The Project Notebook

Just Think of all the Money That We’ve Saved!

By: Susan Peterson, M.B.A., PMP
Copyright 2013, Susan Peterson, All Rights Reserved
No part of this article may be used or reproduced in any manner whatsoever without written permission of the author.

Organizations continue to enforce relentless cost reduction efforts in the face of global competition. Given the emphasis on minimizing costs, virtually every project manager has had at least one project budget that is woefully inadequate. After so many years of hearing “less is more”, “lean and mean”, and other well-worn clichés, project managers have come to expect that initial budgets will seldom be realistic to achieve expectations. This article explores some legal “creative financing” options to address the challenges of underfunded projects.

The “Right” People

Quantity and quality are not synonyms in the project management world. While selecting the right human resources for a project does not necessarily mean getting the most “expensive” personnel, acquiring those people with appropriate skills and relevant expertise does take concerted effort. It means taking time to carefully review resumes, to conduct meaningful interviews, and to ponder the potential effectiveness of the mix of people on the project team. Of course, the “right” people are typically in great demand to participate on multiple teams. Therefore, a project manager may need to rearrange activities and/or dependencies so that the appropriate people can participate. Typically, a few “good” people can outperform a large number of lesser talented resources in a shorter time period. Rescheduling is well worth the effort when it results in fewer personnel costs as well as a shorter time to implementation.

“Time is Money”

In an attempt to keep costs at a minimum project managers are often given completion dates that are unrealistic. Organizations believe that an aggressive timeframe keeps everyone motivated and does not allow for the cost overruns often associated with lengthy projects. Competitive pressures may also drive a tight time schedule. After all, being “second to market” is not a goal for most companies. In the face of this focus on time project managers need to assess what really needs to be accomplished on a project. This assessment needs to be made before developing the project schedule so that any tasks that are not essential to complete the core requirements can be eliminated. Too often project managers attempt to complete “everything” that is requested. In this futile effort the project may actually not accomplish anything concrete. In such situations the project either has to obtain more money in order to complete anything or has to be severely downsized or even scrapped. Any of the preceding three situations means that money has been wasted. It is better to complete a basic deliverable than to deliver only promises.

“We Can Fix It Later”

Every project includes some interim deliverables prior to the final deliverable that do not turn out as planned. The tendency is to say, “We can fix it later”. However, “later” seldom comes, and so the inadequate interim deliverables do not meet expectations. If an interim deliverable is part of a larger downstream deliverable, there can be a cascading failure effect. (Remember the Challenger’s “O” rings?) Even if the interim deliverable stands alone, its implemented version may not be used or worse yet, may result in a “work around”. The potential for interim deliverable failure needs to be a part of proactive contingency planning with scheduled backup tasks and resources to address those deliverables that truly need fixing now not later.

In summary, there are creative methods to stretch budget dollars effectively. While the tendency is to focus directly on costs, the concepts discussed in the above article represent some other types of actions that can be effective when project budgets are anything but realistic.

Susan Peterson, M.B.A., PMP, is a consultant who manages diverse programs and projects in both the private and public sectors for individual organizations and consortia. She also conducts enterprise assessments of project portfolio management practices. Prior to establishing her consulting practice Susan led major efforts for Fortune 100 organizations throughout the United States. She teaches the Project Management Simulation capstone course in the University of California, San Diego, Project Management certificate program and is a member of the curriculum advisory committee. She can be contacted at susanada@aol.com.

Smaller is Better and More Effective

By: Susan Peterson, M.B.A., PMP
Copyright 2012, Susan Peterson, All Rights Reserved
No part of this article may be used or reproduced in any manner whatsoever without written permission.

It seems as if everything comes in larger and larger sizes — including projects. While a giant pizza or a super-sized drink may be refreshing, a large and complex project often seems overwhelming to all participants as well as to the project manager. This article focuses on “small” approaches to major projects.

The presence of many unknowns is one of the most challenging aspects of projects. Regardless of the sources of the unknowns — technical specifications, scientific barriers, market demand, etc. — the project manager is the one who must provide the direction and the methods to convert unknowns into knowns. This responsibility does not mean that the project manager must be the one who conducts the research necessary to solve the mysteries. Rather, the project manager must assess the strengths of the team not only in terms of specific expertise but also in terms of problem identification and solution skills. All the knowledge in the world is useless if it is applied to a symptom instead of a problem. Determining when “enough” information has been assembled is also a critical assessment. Therefore, using a few people who can identify relevant problems and quickly resolve them is more effective than having an entire team running in multiple, counterproductive directions.

Another challenge occurs when a lengthy timeframe is estimated for project completion. Virtually every project of this nature needs to use a phased approach rather than attempting to schedule all of the activities at the beginning of the project. For example, a project to develop a new drug may span many years before the drug is finally brought to market. While a project manager may be tempted to fully populate a Gantt chart with thousands of activities that culminate in product release, a more effective approach is to “plan only what you know”. This technique means that accurate time estimates can be made only for the initial phase of research. The high-level project plan should definitely have milestones and deliverables defined for the full length of the project. However, there is no point in detailed planning beyond the first phase until there are indications of success. Even then, the detailed planning should only extend to the next phase. This practice forces an organization to identify upfront the criteria for success for each phase as well as to require that projects continue to “prove themselves”.

Most large projects require large project teams. In these situations individual participants may feel that their contributions are not necessary or valued. Large project teams provide lots of opportunities for people to “hide” or even “disappear”. Meanwhile, the project manager gets hounded as to why there is not a high volume of work forthcoming from such a large number of team members. Running “lean and mean” (using a small project team) is one method to ensure that each team member has high visibility and accountability. This method is not always practical given the amount of work that may be required to complete a project. In those cases that mandate a large number of participants, a more appropriate technique is to organize the total large project team into smaller teams within the project. Each team has a leader who can be chosen by the project manager or by the team. This method may require a different approach to project planning through specifying more tangible deliverables. However, it also keeps individuals focused on near-term accomplishments with defined responsibilities. Those who choose to “hide” or to attempt to “disappear” are quickly identified before their lack of participation negatively impacts project outcomes. At that point project management mentoring, coaching, and/or disciplining can be initiated in a timely manner.

The main emphasis behind all of the techniques and practices that have been described in this article is that even “super-sized” projects need not be overwhelming for project managers. Whether it’s building an aircraft carrier, chairing a fundraiser, or cleaning the garage, “smaller is better and more effective” when it comes to project management.

Susan Peterson, M.B.A., PMP, is a consultant who manages diverse programs and projects in both the private and public sectors for individual organizations and consortia. She also conducts enterprise assessments of project portfolio management practices. Prior to establishing her consulting practice Susan led major efforts for Fortune 100 organizations throughout the United States. She teaches the Project Management Simulation capstone course in the University of California, San Diego, Project Management certificate program and is a member of the curriculum committee. She can be contacted at susanada@aol.com.

Contractor/Vendor Selection: Bridging The Communication Gap

Susan Peterson, M.B.A., PMP 2008,
Copyright Susan Peterson, All Rights Reserved

In the continuing series on outsourcing project work this month’s column addresses the challenges related to selecting those individuals and/or organizations that will provide the expertise needed for specific activities. All too often this process is filled with “communication disconnects” in documenting what is needed from contractors/vendors. Whether one uses requests for proposal (RFPs), requests for information (RFIs), or other types of vendor solicitation documents, clear definition is critical. I have participated in the election process in multiple roles including leading the selection process, writing solicitation documents for clients, and responding to client proposals. The following areas are primary considerations to effectively facilitate the project vendor selection and subsequently the contracting process.

Be specific — even if it hurts.
There is no substitute for clarity in specifying what activities need to be performed. Too often project leaders feel that there is not enough time to fully document requirements or specifications. They also may feel that providing detailed documentation means that there will be no room for negotiation if there are changes during the project. Sometimes, there are situations when many of the details regarding a project work need are unknown. In any case, providing more clear definition is better than merely documenting the are minimum requirements. In those instances where little is known, the solicitation document can state the situation and request that the respondents provide their best solutions. Otherwise, the vendors will be forced to respond vaguely or to guess (often incorrectly) about what was intended.

The project manager should also include a template for responses in order to obtain usable information that is comparable across all responses. For example, a cost template should be provided so that the breakout of costs can be readily compared among vendors. Vendors have a variety of costs that may or may not be included in an hourly rate, so the project manager needs to know what is covered in order to avoid surprises later. Also, it may appear to speed the review of responses by including a number of expertise or capability questions that can be answered “yes” or “no”. However few respondents will answer “no”, knowing full well that a ”no” response can be the basis for rejection while there is “always a way” to provide the “yes”.

“How ‘good’ is ‘good’”?
In order to avoid nasty confrontations during the course of the project that are always counter-productive, the solicitation should include tangible definitions of quality and performance. These definitions should correlate not only with the final deliverables but also with appropriately scheduled interim deliverables. If the potential respondents have not performed project work for the organization in the recent past, these interim deliverables may be scheduled more frequently. Acceptance criteria should also be clearly defined. For example, there are numerous “horror stories” about the disasters caused by the interpretation of “The
software has been fully tested”.

It never gets any better than the “courtship”
One would assume that potential contractors/vendors would present their best possible images to project managers during the selection process. However, I have seen solicitation responses that consisted of photocopied pages stapled together in no apparent sequence. Conversely, I have also seen responses that ere nothing but “color-coordinated glitz”. While few relationships are perfect, the project manager needs to assess the overall caliber of a contractor/vendor’s response in order to better predict the quality of the future relationship.

Contractors/vendors are human beings.
I once heard about a company that circulated many solicitations but that never awarded any contracts. This company took all of the responses and used the information to conduct the work in-house. It is expensive for contractors and vendors to respond to project solicitations. These costs are not recoverable. Project managers need to be prudent in soliciting responses to proposals. Once the contract has been finalized, all respondents should be notified. While a contractor/vendor may not be suitable for one project, it may be a “good fit” for other projects.

As with all successful relationships, effectively working with outside project personnel requires good upfront research, objective review, and ongoing management. Next month’s column concludes the outsourcing series with best practices to manage contractors/vendors in a project environment.

Susan Peterson, M.B.A., PMP, is a consultant who manages diverse programs and projects in both the private and public sectors for individual organizations and consortia. She also conducts enterprise assessments of project portfolio management practices. An overview of her program and project specialties is available at http://www.pmi-sd.org/Consultants. She teaches the Project Management Simulation capstone course in the University of California, San Diego, Project Management Certificate program and is a member of the curriculum committee. She can be contacted at susanada@aol.com.

Outsourcing Sounds Good — But What’s The Cost?

By: Susan Peterson, M.B.A., PMP Copyright 2008, Susan Peterson, All Rights Reserved

Continuing the column series theme of outsourcing, let’s assume that you’ve decided that your project has some definite needs for expertise and/or skills that are not found or that are not readily available inside your organization. As mentioned in last month’s column, the base cost of an activity can be an illusive factor to accurately calculate. There are a number of considerations to assess when determining the “true” cost of performing work. In addition to the base cost, organizations that perform outsourced work will include at a minimum a profit margin and an overhead factor. A project manager who is considering outsourcing needs to be prepared with realistic assessments in advance of contractor negotiations. In this month’s column we cut through some of the “smoke and mirrors” that seem to accompany so many cost estimates and uncover the underlying factors that are major influences of project work costs. Think of the following narrative as a bridge etween accounting textbooks and grim reality.

Do we “have a clue” what it costs us to do this work in house?
Even when using the most sophisticated project accounting systems, it may be difficult to isolate typical costs for specific types of work. A good starting point is to define and document the tasks, the performance measures, and the “allowable” variances. Another critical component of this exercise is to assess areas of risk and to determine which risk areas will be transferred or shared as a part of an outsourcing relationship. Once all of this information has been compiled, an estimate of in-house hours and costs can be determined. Typically, this estimate will be higher than project sponsors want to acknowledge. A project manager needs to hold firm amidst pressure to eliminate tasks in order to “cut costs”. Providing an overly optimistic estimate of work required to an outsourcing organization invariably leads to additional charges and schedule extensions hen the actual hours overrun the false estimate.

What don’t we know?
There are those situations when organizations do not know all of the factors about the work that needs to be performed because the work has never been done in-house. Particularly if the work involves new or unproven technology, custom equipment, or specialized skills, project managers may feel unqualified to estimate the actual level of effort that is involved. In these cases some upfront research is necessary. While a project manager may not uncover all of the aspects related to a particular activity, he/she should obtain enough information to avoid being “blown away” by potential contractors that may inflate the effort, complexity, and investment necessary to perform specific work. It is also necessary that the project manager have a “healthy respect” for the actual challenges that are inherent in unfamiliar work.

Let’s “get real” about our expectations
One of the more prevalent areas of misunderstanding between organizations and contractors concerns expectations. While project managers may believe that specifications and requirements have fully documented every aspect of each activity and deliverable, there are unwritten expectations that are assumed. Often these expectations are based on the work culture of the organization. The bottom line about expectations is “don’t ake anything for granted”. Some areas that the organization needs to consider include the following:

• Project management — What project management practices are used in-house? Is the project manager expected to oversee the contractor’s personnel, to be responsible for quality of outsourced deliverables, etc?
• Service levels — How accessible do contractor management and personnel need to be (especially important in global outsourcing)? What turnaround is expected on interim decisions? Are a number of decisions made “on the fly”?
• Deadlines — What does “completed” really mean for each deliverable?
• Unanticipated problems — What degree of flexibility or agility is considered the “norm” in-house, meaning are problems “worked around”, solved, or ignored?

Readers will note that no traditional accounting principles were detailed in this discussion of project cost considerations. While there are numerous publications that address specific quantitative approaches, it is the realistic definition of work, risk, and expectations that must be determined before any cost numbers can be ffectively applied.

Susan Peterson, M.B.A., PMP, is a consultant who manages diverse programs and projects in both the private and public sectors for individual organizations and consortia. She also conducts enterprise assessments of project portfolio management practices. An overview of her program and project specialties is available at http://www.pmi-sd.org/Consultants. She teaches the Project Management Simulation capstone course in the University of California, San Diego, Project Management certificate program and is a member of the curriculum committee. She can be contacted at susanada@aol.com.

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© 2010-2012 Ray W. Frohnhoefer, MBA, PMP, CCP