TM 665 Lecture 11

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TM 665: Project Planning & Control 1

TM 665: Lecture 11

Project Audits, Termination & Review

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Agenda

Project Audits (CH 12) Goal-based Project Outcomes

Project Audit Reports

Audit Life Cycle

Report Credibility Revenue Reporting

Project Termination (CH 13) Methods of Project Termination

Early Project Termination

Project Shortcomings

PM Responsibilities

Project Final Report

Final Exam Review

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Project Auditing

A major vehicle for evaluation is the project audit, a

more or less formal inquiry into any aspect of the project

A project audit is highly flexible and may focus onwhatever matters senior management desires

The evaluation of a project must have credibility in theeyes of the management group for whom it is performed

and also in the eyes of the project team on whom it isperformed

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Purposes of Evaluation - Goals of Project Audit

Four independent dimensions of success:

The most straightforward dimension is the projects efficiencyin meeting both the budget and schedule

Another dimension, and the most complex, is that ofcustomer impact/satisfaction

A third dimension, again somewhat straightforward and

expected, is business/direct success

The last dimension, somewhat more difficult and nebulous toascertain, is future potential

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Purposes of Evaluation - Goals of Project Audit

Another primary purpose of evaluation is to help translate

the achievement of the projects goals into a contribution

to the parent organizations goals

To do this, all facets of the project are studied in order toidentify and understandthe projects strengths andweaknesses

The result is a set ofrecommendations that can helpboth ongoing and future projects

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Evaluation Benefits of Project Audit

A successful project evaluation via audit can

help an organization:1. Identify problems earlier

2. Clarify performance, cost, and time relationships

3. Improve project performance

4. Locate opportunities for future technological advances

5. Evaluate the quality of project management

6. Reduce costs

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Purposes of Evaluation Need for Project Audit

Organizational Benefits Speed the achievement of results

Identify mistakes, remedy them, and avoid them in the future

Provide information to the client

Reconfirm the organizations interest in, and commitment to,

the project

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Purposes of Evaluation Other Project Audit Outcomes

Ancillary goals are often unstated, but IMPORTANT:

Identify organizational strengths and weaknesses in

project-related personnel, management, and decision-

making techniques and systems

Identify risk factors in the firms use of projects

Improve the way projects contribute to the professional

growth of project team members

Identify project personnel who have high potential for

managerial leadership

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Project Audit

The project audit is a thorough examinationof the management of a project, itsmethodologyand procedures, its records, itsproperties, its budgets and expenditures and

its degree of completion

The formal report may be presented in variousformats, but should, at a minimum containcomments on some specific points

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Project Audit

Six parts of a project audit:

1. Current status of the project

2. Future status

3. Status of crucial tasks

4. Risk assessment

5. Information pertinent to other projects

6. Limitations of the audit

It is far broader in scope than a financial audit andmay deal with the project as a whole or any subset ofproject components

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Audit Depth

Timeand money are two of the most common limitson depth of investigation and level of detail presentedin the audit report

Accumulation, storage, and maintenance of auditabledata are important cost elements

Two often overlooked costs are the self protective

activity of team members during an audit, and thepotential for project morale to suffer as a result of anegative audit

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Audit Depth

There are three distinct and easily recognized levels

of project auditing:

1. General audit - normally most constrained by time

and resources and is usually a brief review of theproject touching lightly on the six parts of an audit

2. Detailed audit - usually conducted when a follow-upto the general audit is required

3. Technical audit - generally carried out by a qualifiedtechnician under the direct guidance of the project

auditor

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Audit Timing

The first audits are usually done early in theprojects life, and are often focused on the technicalissues in order to make sure that key technical

problems have been solved Audits done later in the life cycle of a project are of

less immediate value to the project, but are more

valuable to the parent organization

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Audit Timing

As the project develops, technical risks are less likelyto be matters of concern

Conformity to the schedule and budget become theprimary interests

Managementissues are major matters of interest foraudits made latein the projects life

Postproject audits are often a legal necessity becausethe client specified such an audit in the contract

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Risk Event Graph

Risk

High

Cost

Low

Project Life Cycle

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Preparation and Use of Audit Reports

The information should be arranged so as to facilitate

the comparison ofpredicted versus actual results

Significant deviations of actual from predicted resultsshould be highlighted and explained in a set offootnotes or comments

Negative comments about individuals or groupsassociated with the project should be avoided

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Construction and Use of Audit Reports

Information that should be contained in the audit report:

1. Introduction

2. Current Status

3. Future Project Status

4. Critical Management issues

5. Risk Analysis

6. Caveats, Limitations, and Assumptions

P

C T

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Project Auditor/Evaluator Responsibilities

First and foremost, the auditor should tell the truth

The auditor must approach the audit in an objectiveand ethical manner

Must assume responsibility for what is included and

excluded from consideration in the report

The auditor/evaluator must maintain political and

technical independence during the audit and treat allmaterials as confidential

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Steps to carry out an audit:

1. Assemble a small team ofexperienced experts

2. Familiarize the team with the requirements of the

project

3. Audit the project on site

4. After the completion, debrief the projects

management

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Steps to carry out an audit (cont.):

5. Produce a written report according to a

prespecified format

6. Distribute the report to the project manager

and project team for their response

7. Follow up to see if the recommendations

have been implemented

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The Project Audit Life Cycle

Like the project itself, the audit has a life cycle

composed of an orderly progression of well-defined

events:

Project audit initiation Project baseline definition

Establishing an audit database

Preliminary analysis of the project

Audit reportpreparation Project audit termination

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Essentials of an Audit/ Evaluation

For an audit/evaluation to be conducted with skill and

precision, and to be generally accepted by senior

management, the client and the project team, several

conditions must be met:1. The audit team must be properly selected

2. All records and files must be accessible

3. Free contact with project members must be preserved

All of these essentials deserve further discussion

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Audit/Evaluation Team

The choice of the audit/evaluation team is critical to

the success of the entire process

The size of the team will generally be a function of

the size and complexity of the project

For a small project, one person can often handle all

the tasks of an audit, but for a large project, the team

may require representatives from several areas

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The Audit/Evaluation Team

Typical areas that may furnish audit team members are:

The project itself

The accounting/controlling department

Technical specialty areas The customer

The marketing department

Purchasing/asset management

Human resources Legal/contract administration department

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Audit/Evaluation Team

The main role of the audit/evaluation team is to conduct

a thorough and complete examination of the project or

some prespecified aspect of the project

The team must determine which items should be brought

to managements attention

The team is responsible forconstructiveobservations

and advice based on the training and experience of itsmembers

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Access to Information

In order for the audit/evaluation team to be effective, it

must have free access to all information relevant to

the project

Most of the information needed will come from theproject teams records or from various departments

such as accounting, personnel, and purchasing

Some of the most valuable information comes fromdocuments that predatetheproject

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Access to Information

Examples of documents that predate the project:

Customer Requirements (i.e. RFP Process)

Minutes ofproject selection meetings

Minutes ofsenior management committees thatdecided to pursue a specific area of technical interest

Priorities must be set to ensure that important analyses

are undertaken before those of lesser importance

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Access to Project Team and Others

Several rules that should be followed when contactingproject team and other stakeholders

Avoid misunderstandings between the audit/evaluationteam and project team members

Project team should always be made aware of in-progressaudit

Avoid Critical Comments

Constructive suggestions where appropriate

Avoid Off-Hand Comments

No shooting from the hip

Avoid excess comment that could be misinterpreted

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Access to Project Team and Others

At times, information may be given to audit evaluation

team members in confidence

Discreet attempts should be made to confirm such

information through non-confidential sources

If it cannot be confirmed, it should not be used

The auditor/evaluator must protect the sources of

confidential information

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Measurement

Measurement is an integral part of the audit/evaluation

process

Performance against planned budget and schedule

usually poses no major measurement problems

Measuring the actual expenditure against the plannedbudgetisharder and depends on an in-depthunderstanding of the procedures used by the accounting

department

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Measurement

Big Challenge: determine what revenues should beassigned to a project

All cost/revenue allocation decisions must be made when

the various projectsareinitiated

When the battles are fought up front, the equity of

cost/revenue allocations ceases to be so serious an issue

As long as allocations are made by a formula, majorconflictis avoided-or at least mitigated

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Auditor/Evaluator

Above all else, the auditor/evaluator needs

permission to enter the system

If the auditor maintains a calm, relaxed attitude,the project team generally begins to extend

limited trust

The first step is to allow the auditor qualified

access to information about the project

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Advice for the Auditor/Evaluator

Deal professionally with information gathered, neither

ignoring nor stressing the projects shortcomings

Recognize and reinforce aspects of the projects

strengths

Trust is earned during an audit, even with negative

findings

Trust-building is a slow and delicate process that iseasily lost

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Break!

Next Up:

Project Termination

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Project Termination Conditions

A project can be said to be terminated when workon the substance of the project has ceased orslowedto the point that further progress is nolonger possible

There are four fundamentally different ways to close

out a project:

1. Extinction

2. Addition3. Integration

4. Starvation

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Project Termination Factors

1. Low Probability of Success:

Technical Objectives

Commercial Viability

ROI Achieved

2. No Solution

Engineering Design

Lasting Process

3. Intellectual Property Issues

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Project Extinction

All (substantive) activity ceases

Stopped:

Successful

Met goals Unsuccessful

Failed tests

Superceded

External event

Extinction by Murder

Political assassination; projecticide

Merger redundancy

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Project Addition

Project becomes a part of organization

New functionality

Protected status disappears eventually

Transfer of assets People

Equipment

Addition of responsibilities

Budgets Practices and procedures

P & L

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Project Integration

Most common form of termination and also the

most complex

Project Outcome: Becomes Part of Acquiring Organization

Requires Redistribution of Residual Resources

Equipment

Capital Improvements

Follow-on Support

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Project Starvation

Budget Decrement

Reallocation of Resources Away from Project

Business Conditions

Political Considerations

Active without Activity

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When to Terminate a Project

Some questions to ask when considering termination:

Has the project been obviatedby technical advances?

Is the output of the project still cost-effective?

Is it time to integrate or add the project as a part ofregular operations?

Are there betteralternative uses for the funds, time and

personnel devoted to the project?

Has a changein the environment altered the need forthe projects output?

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When to Terminate a Project

Reasons projects fail:

Project organization was not required

Non-Projects and Pseudo-Projects

Insufficient support from senior management

Wrong person as project manager

Poor (or insufficient) planning Lack of Critical Success Factors

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The Termination Process

Components of the termination process

Whether or not to terminate

Goal/Objective-based

or Qualification factors

If terminating:

Carry out termination procedures

Should have been plannedat start Should be done in an orderlymanner

Procedures vary by firm & project type

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Project Termination Decision Tree

Sensitivity

Analysis

Internal Info

SystemsExternal Info

SystemsDecision

Database(s)

Termination

Rules

Continue

ProjectTermination

Decision?

Termination

Procedures

UncertainKeep

Terminate

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Project Termination Areas

Closeout MtgPlans

Personnel

Organization

PayablesReceivables

Budget Report

Financial

ContractsSupplier Comm

Final Payments

Purchasing

Close FacilitiesDispose Equip/Mat'l

Site

Project Closeout

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The Implementation Process

Duties of the termination manager(not always the PM!):

Complete all remaining work

Notification to & acceptance by client

Complete documentation (accurately!)

Final payments

Redistribute assets

Legal reviewArchive files & records (legal reqmnts)

Follow-on support arrangements

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The Final Report - A Project History

Historical recap

Project biography

The Good, the Bad, and the Ugly

Previous documents

Project plan

Audit(s) Change orders

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The Final Report

Focus areas:

1. Project performance

2. Administrative performance

3. Organizational structure

4. Project and administrative teams

5. Techniques of project management

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The Final Report

Focus area recommendations are minimum

Lessons learned

Benchmarks

Killers

Goal: Future project management improvement

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Bonus Considerations

On-Campus Students:

Discussion participation the last two lectures

Off-Campus Students:

Personal Project Plan

Short paper summarizing what you consider tobe the major points of project management

Yourpersonal PMBOK that you could seeyourself applying as a project manager

Due by e-mail before requesting the Final Exam

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Final Examination

Monday, 07 May, 7:009:00 PM, CB 110 Bring Engineering Notebook, calculator, & PENCIL

Format:

Multiple Choice Select the BEST answer

Dont take too long avoid looking them up

Short Answer & Short Calculation

No need to show your work completely

Answer all parts for full credit

Charts & Networks

Plan for several minutes to study & solve

Read carefully

TM 665 Lecture 11

Documents

Transcript of TM 665 Lecture 11