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Chapter 5 of Project Management for Supplier Organizations (978-1-4724-1109-9) by Adrian Taggart

A Generic Project Lifecycle Model

Chapter 5

This chapter is concerned with the description of a generic lifecycle of a project. Such an exercise provides a very valuable insight into the nature of projects.

Firstly, we shall consider how a project comes into being.

Genesis of a Project

Do our lives start at birth or conception?

The question is posed to indicate that, although we conveniently bracket our lifecycle with the events of birth and death, the story is a little more involved. Similarly, although we may recognize the start of the project as the signing of a formal mandate (a Business Case or a charter) there is actually a lot of work required to get to this stage.

All projects have some form of genesis when someone perceives of an opportunity or threat that should or could be addressed. However, that is not to say that all ideas become fully funded projects, and it is not to say that absolute clarity about the idea exists at this stage.

Often, responses to a number of threats or opportunities come together as one initiative. Alternatively, some fragment into a number of separate initiatives. Sometimes, different people will have different ideas and perceptions of how a specific threat or opportunity should be addressed, whilst others may view different opportunities as being more urgent. In such instances, they may launch what may be referred to as ‘counter-moves’ (Miller and Lessard, 2000).

Estimates and predictions made during these earliest timers are the most unreliable and imprecise and it is rarely clear which is the best way to proceed.

 
Figure 5.1 Project genesis

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The chaotic nature of this early ‘ideas stage’ of a project is depicted in Figure 5.1 above, with competing ideas and environmental factors being stirred and churned as organizations strive to find the most advantageous way forward.

Although all projects start with this stage, most of us would not recognize that a project exists until there is an authorized budget, an appointed delivery team and a clear objective. This implies some form of approval or authorization threshold, across which the project has to pass.

Establishing the exact position of this threshold is a difficult prospect for an organization because crossing the threshold requires decisions to be made about which ideas and options to pursue. But, before an idea can be assessed, its rationale must be demonstrated. But, to demonstrate this rationale, work must be done, and this requires time and resources. But, before resources for this work can be released, authorization is required … and so the cycle repeats.

This ‘chicken and egg scenario’ is predominantly managed via the phases and Decision Gates of a lifecycle, as discussed in the previous chapter, but it does make it difficult to decide exactly when a project is deemed to have started.

In a practical sense, the threshold demarcates between the project environment and the ‘business as usual’ environment and within individual organizations is often established on the basis of which budget is being spent. After the threshold, a dedicated and authorized project budget is available, but prior to this, the early feasibility and scoping work is funded from an annual budget established by each department for initiatives they identify.

Project Lifecycle

Figure 5.2 describes the generic lifecycle model offered by the APM (2006).

 
Figure 5.2 The project lifecycle

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Source: Adapted from APM (2006).

Although other models exist, this model is selected for discussion because of its generic nature and hence applicability to a very wide range of projects.

It divides the project into four phases with Decision Gates in-between. Each of the four phases has an output, usually a tangible output, referred to as a phase product.

Concept Phase and the Business Case

The first phase is ‘Concept’ and it addresses the chaotic genesis described above. Whereas the end is a very definite point, its start is vague since projects seemingly condense out of their atmosphere. Accordingly, although drawn as a solid bar for convenience, the phase is better represented as a taper, indistinguishable from its background at first but gradually becoming more definite.

The phase is dedicated to the creation of the Business Case and if we were to summarize in one word the question about the project that this document answers, it is ‘why?’.

This question ‘why?’ is the most fundamental question that must be answered for any endeavour and for this reason the Business Case is the single most important document in any project. Everything else in the project flows from, and is dictated by, it.

If there is not a reason, a business rationale, for the project that is consistent with the overall strategy of the sponsoring organization then no matter how well it is being delivered, how enjoyable it is, how high-profile it is, it must be stopped. It is impossible to argue against this obvious logic and readers may assume, therefore, that instances of projects proceeding without a current Business Case are almost negligible - sadly, they would be very wrong in this assumption.

In a practical sense the Business Case assumes major importance by dint of the signatures it bears, since approval of the project by the project steering group is conveyed by their signing of the back page. The signed document is a mandate, empowering the project team to spend the company’s resources in pursuit of the project’s aims. Thus, the act of endorsing the Business Case1[14] signifies the crossing of the threshold described above; the passing of the first Decision Gate of the lifecycle; and the end of the Concept phase.

The activity conducted within the Concept phase is best considered by reference to the contents of the Business Case.

Content of the Business Case

The Business Case is the ultimate project document and must facilitate authorization and control decisions. This requires the contents as follows.

Firstly, the Business Case must provide a rationale for the project. In the context of commercial projects, this is a ‘cost-benefit’ analysis that contrasts the cost of establishing and operating the new asset or capability, with the benefit that will accrue from its use and ownership. In doing so it must identify and quantify those benefits. This is not straightforward since, whereas costs are relatively easily quantifiable, many benefits are intangible, and therefore not easily quantified. Due to the very high levels of uncertainty associated with this early period of the project, the quantification of both parameters is inevitably offered with caveats relating to risks, assumptions and constraints and it is important these are recorded so that they can be monitored.

Secondly, it is vital to establish the criteria upon which success is going to be judged. Although this will ultimately relate to the magnitude of benefits realized (less cost), it is also very helpful to identify ‘success criteria’ for the actual asset or capability (the project product or deliverable) being created, in terms of technical capability, cost and time to create and their relevant priority. Establishing such criteria is necessary for subsequent control of the project but also because the act of setting them focuses minds. If you do not know what success looks like then it is most unlikely that you will achieve it!

Thirdly, very often projects are not isolated endeavours. Organizations frequently deliver projects in parallel with other projects or ongoing activities within their commercial portfolio. Individual projects are often affected by and affect these other activities and this must be recognized when decisions are being made.

A summary of typical Business Case contents is offered within Table 5.1.

 
Table 5.1 Typical Business Case contents

The purpose of the project

To include a business rationale aligned to the organization’s strategy.

Commercial justification of the project

To include an investment appraisal model containing identified and quantified benefits and costs.

Such models will include provision for uncertainty and risks and will therefore refer to:

  • Identified risks.

  • Mitigation strategies.

  • Assumptions.

  • Constraints.

  • Dependencies.

 

Investment appraisals may also contain evaluation of alternative options and hence demonstrate why the favoured option was chosen.

Success criteria

Typically these will relate to duration, cost and/or performance of the product and the relative prioritization between them.

(In some instances the product will be known and can be wholly technically specified at this point.)

Portfolio considerations

To include:

  • Relative priority of project.

  • Impact on ongoing business.

  • dependencies on other project’s outputs.

  • Opportunity cost.

 

Provisions for strategic control

To include:

  • Phases and phase products.

  • Identity of steering group and sponsor.

  • Stakeholder analysis and appropriate provision (this may include securing the buy-in of resource owners).

 

Provision for tactical control

To include preliminary and high level baseline estimates for scope, time and cost.

Signatures of steering group

The document is a mandate to spend the company’s resources and so must bear authorizing signatures.

Roles Involved with the Business Case

It is far more important to ensure that the right projects are being undertaken than it is to ensure that they are being managed well and the skills and insight required to select a project are different from those required to deliver it. This is yet another reason why projects have both sponsors and project managers and it is the former who owns the Business Case and hence selects projects: they are the most important person in any project.

The sponsor will act as a champion of the project. They will be a permanent and senior person within the organization, be intimate with the organization’s strategy and have sufficient influence and credibility with those in authority to take the project through the initial and subsequent Decision Gates, up to the point when the intended benefit is realized.

Although the sponsor owns the Business Case, this does not mean that they must physically write it. For a very large project, like the creation of a new power station, establishing the Business Case is an enormous task in itself and it is inconceivable that the sponsor would do it on their own. In practice it will be managed as a project in its own right with a dedicated ‘project’ manager and team so although the sponsor must ultimately own the result, they may not manage its creation on a day-to-day basis. To help avoid confusion, some organizations have Development Project Managers and Delivery Project Managers who are engaged before, and after, Business Case approval, respectively. There is no absolute need for the subsequent project manager to be involved before Business Case approval. The Business Case will be approved by the project steering group who are the ‘gatekeepers’ for this and subsequent Decision Gates.

Sub-phases

For very large projects, such as the power station discussed above, because the act of establishing the Business Case is such an enormous commitment in its own right, it will require pre-authorization.

In these instances the single Concept phase discussed is, in effect, being divided into smaller sub-phases with appropriate gates in-between. Such an approach can be appropriate for larger projects when lifecycles of more than four phases are frequently adopted.

Definition Phase and the Project Management Plan

The second phase is ‘Definition’ and the phase product is the ‘Project Management Plan’ (PMP). If we were to summarize in one word the question about the project that this document answers then the answer is ‘how?’.

This document is owned by, and produced under the direction of, the project manager. It contains the output of the planning activity and so anticipates the project work to be done, the method by which this will be controlled, the time and cost that it will consume, how the team will behave and relate to each other, and the like.

Planning is synonymous with project management and its importance is such that Chapter 14 is wholly dedicated to the techniques involved.

The scope and detail of the investigation carried out in this phase leads to a dramatic reduction in uncertainty, most easily recognized by the increased precision of estimates, especially in relation to the key parameters of cost and duration. Also, the detail within the PMP will better indicate the risks and other implications of the project. This improved data is used to update the Business Case, especially the cost-benefit model.

With the superior information to hand at the Decision Gate at the end of this phase, the steering group is well placed to revisit their earlier decision as to whether it is appropriate for the project to proceed.

Implementation

The third phase is ‘Implementation’ and, having planned the work in the previous phase, this plan is now enacted to create, as a phase product, the new asset or capability. The phase is associated with managing and controlling performance against this plan and administering to any changes that may be required.

In terms of money and resources spent (see Figure 4.2), this is by far the most significant phase. However, from a purely project management point of view, it is surprisingly unimportant since, as discussed, the ability to influence the project has diminished rapidly by this stage. Only rarely can a poorly conceived and planned project be recovered in this phase.

Since the new asset will be available at the end of this phase, some may question the need for a Decision Gate. Abandoning a project at this stage would involve the writing-off of a considerable investment, but it is not unheard of. (Just because money has been spent it does not mean it is worth persevering.)

The decision more often relates to whether all the work of this phase has been completed and the timing of subsequent handover activities.

Handover and Closeout

Although this is addressed as just one phase, two separate strands of activity occur in parallel.

The activities associated with ‘Handover’ relate to the formal acceptance by the sponsor of the main deliverable (the new asset or capability) and its ancillaries such as documentation. If we consider a project such as that delivering a new power station, the process of accepting the asset involves very extensive testing and proving lasting many months, sometimes years.

‘Closeout’ activities involve disbanding of the team; disposal of the project facilities, apparatus and materials; closing accounts; and archiving data. As part of this process it is usual to carry out some reflection of how the project performed and what could be improved should a similar endeavour be embraced again. These ‘lessons learned’ activities, as we shall discuss, are extremely valuable to both the sponsoring organization and project personnel.

The Decision Gate is mostly concerned with ensuring that all these activities have been completed and hence allowing the formal closure of the project.

The project manager is responsible for the delivery of the new asset or capability and this point represents the conclusion of their involvement in the project. Their performance will be judged against the success criteria associated with time, cost and performance identified within the Business Case.

Extended Project Lifecycle (Product Lifecycle)

Since the project manager and the delivery team finish their involvement in the project at the end of the Handover and Closeout phase, it would seem appropriate to consider the end of the project has been reached. However in many respects the four-phase model is inadequate.

The fundamental reason that organizations invest in projects is to realize a benefit and this is not achieved during these early phases. So, whereas the four-phase model is relevant to the delivery team, the perspective of the sponsoring organization requires further phases. This gives rise to the ‘extended project lifecycle’ (sometimes referred to as the ‘product lifecycle’; see Figure 5.3 on the previous page).

 
Figure 5.3 The extended project lifecycle

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Source: APM (2006).

This consists of six phases, the first four of which are identical to the earlier model. The two additional phases are ‘Operation’ and ‘Termination’.

Operation

This phase involves the new asset or capability (the project product or deliverable) being put into operation to realize the benefit that was identified in the Business Case as being the reason for the project.

If benefits are not realized then the work to date has been a waste of time and resources.

The sponsor is ultimately responsible for the realization of this benefit and their performance will be judged on this basis.

If the asset in question is, say, a new factory then this phase will be very much longer than the sum of that required by the preceding phases.

This is usually the case but not always. Consider the project addressing an open air concert. It may take months to design and create the stage, seating and site facilities, even though the actual concert takes only a few hours.

Termination

‘Termination’ involves the decommissioning and safe disposal of the asset. For many projects this is inconsequential and may even result in a further benefit, for example, the scrap value of machinery. For others, however, it can be the costliest phase. Consider the decommissioning of a nuclear power station.

The costs associated with such disposal should be incorporated within the cost-benefit model of the Business Case.

Notes

[1] Usually, the product is the unique element of a project but this is not always the case. For instance a project may be initiated to create a standard product but to do so using a different manufacturing technique, or by using alternative equipment, or in a different location. In each of these cases the challenge is to do something which has not been attempted before and as such the word ‘unique’ is applicable and hence the use of the word ‘project’ justified.

[2] The troubled facility created for the 1976 Olympic Games in Montreal, the chaotic preparation of the stadia for the FIFA World Cup in Brazil in 2014 and the reconstruction of Wembley Stadium in 2007 are notable examples in this respect.

[3] Many readers will be employed by organizations that deliver successive projects and the completion of one project does not lead to termination of employment. These types of organizations are referred to as ‘matrix’ organizations and have special characteristics, some of which they share with organizations engaged in non-project work. They will be addressed in some detail in Chapter 2 but for the purposes of this chapter it is appropriate to consider what may be referred to as a ‘pure project’, like our stadium project, a characteristic of which is its temporary management structures.

[4] In practice, the involvement of individual project team members is even more volatile than the life of the overall project team. Most likely, an individual will be a member of a sub-team which will only exist until the fragment of the project for which the sub-team is responsible, is complete. For this reason the make-up of the overall project team is always changing.

[5] This may stretch the historical knowledge of some of our younger readers but suffice to say that after vinyl records, the favoured medium for storing music was a spool of magnetic tape contained within a plastic case; the cassette tape.

[6] The various levels of project success and the interplay between products and benefits is addressed in detail in Chapter 16.

[7] There are instances where organizations may choose to move in the opposite direction, and for good reason, but this book does seek to address their concerns.

[8] Ultimately, all expenditure is for the engagement of people since all material comes out of the ground (either mined or harvested) and at this point is free of charge.

[9] For the mathematically minded it is the integral of the earlier curve (area under the curve) and its gradient, or steepness is equal to the value of the previous curve, at any individual point in time.

[10] The name derives from ‘S’ being an abbreviation for ‘Summation’, since these curves are most properly referred to as ‘Summation Curves’. This explains why, very often, real ‘S-curves’ do not look much like an ‘S’. The important features are, firstly, that it is always ascending (the cumulative expenditure never reduces) and, secondly, the gradient, on a large scale, is shallow-steep-shallow, even though locally, on a finer scale, there may be some variation in gradient.

[11] The decision made at the gates involves the marginal benefit and marginal cost. Actual expenditure to date is ignored on the basis that it is a ‘sunk cost’ and cannot be recovered in any case. This is a reason why, especially at the later Decision Gates, a project may be continued with, even though the total benefits may be exceeded by the total costs.

[12] Further detailed analysis and comparison of strategic and tactical control is offered in Chapter 16.

[13] There is again an analogy to our own lives. Shakespeare once famously wrote about the ‘Seven Ages of Man’ and yet Hinduism talks about the four stages of man. Each is describing the same life; the same journey from cradle to grave, and yet they choose to decompose it in different ways, each to reflect their own understanding and their own emphasis.

[14] Readers may wish to note that in some countries, most notably the United States, the mandate document that bears the authorizing signatures is a ‘Project Charter’. This is a standalone and separate document that will refer to a Business Case.

[15] Some care is required here because there are some obligations of the SO that may not be explicitly stated in the contract. For instance, in any case, the SO is obliged to provide goods of ‘merchantable quality’ and this will confer ‘implied terms’ on the SO.

[16] The analysis is more straightforward if we assume the contract is of ‘Firm Price’ type (see Chapter 13).

[17] Some OO manage major assets and infrastructure (rail, water and telecommunication networks) and are constantly commissioning projects to create or refurbish assets. For them, projects are an ongoing feature, but they are the exception. For most OO their involvement in projects is sporadic.

[18] Like the lifecycle offered in Chapter 5, the lifecycle offered here is a model. To be useful, models need to be simple, however their principal weakness is always their simplicity. The nature of procurement is such that there are a great many combinations and permutations of payment terms, contract types, and the like that can result in variation in the exact Decision Gates and phases that apply. The model is offered as a generic model to assist in the understanding of what appertains to most SO, most of the time. Real examples may, and will, vary.

[19] Some legal obligations of the SO do live on beyond this point, for instance its obligations for latent defects.

[20] It should be noted, however, that this is not always the case. Acme Pool Services is selected on the basis that, unlike the Owner Organization (OO), it is experienced in the construction of pools. It has skills, equipment, knowledge, expertise and contacts that enable it to manage the building of the pool far better than the OO, such that it may well be able to do the work for a considerably cheaper sum and some of this saving may be passed onto the OO in which case the second scenario is both easier and cheaper for the OO.

[21] There are variants that do not contain such an agreement but are less attractive to the OO.

[22] The exact sharing of risk is determined by the wording and quantifications within each specific contract. The arrangement within a continuum offers an approximate guide only.

[23] Ideally such negotiations should be embraced as early as possible and not wait for the final phase but practicalities often result in them being held to the end.

[24] For example some EU legislation imposes constraints on publicly funded projects.

[25] Discrete probability distributions for time or cost of a project are rarely symmetrical. It is almost always the case that it is more likely to cost more, or last longer, than the ‘most likely’ figure, than less, i.e. the mean is very likely to be greater than the mode. This results in a distorted distribution curve with a longer tail to the right of the mode. It is for this reason that the single estimate derived by the three-point estimating technique is usually greater than the mean and a more representative figure of the overall distribution.

[26] Or other entity such as Work Package.

[27] The use of Product Breakdown Structures and Work Breakdown Structures (WBS) will be addressed comprehensively in Chapter 14.

[28] There is an opportunity to withdraw an offer by the offerer, before the expiry of any validity period, but it is limited and different legal systems have different approaches. It is, for instance, an area of inconsistency between English and Scottish law.

[29] For an OO the ‘why’ is addressed within the Business Case and the ‘Project Background’ section of their PMP is informed by this.

[30] This ‘locking’ of the estimate is sometimes referred to as ‘baselining’.

[31] It is the case for project control as it is for planning. ‘Scope creep’ (doing something that was not intended) impacts upon duration and cost and, without a scope baseline, ‘scope creep’ cannot be recognized and hence project cost and duration cannot be controlled.

[32] For projects with very large physical deliverables, such as machinery, many practitioners choose to draw up a PBS (Product Breakdown Structure) that decomposes the deliverable into discrete parts, as a prelude to creating the WBS.

[33] A Work Breakdown Structure Dictionary is a textual document that supports the WBS by containing additional information about individual Work Packages.

[34] ‘Cost’ is a complex entity and care is required here. Chapter 17 refers.

[35] Such ‘house standards’ will be key elements of the project management method adopted by the SO.

[36] Although presented in the context of management of resource, since time and cost are inextricably linked, they can be thought of as time or cost management techniques, depending upon the context.

[37] To many, this four-part cycle is known as the ‘Deming Cycle’ or the ‘Deming Wheel’ on the understanding that it was originated by W. Edwards Deming. However, in his book Out of the Crisis, Deming (1982) himself attributed the original design to W.A. Shewhart.

Others, such as Ronald D. Moen and Clifford L. Norman (2010) differentiate between ‘Deming’s Wheel’ and the PDCA cycle, attributing the latter to a reworking of Deming’s work by a group of Japanese executives after receiving a presentation by Deming in the 1950s.

[38] This can be considered as an example of the ‘Hawthorne Effect’ (Buchanan and Huczynski, 2004).

[39] As discussed in Chapter 7, through the life of a contract the SO has progressively less influence over the gate decisions than the OO. For example, once the contract is signed the opportunity for the SO to terminate the contract is negligible.

[40] For convenience we will consider a Firm Price contract.

[41] If the estimated cost within the baselines of the PMP is less than that within the pre-contract sales estimate it is inconceivable that SO management would not insist on the former being adopted as the target cost.

[42] Although it is easy to refer to just cost, the real goal of the SO is profit and so there is a pressing need to manage and control revenue, both in terms of expediting payments to which the SO is already entitled, and also maximising the amount of entitlement. The latter will involve the SO’s PM acting as a marketer and salesperson seeking out new opportunities within the context of the existing OO and project. Such activity is akin to the ‘farmer’ aspect of selling as opposed to the more conventional ‘hunter’ aspect, as addressed in Chapter 13.

[43] To some extent this is because this strategic level of control is not as easy to exert within an SO because, once a contract is signed, the SO has no option to withdraw.

[44] It is said that project managers spend upwards of 90 per cent of their time simply communicating with others (Heldman, 2009).

[45] Care is required here since some projects will have their own contractual requirements that may not be adequately serviced by the existing facility.

[46] This also helps to manage the risks associated with the unexpected departure of key project staff.

[47] Some practitioners also include the processes and documents required to manage change as being part of the Configuration Management System (CMS).

[48] For instance, to avoid potential for any contradictions such suites should, ideally, ensure that a requirement (such as a dimension) is only stated once, in one document, which is then referenced by the others.

[49] Or alternatively with a CMS imposed by a SO higher in the supply chain.

[50] Some recipients will receive a ‘Controlled Copy’ in which case they will automatically receive any subsequent updated versions. Recipients of ‘Uncontrolled Copies’ do not atomically receive updated versions.

[51] Further enhancement can be adopted when using a spreadsheet’s logic to colour the cells to indicate status (for instance: Green - Work Package has started/finished before its planned date Amber - Work Package has started/finished but after the planned date; Red - Work Package has not started/finished and it is after the planned date).

[52] The size (and hence number) of the smallest fragment into which the project is decomposed.

[53] Implicit within all these discussions of costs incurred by a SO, and their use in the strategic and tactical control of projects, is the assumption that costs can be attributed to each individual bespoke product. Those SO who currently only produce standard products and are looking to embrace the supply of bespoke products may find this requirement surprisingly onerous. This is because, currently, many will operate a cost collection system that uses only functional departments as cost centres and lack the facility to record costs against individual products. Converting such a system can represent a significant amount of work and may, for instance, include the need for employees to create timesheets. Cultural resistance can be expected as well as significant technical difficulties and additional complexity.

[54] Many SO choose to have a ‘Cost Management Plan’, as a subsidiary management plan within the PMP that contains such definitions and conventions.

[55] The precise point of commencement of the warranty period is defined within the contract in question.

[56] In some instances such access is an element within the original supply contract. It can be a useful negotiating token for the OO.

References

6 

Association for Project Management (2006) APM Body of Knowledge 6th Edn, High Wycombe: APMKnowledge.

7 

Miller, R. and Lessard D.R., 2000. The Strategic Management of Large Engineering Projects Shaping Institutions, Risks and Governance Massachusetts: The MIT Press.

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