contractors need to develop relationships with potential customers long before the customers prepare RFPs.
Contractors should maintain frequent contacts with past and current customers and initiate contacts with potential new customers.
A contractor who is familiar with a customer’s needs and requirements can prepare a better proposal in response to the customer’s RFP.
These pre-RFP or pre-proposal efforts by a contractor are considered marketing or business development and are performed at no cost to the customer.
In some cases, the contractor may prepare an unsolicited proposal and present it to the customer.
If the customer is confident that the unsolicited proposal will solve the problem at a reasonable cost, the customer may simply negotiate a contract with the contractor to implement the proposal, thus eliminating the preparation of an RFP and the subsequent competitive proposal process.
Whether the goal is winning a competitive RFP or obtaining a noncompetitive contract from a customer, a contractor’s pre-RFP/proposal efforts are crucial to establishing the foundation for eventually winning a contract from the customer to perform the project.

Decision to Develop a Proposal

Development is costly and time consuming
Contractors must be realistic about their probability of winning a contract
Evaluate bid/no-bid decision
Many non-winning proposals hurt reputation
May be hard to decide to no-bid an RFP

Decision to Develop a Proposal

The development and preparation of a proposal can be costly and time-consuming.
Contractors interested in submitting a proposal must be realistic about the probability of being selected as the winning contractor.
Evaluating whether or not to go forward with the preparation of a proposal is sometimes referred to as the bid/no-bid decision.
Contractors need to be realistic about their ability to prepare proposals and about the probability of winning the contract because submitting a lot of non-winning proposals in response to RFPs can hurt a contractor’s reputation.
Sometimes the hardest thing for a contractor to do is to decide to no-bid an RFP.

Bid or No-Bid?

Factors to consider
Competition
Risk
Mission
Extension of capabilities
Reputation
Customer funds
Proposal resources
Project resources

Bid or No-Bid?

Some factors that a contractor might consider in making a bid/no-bid decision are:

Competition—which other contractors might also submit a proposal?
Risk—is there a risk that the project will be unsuccessful (either technically or financially)?
Mission—is the proposed project consistent with the contractor’s business mission?
Extension of capabilities—would the proposed project provide the contractor with an opportunity to extend and enhance its capabilities?
Reputation—what is the contractor’s reputation with the customer?
Customer funds—does the customer really have funds available to go forward with the project?
Proposal resources—are appropriate resources available to prepare a quality proposal?
Project resources—are appropriate resources available to perform the project if the contractor is selected as the winner?
If a contractor is not sure that it has the resources to perform the project, it needs a plan for securing the necessary resources to successfully perform the project.

Creating a Winning Proposal

Selling document
The best idea to solve the problem
Highlight unique factors
Emphasize benefits to the customer
Be simple and concise
Addresses requirements from RFP
Be realistic

Creating a Winning Proposal

The proposal process can be highly competitive and a proposal is a selling document - not a technical report.
In the proposal, the contractor must convince the customer that the contractor is the best one to solve the problem.
The contractor should highlight the unique factors of its proposal that differentiate it from competing contractors.
The proposal should always emphasize the benefits to the customer.
Proposals should be written in a simple, concise manner.
Proposals must be specific in addressing the customer’s requirements as laid out in the RFP.
Proposals must be realistic, in terms of the proposed scope, cost, and schedule, in the eyes of the customer.

Proposal Preparation

Proposal team
Can be one person or many
Various skills and expertise
Proposal manager for large proposals
Proposal development
Time for writing, review, and management approval
Length dependent upon the RFP requirements
Cost of proposal development is part of normal business costs

Proposal Preparation

The preparation of a proposal can be a straightforward task performed by one person, or it can be a resource-intensive effort requiring a team of organizations and individuals with various expertise and skills.
In large scale efforts, the contractor may designate a proposal manager who coordinates the efforts.
The proposal schedule must allow adequate time for writing, review, and approval by the management of the contractor’s organization.
Proposals in response to RFPs can be as brief as a few pages or as long as hundreds of pages, including text and drawings.
Customers do not pay contractors to prepare proposals. Contractors absorb the costs of proposal development as part of normal marketing costs.

Proposal Contents

Three sections
Technical
Management
Cost
Detail level
Depends on complexity of the project
Requirements from the RFP

Proposal Contents

Proposals are often organized into three sections:

Technical
Management
Cost
The amount of detail the contractor includes will depend on the complexity of the project and the requirements stipulated by the RFP.

Technical Section

Understand the need
Proposed approach or solution
Benefits to the customer

Technical Section

The objective of this section is to convince the customer that the contractor understands the problem or need and can provide the least risky and most beneficial solution. The technical section should contain the following elements:

Understanding of the need—the contractor must show the customer that they thoroughly understand the problem to be solved.
Proposed approach or solution—the proposal should describe the approach or methodology that would be used in developing the solution.
Benefits to the customer—the contractor should state how the proposed solution or approach would benefit the customer and achieve the project’s success criteria or expected outcomes, including cost savings; reduced processing time; reduced inventory; better customer service; reduced errors; improved safety conditions; more timely information; reduced maintenance, etc.

Management Section

Description of major tasks
Deliverables
Project schedule
Project organization
Related experience
Equipment and facilities

Management Section

The objective of the management section is to convince the customer that the contractor can do the proposed work and achieve the intended results. The management section should contain the following elements:

Description of major tasks—the contractor should define the major tasks that will be performed in carrying out the project.
Deliverables—the contractor should include a list of all deliverables that will be provided during the project (such as reports, drawings, manuals, and equipment).
Project schedule—the contractor should provide a schedule for performing the major tasks required to complete the project.
The task schedule can be given in any one of several formats: a list of tasks with their estimated start and completion dates, a Gantt chart, or a network diagram.
Project organization—the contractor should describe how the work and resources will be organized to perform the project.
An organization chart, resumes of the key people, and a responsibility matrix are often helpful.
Related experience—the contractor should provide a list of similar projects it has completed and the dollar value of those contracts.
Equipment and facilities—the contractor may want to provide a list of the equipment and special facilities it has in order to convince the customer that it possesses the necessary resources.

Cost Section

Include estimated costs

Labor

Materials

Equipment

Facilities

Subcontractors and consultants

Travel

Documentation

Overhead

Escalation

Reserve

Fee or profit

Cost Section

The objective of the cost section of the contractor proposal is to convince the customer that the contractor’s costs for the proposed project are realistic and reasonable. The cost section usually consists of tabulations of the contractor’s estimated costs for such elements as the following:
Labor—the estimated costs for the various classifications of people who are expected to work on the project
It might include the estimated hours and hourly rate for each person or classification.
Materials—the cost of materials the contractor needs to purchase for the project
Equipment— the cost of equipment that must be purchased to complete the project
Facilities—sometimes the contractor will have to rent special facilities or specialty space for the project team.
Subcontractors and consultants—when contractors do not have the expertise or resources to do certain project tasks, they may outsource some of the work to subcontractors or other consultants.
Travel—such as airfare, lodging, and meals if trips are required during the project
Documentation—some customers want the contractor to show separately the costs associated with the project documentation deliverables.
This would be the cost of printing manuals, drawings, reports, or the cost of DVDs.
Overhead—contractors will add a percentage to costs of the above items to cover the indirect costs of doing business (such as insurance, depreciation, accounting, general management, marketing, and human resources).
Escalation—for large projects that are expected to take several years to complete, the contractor needs to include the costs of escalation in wage rates and materials costs over the length of the project.
Reserve—the reserve (also referred to as contingency reserve or management reserve) is an amount the contractor may want to include to cover unexpected items that have been overlooked.
Fee or profit— all the above items are costs. The contractor must add an amount for its fee or profit.
The total cost plus the contractor’s fee is the contractor’s price for the proposed project.
Cost estimates should be reasonable and realistic. If possible, it is good practice to have the person who will be responsible for the major work tasks estimate the associated costs.

Pricing Considerations

Competition
Price

Not overpriced or underpriced

Factors

Reliability of cost estimates

Risk

Value of project to the contractor

Customer’s budget

Competition level

Pricing Considerations

When contractors prepare a proposal, they are generally competing with other contractors. There are three main factors that contractors should consider when setting a price for a proposal: competition, prices compared to competitors, and other factors like risk and the customer’s budget.

Contractors need to be careful not to overprice the proposed project, or else the customer may select a lower-priced contractor.
They must be equally careful not to underprice the proposed project; otherwise, the contractor may lose money.
The contractor must consider the following items when determining the price for the proposed project:
Reliability of the cost estimates—the level of confidence that the total cost for the proposed project is complete and accurate
Risk - if the proposed project involves an endeavor that has not been undertaken before, it may be necessary to include a large amount of contingency funds.
Value of the project to the contractor—there may be situations in which the contractor is willing to live with a low price.
For example, in order to get a contract so it will not have lay off workers.
Customer’s budget—a proposal should not exceed what the customer has available.
Competition—if many contractors are expected to submit, it may be necessary to submit a price that includes only a small profit to increase the chances of winning the contract.

© 2018 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

Simplified Project Proposal

Complex

Large number of pages

Defined sections

Charts and figures

Tables of information

Simplified

Statement of the customer’s need

Assumptions

Project scope

Deliverables

Resources

Schedule

Price

Risks

Expected benefits

Simplified Project Proposal

Sometimes a proposal is complex for a large multi-million dollar project. These proposals will be lengthy, with many defined sections, charts, figures and tables.
At other times, the proposal may not need to be complex. A simplified or basic proposal may be appropriate and sufficient.
All proposals should include the following elements as a minimum:
Statement of the customer's need— should clearly describe the contractor's understanding of the customer's need or problem and reference any information or data to support the need
Assumptions– state any assumptions that may affect the contractor’s scope, schedule, or price
Project scope— describe the contractor’s approach to addressing the customer’s need or solving the problem, define specifically what work tasks the contractor proposes to do, and outline how the contractor expects the customer to be involved throughout the project
Deliverables— list all the tangible products or items it will provide to the customer during the performance of the project
Resources— types of expertise and skills that the contractor will utilize on the project, including any key subcontractors, consultants, or suppliers
Schedule— list of key milestones with their target dates or cycle time from the start of the project in sufficient detail to demonstrate a well-thought-out plan
Price— indicate the bottom-line price to perform the project. Emphasize the value provided and not on how low, or “cheap,” the price is.
Risks—identify potential concern about any risks that have a high likelihood of occurrence or a high degree of potential impact. Try to demonstrate that the contractor has experience with these risks and outline a realistic approach to dealing with them in the project.
Expected benefits— pull together information from the preceding sections and make a case to justify the “value” of the proposal in terms of expected quantitative benefits, such as return on investment, payback, cost savings, an increase in productivity, reduced processing times, faster time-to-market, and so on.
The focus of the proposal should be on quality of the content—clear, concise, and convincing—rather than quantity or number of pages.
Many simplified project proposals range from 4 to 8 pages, and they are usually less than 20 pages.
It is appropriate to attach appendices for items such as resumes of key people who will be assigned to the project, back-up details for cost estimates, or a list of past related projects and associated references.

Proposal Submission and Follow-up

Submission

On time

Formatted properly

Sent in manner required

Hard copies

E-mail

Electronic form

Two sets by different delivery methods

Follow-up

Be proactive

Professional manner

Follow RFP guidelines

Proposal Submission and Follow-up

Proposals should be:

Submitted on time
Late or incomplete proposals are often not accepted
Formatted properly
In the manner specified
Possibly deliver two sets by different delivery methods
Depending on the dollar value of the proposal, some contractors have been known to hand-deliver the proposal or send two sets of proposals by different express mail services.

Contractors must continue to be proactive even after the proposal is submitted.

Any follow-up needs to be done in a professional manner and in accordance with the RFP guidelines.

Customer Evaluation of Proposals

Customer sets criteria
Customer may request a best and final offer (BAFO)
Helps to have common comparison criteria

Customer Evaluation of Proposals

Customers evaluate contractors’ proposals in many different ways.

Some customers first look at the prices and select only the three lowest-priced proposals for further evaluation.
Some screen out proposals with prices above their budget or those whose technical section does not meet all the requirements.
Others, especially on large projects, create a proposal review team that uses a scorecard to rate each proposal.
The figure above depicts a proposal evaluation scorecard. Have the students review the proposal evaluation scorecard and make suggestions of what could be done to raise the scores for the proposal submission.
The scorecard can be a valuable tool because it helps to have uniform comparison criteria for different proposals.

Contracts

Agreement

Contract must be signed before starting work

Establishes communication

Agreement of deliverables for a certain price

Types

Fixed Price

Price remains fixed

Low risk for customer

High risk for contractor

For well-defined projects with little risk

Cost-Reimbursement

Price for actual costs

High risk for customer

Low risk for contractor

For higher risk projects

Contracts

Just because the contractor has been selected as the winner does not mean the contractor begins the work right away. Before the project can proceed, a contract must be signed between the customer and the contractor.

A contract is a vehicle for establishing good customer-contractor communications and arriving at a mutual understanding and clear expectations to ensure project success.
It is an agreement between the contractor, who consents to provide a product or service (deliverables), and the customer, who agrees to pay the contractor a certain amount in return.
The contract must clearly spell out the deliverables the contractor is expected to provide.

There are basically two types of contracts: fixed price and cost reimbursement.

In a fixed-price contract, the customer and the contractor agree on a price for the proposed work.
The price remains fixed unless the customer and contractor agree on changes.
This type of contract is low risk for the customer, since the customer will not pay more than the originally agreed-upon price.
This type of contract is high risk for the contractor because, if the cost of completing the project is more than originally planned, the contractor will make a lower profit than anticipated— or may even lose money.
Fixed-price contracts are most appropriate for projects that are well defined and entail little risk.
In a cost-reimbursement contract, the customer agrees to pay the contractor for all actual costs (labor, materials, and so forth), regardless of amount, plus some agreed-upon profit.
This type of contract is high risk for the customer, since contractor costs can overrun the proposed price.
In cost-reimbursement contracts, the customer usually requires that, throughout the project, the contractor regularly compare actual expenditures with the proposed budget and reforecast cost-at-completion.
This type of contract is low risk for the contractor because all costs will be reimbursed by the customer. The contractor cannot lose money on this type of contract.
Cost-reimbursement contracts are most appropriate for projects that involve a higher degree of risk.

Contract Terms and Conditions

Misrepresentation of costs
Notice of cost overruns or schedule delays
Approval of subcontractor
Customer furnished equipment of information
Patents
Disclosure of proprietary information
International considerations
Termination
Terms of payments
Bonus/penalty payments
Changes

Contract Terms and Conditions

The following are some of the terms and conditions that are commonly included in project contracts:

Misrepresentation of costs—states that it is illegal for the contractor to overstate the hours or costs expended on the project
Notice of cost overruns or schedule delays—outlines the circumstances under which the contractor must notify the customer of any schedule delays
Approval of subcontractor—indicates when the contractor needs to obtain approval before hiring a subcontractor
Customer-furnished equipment or information—lists the items that the customer will provide to the contractor throughout the project and the dates by which the customer will make these items available
Patents—covers ownership of patents that may result from conducting the project
Disclosure of proprietary information—prohibits one party from disclosing confidential information, technologies, or processes pertaining to the project
International considerations—specifies accommodations that must be made for customers from other countries
Termination—states the conditions under which the customer can terminate the contract, such as nonperformance by the contractor
Terms of payment—addresses the basis on which the customer will make payments to the contractor
Bonus/penalty payments—some contracts have a bonus provision, wherein the customer will pay the contractor a bonus if the project is completed ahead of schedule or exceeds other customer performance requirements
On the other hand, some contracts include a penalty provision, wherein the customer can reduce the final payment to the contractor if the project is not completed on schedule or if performance requirements are not met.
Changes—Covers the procedure for proposing, approving, and implementing changes to the project scope or schedule

PROJECT SELECTION

BUSINESS CASE

Project Selection Techniques

How Projects Come to Be?

How Projects Come to Be

Project selection can be a difficult process, especially when there are a large number of potential projects competing for scarce dollars.
Some selection methods are highly intuitive; others try to add rigor through more scientific selection processes.

Sacred Cows and Pressing Needs

“Sacred Cow” selection—Senior Management wants it!
(it may often turn out well; many visionary projects
start here)
Business opportunity (make more $$$)
Savings potential (save $$$)
Keeping up with competition (example, many e-commerce projects were in response to competitor’s initiatives)
Risk management (examples: disaster recovery initiatives, Y2K)
Government or regulatory requirements

URGENT!!!

Screening & Selection Issues

Risk – unpredictability to the firm
Commercial – market potential
Internal operating – changes in firm ops
Additional – image, patent, fit, etc.

All models only partially reflect reality and have both objective and subjective factors imbedded

The Business Case

Definition of Business Case: an analysis of the organizational value, feasibility, costs, benefits, and risks of several proposed alternatives or options.
Attributes of a Good Business Case
Thorough in detailing all possible impacts, costs, and benefits
Clear and logical in comparing the cost/benefit impact of each alternative
Objective through including all pertinent information
Systematic in terms of summarizing findings

Developing the Business Case

Step 1: Define Measurable Organizational Value (MOV)
Step 2: Form a Cross-Functional Business Case Team
Advantages:
Credibility
Alignment with organizational goals
Access to the real costs
Ownership
Agreement
Bridge building

Developing the Business Case

Step 3: Identify Alternatives
Possible Options
Change existing process without investing in IT
Adopting or adapting an application developed by a different area or department within the organization
Reengineer the existing system
Purchasing an off-the-shelf application package from a software vendor
Custom building a new application using internal resources or outsourcing the development to another company

3-*

Developing the Business Case

Step 4: Define Feasibility and Assess Risk
Feasibility (“do able and worth doing?”)
Economic feasibility
Technical feasibility
Organizational feasibility
Other feasibilities
Risk
Identification – What can go wrong? What must go right?
Assessment – What is the impact of each risk?
Response – How can the organization avoid or minimize the risk?

Developing the Business Case

Step 5: Define Total Cost of Ownership
Direct or Up-front costs
Ongoing Costs
Indirect Costs
Step 6: Define Total Benefits of Ownership
Increasing high-value work
Improving accuracy and efficiency
Improving decision-making
Improving customer service

Developing the Business Case

Step 7: Analyze alternatives
Payback

Payback Period = Initial Investment

Net Cash Flow

= $100,000

$20,000

= 5 years

Developing the Business Case

Breakeven

If you sell a golf putter for $30.00 and it costs $25.00 to make, you have a profit margin of $5.00:

Breakeven Point = Initial Investment / Net Profit Margin

= $100,000 / $5.00

= 20,000 units

Materials (putter head, shaft, grip, etc.)	$12.00
Labor (0.5 hours at $9.00/hr)	$ 4.50
Overhead (rent, insurance, utilities, taxes, etc.)	$ 8.50
Total	$25.00

Payback Period Example

Developing the Business Case

Return on Investment

Project ROI = Total Expected Benefits – Total Expected Costs

Total Expected Costs

= ($115,000 - $100,000)

$100,000

= 15%

Developing the Business Case

Scoring models
provide a method for comparing alternatives or projects based on a weighted score.
can combine both qualitative and quantitative criteria
weights and scores can be subjective
Things to keep in mind about financial and scoring models
Financial models can be biased toward the short run
Some criteria are reversed-scored
Past experience may help create a more realistic business case.

000

100

Period

Payback

Flow

Cash

Annual

Cost

Project

Period

Payback