Project Management - Assignment Example

?Project Management: The Energy Generation Project This paper examines a project scenario from the viewpoints of organisational structure, procurement strategy and scheduling. It outlines an appropriate organisational structure and considers potential issues relating to people management within the project. It then discusses possible approaches to procurement, identifying and justifying a procurement strategy for the different phases of the project lifecycle, including consultant appointment processes and contract types. Finally, a detailed schedule for the duration of the project will be provided that is fit for the purpose of managing the pilot project. Organisational Structure Project Team Structure The project is to be managed by a single project manager, reporting in to the Operations Director. The organisational structure chosen depends to a large extent on any methodology used and whether the organisation has any existing project management structures that are appropriate. For the purposes of this paper, it is assumed that there are no existing structures and the organisation does not have a preferred project management methodology. Projects are usually organised in one of three ways, according to Clements and Gido (2006 p.390): functional, project and matrix. The functional structure is typically used in organisations producing standard products and projects tend to be managed in-house, if they ever occur. The project-type organisation assumes that the project is a complete entity in its own right, with its own manager, team and resources. The projects are large, complex and expensive, taking years rather than weeks or days. There may be several projects running at once, but they are independent of each other. The matrix structure is similar to the project-type structure, in that multiple projects run at the same time. However, the projects can vary in size and scope from a few months to several years, and the resources need to be co-ordinated across them all. It is similar to the functional structure in that functional expertise is retained. There is a functional manager as well as a project manager involved in organising the project and co-ordinating the resources. This classification of structures is mirrored in the Project Management Body of Knowledge (PMBOK) (Project Management Institute (PMI) 2004 p.28). Based on this brief description, the project-type structure would appear to be suitable. But before a final decision is reached, other possibilities should be assessed. If the PRINCE2 (Office of Government Commerce (OGC) 2009) methodology was to be used, a different organisational structure would be recommended. This would comprise a Project Board, with three members (Senior User, Senior Supplier and Project Executive), to whom the project manager would report. The project could be a separate organisation, like the project-type structure above, or it could take place within another organisation, similar to the functional structure, depending upon the circumstances and the decisions of those involved (ibid, pp.31-43). The three roles on the Project Board represent the interests of the user, the supplier and the business (the Project Executive). The Project Executive is the ultimate authority of the project and may report into a Programme Board if the project is one of a number focused on achieving a particular set of outcomes. The Senior User represents the ultimate users of the project’s outputs who will take those outputs into business-as-usual operation. The Senior Supplier represents those who will provide the resources that create the project’s outputs. PRINCE2 can be used for any size of project as it is considered a generic approach to project management, focusing solely on the management aspects of project management, rather than any specialist contributions (ibid, p.4). So arguably it could be used in this situation as well. This approach to project management organisation is also used by the Association for Project Management (APM), where the Project Board is referred to as the Steering Group, and the Project Executive as the Project Sponsor. The APM define Steering Group as “a group, usually comprising the sponsor, senior managers and sometimes key stakeholders, whose remit is to set the strategic direction of a project. It gives guidance to the sponsor and project manager. Often referred to as the project board.” (APM, 2011 C). Each structure has its advantages and disadvantages, but based on this information, the project-type structure appears to be the best for the project under consideration. There are several advantages of using a project-type structure (Clements and Gido 2006 p.393). The resources required for the project are assigned to it full time, so no co-ordination is needed with other projects and there are no competing interests for them. The project manager has complete authority over the project team because the people required to complete the project report directly to him, rather than having to report to both the project manager and a functional or line manager. Because the project-type organisation allows one project to be set up for each project undertaken, the project team can respond quickly to any issues that arise during the project and remain focused on the objectives of the project and the customer. There are, however, several disadvantages (ibid, pp.393-394). Because all resources are allocated directly to each project, the project-type structure can be inefficient. The project budget must meet the costs of the whole project team for the duration of the project, rather than the costs being shared between different budgets. Duplication of resources and/or tasks also makes the structure inefficient and because staff are not shared between different projects, there is limited learning from the project that can be passed on to other projects to increase efficiency. Idle resources cannot be allocated to other projects while they are idle as they may be required on the original project at an inopportune moment for the project using them. There are ways to help counter these disadvantages (ibid, p.394), including the use of a project management office to provide support to all projects, which enables the sharing of administrative resources and facilitates some learning between projects, or specific functional support which enables consistent application of policies and procedures governing that particular function, removing some of the work that would otherwise be required of the project manager. If planning is done properly, in that it is detailed and accurate with an effective control system, more efficient resource use can be achieved while completing the project within the relevant time, quality and cost constraints. On this basis, the project-type structure would seem to be the best for this project, as long as the project manager has the experience and knowledge to execute his job effectively. People Management Issues People management is an issue within any organisation, including a temporary organisation such as the team set up to manage and deliver a project. The success or otherwise of people management within a project falls within the remit of the project manager, who requires a wide range of skills to undertake his role effectively. Martin and Fellenz (2010, p.227) define a team as a “small group[s] whose members take individual and collective responsibility for their shared objectives and interactively co-ordinate their interdependent activities through roles and specific assignments”. They further define a project team as a “team[s] set up to complete a particular task” (ibid). Interestingly, they also define a task force in such a way that it could also apply to a project team, which may be comprised of individuals from both inside and outside of the organisation. They also distinguish cross-functional teams as a separate entity when it is likely that every project team will involve some degree of cross-functionality. A project is deemed successful if it is delivered within specified measures of cost, time and quality. The people involved in the project are the ones who make it happen and it is essential that they work together otherwise the successful completion of the project is in doubt. Some commentators put the responsibility for this happening in the hands of the project manager, who needs to act as a leader when dealing with project management people issues. Anderson (2010, p.59) highlights the importance of people management within projects by highlighting the inclusion of an appendix covering interpersonal skills by the PMI in their latest edition of the PMBOK. She refers to the ideas of Katzenbach and Smith (1993 in Martin and Fellenz 2010 p.229), and provides a comparison of different models of team formation to highlight the similarities between them and why they are so important (Anderson, 2010, p.63). Ong et al (2009, p.157) link successful projects to leadership, and identify that the success and effectiveness of project management is “the ability of project managers to create an appropriate culture for project management, form a holistic governance structure for project stakeholders, manage the dynamics of change and enforce and encourage communication”. The project team would be stakeholders of the project on which they work, would be directly affected by any changes that occur within the project and would be part of the communications within the project, meaning that effective project management is clearly linked to managing people effectively. Thus the leadership role of the project manager cannot be ignored when considering interpersonal issues within the project team. Toor (2009, p.40) states that effective people management is “vital for effective project management” and identifies twelve key practices/factors that he considers “imperative to effective project management”, including “creating ownership ... build winning structures while forming teams ... generate employee awareness ... develop hybrid skills ... [and] make employees responsibly accountable”. Some of these areas are reproduced by other writers but others, such as “bridge disconnects and retain talent” and those that include more difficult people management issues such as conflict resolution or raising issues, tend to be glossed over, possibly because there is no prescription for dealing with them that can simply be imported from one situation to another. Clements and Gido (2006) identify several causes of poor team effectiveness within projects. These are unclear goals, unclear definition of roles and responsibilities, lack of project structure, lack of commitment, poor communication, poor leadership, turnover of project team members and dysfunctional behaviour (ibid, pp.331-333). Many of these fall within the tasks undertaken by the project manager, so should be easy to avoid or at least mitigate. The project will have goals set from the beginning, so it is a relatively simple matter to communicate these to the project team, and remind them of them on a regular basis, so that they know what they are trying to achieve and how their tasks fit within the whole. This will help the team to feel involved in the whole thing and committed to completing their part of the project to the best of their ability to help not only achieve the project objectives but also to help their colleagues who will also have tasks that fit within the same project that depend on them. Roles and responsibilities are also clarified at the beginning of a project (in PRINCE2 defined roles and responsibilities is one of the underlying principles of the methodology – OCG 2009 p.12). Again, communicating these at the beginning of the project and reminding the team on a regular basis should be part of the normal communications strategy within any project. This also helps the team to see where they, as individuals, fit in and who they can consult if there are any issues. Lack of project structure is easy to counter if the project planning has been done properly from the outset. The use of planning tools such as network analysis and Gantt charts allow a great deal of information to be conveyed in an easy-to-assimilate visual format. Such illustrations can be posted up on notice boards with regular updates to show the progress being made towards the final goal, as well as indicate where changes might need to be made when issues arise that affect the original plans. To counter a lack of commitment, in addition to the above, the project manager needs to discuss individual objectives with each team member and link them to the project as a whole. If individuals see how their work contributes to the whole, there is a greater degree of commitment to get things done and work with others. Allowing individuals to undertake training that aligns with their personal development goals while the project is taking place can also help with commitment. Many of the problems identified stem from poor communication. The project manager is responsible for setting up and executing a communications strategy that involves not just the external stakeholders but the project team members as well. If people do not know what is going on, they can feel lost and as if they don’t matter, which contributes to lack of commitment. It can also contribute to dysfunctional behaviour, when an individual decides to behave in an inappropriate manner. In this case, the project manager needs to discuss the issues directly with the team member and require an improvement to avoid being removed from the team. If no improvement is seen, then the individual should be removed to ensure minimal disruption to the remaining members. Rad and Anantatmula (2009) suggest that the drawing up of a team charter that includes such areas as participation in decision-making and performance of duties. The overall aim of the charter is to specify “the personal behaviour and professional performance of the team members” (ibid, p.000.000.2) with the boundaries set by a project charter which deals with the identification of the deliverables. They see that “the project charter specifies the deliverable by responding to what, whereas the team charter specified the behaviour by responding to how” (ibid). Poor leadership has already been discussed above, but it is essential that the person to whom the project manager reports, in this case the Operations Director, makes sure that the project manager is fulfilling their responsibilities in this area. A failure of project leadership will most likely lead to a project failure so must be addressed as soon as it appears to be a problem. The final issue, turnover of project team members, can make remaining team members feel unsettled, and will interrupt the flow of work for everyone as they become accustomed to a new individual within the team, then have to go through the same process again and again. If the staff selected to be part of the project team can be selected on the basis of skills that will be required for the duration of the project, this allows the team to build coherence and cohesiveness, which helps the achievement of a successful project outcome. Flynn (2011) considers the issue of staff motivation from the perspectives of the psychological contract and organisational maturity levels. His conclusion is that the type of behaviour organisations want of employees rarely tie up with the level of organisational maturity, with employee requirements usually being set at a level that requires a higher level of organisational maturity than currently exists. For a project organisation, with each project being managed as a separate entity, organisational maturity is always going to be at a low level, with focus on compliance (level 1) and processes (level 2). Many of the employee behaviours required within project teams are those required at organisational maturity levels 3 (continuous improvement) and 4 (“responsible autonomy” – ibid p.13). If Flynn is correct, then the project manager needs to work through the first two or three stages of organisational maturity at a very fast pace to gain the full commitment of the project team. Project Procurement The PMI define project management procurement as “the processes to purchase or acquire the products, services, or results needed from outside the project team to perform the work” (PMI 2004 p.269). The APM define procurement as “the process by which the resources (goods and services) required by a project are acquired. It includes development of the procurement strategy, preparation of contracts, selection and acquisition of suppliers, and management of the contracts” (APM 2011 A). There are clear overlaps here, although the APM make explicit reference to the idea of a procurement strategy governing the process. The APM state a procurement strategy “sets out how to acquire and manage resources (goods and services) required by a project” (APM 2011 B). Neither makes reference to such things as codes of conduct or ethical practices: the energy company is likely to be required to consider the environmental impact of its operations as well as the sustainability aspects associated with both the turbines and generation plant. Before any procurement strategy is set up, the relevant guidance should be obtained as to requirements that must be met in these areas, over and above the legal aspects of the process. Project management is considered part of the wider field of operations management, so in addition to looking at specific project management methodologies or approaches, it is also possible to review the ideas around procurement within operations management, which would usually occur as part of supply chain management. The Supplier Relationship Process Krajewski and Ritzman (2005) identify a supplier relationship process within the area of supply chain management. As the project is being run as if it were a company, such an approach is appropriate, although the underlying relationships may only be of short duration as this is a project being resourced and not business-as-usual. It provides a framework within which to examine the procurement requirements for the Energy Generation project. The supplier relationship process contains the following processes: Design Collaboration: this is the involvement of key suppliers in the design of the product/service to be delivered. Here it would be collaboration between the energy company and, say, the Port operator to determine how best to set up the Biomass plant to facilitate easy delivery of the required fuel. Sourcing: this is the qualification, selection, contract management and evaluation relating to suppliers. The energy company can use existing experience, knowledge and contacts to determine whether any suppliers with whom they have an existing good relationship might be suitable for the new project, otherwise a competitive tender might be required, which is likely to take some time to arrange and complete. Negotiation: this is the contract specification to meet price, quality and delivery requirements of the project, based on the proposed schedule. The energy company is likely to have a range of contracts available to it which have already been cleared by their legal/compliance departments, however, they may not be quite suitable for the project’s requirements. Alternatively, new contracts can be negotiated from scratch, with the associated delays consistent with obtaining appropriate clearances from legal, compliance and environmental agencies. Buying: this is the creation, management and approval of purchase orders. Once the contracts have been drawn up and approved by all relevant parties, the purchases can be made to ensure resources are available for the project when required. Information Exchange: this is the liaison between the project manager and the external suppliers of resources and will involve determining the best way to exchange information regarding relevant operating processes. For the energy company, the project manager is likely to be the key contact point unless this is delegated to a specific individual with the authority to deal with matters arising. Telephone calls and e-mails are likely to be used for normal communications with meetings arranged to deal with major problems as they arise. (adapted from Krajewski and Ritzman, 2005, p.411) An alternative approach is identified by the PMI in the third edition of the PMBOK (2004, p.272), which consists of six stages: Each stage has specific inputs, processes and outputs: Project Procurement Management Overview (Source: PMI 2004 p.272) The PMI overview is, not surprisingly, far more detailed than the approach of Krajewski and Ritzman (2005), which is geared to larger, continuous operations rather than a single production run. However, there are also clear overlaps between the two approaches. Both perhaps assume that there is an organisation already in existence with processes and procedures governing such situations. In the case of the energy company, the company certainly exists but the project, if run as a separate entity, may be starting from scratch with no existing support mechanisms in place. The project manager will need to be very experienced in this area to ensure the best approach is taken for the project. It might be worth hiring a specialist purchasing consultant to ensure that procurement is undertaken to the highest standards with no errors. Contract Types The PMI set out a range of contract options for consideration when undertaking project procurement activities. These are: a. Fixed-Price/Lump-Sum Contracts: this contract provides for a fixed price for a well-defined product. Incentive and penalty clauses can be included, if desired, to encourage early delivery or compliance. b. Cost-Reimbursable Contracts: there are several variants of this type of contract, which involves payment for actual costs incurred plus a fee for the seller’s profit. The costs incurred are divided into direct and indirect costs (those specifically incurred for the project and those associated with the costs of doing business, such as administration and overheads, respectively). This type of contract can also include incentive and penalty clauses if required. Three types of cost-reimbursable contracts are: i. Cost-Plus-Fee (CPF) or Cost-Plus-Percentage of Cost (CPPC) – the seller receives costs plus a fee calculated as a percentage of those costs, thus the fee varies based on the costs incurred. ii. Cost-Plus-Fixed-Fee (CPFF) – the seller receives costs plus a fixed fee agreed at the outset, which is only likely to change if the project scope changes iii. Cost-Plus-Incentive-Fee (CPIF) – the seller receives costs and receives a fixed fee agreed at the outset, if the seller meets certain criteria specified in the contract. If costs are lower than expected, for example, both the seller and the purchaser might agree to split the benefits for mutual gain. c. Time and Material (T&M) Contracts: this is an open-ended agreement that does not specify what is to be delivered in the contract, but can change depending upon project requirements. The value of the contract to the seller can grow if the approach is cost-reimbursable, based either on actual costs incurred or a fixed price per item agreed in the contract. (based on PMI 2004 pp.277-278) It is likely that the energy company will be able to use the fixed-price contract format for many of its requirements, however, there are likely to be some very large purchases of bespoke items that require specialised contracts including the use of incentive/penalty clauses to ensure delivery on time of such items, as it is probable that the timely arrival of such items will be required to ensure the project can continue. Penalty clauses would need to cover the costs of any hold-up resulting from the late delivery of key items, together with a contingency fee to cover unforeseen consequences of any such hold-up. It is unlikely that T&M contracts would be appropriate in this situation, as the requirements for both the turbines and the generation plant will be well-defined at the outset. Procurement Strategy Doherty (2010) highlights the extremely high risk associated with energy infrastructure capital projects and identifies “revamping the relationship between owners and suppliers” (p.43) as one of three areas considered to be imperative to the future of the industry. The need is for shared knowledge to be available 24/7/365, and the recommendation is for a “centralised knowledge management repository” (ibid). Accurate information will be required by the person responsible for procurement to ensure the right contract type is used, with the most appropriate terms and conditions to encourage delivery of the right product, to the correct specifications, at the right price, at the right time. Edwards (2006) links failed procurement outcomes to not implementing procurement best practice, which increases both costs and risk. She identifies such things as waivers and deviations as requiring proper attention when requested, to ensure that the risks associated with granting or not granting waivers or tolerating/not tolerating deviations are fully understood and taken into account before a decision is reached. The project manager and operations director must ensure that the procurement strategy drawn up is both fit for purpose and followed by those involved in the procurement process, including the granting of variations to contracts once the project has started. A well-considered procurement strategy can actually help improve project value. Jacobson (2009) indicates that “when employed properly, procurement planning and discipline in the early steps of procurement can make a significant contribution to improving value” (p.32). This would support the hiring of a procurement specialist known to deliver good results on similar projects at the outset of the project, to ensure correct procedures are set up and followed from the beginning, maximising the amount of value generated from correct procurement practices. Procurement functions can also benefit from benchmarking. Brandmeier and Rupp (2010) identified significant benefits associated with benchmarking the procurement process: “use of cross-functional teams, high hierarchical positioning of the procurement function within the company, strong cooperation with other functions, training and development of the procurement personnel as well as supplier integration and continuous evaluation” (p.5). With such benefits accruing to benchmarking, the energy company should give serious consideration to using the technique when setting up its own procurement function. Gonzales (2009) provides an analysis of the bid prices and schedules of contractors, subcontractors and suppliers when constructing alternative energy projects. He identifies that “ideally, the bid price and schedule should account for the special needs contractors and suppliers may encounter on power projects regarding quality, submittals, scheduling and coordination, procurement, transportation, change orders, delays and disruptions, unforeseen conditions, nonconforming construction documents and material/equipment fabrication” (ibid, p.10.1). This would fall within the domains of both procurement and risk management, providing a handy checklist of things to consider when looking at the items required from contractors and the potential problems that might arise associated with their supply. Hiring of Consultants Any consultant hired for the project must have significant relevant experience in the area of energy generator construction projects to ensure that the energy company can deliver what it wants. Such projects have a tendency to over-run on both cost and time grounds (Doherty, 2010), thus the skills, knowledge and expertise of the consultants and project manager must be fit for purpose. An investigation of the consultants associated with successful projects should be undertaken to identify potential candidates, as well as a general search of the market to identify other possible hires. A clear list of requirements, both academic and experiential, should be drawn up as the hiring criteria, and any contract used should provide for both incentives and penalties should the consultant over-promise and under-deliver. If a consultant who has performed consistently well proves to be extremely expensive, the energy company must remember that the cost of not hiring that particular consultant, but someone with less experience and a mediocre track record will potentially cause problems that are extremely difficult and expensive to solve. Investing in quality advice and guidance from the outset is crucial to achieving a successful project outcome. (4,475 words to this point) References Anderson, B. (2010) ‘Project Leadership and the Art of Managing Relationships’ T+D March, pp.58-63 Association for Project Management (APM) (2011) web resources: A Procurement definition available online at http://www.apm5dimensions.com/content/procurement-0 [accessed 12th January 2011] B Procurement Strategy definition available online at http://www.apm5dimensions.com/content/procurement-strategy [accessed 12th January 2011] C Steering Group definition available online at http://www.apm5dimensions.com/content/steering-group [accessed 12th January 2011] Brandmeier, R. A. and Rupp, F. (2010) ‘Benchmarking Procurement Functions: Causes for Superior Performance’ Benchmarking: An International Journal Vol. 17 No. 1 pp.5-26 Clements, J. P. and Gido, J. (2006) Effective Project Management (International Student Edition) (3rd edn.) Thomson South-Western, Mason, Ohio Doherty, P. (2010) ‘Taking the Risks out of Energy Infrastructure Capital Projects’ Electric Light and Power September/October pp.42-43 Edwards, J. A. (2006) ‘Chapter 15: Project Procurement Management in Practice’ in Dinsmore, P. C. and Cabanis-Brewin, J. (eds.) The AMA Handbook of Project Management (2nd edn.) Amacom New York Flynn, S. (2011) ‘Can you Directly Motivate Employees? Exploding the Myth.’ Development and Learning in Organisations Vol. 25 No. 1 pp.11-15 Gonzales, A. J. (2009) ‘Mitigating Cost and Schedule Risks on Power Generation Construction Projects’ AACE International Transactions pp.10.1-10.17 Jacobson, S. M. (2009) ‘Procurement – the Rarely Used Value Improving Practice’ Cost Engineering Vol. 51 No. 8 pp.32-33 Krajewski, L. J. and Ritzman, L. P. (2005) Operations Management: Processes and Value Chains (International Edition) (7th edn.) Pearson Prentice Hall, Upper Saddle River New Jersey Martin, J. and Fellenz, M. (2010) Organisational Behaviour and Management (4th edn.) Cengage Learning, Andover Office of Government Commerce (OGC) (2009) Managing Successful Projects with PRINCE2 (5th edn.) The Stationery Office, Norwich Ong, V., Richardson, D., Yanqing, D., Qile, H., and Johnson, B. (2009) ‘The Role of Project Leadership in Achieving Effective Project Management’ Proceedings of the European Conference on Management, Leadership & Governance pp.157-163 Project Management Institute (PMI) (2004) A Guide to the Project Management Body of Knowledge (PMBOK Guide) (3rd edn.) Project Management Institute, Newtown Square Pennsylvania Rad, P. F. and Anantatmula, V. S. (2009) ‘Attributes of a Harmonious Project Team’ AACE International Transactions pp.000.000.1-000.000.9 Toor, T. P. S. (2009) ‘Project Management: an Imperative to Effective Project Management’ Business Strategy Series Vol. 10 No. 1 pp.40-64 Read More