Management Control of Projects
ISSUED BY THE
INTERNATIONAL FEDERATION OF ACCOUNTANTS
of the Malaysian Institute of Accountants has approved this Foreword for
The status of
Statements on International Management Accounting Practice is set out in the
Councilís statement on Approved Management Accounting Statements.
This Statement describes the
management control of projects, as contrasted with the management control of
ongoing operations. As used here, a project is a set of activities intended to
accomplish a specified end result of sufficient importance to be of interest
to management. Projects include construction projects, production of a sizable
unique product (such as a turbine), rearranging a plant, developing and
marketing a new product, consulting engagements, audits, acquisitions and
divestments, litigation, financial restructuring, research & development work,
development and installation of information systems, and many others.
Project control begins when
management has approved the general nature of what is to be done and has
authorized the approximate amount of resources that are to be spent in doing
this work. The project ends when its objective has been accomplished or if it
has been abandoned. An important difference between a project and ongoing
operations is that a project team usually is disbanded when the product is
produced, whereas in ongoing operations, the organization tends to operate
indefinitely. The construction of a building and the renovation of a building
are projects; the routine maintenance of the building is not. The production
of a motion picture is a project; the production of a daily television program
is an ongoing operation.
The completion of a project may
lead to an ongoing operation, as in the case of a successful development
project. The transition from the project organization to the operating
organization involves complex management control issues.
Projects vary greatly. At one
extreme, a project may involve one or a few persons working for a few days or
weeks, performing work similar to that done many times previously, as on an
annual financial audit that is conducted by a public accounting firm. At the
other extreme, a project may involve thousands of people working for several
years, performing work unlike anything ever done before, as was the case with
the project to land the first men on the moon. This Statement is limited to
projects that involve enough people so that a formal project organization is
necessary and enough resources so that a formal management control system is
The function of the management
accountant is fundamental to the management control of projects. It is to
provide timely and reliable information and assistance to management as a
basis for planning and controlling decisions by:
developing, installing, and
operating the systems used to collect and report this information;
ensuring that this information
conforms to the rules prescribed in these systems; and
assisting management in using
this information in planning and controlling the project.
A project organization is a
temporary organization. A team is assembled for conducting the project, and
the team is disbanded when the project has been completed. Team members may be
employees of the organization that authorized the project (the sponsoring
organization), they may be hired for the purpose, or some or all of them may
be engaged under a contract with an outside organization. The sponsor may be a
single organization, or the project may be a joint venture sponsored by
If the project is conducted
entirely, or partly, by an outside contractor, the sponsoring organization
should ensure that there is a proper management system in place to deal with
tenders and that the best tender is accepted. The sponsoring organization
should designate someone to act as liaison with the project, and that person
should quickly establish satisfactory working arrangements with the
contractor's personnel. These arrangements are influenced by the terms of the
contract, as will be discussed below. If the project is conducted by the
sponsoring organization, some of the work may be assigned to support units
within the organization, and similar relationships should be established with
them. For example, a central drafting unit in an architectural firm may do
drafting for all projects, and management control problems of such
arrangements are similar to those involved in contracting with an outside
of Organization Structure
Different types of management
personnel and management methods may be required as the project evolves.
The planning phase emphasizes
the skills of architects, engineers, and management accountants.
The execution of the project
will often require the input of production managers and trouble-shooters.
As the project matures, the
principal test will be to obtain approval of the sponsor; marketing skills
will often predominate (especially in consulting projects).
The management accountant should be
able to make a significant contribution throughout the planning, execution, and
commissioning of a project.
If the project is conducted by an
outside contractor, an additional level of project control is created; in
addition to the control exercised by the contractor who does the work, the
sponsoring organization has its own control responsibilities. The contractor
may bring its control system to the project, and this system may need to be
adapted to provide the information that the sponsor needs; it is essential
that a consistent set of data be used by the sponsor and the contractor. The
sponsor reserves the right to revise the scope or schedule of the project
under certain circumstances, and may put pressure on the contractor to improve
performance. The sponsor's management control system, therefore, should
identify the need for changes in the project, document the specifics of
changes that have been agreed to, and facilitate the implementation of these
changes. (This does not mean that there should be two separate systems; a
summary of information collected by the contractor becomes a part of the
The form of the contractual
arrangement has an important impact on management control. Contracts are of
two general types: fixed-price and cost-reimbursement, with many variations
within each type.
In a fixed-price contract, the
contractor agrees to complete the specified work by a specified date at a
specified price. Usually, there are penalties if the work is not completed to
specifications or if the scheduled date is not met. It would appear,
therefore, that the contractor assumes all the risks and, consequently, has
all the responsibility for management control; however, this is by no means
the case. If the sponsor decides to change the scope of the project or if the
contractor encounters conditions not contemplated by the contractual
agreement, a change order (also known as a "variation order" or "contract
modification") is issued. The parties must agree on the scope, schedule and
cost implications of each change order. To the extent that change orders
involve increased costs, these costs are borne by the sponsor. On some complex
fixed-price projects, there are thousands of these change orders. In these
circumstances, the final price of the work is in fact not fixed in advance.
Thus, the sponsor ultimately is responsible for the project.
In a fixed-priced contract, the
sponsor is responsible for auditing the quality and quantity of the work to
ensure that it is done as specified. This may be as comprehensive a task as
auditing the cost of work under a cost-reimbursement contract.
In a cost-reimbursement contract,
the sponsor agrees to pay reasonable costs plus a profit; therefore the
sponsor has considerable responsibility for the control of costs. In these
circumstances, the sponsor needs a management control system and associated
control personnel used by a contractor with a fixed-price contract. A
cost-reimbursement contract is appropriate when the scope, schedule, and cost
of the project cannot be reliably estimated in advance.
of Fixed-Price Contracts and Cost-Reimbursement Contracts
The price for a fixed-price
contract is bid by, or at least proposed by, the contractor. In arriving at
this price, a competent contractor includes, in addition to a profit
component, an allowance for contingencies; the size of this allowance
varies with the degree of uncertainty. Thus, for a project with considerable
uncertainty and a correspondingly large contingency allowance, the sponsor may
end up paying more under a fixed-price contract than under a
cost-reimbursement contract in which there is no such contingency allowance.
This extra payment is the contractor's reward for the assumption of risk.
Fixed-price contracts are
appropriate when the scope of the project can be closely specified in advance
and when uncertainties are low. In these circumstances, the contractor cannot
significantly increase the price by negotiating change orders and is therefore
motivated to control costs. If the contractor signs a contract that does not
include adequate provisions for adjustments caused by changes in scope or by
uncontrollable uncertainties, it will resist the sponsor's requests to make
desirable changes and in the extreme case may be unwilling to complete the
project. If the contractor "walks away from the project," no one gains; the
sponsor doesn't get the product, the contractor doesn't get paid, and both
parties may incur legal costs.
In a cost-reimbursement contract,
the profit component, or fee, usually should be a fixed monetary amount; if it
is a percentage of costs, the contractor is motivated to make the costs high
and thereby increase its profit. However, the fixed fee is normally adjusted
if the scope or schedule of the project is significantly changed. Moreover,
many cost-reimbursement contracts have a "not to exceed" upper limit, and this
too may be adjusted.
There are many variations within
these two general types of contracts. For example, in an incentive contract,
completion dates and/or cost targets are defined in advance, and the
contractor is rewarded for completing the project earlier than the target date
or for incurring less than the target cost. This reward is in the form of a
completion bonus that is set at an amount per unit of time saved, and/or a
cost bonus that is set as a percentage of the costs saved. Such a contract
would appear to overcome the inherent weakness of a cost-reimbursement
contract, which has no such rewards. However, if the targets are unrealistic,
the incentive may be nonexistent. Thus, an incentive contract is a middle
ground; it is appropriate when moderately reliable estimates of completion and
cost can be made.
Different contract types may be
used for different activities on the project. For example, direct costs may be
reimbursed under a cost-reimbursement contract because of the high degree of
uncertainty, while the contractor's overhead costs may be covered by a
fixed-price contract, either for the total project or for each month. A
fixed-price contract for overhead motivates the contractor to control these
costs; avoids the necessity of checking on the reasonableness of individual
salary rates, fringe benefits, bonuses, and other amenities; reduces the
contractor's tendency to load the overhead payroll with less qualified
personnel, and encourages the contractor to complete the work as soon as
possible so that supervisory personnel will be freed for other projects.
However, such a contract may also motivate the contractor to skimp on
supervisory personnel, a good control system, and other resources that help
get the project completed in the most efficient manner.
If unit costs can be estimated
reasonably well, but the quantity of work is uncertain, the contract may be
for a fixed price per unit applied to the actual number of units provided. An
example is an extractive contract with payment made at a specified price per
unit of output.
In a project control system,
information is structured by the elements of the project. For the project as a
whole and for each of its elements, information is collected in three
its scope, or specifications
for the end product;
its schedule, or the time
The smallest units of the project
with which these elements are associated are called work packages, and the way
in which these work packages are aggregated is called the work breakdown
A work package is a measurable
increment of work, usually of fairly short duration (a month or so). It should
have an identifiable starting point and completion point so that there is an
unambiguous way of knowing when a work package has been completed. The
completion point is called a milestone. Each work package should be the
responsibility of a single manager.
If the project has similar work
packages (e.g., a work package for the electrical work on each floor of an
office building), each should be defined in the same way, so that information
about one work package can be compared with similar ones. If an industry has
developed cost or time standards for the performance of certain types of work
packages (as is the case in many branches of the construction industry), or if
the project organization has developed such standards on the basis of prior
work, definitions used in these standards should be followed so that the
actual cost for a work package can be compared with these standards costs.
In addition to work packages for
direct project work, cost accounts are established for overhead and support
activities. Unlike the work packages, these activities have no defined output.
Their costs are usually stated per unit of time, such as a month, just as the
overhead costs of ongoing responsibility centers are stated.
The chart of accounts and the
rules for charging costs to projects are also developed in advance. During
their development several questions need to be considered:
Which cost items will be
charged directly to work packages?
How, if at all, will indirect
costs be allocated to work packages?
What will be the lowest level
of monetary cost aggregation? (Small work packages might be monitored in
terms of person days, rather than money, for example.)
Should committed costs be
collected, in addition to actual costs? (For many types of projects, this is
How will off-site overheads and
the cost of equipment be treated?
In the planning phase, the
project team takes as a starting point the rough estimates that were used as
the basis for the decision to undertake the project. It refines these
estimates into detailed specifications for the product, detailed schedules,
and a cost budget. It also develops a management control system, underlying
task control systems (or adapts these from systems used previously), an asset
control system, and an organization chart. The boxes on this organization
chart gradually are filled with the names of personnel who are to manage the
work, and who report to the one person who has final responsibility and
authority for the entire project. An asset control system is required to
exercise proper control over the acquisition, operation, and eventual disposal
of major items of plant and equipment used for the project and disposed of
when used. Disposal proceeds may be a significant contributor to cash flow and
On a project of even moderate
complexity, there is a "plan for planning," that is, a description of each
planning task, who is responsible for it, when it should be completed, and the
interrelationships among tasks. The planning process is itself a sub-project
within the overall project. There is also a control system to ensure that the
planning activities are properly carried out.
If during the project it turns
out that the work breakdown structure or the accounting system does not
provide a useful way of reporting what is happening on the project, the
structure must be revised. This may require re-analyzing much information,
both information already collected and information describing future plans.
Revising the information structure in midstream is a difficult, time
consuming, frustrating task. In order to avoid this work, the project planners
should give considerable attention to designing and installing a sound
management control system before the project starts.
the Project Plan
The final plan consists of three
related parts: scope, schedule, and costs.
This states the specifications of each work package and the name of the
person or organization unit responsible. If the project is one in which
specifications are nebulous, as is the case with many consulting and
research & development projects, this statement is necessarily brief and
This states the estimated time required to complete each work package and
the interrelationship between work packages (i.e., which work package(s)
must be completed before another can be started). The set of these
relationships is called a network. The schedule may be stated as a PERT
(Program Evaluation and Review Technique), Line of Balance, or Critical Path
Costs are stated in the project budget, usually called the control budget.
Unless work packages are quite large, monetary costs are shown only for
aggregates of several work packages, rather than for individual work
packages. Resources planned to be used for individual work packages are
stated as nonmonetary amounts, such as person-days or cubic meters of
In order to compare actual
performance to the plan, the scope, schedule, and cost dimensions must be
carefully related to one another. The work package device is the basis for
maintaining this relationship. The estimated time required and the estimated
cost of each work package are established for the scope specified in each work
package. Both actual time and actual cost are measured in relation to the work
accomplished on the work package (i.e., its scope).
the Control Budget
The control budget is prepared
close to the inception of the work, allowing just enough time for approval by
decision makers prior to the commitment of costs. It supersedes the
preliminary cost estimate that was prepared in an earlier planning phase. For
a lengthy project, the initial control budget may be prepared in detail only
for the first phase of the project, with fairly rough cost estimates for later
phases; detailed budgets for later phases are deferred until just prior to the
beginning of work on these phases. Delaying preparation of the control budget
until just prior to the start of work ensures that the control budget
incorporates current information about scope and schedule, the results of cost
analyses, and current data about wage rates, material prices, and other
variables. It also avoids creating budgets based on what may turn out to be
The control budget is an
important link between planning and control of performance. It represents both
the sponsor's expectations as to what the project will cost and also the
project manager's commitment to carry out the project at that cost. If, as the
project proceeds, it appears that there will be a significant budget overrun,
the project may no longer be economically justified. In these circumstances
the sponsor may re-examine the scope and the schedule, and perhaps modify
This re-examination is necessary
even for fixed-price projects; large cost overruns may indicate a need to
renegotiate the price.
At the end of the planning
process, there exists for most projects a specification of work packages, a
schedule, and a budget; the manager who is responsible for each work package
is identified. The schedule shows the estimated time for each activity, and
the budget shows estimated costs of each principal part of the project. The
cost information is often stated in a financial model. If resources to be used
in detailed work packages are expressed in nonmonetary terms, such as the
number of person-days required, the control budget states monetary costs only
for a sizable aggregation of individual work packages. In the control process,
data on actual cost, actual time, and actual accomplishment (in terms of both
quantity and quality) are compared with these estimates. The comparison may be
made either when a designated milestone in the project is reached, or it may
be made at specified time intervals, such as weekly or monthly.
The sponsor and the project
manager are basically concerned with these questions:
Is the project going to be
finished by the scheduled completion date?
Is the completed work going to
meet the stated specifications?
Is the work going to be done
within the estimated cost?
If at any time during the course of
the project the answer to one of these questions is "no," the sponsor and the
project manager need to know the reasons and what can be done to correct the
These three questions are not
considered separately from one another, for it is sometimes desirable to make
trade-offs between time, quality, and cost, using the financial model and
other available information. For example, overtime might be authorized in
order to assure completion on time, but this would add to costs; or some of
the specifications might be relaxed in order to reduce costs.
Managers need three somewhat
different types of information which may be described as trouble reports,
progress reports, and financial reports.
These report both on trouble that has already happened (such as a delay
resulting from any of a number of possible causes) and also on anticipated
future trouble. Critical problems are flagged. It is essential that these
reports get to the appropriate manager quickly so that corrective action can
be initiated; they often are transmitted by face-to-face conversation or by
telephone. Precision is sacrificed in the interest of speed; rough numbers
are often used - person-hours rather than labor costs, or numbers of bricks
rather than material cost. If the matter reported on is significant, the
oral report is later confirmed by a written document so that a record is
Progress reports compare actual schedule and costs with planned schedule and
costs for the work done, and contain similar comparisons for overhead
activities not directly related to the work. Variances associated with
price, schedule delays, and similar factors may be identified and measured
quantitatively, using techniques for variance analysis that are similar to
those used in the analysis of ongoing operations. Expected differences
between planned and actual scope, schedule, and cost for the whole project
are included in these reports.
Financial reports of project costs must be accurately prepared if there is a
cost-reimbursement contract because they are the basis for any contractual
progress payments; usually they are necessary even for a fixed-price
contract because they are the basis for financial accounting entries. The
time required to produce accurate, validated reports for such purposes
diminishes the value of financial reports for management control purposes.
Less precise information that is available quickly, such as the reports
described in a) and b) above, is more important to project management.
Much of the information in
management reports comes from detailed records collected in task control
systems. These include such things as work schedules, time sheets, inventory
records, purchase orders, requisitions, and equipment records. When designing
these task control systems, their use as a source of management control
information is one consideration.
In order to make certain that all
needs for information are satisfied, management accountants sometimes create
more than the optimum number of reports. An unnecessary report, or extraneous
information in a report, incurs extra costs in assembling and transmitting the
information. More importantly, users may spend unnecessary time reading the
report, or they may overlook important information that is buried in the mass
of details. In the course of the project, therefore, a review of the set of
reports is often desirable, and this may lead to the elimination of some
reports and the simplification of others.
Some work packages will be only
partially completed at the reporting date, and the percentage of completion of
each such work package must be estimated as a basis for comparing actual time
with scheduled time and actual costs with budgeted costs. If accomplishment is
measured in physical terms, such as cubic meters of concrete poured, the
percentage of completion for a given work package can be easily measured. If
no quantitative measure is available, as in the case of many research &
development and consulting projects, the percentage of completion is
subjective. Some organizations compare actual labor hours with budgeted labor
hours as a basis for estimating completion, but this assumes that the actual
labor effort accomplished all that was planned, which may not have been the
case. Narrative reports of progress may be of some help, but these often are
difficult to interpret. If the percentage of completion is not determinable
from quantitative data, the manager necessarily relies on personal
observation, meetings, and other informal sources as a basis for judging
In addition to determining the
percentage of completion of individual work packages, a summary of progress on
the whole project is also useful. Progress payments often are made when
specified completion points are reached. The employment of a "third party"
expert for an opinion in this regard may be advisable if such skills are not
otherwise available to the sponsor. The system usually contains some method of
aggregating individual work packages, so as to develop an overall measure of
accomplishment to date. A simple approach is to use the ratio of actual
person-hours for work packages completed to date to total person-hours for the
project, but this is reliable only if the project is labor intensive. A
weighting based on the planned cost of each work package may be more
informative, subject to the limitation that the system may not include costs
at the level of individual work packages.
Managers spend much time dealing
with reports of trouble. A large project has many such reports, and one of the
manager's tasks is to decide which ones have the highest priority. In the
limited number of hours in a day, the project manager cannot possibly deal
with all the situations that have caused, or may cause, the project to proceed
less than smoothly. The manager, therefore, has to decide which problems will
get his or her personal attention, which will be delegated to someone else,
and which will be disregarded on the premise that operating personnel will
take the necessary corrective action.
Not only do managers limit the
number of trouble spots to which they give personal attention, but they also
are careful not to spend so much time solving immediate problems that no time
remains for careful analysis of the progress reports. Such an analysis may
reveal potential problems that are not apparent in the reports of current
trouble, and the manager needs to identify these problems and plan how they
are to be solved. The temptation is to spend too much time on current problems
and not enough time identifying problems that are not yet apparent. Some
managers deliberately set aside a block of time to reflect on what lies ahead.
The approach to analyzing
progress reports is the familiar one of "management by exception." If progress
in a particular area is satisfactory, no attention needs to be paid to that
area (except to congratulate the persons responsible). Attention is focused on
those areas in which progress is, or may become, unsatisfactory.
The analyses of reports that show
actual cost compared to budget, and actual time compared to the schedule, are
relatively straightforward. In interpreting the time reports, the usual
presumption is that if a work package is completed in less than the estimated
time, the responsible supervisor is to be congratulated, but if more than the
estimated time has been spent, questions are raised. The interpretation of the
cost reports is somewhat different, for the possibility exists that if actual
costs are less than budget, quality may have suffered. For this reason, unless
there is some independent way of estimating what costs should have been, good
cost performance is often interpreted as meaning being on budget, neither
higher nor lower.
Some organizations compare actual
costs to date with budgeted costs for the work accomplished to date. Others
report the current estimate of total costs for the entire project, compared
with the budgeted cost for the entire project. The current estimate is
obtained by taking the actual cost to date and adding an estimate of the costs
required to complete the project. The latter type of report is extremely
important; it shows how the project is expected to come out, provided that the
estimated cost to complete is properly calculated.
Experience to date in over
running or under running estimated costs for work undertaken should be
reflected in the estimates of the costs yet to be incurred. If overruns to
date are caused by factors that are likely to persist in the future, such as
unanticipated inflation, the current estimates of future costs probably should
be higher than the amounts estimated originally.
Sources of Information
Because written reports are
visible, the description of a management control system tends to focus on
them. In practice, the documents are usually less important than information
that the project manager gathers from talking with people who actually do the
work, with members of his or her staff, from regularly scheduled or ad hoc
meetings, from informal memoranda, and from personal inspection of how the
work is going. From these sources, the manager learns of potential problems
and of circumstances that may cause actual progress to deviate from the plan.
This information also helps the manager to understand the significance of the
formal reports because these reports may not disclose important circumstances
that affected actual performance.
In many cases a problem may be
uncovered and corrective action taken before a formal report is prepared, and
the formal report does no more than confirm facts that the manager has already
learned from informal sources. This is an illustration of the principle that
the formal reports should contain no surprises. Nevertheless, formal reports
are necessary. They document the information that the manager has learned
informally, and this documentation is important if questions about the project
are raised subsequently, especially if there are legal issues. Also,
subordinate managers who read the formal reports may discover that the reports
are not an accurate statement of what has happened, and the managers may take
steps to correct the mis-understanding.
If a project is complex, or if it
is lengthy, there is a good chance that the plan will not be adhered to in one
or more of its three aspects; scope, schedule, or cost. A common occurrence is
the discovery that there is likely to be a budget overrun; that is, actual
costs will exceed budgeted costs. If this happens, the sponsor might decide to
accept the overrun and proceed with the project as originally planned; to cut
back on the scope of the project with the aim of producing an end product that
is within the original cost limitations; or to replace the project manager if
the sponsor concludes that the budget overrun was unwarranted. Changes in
scope or schedule may also be made. Whatever the decision, it usually leads to
a revised plan. In some cases, the sponsor may judge that the current estimate
of benefits is lower than the current estimate of "cost to complete" and,
therefore, decide to terminate the project.
If the plan is revised, the
following question arises: Is it better to monitor future progress against the
revised plan or against the original plan? The revised plan is presumably a
better indication of the performance that is currently expected, but the
danger exists that a persuasive project manager can negotiate unwarranted
increases in budgeted costs or that the revised plan will incorporate, and
thus hide, inefficiencies that have accumulated to date. In either case, the
revised plan may be a rubber baseline; that is, instead of providing a firm
benchmark against which progress is measured, it may be stretched to cover up
The possibility of a rubber
baseline can be minimized by taking a hardheaded attitude toward proposed plan
revisions. Nevertheless, there is a tendency to overlook the fact that a
revised plan, by definition, does not show what was expected when the project
was initiated. On the other hand, if performance continues to be monitored by
comparing it with the original plan, the comparison may not be taken seriously
because the original plan is known to be obsolete.
A possible solution to this
problem is to compare actual cost with both the original plan and the revised
plan. Such a summary report starts with the original budget, and in the first
section sets forth the revisions that have been authorized to date and the
reasons for making them. Another section shows the current cost estimate and
the factors that caused the variance between the revised budget and the
current estimate of costs.
In many projects, the audit of
quality must take place as the work is being done; if it is delayed, defective
work on individual components may be hidden; it is covered up by subsequent
work. (For example, the quality of electrical work on a construction project
cannot be checked after walls and ceilings have been finished.) In some
projects, audits of costs and quality are also done as the work progresses; in
others, cost and quality audits are not made until the project has been
completed. In general, auditing as the work progresses is preferable, for it
may uncover potential errors that can be corrected before they become serious.
However, project auditors should not absorb an undue amount of the time of
those who are responsible for doing the work.
The evaluation of projects has
two separate aspects:
an evaluation of performance in
executing the project, and
an evaluation of the results
obtained from the project.
The former is carried out shortly
after the project has been completed; the latter may not be feasible until
several years thereafter. During a long project, re-evaluation of anticipated
results may occur in order to determine if the project is worth continuing.
of Project Control
The evaluation of performance in
executing the project has two aspects:
an evaluation of project
an evaluation of the process of
managing the project.
The purpose of the former is to
assist in decisions regarding project managers, including rewards, promotion,
constructive criticism, or reassignment. The purpose of the latter is to
discover better ways of conducting future projects. In many cases these
evaluations are informal. If the results of the project were unsatisfactory and
if the project was important, a formal evaluation is worthwhile. Also, formal
evaluation of a highly successful project or of an important unsatisfactory
project may identify techniques that will improve performance on future
Because work on a project tends
to be less standardized and less susceptible to measurement than work in a
factory, evaluation of a project is more subjective than evaluation of
production activities. It resembles the evaluation of marketing activities in
that appraisal of performance requires that the effect of external factors on
performance be taken into account.
In looking back at how well the
work on the project was managed, the natural temptation is to rely on
information that was not available at the time. With hindsight, one can
usually discover instances in which the "right" decision was not made.
However, the decision made at the time may have been entirely reasonable: the
manager may not have had all the information at that time; or the manager may
not have addressed a particular problem because other problems had a higher
priority; or the manager may have based the decision on personality
considerations, trade-offs, or other factors that are not recorded in written
Nevertheless, some positive
indications of poor management may be identified. Diversion of funds or other
assets to the personal use of the project manager is an obvious example. If
there were major specification changes or cost overruns, these changes should
have been authorized, and cash flows should have been recalculated so as to
determine whether the return on the project was still acceptable. Still
another example of poor management is a manager's failure to tighten a control
system that permits others to steal, but this is more difficult to judge
because overly tight controls may impede progress on the project. Evidence
that the manager regards cost control as much less important than an excellent
finished product completed on schedule, is another indication of poor
management, but it is not conclusive. The sponsor may overlook budget overruns
if the product is outstanding, as often happens for motion picture projects.
The evaluation of the process may
indicate that reviews conducted during the project were inadequate, or that
timely action was not taken on the basis of these reviews. For example, the
review may indicate that on the basis of information available at the time,
the project should have been redirected or even discontinued, but this was not
done. This may suggest that more frequent or more thorough analyses of
progress should have been made; consequently, requirements for such reviews on
future projects should be modified.
The evaluation may also lead to
changes in rules or procedure. It may identify some rules that unnecessarily
impeded efficient conduct of the project. Conversely, it may uncover
inadequate controls. As part of the evaluation, suggestions for improving the
process should be solicited from project personnel.
Some projects lead to ongoing
operations. For example, a development project may lead to a promising new
product. Although the skills needed to produce and market a new product may be
different from the skills possessed by the project team, team members often
have information and insights that are valuable to the managers who are
responsible for turning the project results into successful operations. If the
project team disbands too quickly, the new managers may not be able to take
advantage of this knowledge. On the other hand, project team members usually
are anxious to go on to something new once their report has been finished and
sold. Thus, the transition from the project to an ongoing operation may be
The schedule should include work
packages that define end-of-project hand-over tasks such as writing manuals;
liaising with, and training the staff of, operations management; and
post-completion consultation or monitoring.