project management managing complex projects unit V case study and DQ Question

MBA 6951, Managing Complex Projects 1

Course Learning Outcomes for Unit V Upon completion of this unit, students should be able to:

5. Evaluate sources of project risk strategies. 5.1 Evaluate the sources of project risk. 5.2 Develop strategies that would decrease risk within a project.

6. Assess proven scheduling techniques.

6.1 Develop a project management schedule. 6.2 Explain scheduling techniques used by project managers.

7. Explain the steps involved in building a project’s budget.

7.1 Analyze the cost projections completed by a company. 7.2 Develop an effective cost projection analysis for a company.

Course/Unit Learning Outcomes

Learning Activity

5.1

Unit Lesson Chapter 13: Pricing and Estimating, pp. 453-488 Chapter 14: Cost Control, pp. 501-513 Unit V Case Study

5.2

Unit Lesson Chapter 13: Pricing and Estimating, pp. 453-488 Chapter 14: Cost Control, pp. 501-513 Unit V Case Study

6.1

Unit Lesson Chapter 13: Pricing and Estimating, pp. 453-488 Chapter 14: Cost Control, pp. 501-513 Unit V Case Study

6.2

Unit Lesson Chapter 13: Pricing and Estimating, pp. 453-488 Chapter 14: Cost Control, pp. 501-513 Unit V Case Study

7.1

Unit Lesson Chapter 13: Pricing and Estimating, pp. 453-488 Chapter 14: Cost Control, pp. 501-513 Unit V Case Study

7.2

Unit Lesson Chapter 13: Pricing and Estimating, pp. 453-488 Chapter 14: Cost Control, pp. 501-513 Unit V Case Study

Reading Assignment Chapter 13: Pricing and Estimating, pp. 453–488 Chapter 14: Cost Control, pp. 501–513

UNIT V STUDY GUIDE

Pricing and Cost Considerations

MBA 6951, Managing Complex Projects 2

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Unit Lesson Pricing is one of the most strategic segments of the project management process. Accepted bids are the result of carefully researched, developed, and well-thought-out pricing strategies. While a low price is perceived positively, too low of a price can be a signal of inadequate research or even deception on the part of the bidder. Companies need to continuously innovate pricing methodologies and strategies in order to stay current and relevant while, at the same time, maintaining best practices. Estimates tend to be the product of comprehensive research of best available information, the cost estimate relationship (CER), or the use of a cost model. The cost model tends to be a by-product of the CER, which is typically composed of mathematical equations based on regression analysis, cost-quantity relationships, cost- cost relationships, and/or cost-non-cost relationships. Beginning with a very basic type of estimate, the order of magnitude analysis is conducted. Finally, the definitive estimate that includes the engineering data and is the most comprehensive with a variance of only 5%. As a company is compiling the pricing of a project, reporting must be built into the process. These reports include cost breakdowns by task, department, month, year, functional costs, monthly labor hours, raw material expenditures, and total project costs on a monthly basis. These reporting functions provide not only a good overview of project costs-to-date but also a basis for prioritizing projects within companies that are looking to control costs and/or reduce costs. Costing out projects is complicated because the cost of inputs and services are continuously changing over the course of the project. The budget is the result of the planning cycle. Essentially, it must be reasonable, reachable, and a result of continuously negotiated costs within the statement of work (SOW). Once the budget has been established and accepted, cost control must be implemented. This assumes that the project manager is not only monitoring costs and recording data but also completing a continuous analysis of the costs and taking corrective actions in order to reach the project goals within the designated budget. Implementing effective cost management control includes several details as outlined in the interactive element below. Click here to access the interactive slide. Click here to access the transcript for the interactive slide. Additionally, as things are changing, the project manager does not always have control over these factors. This can cause delays, and the cost of the project will probably escalate as well. Click the link below to view a video that provides tips on keeping your project budget under control. Project Management Videos. (2011, November 11). Project cost management tips: Keeping your project

budget under control [Video file]. Retrieved from https://www.youtube.com/watch?v=oXhgwn-girI Click here to access the transcript for the video above. The earned value measurement system (EVMS) is a system intended to provide a system of project management (vs. just project monitoring). The basic idea behind this process is that each task would be assigned an earned value that serves the purpose of integrating cost, schedule, risk management, and performance management. This process quickly identifies glitches or variances from the original plan that enables project managers to pivot and make adjustments before the issues become so large and costly to the overall project. As reporting is an important part of the communication process, there are four typical reports used in the project management industry. Click here to access the interactive slide explaining the four types of reports. Click here to access the transcript for the interactive slide. Within the parameters of exceptional research, estimating, and project manager processes, cost problems can still occur. These can be a result of inaccurate estimating resulting in unrealistic budgets. Many times, this is a result of overzealous project managers attempting to win a bid regardless of the subsequent project consequences. Inappropriate sequencing of activities makes the entire process inefficient with respect to the

MBA 6951, Managing Complex Projects 3

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overall process, which is another problem area. Lack of reporting processes or inadequate formal planning also creates craters of inefficiencies. Other concerns are decreases in budget allocations by management or increases of raw material costs by suppliers. Ethical behavior is not only necessary within a project organization, but it is also crucial in developing and sustaining relationships with customers, suppliers, and subcontractors. In general, most people are interested in doing business with someone who they can trust and practices good ethics. For instance, withholding information about a project is unethical. The gray area is whether the project manager tells the customer as soon as the problem develops or after he or she has attempted to solve the problem with the idea of being able to present a solution. The industry has been plagued with misconduct; see examples below of misconduct below:

 intentionally bidding low,

 purchasing products from suppliers that provide you with kickbacks with no regard of quality of product/service,

 misrepresenting the number of hours worked,

 padding travel expense reports,

 using unsafe designs or materials (in lieu of lower costs),

 paying off inspectors to approve faulty work, and

 approving test results that are actually not accurate. As with all ethical situations, there are so many gray areas within this discussion. At the end of the day, it is really a question of whether or not the act was intentional or accidental. Project management organizations can actually take actions against unethical behaviors. The first action would be training to provide an organization with an understanding of exactly what is ethical and what is unethical within the organization. The implementation of policies and procedures provides a normal and consistent check system within the organization. This communicates expectations and a process for misconduct or engaging in unethical practices. Finally, instilling a culture within the organization that promotes ethical behavior at all times is crucial. This must also be modeled from the top down (no matter the size of the organization). If the CEO is practicing unethical behavior, how can he or she expect employees to be ethical? Related to ethical behavior is the resolution of conflicts within the project management team. Even with the highest level of communication and preparedness, conflict is bound to happen. Humans will have differences of opinion that actually, if managed correctly, can be a positive thing. Differing opinions provide for diversity of thought, innovativeness within the project, new background and information, and different alternatives to consider. This can all lead to better solutions to the client’s challenges. Several common sources of conflict are identified below.

Source Description

Work Scope Differences related to how much work should be done, how it should be done, or at what level of quality the work should have

Resource Assignments Differences over who is assigned to what tasks

Schedule Differences about sequencing activities

Cost Differences based upon how much tasks should cost

Priorities Differences when workers have multiple projects and cannot agree on priorities

Organizational Issues Differences in reporting/approval necessities or poor communication

Stakeholder Issues Differences in opinions on the importance of certain aspects of project

Personal Differences Differences resulting from simple human values, attitudes, perceptions, and/or personalities

Effectively managing these areas of conflict within the project management process is an indicator of a good project manager. Collaborating and confronting with an eye on problem-solving usually brings forward the best results. Attempting to engage all interested parties in a team problem-solving venue provides all members with the opportunity to voice their opinions and move toward resolution of the conflict.