GPM First
Chapter 15 of Project Management for Supplier Organizations (978-1-4724-1109-9) by Adrian Taggart

Management of Resources

Chapter 15

In Part 1 we explored how, in a project environment, the demand for resources was erratic; but that the size of an organization’s resource pool is largely static; and that this has an impact upon the culture and structure of the organization.

In Part 2 we explored how these impacts were disproportionately felt by Supplier Organizations (SO), rather than Owner Organizations (OO).

Also in Part 2, we discussed how the commercial imperative of a SO was to make a profit and, since its resources are its primary source of both costs and its revenue, resource management is vital to its success. Further, in Chapter 14 it was acknowledged that the availability of resources was a major determinant of the duration and scheduling of project work, and hence the ability of the SO to satisfy its contractual time commitments.

Any way it is looked at, it is imperative that Supplier Organizations (SO) are able to manage their resources.

Resource Demand Versus Resource Availability

As alluded to earlier, the challenge of resource management derives from two facts. Firstly, demand for resources is not stable. Figure 4.2 shows how the rate of expenditure varied during the life of a project but, since all money spent on projects (either directly or via suppliers) is spent on resources, the curve also shows the aggregated demand made for resources. If we look at each individual type of resource demanded by a project, then the picture is even more volatile. Secondly, the size of resource pools is not easy to change. How long would it take to recruit a new full-time employee? How long would it take to lay-off a full-time employee?

These parameters of demand for, and supply of, resources can each be represented pictorially as a type of graph known as a histogram (see Figure 15.1).

 
Figure 15.1 Typical demand for, and availability of, resources

graphics/fig15_1.jpg

The resource demand profile is created during the planning of the project. In Chapter 14 we discussed how, when establishing the time baseline, a provisional schedule was created on the basis of the sequencing and duration of project activities. This can be augmented by specifying the demand made by each activity, for each resource, within each time period. Aggregating the demand across all project activities gives the total project demand for each resource. Although this sounds quite complex, the myriad of software packages available for scheduling projects make this task relatively straightforward.

Resource availability is a feature of the organization; the amount of its resources and their working times. Again, scheduling software can assist the process of creating a graph that can reflect shift patterns, holiday periods and the like. It is sometimes known as a ‘resource calendar’.

The interplay between the two graphs shows that in some instances the project is demanding more resources than are available, and at others there are more resources available than demanded.

The first point to make is that the situation so depicted in the figure cannot actually occur in practice since it is impossible to use resources that are not available. Changes must be made to eliminate times of over-demand.

The simplest way of doing this is to secure more resources, but even ignoring the practical difficulties of recruitment, it does not provide an ideal solution. Figure 15.2 applies.

 
Figure 15.2 Over-supply of resources

graphics/fig15_2.jpg

On a positive note, the schedule can now be achieved because at no point are more resources being demanded than are available. However, a significant price has been paid since the area of the graph showing the under-utilization is now very considerable. From a purely commercial and simplistic point of view this is unattractive because it represents resources that are being paid for, but not used: it represents inefficiency.

Inefficiency also derives from making changes in the size of the resource demand, though this is not easy to represent diagrammatically. Starting and stopping resources working on an activity requires mobilizing and demobilizing resources, which is problematic and risky. In a simple world the area under the resource demand graph would be a single rectangle, but this is rarely achievable.

An alternative, but again simplistic, approach maintains a minimal number of resources and reschedules activities to suit. This will delay the project, which may well be unacceptable. It also presupposes that activities are ‘elastic’ whereby they can be addressed by any number of resources and the time just varies accordingly. This may hold for some tasks (picking a fruit harvest) but it will not for others (moving a heavy table needs at least four people).

From a resource management point of view, the challenge is to manipulate the two curves so that a satisfactory solution is obtained. The conundrum is rendered complex for a number of reasons not least of which is that different projects have different priorities for completion time, final cost and the quality or performance of the product. There are a number of responses that are available and the selection is largely based upon which of these aspects are the most important.

Consider the following.

Resource Management Techniques1[36]

Name

Description

Rescheduling within float (When used: Always)

In Chapter 14 we discussed the concept of float. There are two types (Free and Total) but each relates to the degree with which an activity can be delayed or extended without affecting the rest of the project schedule.

By moving activities within their floats it is sometimes possible to reach a solution that lies within the constraints of time, resources (money) and scope. This approach should be used before those described below.

It can also be used to improve the profile of the resource demand graph so as to minimize mobilizing and demobilizing of resources.

Smoothing (When used: Time and scope constrained projects)

If the primary constraint on the project is time such that the end date cannot be relaxed, and all the scheduled activities are essential, then it is appropriate to compromise cost to preserve time and this involves securing more resources. For the reasons described above it is most likely that these resources will be temporary, i.e. ‘contractors’.

Sanctioning ‘overtime’ is an example of ‘smoothing’.

Levelling (When used: Cost and scope constrained projects)

If the primary constraint on the project is cost, such that more resources cannot be afforded, or alternatively that no more resources are available, and all the scheduled activities are essential, then it is appropriate to compromise time. By this, the amount of available resources is held at a fixed level and activities are delayed until such a time as resources are available.

De-scoping (When used: Cost and time constrained projects)

Inevitably this will delay completion of the project. If more resources cannot be secured, for instance through a lack of money, and the completion date cannot be delayed, it may be appropriate to de-scope the project. This will involve reducing the requirement such that some Work Packages and activities are no longer necessary. Does that new house you are building really need a swimming pool?

Relaxing of specification (When used: Cost and time constrained projects)

This is similar to the above but rather than reducing the breadth of the requirement, the grade or specification may be relaxed.

Activity splitting (When used: Cost, time and scope constrained projects)

Perhaps a hot tub instead of the swimming pool? In some instances it is appropriate to divide an activity that is not on the critical path and which is consuming a scarce resource, into two or more tranches. During the stand-down period in- between, the resources can be diverted to other, critical, activities.

There will be an inefficiency deriving from the added mobilization and demobilization of the resource but this may not be significant in the context of the whole project.

Revision to logic (When used: Cost, time and scope constrained projects)

In some instances it is possible to alter the logical sequence of activities to improve the utilization of resources. Whereas a decorator would prefer to paint walls before fitting the carpet, with care it can be done the other way around if it provides a better solution in the context of the whole project. This technique sometimes involves temporary works. A construction project may elect to build a temporary bridge so that the old bridge can be removed before the new bridge is ready. There will be a cost penalty incurred but this may be acceptable in the context of the overall project.

Reallocation of resources (When used: Cost, time and scope constrained projects)

Activities such as picking the fruit harvest are sometimes described as ‘fixed effort’ and the duration of such activities are elastic and can vary depending upon the number of resources allocated to them. In reaching an original estimate of duration (that allowed the provisional schedule to be put together) an assumption will have been made as to how many resources should be allocated to it. Once the total resource demand for the provisional schedule can be compared to the resource availability, it may be appropriate to revise the number of resources allocated to selected activities. This will extend or reduce the duration of those activities that may secure a good solution for the overall project.

Revision to method (When used: Various)

In some instances it may be possible to simply change the method adopted and in doing so provide an acceptable solution. If two of you want the company car for different trips on the same day then one of you could simply go by train.

There may be consequences for cost or even duration of an individual activity, but, crucially, it will alter the resource demand which may provide a better solution in the context of the whole project.

Fast-tracking (When used: Cost, time and scope constrained projects but where there is tolerance of risk)

‘Fast-tracking’ relates to a technique that is a special case of ‘revision to logic’ described above. It relaxes the logic constraints whereby a successor activity can start before the predecessor is complete. An example would be where manufacture of a component was commenced before design was fully complete. It compromises risk to reduce time.

Crashing (When used: Time and scope constrained projects)

‘Crashing’ is a special example of the ‘smoothing’ technique described above. It is more often referred to as a ‘schedule compression’ technique for the whole project but it has relevance when trying to resolve resource conflicts. It compromises money for time and involves selecting an activity and flooding it with resources to reduce the activity duration. When applying it to compression of the whole project is necessary to:

  1. only select activities on the critical path;

  2. select that activity which will give the maximum compression for the minimum cost; and

  3. recognize that at some point the compressed activity will be so short that the critical path will flow through another part of the schedule and at that point the ‘crashing’ efforts need to be directed at another activity.

 

In the context of resolving resource conflicts, the activities requiring compression may not be on the critical path.

Training (When used: Various)

When faced with a project that makes demand upon a range of different types of resource (see below) it is helpful to have multi-skilled resources that embrace many different disciplines. A domestic appliances repair service may choose to train its service personnel in electrics, plumbing and mechanics rather than sending three separate experts on each call-out. There are drawbacks to this technique. Extensive and expensive training is required and doubtless the highly trained individual would command higher remuneration.

Application of these techniques will require a revision to other aspects of the plan; the scope, the schedule, the budget. Many iterative steps will be taken before the provisional schedule (used to derive the first resource demand estimates and discussed in Chapter 14) is replaced with a final schedule, that is resource loaded and compliant with resource availability, which can be adopted as the time baseline and provide the basis of the cost baseline.

Practical Difficulties of Resource Management

On the face of it, this extensive range of solutions is very attractive and comforting, however, in practice resource management is very difficult. The following addresses some of the reasons for this.

Errors in Estimated Resource Demand

The graph of resource demand shown in Figure 15.1 was established by a complex sequence. Consider the following.

The estimate of the project’s scope will have errors (often very considerable errors). Subsequently modelling of this work into a sequence of activities tied by the logic of predecessors and successors will have simplifications, and hence errors associated with it. Subsequent estimates of the duration of those activities will have errors. The estimate of the resources required by each of those activities will also contain errors. If each of these four steps introduces only a +/- precision of 10 per cent, the eventual output will have a precision of 60–146 per cent.

Further, this presupposes all the factors are under the influence of the project team. The schedule of a Supplier Organization (SO) is often reliant upon its client, for instance by making facilities and sites available at specific times. Similarly, it is often reliant upon the performance of its sub-suppliers to produce goods at specific times. Further, some activities are reliant upon good weather. Each has the capacity to wreak havoc with the plans of the SO but none are under its control.

Errors in Estimated Resource Availability

Estimates of the availability of resources are also subject to errors.

Firstly, resources are not available for revenue-earning work at all times. Resources such as machinery require regular maintenance but also suffer unexpected breakdowns. Human resources need rest and recuperation periods that include holidays, but are also subject to unexpected interruptions to service associated with sickness and personal issues.

Also, people are obliged to service indirect work requirements that are not attributable to fee earning work. Training and staff meetings are obvious examples here but the aggregated effect of minor interruptions, such as answering a colleague’s question, is significant.

Many organizations cater for these issues by establishing empirical ‘availability factors’ that indicate how much of their total time they are available for fee-earning work.

Another difficulty relates to the capacity of individuals. The simplistic mathematical approach assumes that one resource is as capable as the next, but in real life some resources are more experienced and energetic than others and complete work much faster.

Multi-Resource Projects

The above techniques can be applied to just one resource at a time. This is a problem because most projects have activities that engage a variety of different types of resources, indeed some individual activities use more than one type of resource. This adds complexity because the situation depicted in Figure 15.1 must be repeated for each of the resources engaged, with each having a differing level of supply and each subject to a different aggregate of demand.

Adoption of techniques such as ‘smoothing’ or levelling’ will optimize the situation for the resource type in question, but inevitably will make the situation worse for the others.

The Effect of Portfolios

The situation is complicated yet further if the project in question is part of a portfolio of projects that are each feeding off the same resource pools.

In such instances, contagion occurs whereby a delayed project overdemands resources and deprives another project of those same resources, extending the delay to the second project.

In such instances ‘portfolio management’ becomes of critical importance. Portfolio management is defined as follows (APM, 2006):

The selection and management of all of an organization’s projects, programmes, and related operational activities taking into account resource constraints.

This definition is noteworthy for its focus on resources since, when delivering a project within a portfolio, any meaningful resource management must be carried out at a portfolio level rather than just at an individual project level.

Further, by referring to a ‘selection of projects … [on the basis of] resource constraints’, it indicates how the objectives of a Supplier Organization (SO) relate more to the management of its resources rather than any particular project. For the SO contemplating whether to accept a contract, the question ‘Is this the best project for my limited resources?’ is more relevant than simply examining the net profit of any individual project. The starting point for the deliberations of a SO is its resource pool and its most gainful use.

Use of Software

Scheduling and resource management involves much manipulation of data and the reliance on software for the bulk of this work is not surprising. Many readers will be familiar with their use to create the schedules, critical paths and resource demand histograms discussed earlier and also to superimpose resource availability to create charts such as that depicted in Figure 15.1.

Far fewer readers, however, will have had positive experiences of using software to automatically reschedule their project’s activities on the basis of resource availability constraints.

There are many reasons why appropriate software is unable to offer a panacea to all resource management challenges.

High on the list of these is the old adage about ‘garbage in, garbage out’ and as discussed above there are plenty of opportunities for errors in the base estimates to quickly render resource plans obsolete.

Secondly, the portfolio context will require that many projects are analysed simultaneously. Whilst there is software that will do this, it does require consistency in how resource demands are presented for all projects across the portfolio.

Thirdly, how a solution is derived is not straightforward. For example, ‘critical path analysis’ is an established technique (or algorithm), and if followed the same answer is reached regardless of who is carrying out the analysis. This is not the case for resource management since, as demonstrated above, many different techniques can be employed and there may well be many potential solutions. In response, the software adopts a series of heuristics, or rules, that facilitate a solution. Very often these rules are not easily understood and the radically altered schedule that results is no longer recognized, or trusted.

Practical Solutions for Resource Management

Acknowledge the Precision of Forecasts

It may appear defeatist, but Supplier Organizations (SO) must acknowledge just how difficult it is to effectively manage resources across a portfolio of projects. Despite the importance of the topic, and in particular its effect on the profits, practitioners should have a realistic view of the degree of precision that can be brought to bear on estimates of demand and availability. It is very unlikely that the degree of control possible when managing routine operations will be achieved when managing projects. This is not evidence of any lack of ability or professionalism on behalf of the project team; it is a feature of the project management environment.

Prioritize Effectiveness Over Efficiency

Chapter 3 offered the relative prioritization of effectiveness over efficiency as a key difference between a project and routine operations environment. This distinction becomes clearer when looking at resource utility.

Referring again to Figure 15.1, efficiency is promoted by reducing the margin between the availability of, and demand for, resources. However, this restricts the ability of the project manager (PM) to manage, since without surplus resources they cannot respond to emerging problems or overly optimistic estimates. This increases the likelihood that actual demand will exceed the availability (and hence compromise the schedule). It reduces their ability to manage risk, and hence their effectiveness.

The constantly repeated short cycle activities associated with routine operations generates a flat, stable and very predictable aggregated resource demand. This enables a resource availability to be established that exceeds the former by only a small margin, indicating an efficient use of resources.

The uncertainty, erratic resource demand and high levels of risk within the project environment demands a generous margin between resource demand and availability.

Although this generous margin will be seen as inefficiency, in practice it is necessary and a Supplier Organization (SO) must be very wary of seeking to improve efficiency simply by restricting the availability of resources.

Of course, the above is not to say that management of risk is not important to those SO involved in routine operations, and it is not to say that efficient use of resources is not important to those delivering projects. Clearly each is important to both but, in a practical sense, the first instinct of a PM is about managing risk and the inherent uncertainties of a project.

Improve Planning of Work and Schedule

Establishment of the resource demand is at the end of a planning sequence that contains many steps, and therefore many compounded errors. Accordingly an effective way of improving the accuracy of the final estimate is to improve the accuracy of these earlier steps.

Of particular relevance here is scope. An accurate and comprehensive Work Breakdown Structure is the very foundation of subsequent planning, including scheduling and resource management. It is worthy of the investment of considerable time and energy.

Estimating of parameters such as activity duration and resource demand for individual activities is another major source of errors. In this respect the careful management and archiving of actual data from previous projects is crucial.

Optimize the Schedule Only for the Most Expensive Resources

In a multi-resource project, attempts to optimize one resource, almost inevitably, results in a detrimental situation for another resource. Also, the more resources for which optimization is attempted, the more complex and fragmented the overall schedule will become.

Practitioners should seek to optimize the schedule for the most expensive resource first and then consider only the two or three next most expensive resources. Beyond this, the added complexity will erode the advantages to be gained. A consequence of this is that resource utilization for the cheaper resources will be very inefficient.

Manage at a Portfolio Level

As suggested, for Supplier Organizations (SO) engaged in more than one project, meaningful resource management must be undertaken at a portfolio, rather than a project, level.

To secure visibility across the portfolio, each of the projects must submit their plans, and specifically their resource demands, in a common format that is amenable to aggregation.

Further, there must be a central facility which collects and collates these and a role in the organization (a portfolio manager) that is empowered to interrogate and instruct those responsible for individual projects, and subsequently make decisions about prioritization between those projects.

Consider the Soft Skills

Projects are managed by and for people and whilst a consideration of technical procedures and algorithms is appropriate, it must never be forgotten that the whole exercise is ultimately about influencing people’s behaviour. With resource management, as with all other aspects of project management, there must be consideration of the human dimension and appropriate soft skills.

Of vital importance here is openness and honesty on behalf of everyone involved, and also an acceptance that the overall needs of the organization take precedence over individual projects (the latter is something that does not come easy to a tenacious and dedicated PM). Particular care is required with estimates. Too many Supplier Organizations (SO) are plagued with personnel trying to outwit colleagues by inflating or deflating their own and others’ estimates, to precipitate a favourable situation. It serves only to compromise portfolio planning and control.

There needs to be respect for the scheduling needs of others, for instance by not consuming float for our own purposes and thus unnecessarily rendering activities as critical.

Those with executive responsibility for the SO must be prepared to make difficult decisions, especially about prioritization even though, inevitably, this will be to the detriment of individual projects, teams and clients.

Critical Chain Method

In recent years a new technique for managing resources within a project and a portfolio has emerged, known as the ‘critical chain’ technique (Goldratt, 1997).

It is based upon the Theory of Constraints, which asserts that the overall rate at which a system such as factory or project team can perform is determined by a single constraint. In the case of a factory this constraint will be a bottleneck in the production line but for a project it is a single scarce resource. Subsequent management is focused at this constraint.

As applied to project management, the approach has two elements.

One element addresses the soft aspects of behaviour and takes a view on how estimates are put together and, subsequently, how the individual resources schedule their own workloads.

The second element relates to the scheduling algorithms. The critical path is modified to create a ‘critical chain’; a sequence of activities that takes account of the appropriate resource demands. This sequence is more practically relevant to determining the overall project duration. During execution it is protected by the inclusion of resource ‘buffers’ in the non-critical chains.

Published case studies indicate a dramatic improvement in overall project durations and also inventory levels. However, the technique is still reliant upon the understanding of scope, logical sequencing of activities, critical path analysis and activity resource demand estimating referred to above.

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

18 

Association for Project Management (APM), 2006. APM Body of Knowledge, 5th edn. High Wycombe: APMKnowledge.

19 

Goldratt, E.M., 1997. Critical Chain. Massachusetts: The North River Press.

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