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Nicholas' Project Mg Project Management for Business and Engineering This Page Intentionally Left Blank Project Management for Business and Engineering Principles and Practice 2ND EDITION John M. Nicholas Loyola University Chicago Amsterdam Boston Heidelberg London New York Oxford Paris San Diego San Francisco Singapore Sydney Tokyo Elsevier Butterworth–Heinemann 200 Wheeler Road, Burlington, MA 01803, USA Linacre House, Jordan Hill, Oxford OX2 8DP, UK Copyright © 2004, Elsevier Inc. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Permissions may be sought directly from Elsevier’s Science & Technology Rights Department in Oxford, UK: phone: (+44) 1865 843830, fax: (+44) 1865 853333, e-mail: [email protected]. You may also complete your request on-line via the Elsevier homepage (http://elsevier.com), by selecting “Customer Support” and then “Obtaining Permissions.” Front cover photograph of the Mars rover courtesy NASA/JPL. Recognizing the importance of preserving what has been written, Elsevier prints its books on acid- free paper whenever possible. ∞ Library of Congress Cataloging-in-Publication Data Application submitted British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library. This book was previously published by Pearson Education, Inc. ISBN: 0-7506-7824-0 For information on all Butterworth–Heinemann publications visit our Web site at www.bh.com 04 05 06 07 08 09 10 10 9 8 7 6 5 4 3 2 1 Printed in the United States of America To Sharry, Julia, Joshua, and Abigail This Page Intentionally Left Blank CONTENTS Preface xv CHAPTER 1 Introduction 1 1.1 In the Beginning... 1 1.2 What Is a Project? 4 1.3 Project Management: The Need 7 1.4 Response to a Changing Environment 9 1.5 Systems Approach to Management 9 1.6 Project Goals 10 1.7 Project Management: The Person, the Team, the System 11 1.8 About This Book 12 Study Project Assignment 15 MS Project 15 Review Questions 15 Endnotes 16 PART I: PHILOSOPHY AND CONCEPTS 17 CHAPTER 2 What Is Project Management? 19 2.1 Functions and Viewpoints of Management 19 2.2 Project Viewpoint versus Traditional Management 21 2.3 Evolution of Project Management 24 2.4 Where Is Project Management Appropriate? 27 2.5 Project Management: A Common Approach in Everyday Business 29 2.6 Different Forms of Project Management 31 2.7 Project Environments 35 2.8 Project Management in Industrial Settings 36 2.9 Project Management in the Service Sector 40 2.10 Project and Program Management in Government 42 2.11 Summary 45 Review Questions 46 Questions About the Study Project 47 Case 2-1 47 Case 2-2 49 Endnotes 50 vii CHAPTER 3 Systems, Organizations, and System Methodologies 51 3.1 Systems Thinking 51 3.2 Definition of System 52 3.3 Systems Concepts and Principles 53 3.4 Human Organizations 58 3.5 Systems Approach 64 3.6 Systems Analysis 68 3.7 Systems Engineering 74 3.8 Systems Management 76 3.9 Summary 77 Review Questions 79 Questions About the Study Project 80 Case 3-1 81 Endnotes 82 PART II: SYSTEMS DEVELOPMENT CYCLE 85 CHAPTER 4 Systems Development Cycle: Early Stages 87 4.1 Systems Life Cycles 88 4.2 Systems Development Cycle 89 4.3 Systems Development Cycle, Systems Engineering, and Project Management 93 4.4 Constraints in Systems Development 94 4.5 Phase A: Conception 95 4.6 The Project Proposal 106 4.7 Project Contracting 111 4.8 Summary 115 Review Questions 116 Questions About the Study Project 117 Case 4-1 117 Case 4-2 118 Endnotes 118 CHAPTER 5 Systems Development Cycle: Middle and Later Stages 120 5.1 Phase B: Definition 120 5.2 Phase C: Execution 132 5.3 Production/Build Stage 138 5.4 Implementation Stage 141 5.5 Phase D: Operation 143 5.6 Systems Development in Industrial and Service Organizations 144 5.7 Systems Development in Large Government Programs 148 5.8 Summary 151 Review Questions 152 Questions About the Study Project 153 Case 5-1 153 viii Contents Case 5-2 154 Case 5-3 155 Endnotes 156 Part III: SYSTEMS AND PROCEDURES 157 Chapter 6 Planning Fundamentals 159 6.1 Planning Steps 160 6.2 The Project Master Plan 161 6.3 Scope and Work Definition 164 6.4 Project Organization Structure and Responsibilities 173 6.5 Project Management System 177 6.6 Scheduling 177 6.7 Planning and Scheduling Charts 179 6.8 Summary 184 Review Questions 188 Questions About the Study Project 189 Case 6-1 190 Case 6-2 191 Endnotes 191 Chapter 7 Network Scheduling and PDM 193 7.1 Logic Diagrams and Networks 193 7.2 The Critical Path 205 7.3 Calendar Scheduling and Time-Based Networks 213 7.4 Management Schedule Reserve 217 7.5 PDM Networks 217 7.6 Summary 222 Review Questions and Problems 224 Questions About the Study Project 228 Endnotes 228 Chapter 8 PERT, CPM, Resource Allocation, and GERT 229 8.1 Program Evaluation and Review Technique (PERT) 230 8.2 Critical Path Method (CPM) 238 8.3 Scheduling with Resource Constraints 244 8.4 GERT 253 8.5 Discussion and Summary 258 Review Questions and Problems 260 Questions About the Study Project 262 Case 8-1 263 Endnotes 266 Chapter 9 Cost Estimating and Budgeting 268 9.1 Cost Estimating 269 9.2 Cost Escalation 269 Contents ix 9.3 Cost Estimating and the Systems Development Cycle 273 9.4 Cost Estimating Process 274 9.5 Elements of Budgets and Estimates 281 9.6 Project Cost Accounting and Management Information Systems 284 9.7 Budgeting Using Cost Accounts 286 9.8 Cost Summaries 288 9.9 Cost Schedules and Forecasts 293 9.10 Summary 300 Review Questions and Problems 301 Questions About the Study Project 304 Case 9-1 304 Endnotes 305 Chapter 10 Managing Risks in Projects 306 10.1 Risk Concepts 307 10.2 Risk Identification 307 10.3 Risk Assessment 312 10.4 Risk Response Planning 319 10.5 Project Management Is Risk Management 323 10.6 Summary 326 10.7 Supplement: Risk Analysis Methods 327 Review Questions and Problems 333 Questions About the Study Project 336 Case 10-1 336 Case 10-2 337 Endnotes 338 Chapter 11 Project Control 340 11.1 The Control Process 340 11.2 Information Monitoring 341 11.3 Internal and External Project Control 342 11.4 Traditional Cost Control 342 11.5 Cost Accounting Systems for Project Control 343 11.6 Project Control Process 345 11.7 Project Control Emphasis 349 11.8 Performance Analysis 356 11.9 Forecasting “To Complete” and “At Completion” 365 11.10 Performance Index Monitoring 369 11.11 Variance Limits 370 11.12 Controlling Changes 371 11.13 Contract Administration 375 11.14 Control Problems 376 11.15 Summary 377 x Contents Review Questions and Problems 378 Questions About the Study Project 380 Case 11-1 381 Endnotes 382 Chapter 12 Project Management Information Systems 384 12.1 Functions of the PMIS 385 12.2 Computer-Based Tools 385 12.3 Computer-Based PMI Systems 386 12.4 Representative Computer-Based PMISs 389 12.5 Web-Based Project Management 405 12.6 Applying Computer-Based Project Management Systems 407 12.7 Summary 411 Review Questions 411 Questions About the Study Project 412 Endnotes 412 Chapter 13 Project Evaluation, Reporting, and Termination 413 13.1 Project Evaluation 414 13.2 Project Review Meetings 415 13.3 Reporting 419 13.4 Terminating the Project 420 13.5 Termination Responsibilities 422 13.6 Closing the Contract 423 13.7 Project Extensions 424 13.8 Project Summary Evaluation 424 13.9 Summary 427 Review Questions 428 Questions About the Study Project 428 Endnotes 429 PART IV: ORGANIZATION BEHAVIOR 431 Chapter 14 Project Organization Structure and Integration 433 14.1 Formal Organization Structure 434 14.2 Organization Design by Differentiation and Integration 434 14.3 Requirements of Project Organizations 438 14.4 Integration of Subunits in Projects 438 14.5 Liaison Roles, Task Forces, and Teams 439 14.6 Project Expeditors and Coordinators 440 14.7 Pure Project Organizations 442 14.8 Matrix Organization 444 14.9 Selecting a Project Form 447 14.10 Project Office 450 Contents xi 14.11 The Informal Organization 451 14.12 Integration in Large-Scale Projects 452 14.13 Integration in Systems Development Projects 456 14.14 Concurrent Engineering 458 14.15 Quality Function Deployment 463 14.16 Summary 470 Review Questions 471 Questions about the Study Project 472 Case 14-1 473 Case 14-2 474 Endnotes 475 Chapter 15 Project Roles, Responsibility, and Authority 477 15.1 The Project Manager 478 15.2 Project Management Authority 483 15.3 Selecting the Project Manager 486 15.4 Ways of Filling the Project Management Role 490 15.5 Roles in the Project Team 491 15.6 Roles Outside the Project Team 494 15.7 Relationships Among Project and Functional Roles 496 15.8 Summary 496 Review Questions 498 Questions About the Study Project 499 Case 15-1 500 Case 15-2 500 Endnotes 501 Chapter 16 Managing Participation, Teamwork, and Conflict 503 16.1 Leadership in Project Management 504 16.2 Participative Management 506 16.3 Teams in Project Management 507 16.4 The Team Building Approach 510 16.5 Improving Ongoing Work Teams 512 16.6 Building New Teams 513 16.7 Intergroup Problem Solving 515 16.8 Origins of Conflict 518 16.9 Consequences of Conflict 520 16.10 Managing Conflict 521 16.11 Team Methods for Resolving Conflict 523 16.12 Emotional Stress 525 16.13 Stress Management 526 xii Contents 16.14 Summary 528 Review Questions 529 Questions About the Study Project 530 Case 16-1 531 Endnotes 532 Chapter 17 Project Failure, Success, and Lessons Learned 534 17.1 Project Failure 535 17.2 Project Management
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