1 Introduction 1
1.1 Nature of Project Management 1
1.2 Relationship Between Projects and Other Production Systems 2
1.3 Characteristics of Projects 4
1.3.1 Definitions and Issues 5
1.3.2 Risk and Uncertainty 7
1.3.3 Phases of a Project 9
1.3.4 Organizing for a Project 11
1.4 Project Manager 14
1.4.1 Basic Functions 15
1.4.2 Characteristics of Effective Project Managers 16
1.5 Components, Concepts, and Terminology 16
1.6 Movement to Project-Based Work 24
1.7 Life Cycle of a Project: Strategic and Tactical Issues 26
1.8 Factors that Affect the Success of a Project 29
1.9 About the book: Purpose and Structure 31 Team Project 35 Discussion Questions 38 Exercises 39 Bibliography 41
Appendix 1A: Engineering Versus Management 43
1A.1 Nature of Management 43 1A.2 Differences between Engineering and Management 43 1A.3 Transition from Engineer to Manager 45 Additional References 45
2 Process Approach to Project Management 47
2.1 Introduction 47
2.1.1 Life-Cycle Models 48
2.1.2 Example of a Project Life Cycle 51
2.1.3 Application of the Waterfall Model for Software Development 51
2.2 Project Management Processes 53
2.2.1 Process Design 53
2.2.2 PMBOK and Processes in the Project Life Cycle 54
2.3 Project Integration Management 54
2.3.1 Accompanying Processes 54
2.3.2 Description 56
2.4 Project Scope Management 60
2.4.1 Accompanying Processes 60
2.4.2 Description 60
2.5 Project Time Management 61
2.5.1 Accompanying Processes 61
2.5.2 Description 62
2.6 Project Cost Management 63
2.6.1 Accompanying Processes 63
2.6.2 Description 64
2.7 Project Quality Management 64
2.7.1 Accompanying Processes 64
2.7.2 Description 65
2.8 Project Human Resource Management 66
2.8.1 Accompanying Processes 66
2.8.2 Description 66
2.9 Project Communications Management 67
2.9.1 Accompanying Processes 67
2.9.2 Description 68
2.10 Project Risk Management 69
2.10.1 Accompanying Processes 69
2.10.2 Description 70
2.11 Project Procurement Management 71
2.11.1 Accompanying Processes 71
2.11.2 Description 72
2.12 Project Stakeholders Management 74
2.12.1 Accompanying Processes 74
2.12.2 Description 75
2.13 The Learning Organization and Continuous Improvement 76
2.13.1 Individual and Organizational Learning 76
2.13.2 Workflow and Process Design as the Basis of Learning 76 Team Project 77 Discussion Questions 77 Exercises 78 Bibliography 78
Team Project 176 Discussion Questions 176 Exercises 177 Bibliography 179
5 Portfolio Management—Project Screening and Selection 181
5.1 Components of the Evaluation Process 181
5.2 Dynamics of Project Selection 183
5.3 Checklists and Scoring Models 184
5.4 Benefit-Cost Analysis 187
5.4.1 Step-By-Step Approach 193
5.4.2 Using the Methodology 193
5.4.3 Classes of Benefits and Costs 193
5.4.4 Shortcomings of the Benefit-Cost Methodology 194
5.5 Cost-Effectiveness Analysis 195
5.6 Issues Related to Risk 198
5.6.1 Accepting and Managing Risk 200
5.6.2 Coping with Uncertainty 201
5.6.3 Non-Probabilistic Evaluation Methods when Uncertainty Is Present 202
5.6.4 Risk-Benefit Analysis 207
5.6.5 Limits of Risk Analysis 210
5.7 Decision Trees 210
5.7.1 Decision Tree Steps 217
5.7.2 Basic Principles of Diagramming 218
5.7.3 Use of Statistics to Determine the Value of More Information 219
5.7.4 Discussion and Assessment 222
5.8 Real Options 223
5.8.1 Drivers of Value 223
5.8.2 Relationship to Portfolio Management 224 Team Project 225 Discussion Questions 228 Exercises 229 Bibliography 237
Appendix 5A: Bayes’ Theorem for Discrete Outcomes 239
6 Multiple-Criteria Methods for Evaluation and Group Decision Making 241
6.1 Introduction 241
6.2 Framework for Evaluation and Selection 242
6.2.1 Objectives and Attributes 242
6.2.2 Aggregating Objectives Into a Value Model 244
6.3 Multiattribute Utility Theory 244
6.3.1 Violations of Multiattribute Utility Theory 249
Contents XXIII
6.4 Analytic Hierarchy Process 254
6.4.1 Determining Local Priorities 255
6.4.2 Checking for Consistency 260
6.4.3 Determining Global Priorities 261
6.5 Group Decision Making 262
6.5.1 Group Composition 263
6.5.2 Running the Decision-Making Session 264
6.5.3 Implementing the Results 265
6.5.4 Group Decision Support Systems 265 Team Project 267 Discussion Questions 267 Exercises 268 Bibliography 271
Appendix 6A: Comparison of Multiattribute Utility Theory with the AHP: Case Study 275
6A.1 Introduction and Background 275 6A.2 The Cargo Handling Problem 276 6A.2.1 System Objectives 276 6A.2.2 Possibility of Commercial Procurement 277 6A.2.3 Alternative Approaches 277 6A.3 Analytic Hierarchy Process 279 6A.3.1 Definition of Attributes 280 6A.3.2 Analytic Hierarchy Process Computations 281 6A.3.3 Data Collection and Results for AHP 283 6A.3.4 Discussion of Analytic Hierarchy Process and Results 284 6A.4 Multiattribute Utility Theory 286 6A.4.1 Data Collection and Results for Multiattribute Utility Theory 286 6A.4.2 Discussion of Multiattribute Utility Theory and Results 290 6A.5 Additional Observations 290 6A.6 Conclusions for the Case Study 291 References 291
7 Scope and Organizational Structure of a Project 293
7.1 Introduction 293
7.2 Organizational Structures 294
7.2.1 Functional Organization 295
7.2.2 Project Organization 297
7.2.3 Product Organization 298
7.2.4 Customer Organization 298
7.2.5 Territorial Organization 299
7.2.6 The Matrix Organization 299
7.2.7 Criteria for Selecting an Organizational Structure 302
7.3 Organizational Breakdown Structure of Projects 303
7.3.1 Factors in Selecting a Structure 304
7.3.2 The Project Manager 305
7.3.3 Project Office 309
7.4 Project Scope 312
7.4.1 Work Breakdown Structure 313
7.4.2 Work Package Design 320
7.5 Combining the Organizational and Work Breakdown Structures 322
7.5.1 Linear Responsibility Chart 323
7.6 Management of Human Resources 324
7.6.1 Developing and Managing the Team 325
7.6.2 Encouraging Creativity and Innovation 329
7.6.3 Leadership, Authority, and Responsibility 331
7.6.4 Ethical and Legal Aspects of Project Management 334 Team Project 335 Discussion Questions 336 Exercises 336 Bibliography 338
8 Management of Product, Process, and Support Design 341
8.1 Design of Products, Services, and Systems 341
8.1.1 Principles of Good Design 342
8.1.2 Management of Technology and Design in Projects 344
8.2 Project Manager’s Role 345
8.3 Importance of Time and the Use of Teams 346
8.3.1 Concurrent Engineering and Time-Based Competition 347
8.3.2 Time Management 349
8.3.3 Guideposts for Success 352
8.3.4 Industrial Experience 354
8.3.5 Unresolved Issues 355
8.4 Supporting Tools 355
8.4.1 Quality Function Deployment 355
8.4.2 Configuration Selection 358
8.4.3 Configuration Management 361
8.4.4 Risk Management 365
8.5 Quality Management 370
8.5.1 Philosophy and Methods 371
8.5.2 Importance of Quality in Design 382
8.5.3 Quality Planning 383
8.5.4 Quality Assurance 383
8.5.5 Quality Control 384
8.5.6 Cost of Quality 385 Team Project 387 Discussion Questions 388 Exercises 389 Bibliography 389
Contents XXV
9 Project Scheduling 395
9.1 Introduction 395
9.1.1 Key Milestones 398
9.1.2 Network Techniques 399
9.2 Estimating the Duration of Project Activities 401
9.2.1 Stochastic Approach 402
9.2.2 Deterministic Approach 406
9.2.3 Modular Technique 406
9.2.4 Benchmark Job Technique 407
9.2.5 Parametric Technique 407
9.3 Effect of Learning 412
9.4 Precedence Relations Among Activities 414
9.5 Gantt Chart 416
9.6 Activity-On-Arrow Network Approach for CPM Analysis 420
9.6.1 Calculating Event Times and Critical Path 428
9.6.2 Calculating Activity Start and Finish Times 431
9.6.3 Calculating Slacks 432
9.7 Activity-On-Node Network Approach for CPM Analysis 433
9.7.1 Calculating Early Start and Early Finish Times of Activities 434
9.7.2 Calculating Late Start and Late Finish Times of Activities 434
9.8 Precedence Diagramming with Lead–Lag Relationships 436
9.9 Linear Programming Approach for CPM Analysis 442
9.10 Aggregating Activities in the Network 443
9.10.1 Hammock Activities 443
9.10.2 Milestones 444
9.11 Dealing with Uncertainty 445
9.11.1 Simulation Approach 445
9.11.2 PERT and Extensions 447
9.12 Critique of PERT and CPM Assumptions 454
9.13 Critical Chain Process 455
9.14 Scheduling Conflicts 457 Team Project 458 Discussion Questions 459 Exercises 460 Bibliography 467
Appendix 9A: Least-Squares Regression Analysis 471 Appendix 9B: Learning Curve Tables 473 Appendix 9C: Normal Distribution Function 476
10 Resource Management 477
10.1 Effect of Resources on Project Planning 477
10.2 Classification of Resources Used in Projects 478
10.3 Resource Leveling Subject to Project Due-Date Constraints 481
10.4 Resource Allocation Subject to Resource Availability Constraints 487
10.5 Priority Rules for Resource Allocation 491
10.6 Critical Chain: Project Management by Constraints 496
10.7 Mathematical Models for Resource Allocation 496
10.8 Projects Performed in Parallel 499 Team Project 500 Discussion Questions 500 Exercises 501 Bibliography 506
11 Project Budget 509
11.1 Introduction 509
11.2 Project Budget and Organizational Goals 511
11.3 Preparing the Budget 513
11.3.1 Top-Down Budgeting 514
11.3.2 Bottom-Up Budgeting 514
11.3.3 Iterative Budgeting 515
11.4 Techniques for Managing the Project Budget 516
11.4.1 Slack Management 516
11.4.2 Crashing 520
11.5 Presenting the Budget 527
11.6 Project Execution: Consuming the Budget 529
11.7 The Budgeting Process: Concluding Remarks 530 Team Project 531 Discussion Questions 531 Exercises 532 Bibliography 537
Appendix 11A: Time–Cost Tradeoff with Excel 539
12 Project Control 545
12.1 Introduction 545
12.2 Common Forms of Project Control 548
12.3 Integrating the OBS and WBS with Cost and Schedule Control 551
12.3.1 Hierarchical Structures 552
12.3.2 Earned Value Approach 556
12.4 Reporting Progress 565
12.5 Updating Cost and Schedule Estimates 566
12.6 Technological Control: Quality and Configuration 569
12.7 Line of Balance 569
12.8 Overhead Control 574 Team Project 576 Discussion Questions 577 Exercises 577 Bibliography 580
Contents XXVII
Appendix 12A: Example of a Work Breakdown Structure 581 Appendix 12B: Department of Energy Cost/Schedule Control Systems Criteria 583
13 Research and Development Projects 587
13.1 Introduction 587
13.2 New Product Development 589
13.2.1 Evaluation and Assessment of Innovations 589
13.2.2 Changing Expectations 593
13.2.3 Technology Leapfrogging 593
13.2.4 Standards 594
13.2.5 Cost and Time Overruns 595
13.3 Managing Technology 595
13.3.1 Classification of Technologies 596
13.3.2 Exploiting Mature Technologies 597
13.3.3 Relationship Between Technology and Projects 598
13.4 Strategic R&D Planning 600
13.4.1 Role of R&D Manager 600
13.4.2 Planning Team 601
13.5 Parallel Funding: Dealing with Uncertainty 603
13.5.1 Categorizing Strategies 604
13.5.2 Analytic Framework 605
13.5.3 Q-GERT 606
13.6 Managing the R&D Portfolio 607
13.6.1 Evaluating an Ongoing Project 609
13.6.2 Analytic Methodology 612 Team Project 617 Discussion Questions 618 Exercises 619 Bibliography 619
Appendix 13A: Portfolio Management Case Study 622
14 Computer Support for Project Management 627
14.1 Introduction 627
14.2 Use of Computers in Project Management 628
14.2.1 Supporting the Project Management Process Approach 629
14.2.2 Tools and Techniques for Project Management 629
14.3 Criteria for Software Selection 643
14.4 Software Selection Process 648
14.5 Software Implementation 650
14.6 Project Management Software Vendors 656 Team Project 657 Discussion Questions 657 Exercises 658 Bibliography 659
Appendix 14A: PMI Software Evaluation Checklist 660
14A.1 Category 1: Suites 660 14A.2 Category 2: Process Management 660 14A.3 Category 3: Schedule Management 661 14A.4 Category 4: Cost Management 661 14A.5 Category 5: Resource Management 661 14A.6 Category 6: Communications Management 661 14A.7 Category 7: Risk Management 662 14A.8 General (Common) Criteria 662 14A.9 Category-Specific Criteria Category 1: Suites 663 14A.10 Category 2: Process Management 663 14A.11 Category 3: Schedule Management 664 14A.12 Category 4: Cost Management 665 14A.13 Category 5: Resource Management 666 14A.14 Category 6: Communications Management 666 14A.15 Category 7: Risk Management 668
15 Project Termination 671
15.1 Introduction 671
15.2 When to Terminate a Project 672
15.3 Planning for Project Termination 677
15.4 Implementing Project Termination 681
15.5 Final Report 682 Team Project 683 Discussion Questions 683 Exercises 684 Bibliography 685
16 New Frontiers in Teaching Project Management in MBA and Engineering Programs 687
16.1 Introduction 687
16.2 Motivation for Simulation-Based Training 687
16.3 Specific Example—The Project Team Builder (PTB) 691
16.4 The Global Network for Advanced Management (GNAM) MBA New Product Development (NPD) Course 692
16.5 Project Management for Engineers at Columbia University 693
16.6 Experiments and Results 694
16.7 The Use of Simulation-Based Training for Teaching Project Management in Europe 695
16.8 Summary 696 Bibliography 697
Index 699
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