Project Management In Practice, Sixth Edition Solution Manual

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1/The World of Project Management1-1Chapter 1The World of Project ManagementThis chapter introduces the topic of project management. Projects are defined as temporaryendeavors undertaken to create a unique product or service. The chapter points out thatrecent interest in project management is based on a recognition that many organizational tasksdo not fit neatly into business-as-usual. The significant differences between projectmanagement and general management are overviewed.The chapter points out that the twoprimary roles of the project manager are managing trade-offs among the three interrelatedproject objectives and managing risk.The three interrelated objectives of budget, schedule,and specifications are also introduced. In addition, two alternative project life cycles arepresented and the importance of understanding this distinction is discussed. Also included inthe chapteris a discussion of project selection including both non-numeric and numericselection methods. The chapter concludes with a discussion of the aggregate project plan andan overview of the organization of the remainder of the text.Cases and ReadingsSome cases appropriate to the subject of this chapter are:Harvard: 9-688-040 Boeing 767: From Concept to Production (A); 9-688-041 (B) 9-888-519Videotape.This 19 page best-selling case shows how a massive corporation manages theevolution of an enormously complex and risky project from conception to manufacture. The 1-page B case is a supplement update about whether Boeing needs to change the way theymanage such projects. The video shows the assembly process of an airplane, compressing 10weeks of work into ten minutes. Good introductory case to the idea oflarge-scale projects. An18 page teaching note is available for this case (9-689-027).Harvard: 9-396-311 BAE Automated System (A): Denver International Airport Baggage-Handling System.This 15-pagecase describes the difficult, continually-delayed Denver airportproject from the viewpoint of one of the contractors. Includes issues of budgeting, scheduling,planning, contracting, and other managerial aspects of this large project. There is also a (B)case, described in Chapter 7: Monitoring and Controlling the Project. A 32 page teaching note isavailable for this case (5-399-099).Harvard: 9-692-083 BMW: The 7-Series Project (A); 9-695-013 (B).This 20-page best-sellingcase describes the situation of a manufacturer with a high-quality product trying to selectamong two processes for producing its new model. The proposed project for initiating a newproduction process promises to eliminate start-up production problems and improve qualitybut may be less flexible for downstream product improvements. A 13 page teaching note isavailable for this case (5-692-094).

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1/The World of Project Management1-2Harvard: 9-689-073 Plus Development Corp. (B) (Abridged); 9-693-064 (C).These two cases,normally meant to follow the (A) case (see Chapter 2), describe the need for this corporation toselect between alternative methods of product development. The situation is exacerbated bycompetitors’ aggressive actions in the market andmixed results with current developmentprocedures. A 21 page teaching note is available(5-690-093).Some readings appropriate to the subject of this chapter are:J.K. Pinto et al. Lessons for an Accidental Profession(Business Horizons, March-April 1995).This reading describes the common occurrence of someone suddenly being appointed a projectmanager and finding he or she has been inadequately trained for the task. Based on theauthors’ own experiences and interviews with dozens ofsenior project managers, they distilltwelve guidelines for new project managers. The guidelines run the gamut from projectinitiation, through planning, to execution, to close-out.Some are technical, some areuncommon sense, and many are philosophical, and sometimes political. But they are sageadvice, not only for the novice but for the experienced projectmanager aswell.1.Cooke-Davies (2002).The real success factors on projects(International Journal ofProject Management,vol. 20, #3, pp 185-190).This reading uses three questions to question on which factors are critical to projectsuccess. The questions are: ‘‘What factors lead to project management success?’’,‘‘What factors lead to a successful project?’’ and ‘‘What factors lead to consistentlysuccessful projects?’’ This paper is based on empirical research from more than 70 largemulti-national or national organizations It i identifies 12 factors that are, in one way oranother, critical to project success.2.Thomas, G & Fernández, W. (2008), Success in IT projects: A matter of definition?(International Journal of Project Management, 26, 733-742).This reading investigateshow project management success is defined and measured within companies indifferentindustries. The study was done in Australia andprovides an internationalperspective on project success. The authorssuggest that when success criteria areformally defined and then measured, IT project outcomes are improved and projectresources are better utilized.

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1/The World of Project Management1-3Answers to Review Questions1.What is the primary role of a project manager?How are the primary roles related to oneanother?The primary roles of the project manager aremanaging the tradeoffs among the threeproject goals(cost, scope, time)and managing risk.The primary roles are related to oneanother in thatto some extent they can be traded-off for one another. For example,managing risk is about managing uncertainty. One uncertainty is whether the project willbecompleted on time. One way to manage the uncertainty associated with the projectbeing completed on time is to pad the project due date.2.Contrast a project from anonproject.The difference between a project and anonprojectis not always crystal clear. At base,however, projects are unique, have a specific deliverable, and have a specific due date whilenonprojectsusually do not have all these characteristics.3.Contrast win-lose negotiation, lose-losenegotiationand win-win negotiation and explainwhy the latter is so important in project management.Win-lose negotiation is like a zero-sum game. Anything one side wins is a loss for the otherside. In win-win negotiation, the outcome is such that both parties gain something from theinterchange.Win-lose negotiating is dangerous for project managers who will have to deal with the sameparties over and over again. The project manager who forces a functional manager to losewill have created a permanent enemy.4.Identify the three goals of a project. What does it mean for a project to be“overdetermined?”The three goals of a project are:1.On time,2.On budget, and3.To specification (i.e., including “quality” and “client satisfaction”).Anoverdeterminedproject is one that has a fixed budget, fixed delivery time, and fixedspecifications (i.e., all three goals are fixed). In reality, projects must have some flexibility toallow for chance events. In the case of anoverdeterminedproject, there is no allowance forany such events.

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1/The World of Project Management1-45.Contrast the two types of project life cycle and discuss why it is important to know whichtype the current project is following.The traditional project life cycle (the S-shaped curve) is concave to the baselineduring thelast stages in the project life (i.e., the curve runs parallel to the x-axis). Some projects,however, have a life cycle curve that is convex to the baseline at the end of the project life(i.e. the curve runs parallel to the y-axis). This isknown as a J-shaped curve).The main reason one should understand the difference is that resource allocation for thetwo types is quite different. (Cf. Chapters 4 and 6.)6.How does the weighted scoring approach avoid the drawbacks of the NPV approach? Canthe two approaches be combined? How? What weights would be appropriate if theywere combined?The weighted scoring model allows the introduction of nonmonetary and even qualitativeelements into the selection criteria. It also allows long-run benefits and risks to beconsidered.The two approaches can be combined by including NPV as a criterion in the scoring model.Criteria weights are always selected with the approval of the organization’s senior policymakers, but typically the weight on NPV will be quite high if not the highest.7.Why is it suggested thatfactors with less than 2 percentor 3 percent impact not beconsidered in this approach?Dealing with criteria with such small impact on the final choice uses considerable amount ofthedecision makers’ time and effort and contributes little to the choice.8.Draw a distinction between a project and a program. Why is the distinction important?A program is a large generalizedeffort consistingof acoherent, often integratedset ofprojects.The distinction is important because to accomplish a program, it is critical to manage itsconstituent projects so that they make an optimum contribution to the overall program.This is the basic principal behind the creation of a “project portfolio.”9.Why are R&D projects in a company’s Aggregate Project Plan significantly different in typefrom the firm’s Derivative, Breakthrough, and Platform projects?R&D projects seek to develop new knowledge which hopefully will become the basis for oneor more of theotherthree types of projects: breakthrough, platform, and derivative.

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1/The World of Project Management1-5Suggested Answers to Discussion Questions1.Contrast the three types of nonnumeric project selection methods. Could anyspecificcase combine two of them, such as the sacred cow and the operating necessity, or thecomparative benefits and the competitive necessity?The three types of non-numeric selection models are quite similar in that they have set asingle criterion for choice. They differ in that the criteria are different.An example of using a combination of the sacred cow and the competitive necessity criteriamight be a case where a project is set up to find a new and more effective advertisingcampaign to improve sales for a product suggested by the CEO.A combination of comparative benefits and the competitive necessity models might be usedto choose the appropriate extensions for an application software program that seems toolimited in its current level of development to maintain its place in the market.2.What errors in a firm’s project portfolio might the Wheelwright and Clark aggregateproject plan graphically identify?The method will allow senior management to identify the absence or over/underrepresentation of any of the four types of projects; derivative, platform, break through, andR&D. Management can then control the number and direction of each of the types as wellas the types as a set or portfolio.The representation might not just be limited to thenumber of projects but also the resource size of the projects, or their timing.3.You are the project manager of a team of software specialists working on a project toproduce a piece of application software in the field of projectmanagement. Give someexamples of things that might go wrong on such a project and the sorts of trade-offs youmight have to make.Some of the things that might go wrong would include:The project could be delayed … and the project manager couldrespond bycontracting out, at a higher cost,some of the code writing to shorten theduration of that activity.The project could exceed its budget … and the project manager couldrespond by negotiating for the removal of some of the less-importantprogram capabilities, that is, reducing the scope.

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1/The World of Project Management1-64.In Figure1-5, what distribution of large and small circles and squares across the fourboxes would characterize a strong, well-positioned product development business? Aweak business?A well-positioned product development business would generally be characterized by anappropriate mix of R&D, breakthrough, platform, and derivative projects. Generallyspeaking, a strongproduct developmentcompany will have a mix of all four types ofprojects with the appropriate mix determined by the organization’s overall businessstrategy. For example:Organizations that compete by offering a continuous stream of new products basedon the latest technology would likely have a high proportion of breakthrough andR&Dprojects, some platform projects, and very few, if any, derivative projects.On the other hand, an organization that competes in relatively mature markets onthe basis of costs may have alower proportion, or no, R&D projects and ahigherproportion of derivative projects.A weak and poorly-positioned product development business is generally characterized bytoo large a proportion ofsimplederivative projects and a mix of projects that are weaklylinked to its overall business strategy.5.Give several examples of projects found in your city, region, or country–avoiding thoseused as examples in the chapter.Some projects which might be given as examples include:1.Construction of a sports stadium.2.Offering a New ParentsWorkshop at a church.3.Building of a large mall or shopping center.4.Repaving of streets and highways.5.Organizing the homecoming at a local college.6.Organizing and conducting a military training exercise.7.Conducting a census of the population.8.Organizing and holding a political convention, and,9.Conducting a bank robbery.6.For each of the projects identified in the answer to Question 5, is the life cycle for theproject S-shaped or J-shaped?Construction of a sports stadium–S shapedNew Parents Workshop—S or J shaped

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1/The World of Project Management1-7Building of a large mall or shopping center–S shapedRepaving of streets and highways–S shapedOrganizing the homecoming at a local college–J shapedOrganizing and conducting a military training exercise–S orJ shapedConducting a census of the population–S shapedOrganizing and holding a political convention–Sor JshapedConducting a bank robbery–J shaped7.Construct a list offactors, conditions, and circumstances you think might be important fora manufacturing firm to evaluate during the project selection process. Do the same for acomputer repair shop.Manufacturing firmProduction factors:Energy requirements, time required for installation, raw materialusage.Marketing factors:Potential market size, probable market share, time till target marketshare is acquired, estimated life of product.Financial factors:Profitability, effect on cash flows, time until breakeven.Personnel factors:Labor requirements, availability of appropriate labor, impact onworking conditions.Other factors:Impact on environment, meetinggovernment safety standards, patentprotections, impact on our image in the industry.Similar factors could be identified for the computer repair shop as well as others such as:Customer service:Time to repair, cost to repair,reputation.8.How might you use project management in doing a major school work assignment?The strong emphasis onplanning and scheduling will increase the likelihood of finishing aterm project or paper on time. The planning also improves the chance that the project willbe well-structured and have the appropriate content.9.What advantages are lost if the sum of the weights in a weighted scoring approach doesnot add to 1.0?If the weights in a scoring model are normalized to sum to 1.0, each individual weightbecomes the percent contribution that criterion makes to the score of whatever is being

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1/The World of Project Management1-8considered. This makes it simple and quick to see the relative value of that criterion againstthe others.10.Why is it important for a project to have “flexibility”?Flexibility is needed in every project because projects are carried out in an uncertain worldwhich often impedes one or more of the project’s goals. This is why projects should not be“over determined.”Solutions to Exercises1.A four-year financial project is forecast to have net cash inflows of $20,000; $25,000;$30,000; and $50,000 in the next four years. It will cost $75,000 to implement the project,payable at the beginning of the project. If the required rate of return is 0.2, conduct adiscounted cash flow calculation to determine the NPV.In order to answer this question, the student needs to discount the cash flows in years 1through 4 ($20,000, $25,000, $30,000 and $50,000 respectively) to the present using a 30%discount rate and compare this value with the initial outflow of $75,000. Using theNPV Excelformula gives the following analysis:2.A company has established a project team to identify a location for a new manufacturingfacility. Use a weighted scoring model to analyze three candidate locations (A, B, C) forsetting up the new factory. The relative weights for each criterion are shownin thefollowing table. A score of 1 represents unfavorable, 2 satisfactory, and 3 favorable.123456789ABCDEReq Rate of Return20.0%YearCash Flow0-$75,0001$20,0002$25,0003$30,0004$50,000NPV$502=B4+NPV(B1,B5:B8)

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1/The World of Project Management1-9This exerciserequires that the student set up a matrix as indicated below:As shown in the spreadsheet above, location C is the best location based on the weightedscores (i.e., it has the highest value).Note:These weights happen to sum to 100 but this is not necessary. Of course, when theweights are normalized they must sum to 100 except for rounding errors.3.(a) Compare your answer in Exercise 2to the answer you would have found if you hadused anunweighted, 0-1 scoring model. Assume that a score of 1 means does not qualifyand a 2 or 3 means it does qualify.As shown below, that would result in a score of five for all three projects.1234567891011121314ABCDEFCategoryWeightABCLabor costs20123Labor productivity20231Labor supply10213Union relations10332Material supply10211Transport costs25123Infrastructure5222Score165210225=SUMPRODUCT($B2:$B8,C2:C8)copy to cells D10:E10

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1/The World of Project Management1-10LocationCategoryABCLabor costsxxLabor productivityxxLabor supplyxxUnionrelationsxxxMaterial supplyxTransport costsxxInfrastructurexxxCount555(b) Next, revise theunweightedmodel by deleting all categories that, as recommended, havea weight of less than 20 percent. Compare to your answer to (a) above and also Exercise 2.Which method seems best?Deleting all categories that have a weight of less than 20 percentresult in selecting B with acount of three, as shown below.LocationCategoryABCLabor costsxxLabor productivityxxTransport costsxxCount1324.Using aspreadsheet for Exercise 2, find the following: (a) What would beyourrecommendation if the weight for the transportation cost went down to 10 and theweight for union relations went up to 25?The spreadsheet can be modified by changing the two weightings as follows:The entry in cell B5 is changed from 10 to 25, andThe entry in cell B7 is changed from 25 to 10.The result of these changes is changes results in location A having a score of 195, location B ascore of 225, and location C a score of 210. Location B, therefore, is the preferred location.

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1/The World of Project Management1-11(b) Suppose location A received a score of 3 for transport cost and location C received a scoreof 2 for transport cost. Would your recommendation change under these circumstances?The spreadsheet can bemodified by changing the two evaluations as follows:The entry in cell C7 is changed from 1 to 3, andThe entry in cell E7 is changed from 3 to 2.Making these changes results in location A having a score of 215, location B a score of 210, andlocation C a score of 200. Location A is, therefore, the preferred location.(c) The VP of Finance has looked at your scoring model and feels that tax considerationsshould be included in the model with a weight of 15. In addition, the VP has scored thelocations on tax considerations as follows: A-3, B-2, and C-1. How does this affect yourrecommendation?The spreadsheet shown in Exercise2 can be modified as shown below by adding a new row fortax considerations. According to the results shown below, including tax considerations resultsin locations B and C bothhaving an identical score of 240.23.Nina has been asked to lead a team that has been tasked with finding a new location fora boutique concept her company would like to test. The team hasidentified fourcandidate shopping centers to locate the new boutique in. Some cater to a higher class ofclientele than others, some are in an indoor mall, some have a much greater volume thanothers, and, of course, rent varies considerably…

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1/The World of Project Management1-12Based on the information provided, Nina believes that Clientele is the most importantfactor. We therefore somewhat arbitrarily assign this factor a weight of 100. Next, Rent isestimated to be 90% as important as Clientele so it is assigned a weight of90 (100.90).The weights for Indoor mall and Volume are 85.5 (90.95) and 72 (90.80), respectively,and are calculated in a similar fashion.According to the results shown in the spreadsheet below, Nina should select Location 1since it has the highest score.6.Using a spreadsheet for Exercise5, determine how Nina’s ability to negotiate a lower rentat location 3, thereby raising its ranking to “good,” will affect the overall rankings of thefour locations.Using the spreadsheet forExercise5and changing cell E5 from 1 to 3 increases the score ofLocation 3 from 662.5 to 842.5 and thus from having the lowest score to the second highestscore.Note:since the scores for the otherthreelocations are not impacted by this change, the overallrecommendation (location 1) remains unchanged.1234567891011121314ABCDEFWeight1234Clintele1002313Rent903213Indoor85.53131Volume723231Score942.5709.5662.5727.5Location=SUMPRODUCT($B4:$B7,C4:C7)copy to cells D9:F9

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1/The World of Project Management1-13Incidents for Discussion Suggested AnswersBroken WeldsQuestion: What information does Alison need to determine the probable impact of Kelsey’sproposed project on the other projects in the department?Alison needs the following information to estimate the cost/benefits of starting Kelsey’s project,namely:oAn estimate of the rework charges for failed welds and the estimated number ofwelds that will have to be redone. Kelsey’s project may stop these costs.oA rough estimate of the time and resources required to carry out Kelsey’s proposedproject.oThe impact the immediate use of these resources will have on the department’sother projects over the estimated life of Kelsey’s project.Question: Should her findings affect her decision about Kelsey’s project? How?For any current projects delayed, the projects’ benefits may be delayed and this is also a costassignable to Kelsey’s project. These costs and benefits should immediately be shown to theChief Engineer before proceeding with Kelsey’s project though Kelsey may do some informalinitial planning.

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1/The World of Project Management1-14Suggested Case Analyses and SolutionsFriendly Assisted Living Facility–1Teaching Purpose:The FriendlyAssisted Living Facility cases comprise a set of cases beginningin this chapter and are all associated with the same project–the planning, building, andmarketing of an assisted living facility for people whose state of health makes it difficult forthem to live independently, but who are not yet ill enough to require nursing home care. Inthis initial installment of the case, students address issues related to the project deliverables,project constraints and assumptions, the development of an actionplan, and the selection of aproject manager.1.Identify as well as you can the three iron triangle constraints for this project: cost, time,and scope.Cost: $11 million;Time: start after Nov 20X6, finish by July 20X7;Scope: construct a project plan, purchase land, purchase furnishings, purchase materials andcontract labor to construct building and connection, and train staff in the new facility services.2.Identify the expected benefits of this project for Friendly Medical Center.A profit program for the Center but under their control that would gain net cash flow of $1.5million/year;Improve the local image of Friendly Medical Center;Gain additional referrals to the Center’s outpatient therapy programs;Increase the census in the hospital’s inpatient units, andProvide better care for the community in terms of reimbursable preventive and wellnessprograms.3.Comment on the strategic initiatives resulting from the Board’s major strategic planningretreat. Would you consider this a productive retreat?The outcomes of the retreat were rather shallow. Better would have been to have come up withthese two initiatives at a special board meeting and then collect data to decide at the retreat whatareas to focus on for improving the cost effectiveness of patient care delivery and what alternativesto explore in more detail for new programs and services that would capitalize on their excellentstaff and reputation.

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1/The World of Project Management1-154.What “project selection” procedure was used here? How common do you think this is?How wise do you think it is?This was basically a “sacred cow” approach by the CEO, probably not that uncommon. Although the ideasounds like it could be a success, we don’t see any risk analysis being considered, or the consideration ofother alternatives that might have been even more promising.HandstarInc.Teaching Purpose:This case requires students to rank a number of candidate projects usingboth the NPV approach and the weighted scoring model approach. The case demonstrates howthe NPV approach can be combined with the weighted scoring approach in evaluating projects.Question 1: Which projects would you recommendHandstarpursue based on the NPVapproach?The spreadsheet bellow summarizes the NPV calculations for the six projects assuming thedevelopment costs are incurred at the end of year zero and each product has a three year life.Since the six projects require a total of 13,025 development hours andonly 10,000 hours areavailable, one or more projects will need to be postponed or eliminated from furtherconsideration.If we start with the project with the highest NPV, the Browser project would be selected firstrequiring 1,875 hours of development time. Next, the Trip Planner would be selected requiringan additional 6,250 hours of development time. The project with the next highest NPV is theSpreadsheet project. However, this project requires 2,500 hours and only 1,875 hours areavailable after selecting the Browser and Trip Planner projects. The project with the nexthighest NPV is the Calendar/Email project whichrequires 1,250 hours of development timeleaving 625 hours available. Of the remaining projects, the Portfolio Tracker requires too manyhours while the Expense Report project can be completed with the hours available. Thus,Browser, Trip Planner, Calendar/Email, and the Expense Report projects would be selectedbased on the NPV approach.For students that have been exposed to optimization and Solver, a better approach for solvingthis problem is to set it up as an optimization model where the objective function is tomaximize the total NPV subject to the available hours.

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