Project management for engineering business and technology fifth edition pdf

Project Management for Engineering, Business

and Technology FIFTH EDITION

Project Management for Engineering, Business and Technology, 5th edition, addresses project management across all industries. First covering the essential background, from origins and philosophy to methodology, the bulk of the book is dedicated to concepts and techniques for practical application. Coverage includes project initiation and proposals, scope and task definition, scheduling, budgeting, risk analysis, control, project selection and portfolio management, program management, project organization, and all-important “people” aspects—project leadership, team building, conflict resolution and stress management.

The Systems Development Cycle is used as a framework to discuss project management in a variety of situations, making this the go-to book for managing virtually any kind of project, program or task force. The authors focus on the ultimate purpose of project management—to unify and integrate the interests, resources, and work efforts of many stakeholders, as well as the planning, scheduling, and budgeting needed to accomplish overall project goals.

This new edition features:

• Updates throughout to cover the latest developments in project management methodologies • New examples and 18 new case studies to help students develop their understanding and put

principles into practice • A new chapter on agile project management and lean • Expanded coverage of program management, stakeholder engagement, buffer management, and

managing virtual teams and cultural differences in international projects. • Alignment with PMBOK terms and definitions for ease of use alongside PMI certifications • Cross-reference to IPMA, APM, and PRINCE2 methodologies • Extensive instructor support materials, including an Instructor’s Manual, PowerPoint slides,

answers to chapter review questions, problems and cases, and a test bank of questions.

Taking a technical yet accessible approach, Project Management for Business, Engineering and Technology, 5th edition, is an ideal resource and reference for all advanced undergraduate and graduate students in project management courses as well as for practicing project managers across all industry sectors.

John Nicholas, PhD, is Professor of Operations Management at Loyola University, Chicago, USA.

Herman Steyn, PhD, is a Professor in the Graduate School of Technology Management, University of Pretoria, South Africa where he specializes in project management.

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“As a Professor who has taught Project Engineering for the last 14 years, I have also performed large scale Project Engineering throughout my first career (over 20 years) in Aerospace, Defense and Information Technology. When deciding on a textbook for my graduate Project Engineering class, I looked long and hard. I wasn’t finding what I was looking for and was going to write my own, until I found Project Management for Engineering, Business and Technology. This is the textbook I would have written. It is robust, complete and easy to follow. The graphics, charts and figures are all very descriptive and real. And my students like the paperback nature of the book. I highly recommend this textbook for anyone teach- ing Engineering, Business or Technology Project Management/Engineering. I also recommend it as a ‘keeper’ for students who will be guiding projects in the future.”

Mark Calabrese, University of Central Florida, USA

“The publication of the 5th edition of Project Management for Engineering, Business and Technology by John Nicholas and Herman Steyn is an important milestone in a continuing conversation between the authors and the current and future practitioners of project management around the world. This book has long been a comprehensive but accessible publication that provides valuable insights into the strategic and day-to- day management of projects both large and small. There are numerous publications in this field but Nicholas and Steyn have found the balance between the needs of experienced practitioners looking for ways to improve project outcomes, and the needs of students who are new to the project management field. The concepts are clearly and logically laid out, and the language is appropriate for a wide range of audiences. It continues to be a benchmark in a crowded field of publications offering both practical and strategic insights into the art and craft of project management.”

Barrie Todhunter, University of Southern Queensland, Australia

“I have been using the earlier editions of this book in my Project Management teaching to working executives of a major engineering company employing close to 40000 people in various types of pro- jects. I have evaluated the current 5th edition of the book from the perspective of (a) a teaching resource (b) study material and (c) as a resource for case studies and references. I find that the 5th edition has been thoroughly revamped and incorporates several relevant resources and is presented in a very lucid and structured way. I have absolutely no hesitation in recommending this book as a standard resource for teaching students in a university set up and/or for working executives in a project environment. The book is also a good resource as a study material for certification courses.”

Krishna Moorthy, Ex-Dean, Larsen & Toubro Institute of Project Management, India

“Project Management for Engineering, Business and Technology is one of the most comprehensive textbooks in the field. Nicholas and Steyn explain the matter in a readable and easy-to-understand way, illustrated with interesting examples. The authors combine the ‘hard matter’ of project management with relevant behavioural aspects. Overall, a useful work for anyone new to the field or as reference for the more advanced project manager.”

Martijn Leijten, Delft University of Technology, The Netherlands

“Project management plays a vital role in achieving project objectives. Projects bring change and project management is recognised as the most effective way to managing such change. This book encourages readers to become interested and involved in the change towards renewed project management and management of projects.”

Benita Zulch, University of the Free State, South Africa

“A very comprehensive text. An excellent mix of materials to enable students to learn techniques and engage in discussion of scenarios.”

Richard Kamm, University of Bath, UK

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Project Management for Engineering, Business

and Technology FIFTH EDITION

John M. Nicholas Loyola University Chicago

Herman Steyn University of Pretoria

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Fifth edition published 2017 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN

and by Routledge 711 Third Avenue, New York, NY 10017

Routledge is an imprint of the Taylor & Francis Group, an informa business

© 2017 John Nicholas and Herman Steyn

The right of John Nicholas and Herman Steyn to be identified as authors of this work has been asserted by them in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988.

All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers.

Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe.

Fourth edition published by Routledge 2012 Third edition published by Elsevier Inc. 2008

British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library

Library of Congress Cataloging in Publication Data A catalog record for this book has been requested

ISBN: 978-1-138-93735-2 (hbk) ISBN: 978-1-138-93734-5 (pbk) ISBN: 978-1-315-67631-9 (ebk)

Typeset in Joanna by Servis Filmsetting Ltd, Stockport, Cheshire

Visit the companion website: www.routledge.com/cw/nicholas

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http://www.routledge.com/cw/nicholas
To Sharry, Julia, Joshua, and Abigail J.M.N.

To Karen and Janine H.S.

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Brief Contents

Introduction 1

PART I: PHILOSOPHY AND CONCEPTS 19 1 What Is Project Management? 21 2 Systems Approach 42

PART II:  PROJECT LIFE CYCLE 65 3 Project Life Cycle and Project Conception 67 4 Project Definition and System Definition 109

PART III: SYSTEMS AND PROCEDURES FOR PLANNING AND CONTROL 153 5 Basic Project Planning Techniques 155 6 Project Schedule Planning and Networks 190 7 Advanced Project Network Analysis and Scheduling 232 8 Cost Estimating and Budgeting 275 9 Project Quality Management 316 10 Project Risk Management 346 11 Project Execution, Monitoring, and Control 385 12 Project Evaluation, Communication, Implementation, and Closeout 430 13 Agile Project Management and Lean 453

PART IV:  ORGANIZATION BEHAVIOR 481 14 Project Organization Structure and Integration 483 15 Project Roles and Stakeholders 515 16 Managing Participation, Teamwork, and Conflict 541

PART V:  PROJECT MANAGEMENT IN THE CORPORATE CONTEXT 567 17 Meta-Management of Projects and Program Management 569 18 Project Selection and Portfolio Management 604 19 International Project Management 628

Appendix A: RFP for Midwest Parcel Distribution Company 659 Appendix B: Proposal for Logistical Online System Project (LOGON) 663 Appendix C: Project Evaluation Plan for Logistical Online System 670

Index 686

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http://taylorandfrancis.com
Contents

Preface xvii Acknowledgements xix About the Authors xxi

Introduction 1 I.1 In the Beginning... 1 I.2 What Is a Project? 3 I.3 All Projects are Not the Same 4 I.4 Project Management: The Need 7 I.5 Project Goal: Time, Cost, and Performance 8 I.6 Project Management: The Person, The Team, The Methodology 9 I.7 Project Management Standards of Knowledge and Competencies 10 I.8 About This Book 10 I.9 Study Project 11 Appendix: Relation Between Professional Standards and Chapters of This Book 12 Review Questions 16 Case I.1 The Denver Airport 16 Questions About the Case 18 Endnotes 18

PART I: PHILOSOPHY AND CONCEPTS 19 1 What Is Project Management? 21

1.1 Functions of Management 21 1.2 Features of Project Management 22 1.3 Evolution of Project Management 23 1.4 Where is Project Management Appropriate? 24 1.5 Management by Project: A Common Approach 26 1.6 Different Forms of Project-Related Management 27 1.7 Project Environments 29 1.8 New Product and Systems Development Projects 30 1.9 Construction Projects 32 1.10 Service-Sector Projects 33 1.11 Public-Sector and Governmental Projects and Programs 34 1.12 Miscellaneous Projects 36 1.13 Summary 37 Review Questions 37 Questions About the Study Project 38 Case 1.1 Disaster Recovery at Marshall Field’s 38 Case 1.2 Flexible Benefits System Implementation at Shah Alam Medical Center 40 Endnotes 40

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2 Systems Approach 42 2.1 Systems and Systems Thinking 42 2.2 Systems Concepts and Principles 43 2.3 Systems Approach 48 2.4 Systems Engineering 51 2.5 Project Management: A Systems Approach 54 2.6 Summary 55 Review Questions 55 Questions About the Study Project 56 Case 2.1 Glades County Sanitary District 57 Case 2.2 Life and Death of an Aircraft Development Project 58 Case 2.3 Jubilee Line Extension Project 59 Case 2.4 Santa Clara County Traffic Operations System and Signal

Coordination Project 61 Endnotes 62

PART II: PROJECT LIFE CYCLE 65 3 Project Life Cycle and Project Conception 67

3.1 Project Life Cycle 67 3.2 Systems Development Cycle 68 3.3 Phase A: Conception 73 3.4 Project Feasibility 74 3.5 The Project Proposal 84 3.6 Project Contracting 90 3.7 Summary 97 Appendix: Kinds of Contracts 97 Review Questions 104 Questions About the Study Project 105 Case 3.1 West Coast University Medical Center 105 Case 3.2 X-Philes Data Management Corporation: RFP Matters 106 Case 3.3 Proposal Evaluation for Apollo Spacecraft 106 Case 3.4 Contract Mess-Up at Polanski Developers 107 Endnotes 107

4 Project Definition and System Definition 109 4.1 Phase B: Definition 109 4.2 Project Definition 112 4.3 Phased (Rolling Wave) Project Planning 114 4.4 System Definition 118 4.5 Summary 127 Appendix A: Stages of Systems Engineering 128 Appendix B: Quality Function Deployment 141 Review Questions 146 Questions About the Study Project 147 Case 4.1 Star-Board Construction and Santaro Associates:

Requirements Snafu 147 Case 4.2 Revcon Products and Welbar, Inc.: Client–Contractor Communication 148 Case 4.3 Lavasoft.com: Interpreting Customer Requirements 149 Case 4.4 Proposed Gold Mine in Canada: Phased Project Planning 150 Endnotes 151

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PART III: SYSTEMS AND PROCEDURES FOR PLANNING AND CONTROL 153 5 Basic Project Planning Techniques 155

5.1 Planning Steps 155 5.2 The Project Execution Plan 156 5.3 Scope and Statement of Work 159 5.4 Work Definition 161 5.5 Project Organization and Responsibilities 168 5.6 Scheduling 170 5.7 Planning and Scheduling Charts 172 5.8 Line of Balance (Linear Scheduling Method) 177 5.9 Procurement Management 179 5.10 Summary 182 Review Questions 182 Questions About the Study Project 184 Case 5.1 Barrage Construction Company: Sean’s WBS 184 Case 5.2 Startrek Enterprises, Inc.: Deva’s Project Plan 185 Case 5.3 Walter’s Project Plan 186 Case 5.4 Planning the Boca Implementation at Kulczyński Products 187 Endnotes 188

6 Project Schedule Planning and Networks 190 6.1 Network Diagrams 190 6.2 The Critical Path 195 6.3 Converting to Gantt Calendar Schedules 202 6.4 Management Schedule Reserve 203 6.5 Alternative Relationships 204 6.6 Scheduling with Resource Constraints 209 6.7 Criticisms of Network Methods 216 6.8 Summary 217 Appendix A: AOA Diagrams 218 Appendix B: Alternate Scheduling Method: Project Starts at Day 1 220 Review Questions and Problems 221 Questions About the Study Project 225 Case 6.1 Network Diagram for a Large Construction Project 226 Case 6.2 Melbourne Construction Company, A 228 Case 6.3 Melbourne Construction Company, B 229 Case 6.4 Melbourne Construction Company, C 230 Endnotes 231

7 Advanced Project Network Analysis and Scheduling 232 7.1 CPM and Time-Cost Tradeoff 232 7.2 Variability of Activity Duration 238 7.3 PERT 241 7.4 Allocating Resources and Multiple Project Scheduling 251 7.5 Theory of Constraints and Critical Chain Method 252 7.6 TOC Method for Allocating Resources to Multiple Projects 260 7.7 Discussion and Summary 262 Summary List of Symbols 263 Review Questions and Problems 264 Questions About the Study Project 268

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Case 7.1 Bridgecon Contractors 268 Case 7.2 LOGON Project 270 Case 7.3 Papua Petera Village Project 271 Endnotes 272

8 Cost Estimating and Budgeting 275 8.1 Cost Estimates 275 8.2 Cost Escalation 276 8.3 Cost Estimating and the Systems Development Cycle 280 8.4 Cost Estimating Process 281 8.5 Elements of Estimates and Budgets 288 8.6 Project Cost Accounting Systems 292 8.7 Budgeting Using Control (or Cost) Accounts 293 8.8 Cost Summaries 295 8.9 Cost Schedules and Forecasts 298 8.10 Life Cycle Costs 306 8.11 Summary 308 Review Questions and Problems 309 Questions About the Study Project 311 Case 8.1 Life Cycle Costs for Fleet of Tourist Spaceships 312 Case 8.2 Estimated Costs for the Chunnel Project 312 Case 8.3 Fiona’s Estimate for the Gorgy Project 313 Case 8.4 Melbourne Construction Company, D 314 Endnotes 314

9 Project Quality Management 316 9.1 The Concept of Quality 316 9.2 Project Quality Management Processes 320 9.3 Techniques for Quality Assurance in System Development 324 9.4 Techniques for Quality Control 335 9.5 Summary 338 Review Questions 338 Questions About the Study Project 339 Case 9.1 Ceiling Panel Collapse in the Big Dig Project 339 Case 9.2 FIFA 2010 World Cup South Africa 341 Case 9.3 Airbag Adversity 344 Endnotes 344

10 Project Risk Management 346 10.1 Risk Concepts 346 10.2 Risk Identification 347 10.3 Risk Assessment 353 10.4 Risk Response Planning 360 10.5 Risk Monitoring and Response 366 10.6 Project Management Is Risk Management 366 10.7 Summary 370 Appendix: Risk Analysis Methods 370 Review Questions and Problems 375 Questions About the Study Project 378 Case 10.1 The Sydney Opera House 379

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Case 10.2 Infinity & Beyond, Inc. 380 Case 10.3 The Nelson Mandela Bridge 381 Endnotes 383

11 Project Execution, Monitoring, and Control 385 11.1 Phase C: Execution 385 11.2 Detail Design Stage 385 11.3 Production/Build Stage 389 11.4 Monitoring and Control Process 390 11.5 Work Packages and Control Accounts 392 11.6 Project Monitoring and Control Emphasis 395 11.7 Performance Analysis and Earned Value Management 400 11.8 Issue Management 414 11.9 Change Control 416 11.10 Contract Administration 419 11.11 Problems with Monitoring and Controlling Projects 420 11.12 Summary 420 Summary of Variables 421 Review Questions and Problems 421 Questions About the Study Project 425 Case 11.1 Cybersonic Project 426 Case 11.2 SA Gold Mine: Earned Value After a Scope Change 427 Case 11.3 Change Control Process at Dynacom Company 428 Endnotes 428

12 Project Evaluation, Communication, Implementation, and Closeout 430 12.1 Project Evaluation 430 12.2 Project Communication Management 432 12.3 Project Management Information Systems 435 12.4 Informal Communication 439 12.5 Implementation Stage 440 12.6 Project Termination and Closeout 441 12.7 Project Summary Evaluation 445 12.8 After the Project—Phase D: Operation 447 12.9 Summary 448 Review Questions 448 Questions About the Study Project 449 Case 12.1 Status Report for the LOGON Project 450 Case 12.2 SLU Information Central Building 450 Case 12.3 Formal and Informal Communication 451 Endnotes 452

13 Agile Project Management and Lean 453 13.1 Traditional Project Management 453 13.2 Agile Project Management, APM 455 13.3 Scrum 457 13.4 APM Controversy 465 13.5 Lean Production and Project Management 466 13.6 Summary 474

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Review Questions 475 Questions about the Study Project 476 Case 13.1 Grand Entry for Accent, Inc. 477 Case 13.2 Technology to Track Stolen Vehicles 479 Endnotes 480

PART IV: ORGANIZATION BEHAVIOR 481 14 Project Organization Structure and Integration 483

14.1 Formal Organization Structure 483 14.2 Organizational Design by Differentiation and Integration 484 14.3 Requirements of Project Organizations 487 14.4 Integration of Subunits in Projects 487 14.5 Liaison Roles, Task Forces, and Teams 488 14.6 Project Expeditors and Coordinators 489 14.7 Pure Project Organizations 491 14.8 Matrix Organizations 493 14.9 Selecting an Organization Form for Projects 496 14.10 Project Office and PMO 498 14.11 Integration in Large-Scale Projects 500 14.12 Integration in Systems Development Projects 504 14.13 Concurrent Engineering 505 14.14 Summary 508 Review Questions 509 Questions about the Study Project 510 Case 14.1 Organization for the LOGON Project 511 Case 14.2 Pinhole Camera and Optics, Inc.: Why Do We Need a Project Manager? 511 Case 14.3 Implementing a Matrix Structure in an R&D Laboratory 512 Endnotes 514

15 Project Roles and Stakeholders 515 15.1 The Project Manager 516 15.2 Project Management Authority 519 15.3 Project Manager Qualifications 522 15.4 Filling the Project Management Role 526 15.5 Roles in the Project Team 527 15.6 Roles Outside the Project Team 530 15.7 Project Stakeholder Engagement 531 15.8 Summary 534 Review Questions 535 Questions About the Study Project 536 Case 15.1 The LOGON Project 537 Case 15.2 Selecting a Project Manager at Nuwave Products Company 537 Case 15.3 Stakeholders in Boston’s Big Dig 538 Endnotes 539

16 Managing Participation, Teamwork, and Conflict 541 16.1 Leadership in Project Management 542 16.2 Participative Management 543 16.3 Teams in Project Management 544 16.4 The Team-Building Approach 547

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16.5 Improving Ongoing Work Teams 548 16.6 Building New Teams 549 16.7 Intergroup Problem Solving 551 16.8 Virtual Teams 552 16.9 Conflict 555 16.10 Managing Group Conflict 558 16.11 Managing Emotional Stress 559 16.12 Summary 562 Review Questions 562 Questions About the Study Project 563 Case 16.1 Wilma Keith 564 Case 16.2 Mars Climate Orbiter Spacecraft 565 Endnotes 565

PART V: PROJECT MANAGEMENT IN THE CORPORATE CONTEXT 567 17 Meta-Management of Projects and Program Management 569

17.1 Project Management Maturity and Maturity Models 569 17.2 Project Management Methodology 572 17.3 Managing Project Knowledge 577 17.4 Project Management Office 582 17.5 Program Management 586 17.6 Program Phases 587 17.7 Program Management Themes 588 17.8 Program Organization 590 17.9 Special Considerations 591 17.10 Summary 593 Review Questions 594 Questions About the Study Project 595 Case 17.1 Maxim Corporation America (MCA) 595 Case 17.2 Motorola’s M-Gate Methodology and the RAZR Project 597 Case 17.3 Tecknokrat Company 598 Case 17.4 Mercury Exploration Program 599 Endnotes 601

18 Project Selection and Portfolio Management 604 18.1 Project Portfolio Management 604 18.2 Framework for Project Selection and Portfolio Management 607 18.3 Methods for Assessing Individual Projects 609 18.4 Methods for Comparing and Selecting Projects 613 18.5 Integrating the Gating Process and Portfolio Management 620 18.6 Summary and Discussion 621 Review Questions and Problems 622 Question About the Study Project 624 Case 18.1 Consolidated Energy Company 624 Case 18.2 Proposed Cement Factory for PCS Company 625 Endnotes 626

19 International Project Management 628 19.1 International Projects 628 19.2 Problems Managing International Projects 629

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19.3 Local Institutions and Culture 630 19.4 Local Stakeholders 636 19.5 Geo-National Issues 636 19.6 Project Manager 638 19.7 Local Representative 640 19.8 Top Management, Steering Committee, and PMO 640 19.9 Team and Relationship Building 641 19.10 Project Definition 642 19.11 Project Monitoring 647 19.12 Communication 648 19.13 Risks and Contingencies 649 19.14 Summary 650 Review Questions 651 Questions About the Study Project 652 Case 19.1 Mozal Project—International Investment in an Undeveloped Country 652 Case 19.2 Spirit Electronics’ Puerto Rico Office 655 Endnotes 657

APPENDIX A RFP for Midwest Parcel Distribution Company 659 APPENDIX B Proposal for Logistical Online System Project (LOGON) 663 APPENDIX C Project Execution Plan for Logistical Online System 670

Index 686

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Preface

When people see or use something impressive—a bridge arching high over a canyon, a space probe touching down on a distant planet, an animated game so realistic you think you’re there, or a nifty phone/camera/computer the size of your hand—they sometimes wonder, “How did they do that?” By they, of course, they are referring to the creators, designers, and builders, the people who created— thought up and made—those things. Seldom do they wonder about the leaders and managers, the people who organized and led the efforts that brought those astounding things from concept to reality and without whom most neat ideas would never have been achieved. This book is about them—the manag- ers of project managers, the mostly unsung heroes of engineering, business, and technology who stand outside the public eye but ultimately are responsible for practically everything that requires collective human effort.

The project manager is but one of many people involved in the creation of society’s products, systems, and artifacts, yet it is he or she who gets the others involved and organizes and directs their efforts so everything comes out right. Occasionally, the manager and the creator happen to be the same: Burt Rutan, Woody Allen, and Gutzon Borglum are examples; their life work—in aerospace, motion pictures, and monumental sculptures, respectively—represent not only creative or technological genius, but leadership and managerial talent as well.

In the last several decades businesses have expanded from domestic, nationalistic enterprises and markets into multinational, global enterprises and markets. As a result, from a business perspective there is more of everything to contend with—more ideas, competitors, resources, constraints, and, certainly, more people doing and wanting things. Technology is advancing and products and processes evolving at a more rapid pace; as a result, the life cycles of most things in society are getting shorter. This “more of everything” has had a direct impact on the conduct of projects—including projects to develop products, systems, or processes that compete in local, domestic, and international markets; projects to create and implement new ways of meeting demand for energy, recreation, housing, communication, transporta- tion, and food; and projects to answer basic questions in science and resolve grave problems such as disease, pollution, global warming, and the aftermath of natural disasters. All of this project activity has spurred a growing interest in improved ways to plan, organize, and guide projects to better meet the needs of customers, markets, and society within the bounds of limited time and resources.