Project Evaluation and Control

How does a project get one year late?. . . One day at a time.

“If we complete our project on time and within our allocated budget, then

the project will be a success.”

Is the above statement valid?

Why or why not?

Questioning Project Performance

Without a control process, a manager has no way to determine the overall effectiveness of a project.

• What is the current status of the project in terms of schedule and cost?

• How much will it cost to complete the project?• When will the project be completed?• Are there potential problems that need to be addressed now?• What and where are the causes for cost or schedule overruns?• What have we gotten for the dollars spent?• If there is a cost overrun midway in the project, can we

forecast the overrun at completion?• Can potential problems be identified before it is too late to

correct them?

Example of a Control Process

Step 1: Setting a Baseline Plan

Step 2: Measuring Progress and Performance

Step 3: Comparing Plan against Actual

Step 4: Taking Action

Step 1: Setting a Baseline Plan

• A concrete document and commitment.

• Planned cost and expected schedule performance.

• Serves as a basis for developing cash flows and rewarding progress payments.

A baseline serves as an anchor point for measuring performance. The baseline is:

The baseline plan is derived from the work breakdown structure and the time-phase budget documents.

Baseline Data Relationships

Step 2: Measuring Progress and Performance

Quantitative Measures:• Collect the actual cost for the work performed at the work

package level.• Collect the budgeted values for the work actually

accomplished.• Compute the schedule variance.

Qualitative Measures:• Work Progress Reports• On-site Inspection• Actual Use

Step 3: Comparing Plan Against Actual

• Actual costs for the first five months are $1.3 million.• Planned budget costs for the first five months are $1.0

million.

A high-tech firm is implementing an R&D project. The original plan calls for completion of the project in 10 months at a cost of exactly $200,000 per month for a total cost of $2.0 million. After five months, top management assesses the project. The following information is available:

What conclusions can be drawn from this data?

Actual costs for the first five months are $1.3 million.Planned budget costs for the first five months are $1.0 million.

• The project is on schedule, but has a $300,000 cost overrun.

• The project is way ahead of schedule and the $300,000 represents payments to labor working ahead of schedule.

• The project has a cost overrun and is also behind schedule.

Which is true?

Possible Conclusions:

• Actual costs for the first five months are $800,000.• Planned costs for the first five months are $1.0 million.

Using the same high-tech example with another set of outcome data, we are presented with another set of data:

Possible Conclusions:

• The project is costing less than expected by $200,000.• The project is behind schedule.• The project is dramatically behind schedule and over in cost.

Which is true?

Budget comparisons don’t tell the whole story!Without time-phasing of costs to match scheduled activities, cost control cannot yield information that is reliable.

Baseline Gantt Chart

From Gray-Larson, Project Management, 2003

Step 4: Taking Action

If deviations are significant, action will be needed to bring the project back in line with the original or revised plan.

In some cases, conditions or scope can change, which, in turn, will require a change in the baseline plan to recognize the new information.

The Benefits of Performance Evaluation and Control

• Measures accomplishments against plan and deliverables.• Provides a method for tracking directly to a problem

work package and organization unit responsible.• Alerts all stakeholders to early identification of problems,

and allows for quick, proactive corrective action.• Improves communication because all stakeholders are

using the same data set.• Keeps customer informed of progress, and encourages

customer confidence that the money spent is resulting in the expected progress.

• Provides for accountability over individual portions of the overall budget for each organizational unit.

The Project Audit

• Evaluate if the project delivered the expected benefits to all stakeholders. Was the project managed well? Was the customer satisfied?

• Assess what was done wrong and what contributed to successes.

• Identify changes to improve the delivery of future projects.

The project audit includes three major tasks:

It is estimated that about 90 percent of all projects are not seriously reviewed or audited.

Tips for Conducting a Project Audit

• First and foremost, the philosophy must be that the project audit is not a witch hunt.

• Comments about individuals or groups participating in the project are no-nos. Keep to project issues, not what happened or by whom.

• Audit activities should be intensely sensitive to human emotions and reactions. The inherent threat to those being evaluated should be reduced as much as possible.

• The project manager should be notified of the impending audit.• Accuracy of data should be verifiable or noted as subjective,

judgmental, or hearsay.

The project audit must represent an independent, outside view of the project.

Tips for Conducting a Project Audit(continued)

• Senior management should announce support for the project audit and see that the audit group has access to all information, project participants, and (in most cases) project customers.

• The attitude toward a project audit and its aftermath depends on the modus operandi of the audit leadership and group. The objective is not to prosecute. The objective is to learn and conserve valuable organization resources where mistakes have been made. Friendliness, empathy, and objectivity encourage cooperation and reduce anxiety.

• The audit should be completed as quickly as is reasonable.• The audit leader should be given access to senior management

above the project manager.

The Project Audit Process

Step 1: Initiation and Staffing• Clearly express intentions to perform the audit.• Formation of the audit team.• Schedule the audit.

Step 2: Data Collection and Analysis• Obtain the organization’s view.• Obtain the project team view.• Formulate conclusions and recommendations.

Step 3: Reporting• Description of project.• Analysis of information gathered.• Recommendations.• Lessons learned.• Appendix (if warranted).

The Audit Team

• The Audit Leader

• The Project Manager

• Members of the Project Team

• The Client Representative

• Other Critical Stakeholders

Characteristics of an Audit Leader

• No direct involvement or direct interest in the project.• Respect (perceived as impartial and fair) of senior

management and other project stakeholders.• Willingness to listen.• Independence and authority to report audit results

without fear of recriminations from special interests.• Perceived as having the best interests of the

organization in making decisions.• Broad-based experience in the organization or industry.

The Organization View

• Was the organizational culture supportive and correct for this type of project? Why? Why not?

• Was senior management’s support adequate?• Did the project accomplish its intended purpose?• Were the risks for the project appropriately identified and

assessed? Did risk events occur which had an impact greater than anticipated?

• Were the right people and talents assigned to this project?• Were the project start-up and hand-off successful? Why? Is

the customer satisfied?

The Project Team View

• Were the project planning and control systems appropriate for this type of project?

• Did the project conform to plan? Is the project over or under budget and schedule? Why?

• Were relationships with project stakeholders adequate and effective?

• Did the team have adequate access to organizational resources—people, budget, support groups, equipment? Were there resource conflicts with other ongoing projects?

• Was the team managed well?• What does evaluation from outside contractors suggest?

Those who cannot remember the past are condemned to relive it.

—George Santayana, 1863–1952

Project audits provide valuable contributions to an organization’s

tribal memory.

Questions??Comments??