Module 03 : Knowing What the Project Is, Part 2

*Project Management (x470)

*Class Road Map

Session 1

Foundational Concepts

Sessions 2 & 3

Knowing WHAT the

Project Is

Session 4

Knowing WHERE the Project Is

Session 5

Closure, Group

Presentation, Advance

Topics

2

*Session 4 Agenda

Short Quiz 2

• Questions / Review• Homework Discussion• Short Quiz

Knowing

WHAT the

Project Is; Statu

s Reporting

• Communication Plan• Risk Response Plan• Vendor Responses• Responsibility Assignment Matrix• Earned Value Management (slides in Mod 4

set)

Team Sessio

ns

• Communication Plan• Risk Response Plan• Responsibility Assignment

Matrix3

Project Plan

*Knowing What the Project Is:Project Planning

Scope Schedule Cost S

takeh

old

er

Man

ag

em

en

t

Communication Plan

Risk Response Plan

Vendor Responses

Responsibility Assignment Matrix (RAM)

*Knowing What the Project Is:Communications Management Plan

* Distribution structure of the info – what info goes to who, via what method, frequency

* Description of info to be provided – format, content, level of detail, owner

* Collection and filing structure that details methods for gathering and storing various types of info

* Methods for accessing info between schedules

* Methods for updating and refining communications management plan as the project moves on

* Escalation process

Objective: Meet stakeholder communication needs.

5

*Knowing What the Project Is:

Basic Risk Concept* Project risk is an uncertain event or condition,

that if it occurs, has a positive or negative effect on the project

* Risk management focuses on:– Known unknowns– Proactive management

* Risk management effort should be commensurate with the risk and importance of the project

* Tolerance for Risk- Avoider- Neutral- Lover 6

*Knowing What the Project Is:

Risk Management* Systematic process of

identifying, analyzing, and responding to project risks.

* Maximizes probability and consequence of positive events and minimizes probability and consequence of adverse events

* Risk and information are inversely related

7

8

*Knowing What the Project Is:Risk Types

“The starting point for best practices in risk management is the development of a classification systems for the types of risks.” – Harold Kerzner

Technical, quality or performance Project Management

Organizational

External• Legal / regulatory• Labor• Weather• Force Majeure:

earthquake, floods, etc..

*Knowing What the Project Is:Other Risk Types Examples

* Boeing

• Financial

• Market

• Technical

• Production

ABB• Contracts and

agreements• Responsibility and liability• Financial• Political• Warranty• Schedule• Technical• Resources• Supply and demand chain

management• Customer• Consortia• Environmental

9

10

*Knowing What the Project Is:Project Risk Planning Steps

Identify Risk

Perform Quantitative Risk Analysis

Perform Qualitative Risk Analysis

Plan Risk Responses

Objective: Understand project risks and develop options and actions to minimize threats and enhance opportunities to project success

11

*Knowing What the Project Is:

Risk IdentificationObjective: Identify project risks * Process of

determining risks that might affect the project and documenting their characteristics

* Iterative process

* Outputs

– Risks (risk register)

– Triggers

Identify Risk

Perform Quantitative Risk Analysis

Perform Qualitative Risk Analysis

Plan Risk Responses

12

*Knowing What the Project Is:Qualitative Risk Analysis

Objective: Rank risks according to the probability of its occurrence and its impact to the project if it occurs

Identify Risk

Perform Quantitative Risk Analysis

Perform Qualitative Risk Analysis

Plan Risk Responses

13

*Knowing What the Project Is:Qualitative Risk Assessment *Ordinal Scales (rank-ordered values)

–High, Medium, Low

–Red, Yellow, Green

–A, B, C

*Cardinal Scales (assigns values)

–0 to 100% for likelihood of occurrence

–0 to 10 for impact of occurrence

*Knowing What the Project Is:Qualitative Risk Assessment – Ordinal Model

Pro

bab

ility

Impact

High

Medium

Low

Medium HighLow

14

15

*Knowing What the Project Is:Risk Assessment Metric Example

Assessment Probability Impact

High > 50%

Significant disruption of project requirements (schedule, cost, scope) even with close monitoring

Medium 25% - 50%Potential disruption of project requirements; close monitoring may overcome difficulties

Low < 25%

Little potential to disrupt project constraints; normal monitoring should overcome difficulties

15

*Knowing What the Project Is:Qualitative Risk Assessment – Cardinal Model

Pro

bab

ility

Impact

2

16

4

6

8

10

2 4 6 8 10

17

*Knowing What the Project Is:

Risk Response Plan

Objective: Develop options and actions to minimize threats and enhance opportunities to project success

Identify Risk

Perform Quantitative Risk Analysis

Perform Qualitative Risk Analysis

Plan Risk Responses

*Knowing What the Project Is:

Risks StrategiesThreats

• Avoidance – changing plan to eliminate the risk

• Transference – shifts consequence of a risk to a third party, including ownership

• Mitigation – reduces probability and/or consequences of an adverse risk to acceptable level

• Acceptance – risk is assumed. Contingency plan may be developed or team may deal with the risk only at the time of occurrence

Opportunities

• Exploit – ensuring that the opportunity is realized

• Share – allocating ownership to a third party best able to realize benefit / opportunity

• Enhance – modifies size of the opportunity by increasing probability and/or positive impacts and by identifying and maximizing key drivers of the opportunities

• Acceptance – risk is assumed. Contingency plan may be developed or team may deal with the risk only at the time of occurrence

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19

*Knowing What the Project Is:Risk Response Plan Template

IDRisk Type

Risk DescriptionRisk

TriggerImpacted

AreasProbability Impact Priority

Strategy

OwnerStatu

s

I Impacted Area/s: Enter area of potential impact: Scope, Quality, Schedule, Cost2 Probability: Enter probability of occurrence: Low, Medium, High3 Impact: Enter severity of consequences: Low, Medium, High4 Strategies: Accept, Avoid, Mitigate, Transfer5 Status: Open (O) or Close (C)

*Team Work (30 minutes)

Develop Communications Plan

• Use only three major documents on each phase for your plan

Create Risk Response Plan

• Develop the risk types for your project• Identify project risks and triggers for your project

(use Post-It Notes)• Use Ordinal Model to prioritize risks (agree on H,

M and L definitions – probability and impact)• Fill-in Risk Response Plan Form with your top 5 to

10 ranked risks • Update High-Level Risk section in your Scope

Statement

20

*Knowing What the Project Is:Project Procurement Planning StepsObjective: Identify and cost products, services or results from

outside the project team needed to meet project goals/deliverables.

Scope Statement

• Other planning documents

• Procurement Management Plan

• Statements of Work• Make or Buy Decision• Procurement

documents (RFI, RFP, RFQ, IFB)

• Source selection criteria

Plan Procuremen

t

• Seller responses• Sellers selected• Procurement contracts

signed

Conduct Procuremen

t

22

*Knowing What the Project Is:

Contracts

*Major Types–Fixed Price or Lump Sum –Cost-Reimbursable–Time and Material (T&M)

*Risk and reward relationship

*Using wrong contract type can be devastating

23

*Knowing What the Project Is:Principles of Incentive Contracts

TARGET COST: $20,000TARGET FEE: $1500

SHARING RATIO: 80/20 %

• CUSTOMER PAYS 80% OF OVERRUN

• CONTRACTOR PAY 20% OF OVERRUN

• PROFIT IS $1500 LESS CONTRACTOR’S 20%

• CUSTOMER KEEPS 80% OF UNDERRUN

• CONTRACTOR KEEPS 20% OF UNDERRUN

• PROFIT IS $1500 PLUS CONTRACTOR’S 20%

NOTE: LIMITATIONS MAY BE IMPOSED ON PRICE OR PROFIT

EXAMPLE

24

*Knowing What the Project Is:

Contract Variations

FFP Firm-Fixed-Price• High likelihood of scope

change• Profit margin can be high

FPEFirm-Fixed-Price with Economic Price adjustment

• Adjustments for escalation factors and inflation

• Negotiated adjustment cycle

FPIF Fixed-Price-Incentive -Fee

• Contractor can earn add’l profits

• Ceiling on contract price

CPIF Cost-Plus-Incentive-Fee

• Contractor can earn add’l profits

• Floor and ceiling exists on profits

CPAF Cost-Plus-Award-Fee

• Negotiated profit range• Customer decides on profit at

the end

25

*Knowing What the Project Is:

Contract Variations (cont.)

CPFF Cost-Plus-Fixed-Fee

• Fee is fixed (in $$ not %)• Contractor motivated to

complete early

CS Cost-Sharing

• No profits allowed• Customer and contractor share

costs• Contractor may retain control

of propriety knowledge

C Cost• No profits allowed• Contractor usually a non-profit• Cost limitation may be imposed

CPPCCost-Plus-Percentage-Of-Cost

• Cost incurred may be unlimited• Contractor can maximize profit• Scope changes may be

frequent and unlimited

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*Knowing What the Project Is:Relative Contract Risk

RISKLOCATION

FFP

FPE

FPIF

CPIF

CPAF

CPFF

CSC

CPPC

0 %

100 %

CO

NTR

AC

TO

R’S

RIS

K

0 %

100 %

CU

STO

ME

R’S

RIS

K

RISK SHARING METER

27

*Knowing What the Project Is:Responsibility Assignment MatrixObjective: Maps stakeholder function/s to deliverables

Deliverable

Sponsor Project Manager

Functional Manager

1

Functional Manager

2

Project Charter

Owner Reviewer

Scope Statement

Approver Owner Input Req’d

Input Req’d

WBS Approver Owner Input Req’d

Input Req’d

Resource

Role: who does whatResponsibility: who decides what

28

*Team Work

*Develop the RAM for your project.

*Note: Use only 3 major deliverables of each phase for your RAM

*20 minutes

29

*Knowing What the Project Is:Balancing the Plan

• Do your end and milestone dates meet the expectations of the stakeholders?

• Are resources available to meet project requirements?

• Does your cost baseline meet the project requirements?

• Trade-Off Analysis

• Iterative Process

• Trade-offs between competing objectives

Scope

Tim

e Cost