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accepted by the customer, all payments have been collected, and all invoices have been paid. An important task during this phase is evaluating performance of the project team in order to learn what could be improved if a similar project were to be carried out in the future. This phase should include obtaining feedback from the customer to determine the level of the customer’s satisfaction and whether the project met the customer’s expectations. Also, recommendations and feedback from the project team will help improve performance of similar projects in the future.

      Project life cycles vary in length from a few weeks to several years, depending on the content, complexity, and magnitude of the project. What’s more, not all projects formally go through all four phases of the project life cycle. If a group of community volunteers decides that they want to use their own time, talents, and resources to organize a food drive for the homeless, they may get right into phase three— planning the event and carrying it out. The first two phases of the life cycle would not be relevant to such a project. Likewise, if a company’s general manager determines that changing the layout of equipment in the factory will increase efficiency, he or she might simply instruct the manufacturing manager to initiate such a project and to implement it using the company’s own people. In this case, there would be no written request for proposal from external contractors.

      In other situations, such as a home remodeling project for which a contractor will likely be hired, a customer may go through the first two phases of the project life cycle in a less structured, more informal manner. He or she may not write down all of the requirements or ask several contractors for estimates. Rather, they may call a specific contractor who has been recommended by a friend or neighbor, explain what the job is, and ask that contractor to provide some sketches and a cost estimate.

      In general, the project life cycle is followed in a more formal and structured manner when a project is conducted in a business setting. It tends to be less formal when a project is carried out by a private individual or volunteers.

       Types of Contracts

      Contract type is an important consideration. Different types of contracts can be used in different situations. Two broad categories of contracts are fixed price or lump sum, cost reimbursable, and unit price.

      Fixed price or lump sum contracts involve a fixed total price for a well-defined product or service. The buyer incurs little risk in this situation. For example, a company could award a fixed price contract to purchase 100 laser printers with a certain print resolution and print speed to be delivered to one location within two months. In this example, the product and delivery date are well defined. Fixed price contracts may also include incentives for meeting or exceeding selected project objectives. For example, the contract could include an incentive fee paid if the laser printers are delivered within one month. A firm-fixed price contract has the least amount of risk for the consumer, followed by a fixed price incentive contract.

      Cost reimbursable contracts involve payment to the seller for direct and indirect actual costs. Direct costs are costs that are related to a project and can be traced back in a cost-effective way. Indirect costs are costs related to the project that cannot be traced back in a cost-effective way. For example, the salaries for people working directly on a project and hardware or software purchased for a specific project are direct costs, while the cost of providing a work space with electricity, a cafeteria, and the like are indirect costs. Indirect costs are often calculated as a percentage of direct costs. Cost reimbursable contracts often include fees such as a profit percentage or incentives for meeting or exceeding selected project objectives. These contracts are often used for projects that include providing goods and services that involve new technologies. The consumer absorbs more of the risk with cost reimbursable contracts than they do with fixed price contracts.

       The Project Management Process

      Succinctly, the project management process means planning the work and then working the plan. A coaching staff may spend hours preparing unique plans for a game, then the team executes the plans to meet the objective and the result—victory. Similarly, project management involves a process of first establishing a plan and then implementing that plan to accomplish the project objective.

      The front-end effort in managing a project must be focused on establishing a baseline plan that provides a roadmap for how the project scope will be accomplished on time and within budget. This planning effort includes the following:

      1. Clearly define the project objective. The goal must be defined in a way that is agreed upon by the customer and the individual or organization that will perform the project.

      2.Divide and subdivide the project scope into major “pieces” or work packages. Although major projects may seem overwhelming when viewed as a whole, one way to conquer even the most monumental endeavor is to break it down. A work breakdown structure (WBS) is a hierarchical tree of work elements or items accomplished or produced by the project team during the project. The work breakdown structure usually identifies the organization or individual responsible for each work package. Exhibit 4 is an example of a work breakdown structure (WBS). Chapter 4 discusses the WBS.

Exhibit 4: Work breakdown structure (WBS)

      3.Define the specific activities that need to be performed for each work package in order to accomplish the project objective. In Exhibit 4, the work package, Vacuum carpets involves many smaller specific activities involved in the broader task of vacuuming the carpet.

      4.Graphically portray the activities in the form of a network diagram. This type of diagram shows the necessary sequence and interdependencies of activities to achieve the project objective. (Network diagrams will be discussed further in Chapter 5.)

      5.Make a time estimate for how long it will take to complete each activity. It is also necessary to determine which types of resources and how many of each resource are needed for each activity to be completed within the estimated duration.

      6.Make a cost estimate for each activity. The cost is based on the types and quantities of resources required for each activity.

      7. Calculate a project schedule and budget to determine whether the project can be completed within the required time, with the allotted funds, and with the available resources. If it is determined that the project cannot be accomplished within the limitations, adjustments must be made to the project scope, activity time estimates, or resource assignments until an achievable, realistic baseline plan (a roadmap for accomplishing the project scope on time and within budget) can be established. Exhibit 5 shows an example of a project schedule, and Exhibit 6 illustrates a project budget. (These will be covered in Chapters 5 and 7.)

Exhibit 5: Network Diagram – Consumer Market Study Project

Exhibit 6: Project Budget

       Planning determines what needs to be done, who will do it, how long it will take, and how much it will cost. The result of this effort is a baseline plan. Taking the time to develop a well thought out plan is critical to the successful accomplishment of any project.