Wk2 - Project Management - Introduction + Project Initiation

Construction Project Management
Course Code: 0865702

Sunday, Tuesday, and Thursday (11:00 – 12:00)
Dr. Sandra Matarneh
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Introduction
1. Introduction, Define Projects and Project 8. Project scheduling.

Management, 9. Tracking work.
2. Working with project teams, project teams, design 10. Design Coordination.
teams, construction teams 11. Construction Phase.
3. Project initiation. 12. Project Closeout.
4. Early estimates. 13. Personal Management Skills.
5. Project budgeting. 14. Total Quality Management.
6. Development of work plan
7. Design proposals.
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❖ Project Management provides an organization with powerful tools that improve its ability to plan,
implement, and control its activities as well as the ways in which it utilizes its people and resources.
Why can’t they rum government the way I run my business?”
❖ The Project Management Institute (PMI) was founded in 1969 to foster the growth of project
management.
❖ Multimillion dollar project or small house project have in common:

they are complex, multidisciplinary, and have the same objectives
(Scope, time, and cost)
❖ The primary task of the project manager is to manage these trade-offs.
What are the three project objectives?

Time overrun
Cost overrun
Scope Creep 3
❖ Scope represents the work to be accomplished, i.e., the quantity and quality of work..
❖ Budget refers to costs, measured in dollar ( Or any other currency) and/or labor-hours of work..
❖ Schedule refers to the logical sequencing and timing of the work to be performed.
❖ The quality of a project must meet the owner's satisfaction. Quality is an element that is integrated
into and between all parts of a project: scope, budget, and schedule. Quality is the responsibility of all
participants in a project.
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Definition of the Project
❖ The PMI has defined a project as “A temporary endeavor undertaken to create a unique product or
service”
❖ A construction Project could be: residential, healthcare, educational, industrial, infrastructure, plant.
❖ A project is usually a one-time activity with well-defined set of desired end results. It can be divided into
subtasks that must be accomplished in order to achieve the project goals.
❖ The project is complex enough that the subtasks require careful coordination and control in terms of timing,
precedence, cost and performance.
❖ Our terminology follows in this order: program, project, task, work package, work unit.
❖ Like organic entities, projects have life-cycle. From a slow beginning they progress to a build-up of size, then
peak, begin to decline, and finally must be terminated. Projects often start slowly, build-up speed while using
considerable resources, and then slow down as a completion nears.
❖ But remember, every project is a unique project
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Projects life-cycle
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Projects life-cycle
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Glossary
Project Management :The means, techniques, and concepts used to run a project and achieve its objectives.
Program: Often not distinguished from a project, but frequently meant to encompass a group of similar projects
oriented toward a specific goal.
Task: Set of activities compromising a project
Work Package: Division of tasks
Work Unit: Division of work packages
Trade-off: Taking less on one measure, such as performance, in order to do better on another, such as schedule
or cost.
Risk:The chance that outcomes will not turn out as planned

Uncertainty: Having only partial information about the situation or outcomes
Stakeholder: Parties-at-interest. Individuals or groups with a special interest in a project, usually the project
team, client, senior management, etc.
Deliverables:The desired outcomes or results of a project
Interdependencies: Relations between organizational functions where one function or task is dependent on
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others
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Project Management
❖ Project management is the art and science of coordinating people, equipment, materials, money, and schedules to
complete a specified project on time and within approved cost.
❖ Throughout the project management process there are four questions that must be addressed: Who? Does what?
When? and How much?
❖ Project management requires a multi-discipline focus to coordinate the overall needs of a project with reliance on
others to provide the technical expertise.
❖ A fundamental principle of project management is to organize the project around the work to be accomplished.
❖ The work environment focuses on what must be performed,
❖ When it must be accomplished,
❖ How much it will cost.
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Project Management Processes
The management of a project generally follows these steps:
Step 1: Project Definition (to meet the needs of the end user) Intended use by the owner upon completion of
construction Conceptual configurations and components to meet the intended use.
Step 2: Project Scope (to meet the project definition) Define the work that must be accomplished Identify the
quantity, quality, and tasks that must be performed.
Step 3: Project Budgeting (to match the project definition and scope) Define the owner's permissible budget,
Determine direct and indirect costs plus contingencies.
Step 4: Project Planning (the strategy to accomplish the work) Select and assign project staffing Identify the tasks
required to accomplish the work.
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Project Management Processes
Step 5: Project Scheduling (the product of scope, budgeting, and planning) Arrange and schedule activities in a
logical sequence Link the costs and resources to the scheduled activities.
Step 6: Project Tracking (to ensure the project is progressing as planned) Measure work, time, and costs that are
expended Compare "actual" to "planned work, time, and cost.
Step 7: Project Close Out (final completion to ensure owner satisfaction) Perform final testing and inspection,
archive documents, and confirm payments, and turn over the project to the owner.
Hint: The topic of project management is further complicated because the responsibility for these steps usually involves many
parties.Thus, the above steps must all be integrated together to successfully manage a project.
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Projects Parties-at-interest
1. Owner (Client)
The owner is responsible for setting the operational criteria for the completed project. Owners also need to identify
their level of involvement in the project, e.g., the review process, required reports, and the levels of approval. The owner
is also responsible for setting parameters on total cost, payment of costs, major milestones, and the project completion
date.
1. Setting the operational criteria for the completed project as usage of the building.
2. Define any special equipment, material, or company standards that are to apply to the project
3. The owner is also responsible for setting parameters on total cost, payment of costs, major milestones, and the
project completion date.
4. Provide site with suitable access to contractor
5. Provide adequate information and instruction for the contractor to start work
6. Pay the contractor in accordance with that mentioned in contract.
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2. Engineer; Designer, Consultant and Architect
The Engineer is responsible for;
1. Producing design alternatives, computations, drawings, and specifications that meet the needs of the owner.
2. Delegated to the designer by the owner, e.g., on-site or periodic inspection, review of shop drawings, and in some
instances the acquisition of land and/or permits.
3. Produce a project design that meets all federal, state, and local codes; standards; and environmental and safety
regulations.
4. Prepare the budget for the design along with a design schedule that matches the owner's schedule.
5. Revise the design to eliminate defects and errors.
6. Provide a proper estimate of quantity and reasonable cost of the construction of a project
7. Review and approval of contractor submittals.
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3. Contractor
The contractor duties are;
1. To complete the works in accordance with the contract documents, plans, drawings, specifications and bill of quantity
on time that specified in the contract.
2. To coordinate between all parties of the construction works to complete the project,
3. To ensure that the construction works performing in a safe manner
4. The contractor must prepare an accurate estimate of the project, develop a realistic construction schedule, and
establish an effective project control system for cost, schedule, and quality.
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Roles and responsibilities of a project manager
▪ Defining scope
▪ Activity planning and sequencing
▪ Resource planning
▪ Developing schedules
▪ Time estimating
▪ Cost estimating
▪ Developing a budget
▪ Documentation
▪ Risk Analysis
▪ Managing risks and issues
▪ Monitoring and reporting progress
▪ Team leadership
▪ Business partnering
▪ Working with vendors
▪ Controlling quality
▪ Benefits realization
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WHY PROJECT MANAGEMENT?
▪ Better control
▪ Better customer relations
▪ Shorter development times
▪ Lower costs
▪ Higher quality and reliability
▪ Higher profit margins
▪ Sharper orientation toward results
▪ Better interdepartmental coordination
▪ Higher worker morale
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THE PROJECT LIFECYCLE
Stages of a Conventional Project:
▪ Slow beginning
▪ Buildup of size
▪ Peak
▪ Begin a decline
▪ Termination
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THE PROJECT LIFECYCLE
Risk during project life cycle
▪ With most projects there is some uncertainty about the ability to meet project goals
▪ Uncertainty of outcome is greatest at the start of a project
▪ Uncertainty decreases as the project moves toward completion
Dr. Sandra Matarneh 19

THE PROJECT MANAGEMENT LIFECYCLE
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Planning Design Construction O&M
Handover Termination
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1. Initiating
▪ Define your project

▪ Assess scope
▪ Determine resources needed
▪ Identify stakeholders
▪ Ask for approval
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2. Planning
▪ What are we going to do?

▪ How are we going to do it?
▪ How will we know when it’s done?
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3. Executing
▪ Launch project
▪ Bring resources on-board
▪ Get resources settled in
▪ Explain rules that will be used to run the project
▪ Put plan to action
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4. Monitoring and Controlling
▪ Check progress of project

▪ Compare actual to what was planned
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5. Closing
▪ Get client to accept project is complete

▪ Document project performance
▪ Close contracts
▪ Help resources move to next assignment
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SUMMARY
The three primary forces behind project management are:
1. The growing demand for complex, customized goods and services

2. The exponential expansion of human knowledge
3. The global production-consumption environment
The three prime objectives of project management are:

1. To meet specified performance
2. To do it within specified costs
3. Complete on schedule
Terminology follows in this order: program, project, task, work package, work unit
▪ Projects are characterized by a singleness of purpose, a definite life cycle, complex interdependencies,
some or all unique elements, and an environment of conflict
▪ Project management, though not problem-free, is the best way to accomplish certain goals
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CHAPTER 2. FIRST THINGS FIRST
PROJECT INITIATION
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PROJECT INITIATION
Project initiation starts with
1. Getting Started with 2. Assign a PM 3. Prepare a Project Charter

Evaluation and Selecting
Projects for Implementation
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PROJECT INITIATION
Project initiation starts with

1. Getting Started with
Evaluation and Selecting 1. Project selection is the process of evaluating individual projects
Projects for Implementation or groups of projects, and then choosing to implement some set of
them so that the objectives of the parent organization will be
achieved
• Managers often use decision-aiding models to extract the relevant

issues of a problem from the details in which the problem is
embedded
• Models represent the problem’s structure and can be useful in
selecting and evaluating projects
PROJECT INITIATION
Criteria for Project Selection Models
▪ Realism - The model should reflect the reality of the firm’s decision situation, especially the
multiple objectives of both the firm and its managers, bearing in mind that without a common
measurement system, direct comparison of different projects is impossible. The model should
also take into account the realities of the firm’s limitations on facilities, capital, personnel, and
so forth, and include factors that reflect project technical and market risks: performance, cost,
time, customer rejection, and implementation.
▪ Capability- The model should be sophisticated enough to deal with the relevant factors:
multiple time periods, situations both internal and external to the project (e.g., strikes, interest
rate changes), and so on.
▪ Flexibility - The model should give valid results within the range of conditions that the firm
might experience. It should be easy to modify in response to changes in the firm’s
environment; for example, tax law changes, new technological advancements that alter risk
levels, and, above all, organizational goal changes.
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PROJECT INITIATION
Criteria for Project Selection Models
▪ Ease of Use - The model should be reasonably convenient, not take a long time to execute,
and be easy to use and understand. It should not require special interpretation, data that are
difficult to acquire, excessive personnel, or unavailable equipment.
▪ Cost - Data-gathering and modeling costs should be low relative to the cost of the project
and less than the potential benefits of the project. All costs should be considered, including the
costs of data management and of running the model
▪ Easy Computerization - It should be easy and convenient to gather and store the
information in a computer database, and to manipulate data in the model through use of a
widely available, standard computer package such as Excel
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PROJECT INITIATION
Nature of Project Selection Models
Two Basic Types of Models:

1. Numeric
2. Nonnumeric
Two Critical Facts:

1. Models do not make decisions - People do!
2. All models, however sophisticated, are only partial representations of the reality the are
meant to reflect
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PROJECT INITIATION
Nonnumeric Models
▪ Sacred Cow - project is suggested by a senior and powerful official in the organization.
The project is “sacred” in the sense that it will be maintained until successfully concluded,
or until the boss, personally, recognizes the idea as a failure and terminates it.
▪ Operating Necessity - the project is required to keep the system running. If a flood is
threatening the plant, a project to build a protective dike does not require much formal
evaluation, which is an example of this scenario.
▪ Competitive Necessity - project is necessary to sustain a competitive position
▪ Product Line Extension - projects are judged on how they fit with current product line,
fill a gap, strengthen a weak link, or extend the line in a new desirable way.
▪ Comparative Benefit Model - several projects are considered and the one with the
most benefit to the firm is selected.
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PROJECT INITIATION
Numeric Models: Profit/Profitability
Non-Discounting Discounted
1. Pay Back Period 1. Net Present Value (NPV)

2. Accounting Rate of Return 2. Internal Rate of Return (IRR)
3. Profitability Index
4. Modified IRR
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PROJECT INITIATION
Pay Back Period
As large majority of all firms using project evaluation and selection models use profitability as
the sole measure of acceptability.
▪ Payback period - The payback period for a project is the initial fixed investment in the
project divided by the estimated annual net cash inflows from the project. The ratio of these
quantities is the number of years required for the project to repay its initial fixed investment.
▪ Simply it is how soon can we get our cash back
▪ For example, assume a project costs $100,000 to implement and has annual net cash inflows
of $25,000. Then ˃ Payback period $100,000/$25,000 = 4 years
▪ This method assumes that the cash inflows will persist at least long enough to payback the
investment, and it ignores any cash inflows beyond the payback period. The method also serves
as an (inadequate) proxy for risk.
▪ The faster the investment is recovered, the less the risk to which the firm is exposed. 36
PROJECT INITIATION
Pay Back Period
Imagine that we need to know which is better, to buy machine A or B for a

construction project.
Machine A Machine B
Initial Investment = 150,000 JOD Initial Investment = 200,000 JOD
Cash Inflows = 50,000 JOD Cash Inflows = 55,000 JOD
PPP= Initial Investment / Cash Inflows PPP= Initial Investment / Cash Inflows
PPP = 150,000/50,000 = 3 Yrs PPP= 200,000/55,000 = 3.6 Yrs
So, Machine A is better
PPP= Initial Investment / Cash Inflows
We use this formula when the Cash Inflows are equals

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PROJECT INITIATION
Pay Back Period
An industry is considering investment in a project which costs 600,000 JOD. Cash inflows are
120,000, 140,000, 180,000, 200,000 and 250,000 . When they will get their cash back?
Years Cash flows Cumulative Cash flow
0 - 600,000 - 600,000
1 120,000 - 480,000
2 140,000 - 340,000
3 180,000 - 160,000
4 200,000 40,000
5 250,000
We stop when we reach the positive value which means that we will get our cash back between 3
& 4 year. But when exactly.
3 Yrs + 160,000/200,000 = 3Yrs + 0.8 = 3.8 Yrs 38

PROJECT INITIATION
NPV is a discounted cash flow method that considers time value of money in evaluating capital
investments
Let me ask you a question. Which is better to have 500 JOD now in your hand or to have the
same 500 JOD a year later in future?
500 JOD 500 JOD

Now Future
1 year later
In financial management, anything we are going to receive in future is discounted to present value
using a discounting factor/percentage
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PROJECT INITIATION
PV FV
Discounting Rate
? 500 JOD
1 Year Later
10%
1
𝑃𝑉 = 𝐹𝑉 𝑥
(1 + 𝑟)𝑛
1
𝑃𝑉 = 500 𝑥
(1 + 0.10)1
= 455 JOD
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PROJECT INITIATION
NPV is a method of calculating the present value of cash flows (inflows & outflows) of an
investment proposal using the cost of capital as an appropriate discounting rate.
Format
Years Cash flows Discounting rate Present Value
0 (Initial Investment)
1
2 NPV XXXXXXXXXX
(Initial Investment) always negative because it is an outflow
If NPV > Zero ………………..Accept the proposal

If NPV < Zero ……………….Reject the proposal
If there are more than one project, select the project with the highest NPV 41
PROJECT INITIATION
Example: calculate the NPV of the two projects and suggest which of the two projects should
be accepted assuming discount rate @ 10%
Project X Project Y
Initial Investment 40,000 JOD 60,000 JOD
Estimated Life 5 Yrs 5 Yrs
Salvage Value 2,000 JOD 4,000 JOD
Cash flows:
1 2 3 4 5
Project X 10,000 20,000 20,000 6,000 4,000
Project Y 40,000 20,000 10,000 6,000 4,000
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PROJECT INITIATION
First: we calculate the discounting factor using 1/(1+r)
Years 1 2 3 4 5
Discounting 0.909 0.826 0.751 0.683 0.621
factor @ 10%
1/(1+r) = 1/1+.10 = 1/1.10
1/(1+r)^1 +1/(1+r)^2+………1/(1+r)^n
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PROJECT INITIATION
Project X
Years Cash flows @ 10% PV

0 (40,000) 1 (40,000)
1 10,000 0.909 9,090
2 20,000 0.826 16,520
3 20,000 0.751 15,020
4 6,000 0.683 4,098
5 4,000 0.621 2,484
5 (Salvage) 2,000 0.621 1,2420
NPV 8,454
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PROJECT INITIATION
Project Y
Years Cash flows @ 10% PV

0 (60,000) 1 (60,000)
1 40,000 0.909 36,360
2 20,000 0.826 16,520
3 10,000 0.751 7,510
4 6,000 0.683 4,098
5 4,000 0.621 2,484
5 (Salvage) 4,000 0.621 2,484
NPV 9,456
Which means that we will select Project Y over project X as it has a higher NPV
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PROJECT INITIATION
▪ Internal Rate of Return - If we have a set of expected cash inflows and cash outflows, the
internal rate of return is the discount rate that equates the present values of the two sets of
flows. If At is an expected cash outflow in the period t and Rt is the expected inflow for the
period t, the internal rate of return is the value of k that satisfies the following equation (note
that the A0 will be positive in this formulation of the problem):
▪ IRR – represents the discount rate of which the NPV of an investment is Zero
▪ It is a discounted cash flow technique which takes into account the time value money
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PROJECT INITIATION
▪ Internal Rate of Return
PV of the expected cash flows = Initial Cash flow

Which means NPV = Zero
If IRR > K ……………….Accept the proposal

If IRR < K ……………….Reject the proposal
K = Cost of Capital
How to Calculate IRR:

1- We need to calculate two NPVs for the project at two different costs of capital
2- Use the interpolation formula to find the IRR
𝑁𝐿
𝐼𝑅𝑅 = 𝐿 + 𝑥 (𝐻 − 𝐿)
𝑁𝐿 − 𝑁𝐻 47
PROJECT INITIATION

Project
Calculate NPV
- NPV 0 + NPV
(-) NPV (+) NPV
Calculate NPV Calculate NPV

with lower rate with higher rate
(+) NPV (-) NPV
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PROJECT INITIATION
Calculate the IRR of an investment of JOD 136,000 which yields the following cash flow
Years Cash flows

1 30,000
2 40,000
3 60,000
4 30,000
5 20,000
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PROJECT INITIATION
To calculate IRR we need 2 values of NPV, one negative and one positive. Let us start with 10%
Years Cash flows @10% PV

0 (136,000) 1 (136,000)
1 30,000 0.909 27,270
2 40,000 0.826 33,040
3 60,000 0.751 45,060
4 30,000 0.683 20,490
5 20,000 0.621 12,420
NPV 2,280 (Positive)
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PROJECT INITIATION
Take higher value @12%
Years Cash flows @12% PV

0 (136,000) 1 (136,000)
1 30,000 0.893 26,790
2 40,000 0.797 31,790
3 60,000 0.712 42,720
4 30,000 0.636 19,080
5 20,000 0.567 11,340
NPV - 4,190 (Negative)
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PROJECT INITIATION
Interpolate
𝑁𝐿
𝐼𝑅𝑅 = 𝐿 + 𝑥 (𝐻 − 𝐿)
𝑁𝐿 − 𝑁𝐻
2280
𝐼𝑅𝑅 = 10 + 𝑥 (12 − 10)
2280 − (−4190)
IRR = 10.70 %
If we use this rate in our calculations what could happen?
Our NPV = Initial investment

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PROJECT INITIATION
▪ Profitability Index - Also known as the benefit–cost ratio, the profitability index is the net
present value of all future expected cash flows divided by the initial cash investment. (Some
firms do not discount the cash flows in making this calculation.) If this ratio is greater than 1.0,
the project may be accepted.
Profitability Index Capital budgeting tool
PI = PV of future cash flow / Initial investment
PI = PV of cash inflows/ PV of cash outflows
PI > 1.0 ……………… Profitable and acceptable………. +NPV

PI < 1.0 …….…… Unprofitable and unacceptable ……… -NPV
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PROJECT INITIATION
▪ Profitability Index
Let us assume that we want to invest JOD 25,000 and the cash inflows will be 8,000, 10,000, and
13,000 with discounting rate 5%
0 1 2 3
25,000 8,000 10,000 13,000

7,619
𝟏
27,919 PV = FV x (𝟏+𝒓)𝒏
9,070
11,230
27,919
PI =
25,000
PI = 1.12 which means that we generate 1.12 JOD for every 1 JOD invested
PI > 1.0 ……………… Profitable and acceptable
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PI < 1.0 ………………… Unprofitable and unacceptable
PROJECT INITIATION
▪ Profitability Index
Let us learn how to do it in Excel ….. Easy Breezy

PROJECT INITIATION
Numeric Models: Scoring
▪ Unweighted 0-1 Factor Model

▪ Unweighted Factor Scoring Model
▪ Weighted Factor Scoring Model
▪ Constrained Weighted Factor Scoring Model
▪ Goal Programming with Multiple Objectives
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PROJECT INITIATION
ANALYSIS UNDER UNCERTAINTY — THE MANAGEMENT OF RISK
▪ For the most part, risk has been interpreted as being unsure about project task durations
and/or costs, but uncertainty plagues all aspects of the work on projects and is present in all
stages of project life cycles.
Risk Versus Uncertainty

▪ Risk - when the decision maker knows the probability of each and every state of nature and
thus each and every outcome. An expected value of each alternative action can be determined
▪ Uncertainty - when a decision maker has information that is not complete and therefore
cannot determine the expected value of each alternative
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PROJECT INITIATION
ANALYSIS UNDER UNCERTAINTY — THE MANAGEMENT OF RISK
Risk Analysis
▪ Principal contribution of risk analysis is to focus the attention on understanding the nature
and extent of the uncertainty associated with some variables used in a decision-making
process. Usually understood to use financial measures in determining the desirability of an
investment project.
▪ Probability distributions are determined or subjectively estimated for each of the “uncertain”
variables. The probability distribution for the rate of return (or net present value) is then
found by simulation. Both the expectation and its variability are important criteria in the
evaluation of a project
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PROJECT INITIATION
Feasibility Study
▪ A feasibility study is a multidimensional set of

actions which aims to analyse and evaluate a
project in order to determine if its
construction is feasible.
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PROJECT INITIATION
How To Conduct A Feasibility Study
▪ What
✓ An assessment of the practicality of a proposed plan or method.
✓ Is this “Feasible” ?
• Do we have what is needed to do this?
• Will we get our Return On Investment (ROI)?
▪ When
✓ During a project lifecycle
✓ After the business case
▪ Why
✓ Determine the factors that will make the business opportunity a success
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PROJECT INITIATION
How To Conduct A Feasibility Study
▪ How
▪ Feasibility Report
✓ Conduct a preliminary analysis
✓ Executive summary
✓ Prepare a projected income statement
✓ Description of project
✓ Conduct a market survey (is this a demand?
✓ Market place
Is there a market for this?)
✓ Marketing strategy
✓ Plan business origination & operations
✓ Required resources
(what kind of resources do we need)
✓ Schedule
✓ Prepare an opening day balance sheet
✓ Financial projections
(inflows and outflows to determine if we
✓ Findings and recommendations
are going to make our ROI)
✓ Review and analyze all data
✓ Make Go/No-Go decision
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PROJECT INITIATION
2. Selecting a Project Manager
▪ The Functional Manager vs.The Project Manager

✓ Functional managers are usually specialists, analytically oriented and they know the details of
each operation for which they are responsible
✓ Project managers must be generalists that can oversee many functional areas and have the
ability to put the pieces of a task together to form a coherent whole
▪ The Functional Manager

✓ Analytical Approach
✓ Direct, technical supervisor
▪ The Project Manager

✓ Systems Approach
✓ Facilitator and generalist
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2. Selecting a Team for designing a hospital building
▪ We assign the PM
✓ Architect … Functional Manager ……Team
✓ Structure ….. Functional Manager ……Team
✓ MEP …. Functional Manager ……Team
✓ ID …. Functional Manager ……Team Project Team
✓ Health care planner
✓ Health care equ. Provider
✓ Cost engineers ( budget +QS) …. Functional Manager ……Team
✓ H&S specialist
✓ Lighting specialist
✓ Functional Manager (Department head) FM
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PROJECT INITIATION
▪ Responsibilities of a Project Manager

✓ Responsibility to the Parent Organization
✓ Responsibility to the Client
✓ Responsibility to the Team Members
✓ Above all, the Project Manager must never allow senior management to be surprised
▪ Responsibilities to the Parent Organization

✓ Conservation of resources
✓ Timely and accurate project communications
✓ Careful, competent management of the project
✓ Protect the firm from high risk
✓ Accurate reporting of project status with regard to budget and schedule
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PROJECT INITIATION
▪ Responsibility to the Client

✓ Preserve integrity of project and client
✓ Resolve conflict among interested parties
✓ Ensure performance, budgets, and deadlines are met
▪ Responsibility to project team members

✓ Fairness, respect, honesty
✓ Concern for members’ future after project
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PROJECT INITIATION
▪ Importance of Project Management Experience
✓ Experience as a project manager serves to teach the importance of:

• An organized plan for reaching an objective
• Negotiation with one’s co-workers
• Follow through
• Sensitivity to the political realities of organizational life
✓ The career path often starts with participation in small projects, and later in larger projects,
until the person is given control over small, then larger projects
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PROJECT INITIATION
▪ A number of demands are critical to the management of projects:

✓ Acquiring adequate resources
✓ Acquiring and motivating personnel
✓ Dealing with obstacles
✓ Making project goal trade offs
✓ Dealing with failure and the risk and fear of failure
✓ Maintaining breadth of communication
✓ Negotiation
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PROJECT INITIATION
▪ Acquiring Adequate Resources

✓ Resources initially budgeted for projects are frequently insufficient
✓ Sometimes resource trade-offs are required
✓ Subcontracting is an option
✓ Project and functional managers perceive availability of resources to be strictly limited
✓ Competition for resources often turns into “win-lose” propositions between project and
functional managers
▪ Acquiring and Motivating Personnel

✓ A major problem for the project manager is that most people required for a project must be
“borrowed”
✓ Typically, the functional manager retains control of personnel evaluation, salary, and promotion
for those people lent out to projects
✓ Because the functional manager controls pay and promotion, the project manager cannot
promise much beyond the challenge of the work itself
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PROJECT INITIATION
▪ Acquiring and Motivating Personnel

✓ Characteristics of effective team members:
• High quality technical skills
• Political sensitivity
• Strong problem orientation
• Strong goal orientation
• High self-esteem
▪ Dealing with Obstacles

✓ One characteristic of any project is its uniqueness and with that come a series of crises:
• At the inception of a project, the “fires” tend to be associated with resources
• As a project nears completion, obstacles tend to be clustered around two issues:
1. Last minute schedule and technical changes
2. Uncertainty surrounding what happens to members of the project team when the
project is completed
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PROJECT INITIATION
▪ Making Project Goal Trade-offs

✓ The project manager must make trade offs between the project goals of cost, time and
performance
✓ During the design or formation stage of the project life cycle, there is no significant difference
in the importance project managers place on the three goals
✓ Schedule is the primary goal during the build up stage, being more important than
performance, which is in turn significantly more important than cost
✓ During the final stage, phaseout, performance is significantly more important than cost
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PROJECT INITIATION
▪ Failure and the Risk of Fear and Failure

✓ It is difficult, at times, to distinguish between project failure, partial failure, and success. What
appears to be a failure at one point in the life of a project may look like a success at another
✓ By dividing all projects into two general categories, interesting differences in the nature and
timing of perceived difficulties can be found
▪ Two general types of projects:

Type 1
✓ These projects are generally well-understood, routine construction projects
✓ Appear simple at the beginning of the project
✓ Rarely fail because they are late or over budget, though commonly are both
✓ They fail because they are not organized to handle unexpected crises and deviations from
the plan
✓ These projects often lack the appropriate technical expertise to handle such crises
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PROJECT INITIATION
▪ Two general types of projects:

Type 2
✓ These are not well understood, and there may be considerable uncertainty about
specifically what must be done
✓ Many difficulties early in the life of the project
✓ Often considered planning problems
✓ Most of these problems result from a failure to define the mission carefully
✓ Often fail to get the client’s acceptance on the project mission
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PROJECT INITIATION
▪ Breadth of Communication
✓ Most of the project manager’s time is spent communicating with the many groups interested
in the project
✓ Considerable time must be spent selling, reselling, and explaining the project
✓ Interested parties include:
• Top management
• Functional departments
• Clients
• Members of the project team
✓ To effectively deal with the demands, a project manager must understand and deal with certain
fundamental issues:
• Critical to have the support of top management
• Build and maintain a solid information network
• Must be flexible in many ways, with as many people, and about as many activities as
possible throughout the life of the project
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PROJECT INITIATION
▪ Selecting the Project Manager

✓ Some of the most popular attributes, skills, and qualities that have been sought in project
managers are:
• Strong technical background
• Hard-nosed manager
• A mature individual
• Someone who is currently available
• Someone on good terms with senior executives
• A person who can keep the project team happy
• One who has worked in several different departments
• A person who can walk on (or part) the waters
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PROJECT INITIATION
▪ Selecting the Project Manager

✓ Four major categories of skills that are required for the project manager and serve as the
key criteria for selection:
• Credibility
• Sensitivity
• Leadership and management style
• Ability to handle stress
75
PROJECT INITIATION
▪ Project Management Structures
Challenges to Organizing Projects

✓ The uniqueness and short duration of projects relative to ongoing longer-term
organizational activities
✓ The multidisciplinary and cross-functional nature of projects creates authority and
responsibility dilemmas.
✓ Choosing an Appropriate Project
✓ Management Structure
✓ The best system balances the needs of the project with the needs of the organization.
76
PROJECT INITIATION
▪ Why structure selection?
The nature of work organization is important as it:

✓ Defines responsibility and authority;
✓ Outline reporting arrangement;
✓ Determines the management overhead (costs)
✓ Sets the structure behind the organizational culture;
✓ Determines one group of stakeholders in project activities
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How organizational structure affects projects
• Types of project management structure:

– Functional Organization: The project as part of the Functional Organization
– Project based organization: The project as a free-standing part of the parent organization.
– Matrix Organization :A third type, called a Matrix Organization is a hybrid of the two
main types.
– Each has advantages and disadvantages
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Functional Matrix Projectized
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1. Functional Organizational Structure

In a functional organizational structure, you would find the components of a hierarchy system
where authority-driven decisions on budget, schedule, and equipment rest on the shoulders of
the functional manager who possesses a significant level of expertise in the same field.
That is to say that the project manager, in this type of organization has little to no authority
here; in some functional organizations, that position does not even exist
– Project manager has almost no authority
– Functional manager in charge of budget
– Resources do not report to project manager
– Project manager has divided responsibilities
80
Advantages of using the functional elements of the parent organization as the administrative
home for a project include:
✓ Maximum flexibility in the use of staff

✓ Individual experts can be utilized by many different projects
✓ Specialists in the division can be grouped to share knowledge and experience
✓ The functional division also serves as a base of technological continuity when individuals
choose to leave the project
✓ The functional division contains the normal path of advancement for individuals whose
expertise is in the functional area
81
There are also disadvantages to housing the project in a functional area:
✓ The client is not the focus of activity and concern

✓ The functional division tends to be oriented toward the activities particular to its function
✓ Occasionally, no individual is given full responsibility for the project
✓ There are often several layers of management between the project and the client
✓ There is a tendency to suboptimize the project
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83
2. Project Based Organizational Structure

The projectized organizational structure is the complete opposite of the functional
organizational structure even though the organization may still group staff according to their
work functions.
In this case, the project management team structure is organized in such a way that the project
manager has project authority. He has jurisdiction over the project’s budget, schedule, and the
project team.You would find him at the top of the hierarchical structure, calling all the shots;
with employees playing supporting roles for the project. At the end of the project, the project
team members are released and resources directed towards more relevant areas.
– Project manager has almost complete authority
– Resources are dedicated to project
– Project manager and admin staff work full time
84
Advantages of a pure project organization:
✓ The project manager has full line authority over the project
✓ All members of the project workforce are directly responsible to the project manager
✓ When the project is removed from the functional division, the lines of communication are
shortened
✓ When there are several successive projects of a similar kind, the pure project organization can
maintain a permanent cadre of experts who develop skills in specific technologies
✓ A project team that has a strong and separate identity and develops a high level of commitment
from its members
✓ Because the authority is centralized, the ability to make a swift decision is enhanced
✓ Unity of command exists
✓ Pure project organizations are structurally simple and flexible, which makes them relatively easy
to understand and implement
✓ The organizational structure tends to support a holistic approach to the project
85

Disadvantages of a pure project organization:
✓ Each project tends to be fully staffed which can lead to a duplication of effort in every area
from clerical staff to technological support
✓ There is a need to ensure access to technological knowledge and skills that results in an
attempt by project managers to stockpile equipment and technical assistance
✓ The functional division is a repository of technical lore, but it is not readily accessible to
team members of the pure project team
✓ Pure project groups seem to foster inconsistency in the way in which policies and
procedures are carried out
✓ In a pure project organization, the project takes on a life of its own
✓ There tends to be concern among team members about “life after the project ends”
86
87
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3. Matrix Organizational Structure
Matrix organizations blend features of project-based and functional organizational structures.
The key challenge with a matrix organization is that every employee has two (or more) managers
they report to, their Functional Manager and the Project Manager. If they are working on multiple
projects, they may have even more managers to report to.
– Project manager has some authority
– Resources report to two managers
– Project manager and staff work full time in a strong matrix
There are three types of matrix organizations:
▪ Weak Matrix
▪ Balanced Matrix
▪ Strong Matrix
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Weak Matrix
A weak matrix organizational structure maintains many of the features of the functional
organizational structure. The role of the Project Manager is more that of a Project Coordinator.
Their ability to make or enforce decisions is low and most of the authority remains with the
Functional Manager.
90
Balance Matrix:
A balanced matrix organizational structure recognizes the need for a Project Manager. However,
the Project Manager does not have full authority over the project, project staff or project budget.
91
Strong Matrix:
A strong matrix organizational structure has many of the features of the projectized organizational
structure. They have full-time Project Managers and project administrative staff. Project Managers
have considerable authority over the project in this organizational structure.
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As with other organizational forms, the matrix organization has its own unique advantages:
✓ The project is the point of emphasis

✓ Because the project is overlaid on the functional divisions, the project has reasonable access
to the reservoir of technology in all areas
✓ There is less anxiety about what happens when the project is completed
✓ Response to client’s needs is as rapid as in the pure project organization
✓ Matrix management gives the project access to representatives from the administrative
units of the parent firm
✓ The matrix organization allows a better company-wide balance of resources to achieve
goals
✓ There is a great deal of flexibility in precisely how the project is organized within the matrix
93
There are also disadvantages to using the matrix organization; most involve conflict between the
functional and project managers:
✓ The balance of power between the project and functional areas is very delicate
✓ The movement of resources from project to project may foster political infighting
✓ Problems associated with shutting down projects can be as severe as in a pure project
organization
94
How Organizational Structure Influences Project
Management:
Two of the key project aspects affected by organizational structure types are Project Manager Authority and Resource
Availability.
95
Management:
96
Management:
• Choosing an Organizational Form

Selecting the organizational interface between the project and the firm is a difficult task
The choice is determined by the situation but is also partly intuitive. Must consider the nature of
the potential project, the characteristics of the various organization options, the advantages and
disadvantages of each, the cultural preferences of the parent organization, and then make the best
compromise that can be made
97
Management:
▪ Criteria for the selection of a project organization:

✓ Define the project with a statement of the objective(s) that identifies the major outcomes
desired
✓ Determine the key tasks associated with each objective and locate the units in the parent
organization that serve as functional “homes” for these types of tasks
✓ Arrange the key tasks by sequence and decompose them into work packages
✓ Determine which organizational units are required to carry out the work packages and
which units will work particularly closely with which others
✓ List any special characteristics or assumptions associated with the project
✓ In light of items 1-5, and with full cognizance of the pros and cons associated with each
structural form, choose a structure
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PROJECT INITIATION
3. Prepare the project charter
▪ A project charter is a vital document that formally authorizes the existence of a project. A
project charter depicts how the success of a project will be measured
▪ In reality, no one embarks on a journey without a clear direction, the same principle is applicable
in Project Management. A project manager that embarks on a project without the project
charter is bound to fail.
▪ As a project manager, you must painstakingly prepare your project charter before the project is
kick-started, and by doing so, you are assured of achieving mind-blowing success.
99
PROJECT INITIATION
WHAT ARE THE COMPONENTS OF A PROJECT CHARTER?
▪ Overview of the project: this addresses the name of the project, author of the charter,
creation date, project manager, and the purpose of the project.
▪ Project details: in this is the detailed project description which includes the project’s
mission, the general scope of the project, relevant stakeholders, and clients.
▪ Project scope: this highlights how the project will be executed. In a project charter scope
example, you have the details such as project objectives, goals, deliverables, assumptions, risks,
and other constraints.
▪ Project team organization: in this, you have the list of the team members that will be
involved in the execution of the project. It can also include their roles in the project.
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PROJECT INITIATION
WHAT ARE THE COMPONENTS OF A PROJECT CHARTER?
▪ Project resource planning: this states the resources that will be used in the implementation of
the project.
▪ Project communication plan: this helps in explaining the communication plan that will be used
to manage the changes that could arise in the project to ensure that the set goals and objectives
are achieved.
▪ Project timeline: this helps you to have an idea of what the timeline of the project will look like.
This assists in the thorough management of the project schedules.
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Construction Project Management

Course Code: 0865702

Dr. Sandra Matarneh

1. Introduction, Define Projects and Project 8. Project scheduling.

Why can’t they rum government the way I run my business?”

❖ Multimillion dollar project or small house project have in common:

❖ The primary task of the project manager is to manage these trade-offs.

What are the three project objectives?

❖ But remember, every project is a unique project

Risk:The chance that outcomes will not turn out as planned

Deliverables:The desired outcomes or results of a project

❖ The work environment focuses on what must be performed,

❖ When it must be accomplished,

❖ How much it will cost.

Dr. Sandra Matarneh 19

▪ Define your project

▪ What are we going to do?

▪ Check progress of project

▪ Get client to accept project is complete

1. The growing demand for complex, customized goods and services

The three prime objectives of project management are:

1. Getting Started with 2. Assign a PM 3. Prepare a Project Charter

Project initiation starts with

• Managers often use decision-aiding models to extract the relevant

Two Basic Types of Models:

Two Critical Facts:

▪ Competitive Necessity - project is necessary to sustain a competitive position

Numeric Models: Profit/Profitability

1. Pay Back Period 1. Net Present Value (NPV)

▪ Simply it is how soon can we get our cash back

Imagine that we need to know which is better, to buy machine A or B for a

So, Machine A is better

PPP= Initial Investment / Cash Inflows

We use this formula when the Cash Inflows are equals

3 Yrs + 160,000/200,000 = 3Yrs + 0.8 = 3.8 Yrs 38

500 JOD 500 JOD

(Initial Investment) always negative because it is an outflow

If NPV > Zero ………………..Accept the proposal

First: we calculate the discounting factor using 1/(1+r)

1/(1+r) = 1/1+.10 = 1/1.10

Years Cash flows @ 10% PV

Years Cash flows @ 10% PV

▪ Internal Rate of Return

PV of the expected cash flows = Initial Cash flow

If IRR > K ……………….Accept the proposal

How to Calculate IRR:

Numeric Models: Profit/Profitability

(-) NPV (+) NPV

Calculate NPV Calculate NPV

(+) NPV (-) NPV

▪ Internal Rate of Return

Years Cash flows

▪ Internal Rate of Return

Years Cash flows @10% PV

▪ Internal Rate of Return

Take higher value @12%

Years Cash flows @12% PV

▪ Internal Rate of Return

If we use this rate in our calculations what could happen?

Our NPV = Initial investment

Profitability Index Capital budgeting tool

PI = PV of future cash flow / Initial investment