Lessons in Project Management - 3 - Project Scoping and Contracting

International Project Management
Prof. Dr. Frank Habermann
Lecture 3 –
Envisioning, Scoping and Contracting

© Becota GmbH | www.becota.com | 2010
 How to find a project mission?
 What is a project customer?
 Dealing with different customer constellations
 Types of project needs, drivers and reasons
 The challenge and art of scoping
 Pre-projects and business case analysis
 Project contracts and project charter
 Project organisation and responsibility matrix
Content

© Becota | www.becota.org | 2010
From vision to implementation … a not too rare scenario

in the beginning, every project
needs
a clear
mission!

What is a clear mission?
Picture source: blog.brandintegrity.com/content/binary/mission%20statement.jpg

A clear mission
means having an unmistakable assignment
Picture source: ww.youtube.com/watch?v=qq9R65fXDKQ

What defines your mission?
you:
PROJECT
MANAGER

you:
PROJECT
MANAGER
the guy
who has hired you
and pays the bill:
SPONSOR

you:
PROJECT
MANAGER
the service
or product
you deliver:
DELIVERABLE
the guy
who has hired you
and pays the bill:
SPONSOR

you:
PROJECT
MANAGER
the service
or product
you deliver:
DELIVERABLE
the receiver(s)
of your project
service/product:
TARGET GROUP
the guy
who has hired you
and pays the bill:
SPONSOR

you:
PROJECT
MANAGER
the service
or product
you deliver:
DELIVERABLE
the receiver(s)
of your project
service/product:
TARGET GROUP
THE JOB
the guy
who has hired you
and pays the bill:
SPONSOR

the customer is god
the customer is king
the customer is always right … but
who
actually is your
customer?

A simple question with a not always easy to find answer:
who is your customer?

„Your customer is a
person who
purchases your
product or service!“

person who
purchases your
Consequently, the
project sponsor is
always your customer!

person who
purchases your
Consequently, the
project sponsor is
person who receives
and uses your

person who
purchases your
Consequently, the
project sponsor is
person who receives
and uses your
Typically, there are
additional customers
(or customer groups)
within your project!

Project customers:
Three typical project constellations
Scenario 1: The guy who pays you
also is the direct receiver of
your project‘s services
Example:
Developing a new
business strategy
for the CEO

Project customers:
Scenario 2: The sponsor asks you
to provide services to members
of his closest „family“
Example:
Developing a new
business strategy
for the CEO
Example:
Organizing an
internal event
(„Michael‘s birthday“)

Project customers:
to provide services to third party
or „distant relatives“
Example:
Implementing
new software
for HR
Example:
Developing a new
business strategy
for the CEO
Example:
Organizing an
internal event
(„Michael‘s birthday“)

Project customers:
TWO customers:
But sponsor and receiver
widely share the same goals
ONE single customer:
Sponsor and receiver
are identical
TWO customers:
The receiver has individual
goals which might be in conflict
with the sponsor‘s intentions
to provide services to third party
or „distant relatives“

each project
must start with
a clear understanding
Of the need!

Project drivers you will hear …. and such you won‘t
Picture source: www.cnn.com

We must
meet regulations
We need to keep up
with global competition
We need to
get more
effective
We need to
create synergies
This is of highest
strategic importance

I have to show
some action
I want to get rid of
my predecessor‘s
stuff
This is crucial
for my careerI just want
to have
that thing
We must
meet regulations
We need to keep up with
global competition
We need to
get more
effective
We need to
create synergies
This is of highest
strategic importance

Uncover the real project!
Picture Source: Sony

What is a project need?
 The need is the driver for
investing time and resources
 The need explains the purpose
for initiating the project
 THE NEED COMES FROM
YOUR CUSTOMER(S)
 Thus, needs can be both,
economically reasonable as
well as significantly selfish
 The economic need is
described in a “business case”
official
(and hidden)
agenda
beneficial
business case
PURPOSE
NEED

Following-up: what defines your mission?
the service
or product
you deliver:
DELIVERABLE
the receiver(s)
of your project
service/product:
TARGET GROUP
the guy
who has hired you
and pays the bill:
SPONSOR
official
(and hidden)
agenda
beneficial
case
PURPOSE
you:
PROJECT
MANAGER

A pre-project analyses the business case
and clarifies a feasible project approach
 Sometimes, in the beginning
the project need is not
entirely clear, i.e. it is
• too big,
• too vague,
• too academic,
• too controversial, etc.
Main Project
?

A pre-project analyses the business case
and clarifies a feasible project approach
 Sometimes, in the beginning
the project need is not
entirely clear, i.e. it is
• too big,
• too vague,
• too academic,
• too controversial, etc.
 In all these cases, a pre-
project will help to prepare a
good starting point (i.e.
clarify the business case)
Pre-Project Main Project
aka
- Envisioning
- Feasibility Study
- Business Case Analysis
- Strategic Planning
- Blueprinting

Elements of a Business Case
 Background (why is this paper written?)
 Business Vision and Goals (what do we want to reach?)
 Problem Statement (specific challenge, target group, benefits?)
 Underlying Conditions (what are known constraints?)
 Project Options (alternative course-of-action and risks?)
 Recommendation:
- Deliverables and proposed approach to produce them
- Estimated effort (required resources and expertise)
- Estmated budget
- Estimated schedule
Picture Source: www.lowesforpros.com

SWOT analysis helps to better understand
the current business situation (where are we and
what are drivers for moving?)
 S = Strengths
 W = Weaknesses
 O = Opportunities
 T = Threats
S
O
W
T

 S = Strengths
 W = Weaknesses
 T = Threats
S
O
W
T
positive negative

 S = Strengths
 W = Weaknesses
 T = Threats
S
O
W
T
Internal
(manageable)
External
(not manageable)

 S = Strengths
 W = Weaknesses
 T = Threats
S
TO
WInternal
(manageable)
External
(not manageable)
positive negative

Following-up: what defines your mission?
the service
or product
you deliver:
DELIVERABLE
the receiver(s)
of your project
service/product:
TARGET GROUP
the guy
who has hired you
and pays the bill:
SPONSOR
rules of
the gameunderlying
conditions
RESTRICTIONS
official
(and hidden)
agenda
beneficial
case
PURPOSE
you:
PROJECT
MANAGER

after all,
set the
right
scope!

Scoping means clarifying responsibility
and managing expectations
 The project scope defines
the tasks of the main project
Main ProjectCASE
Pre-
Project

The project profiler helps understanding complexity and
thus setting the right project scope
Source: Becota – The Berlin Consulting & Talent Association
Mission
unit
determinedsemi-
defined
unpre-
dictable
archi-
tectural
incor-
porated
iso-
lated
novel
extended
modified
rarely
steadily
often
Activity
Technology
business
line
enter-
prise
< 6
6-12
months
> 12
months
passive
inert
active
object
doubt
agree
Stakeholders
many
few
single
elusive
varying
stable
Staff
Organization
auto-
nomous
central
federated
ope-
rative
tactical
strategic
Knowledge
paper/file
data
base
em-
bedded
Skills
iden-
tical
heteroge-
nous
similar
tech-
nical
beha-
vioral
academic
scopeduration
approach
level
quantity
stability
attitudeposition
type
set
focus
maturity
source
structure
frequency
access
easy
spiny
limited

Mission
unit
determinedsemi-
defined
unpre-
dictable
archi-
tectural
incor-
porated
iso-
lated
novel
extended
modified
rarely
steadily
often
Activity
Technology
business
line
enter-
prise
< 6
6-12
months
> 12
months
passive
inert
active
object
doubt
agree
Stakeholders
many
few
single
elusive
varying
stable
Staff
Organization
auto-
nomous
central
federated
ope-
rative
tactical
strategic
Knowledge
paper/file
data
base
em-
bedded
Skills
iden-
tical
heteroge-
nous
similar
tech-
nical
beha-
vioral
academic
scopeduration
approach
level
quantity
stability
attitudeposition
type
set
focus
maturity
source
structure
frequency
access
easy
spiny
limited
Orga-technical
drivers of complexity
(„hard factors“)
=> Classic
Project Management
Psycho-social
drivers of complexity
(„soft factors“)
=> Classic
Change Management

Mission
unit
determinedsemi-
defined
unpre-
dictable
archi-
tectural
incor-
porated
iso-
lated
novel
extended
modified
rarely
steadily
often
Activity
Technology
business
line
enter-
prise
> 6
6-12
months
> 12
months
passive
inert
active
object
doubt
agree
Stakeholders
many
few
single
elusive
varying
stable
Staff
Organization
auto-
nomous
central
federated
ope-
rative
tactical
strategic
Knowledge
paper/file
data
base
em-
bedded
Skills
iden-
tical
heteroge-
nous
similar
tech-
nical
beha-
vioral
academic
scopeduration
approach
level
quantity
stability
attitudeposition
type
set
focus
maturity
source
structure
frequency
access
easy
spiny
limited
Mission
unit
determinedsemi-
defined
unpre-
dictable
archi-
tectural
incor-
porated
iso-
lated
novel
extended
modified
rarely
steadily
often
Activity
Technology
business
line
enter-
prise
> 6
6-12
months
> 12
months
passive
inert
active
object
doubt
agree
Stakeholders
many
few
single
elusive
varying
stable
Staff
Organization
auto-
nomous
central
federated
ope-
rative
tactical
strategic
Knowledge
paper/file
data
base
em-
bedded
Skills
iden-
tical
heteroge-
nous
similar
tech-
nical
beha-
vioral
academic
scopeduration
approach
level
quantity
stability
attitudeposition
type
set
focus
maturity
source
structure
frequency
access
easy
spiny
limited
a rather broad scope
=> check, if project is manageable
=> otherwise, re-shape/re-scope
a rather narrow scope
=> check, if project is substantial
=> otherwise, re-shape/re-scope

Scoping means clarifying responsibility
and managing expectations
 The project scope defines
the tasks of the main project
 Things which are beyond the
project scope must be
• either addressed by
third-party (in parallel to
the main project)
• or treated in further
projects (follow-up phases)
Main Project Phase 2
Foreign project
CASE
Pre-
Project

Remember lecture#1:
when do we call a project a success?
on time on budget on quality

Scoping is defining the project goals
regarding the identified business need to be addressed
scoping
is the procedure of setting the parameters for each criteria

Scoping is defining the project goals
regarding the identified business need to be addressed
scoping
is the procedure of setting the parameters for each criteria
be
Specific, Measurable, Achievable, Relevant, Time-bound

setting the
scope
means
negotiating
project goals

Setting the project scope needs understanding
the cost-time-quality equilibrium
changing only one criteria
strongly impacts the others!

for example …
If you would like to
shorten the project duration

for example …
for reaching the same
results as originally defined

for example …
for reaching the same
results as originally defined
You (most likely) have to
calculate higher costs

As project manager you have to be a business juggler
Picture source: www.binbin.net/photos/science-museum

Scoping means negotiating
the parameters for the deliverable
THE
DELIVERABLE
THE
SPONSOR
PROJECT
MANAGER

THE
DELIVERABLE
„In order to deliver
high quality, I need
an excellent team
and sufficient time“
„You got a maximum
budget of X and
I need this done
until tomorrow“
Agreeing the scope means solving natural conflicts of interest!
THE
SPONSOR
PROJECT
MANAGER

Discussion:
How to cope with unrealistic expectations?
Picture source: http://geekandpoke.typepad.com

THE
SPONSOR
PROJECT
MANAGER
THE
DELIVERABLE
Negotiations typically become tricky if a third party steps in!
TARGET
GROUP

THE
SPONSOR
PROJECT
MANAGER
THE
DELIVERABLE
In serious cases the PM needs to decide for one party (or escalate the project)!
TARGET
GROUP
Rule: any conflicts
between sponsor and
target group cannot
be solved by the PM

To sum it up: what defines your mission?
the service
or product
you deliver:
DELIVERABLE
the receiver(s)
of your project
service/product:
TARGET GROUP
the guy
who has hired you
and pays the bill:
SPONSOR
rules of
the gameunderlying
conditions
RESTRICTIONS
official
(and hidden)
agenda
beneficial
case
PURPOSE
you:
PROJECT
MANAGERSCOPE
cost
quality
time

Very important: even if an agreement is found,
watch your scope … it tends to creep away!

Scoping is a continuous fight: what shall be done
in the boundaries of the main project?
 Reasons for
ongoing scope creep:
• The scope is actually not yet
agreed (people just stopped
negotiating)
• Some stakeholders start
thinking not before the project
really starts (-> new needs and
personal interests come up)
• Looking more into details
might lead to further
requirements
• Some people might even try to
step out of agreements (i.e.
delegate tasks back)
Foreign project
CASE
Pre-
Project

Scoping is a continuous fight: what shall be done
in the boundaries of the main project?
 Reasons for
ongoing scope creep:
• The scope is actually not yet
agreed (people just stopped
negotiating)
• Some stakeholders start
thinking not before the project
really starts (-> new needs and
personal interests come up)
• Looking more into details
might lead to further
requirements
• Some people might even try to
step out of agreements (i.e.
delegate tasks back)
Foreign project
CASE
Pre-
Project
?

finally,
write it all down
and
close
the project
contract !

Remember lecture#1:
Typical project douments
INITIATE RUN COMPLETE
Project
Contract
Project
Charter Rough
Require-
ments
Definition
Solution
Documentation
Test
Plan Approvals
(technical &
organizational)
Hand-over
Documention
(e.g. Support
Info)
Closure
Report
Conceptual
Solution
(Models)
Detailed
Require-
ments
Definition
Training
Plan
Project
Plan

Types of projects contracts (service contracts)
TQM setting
C = Fix (lump sum)
Q = Specified (approval criteria)
T = To be agreed
C = Fix (per sub-project/product)
T = To be agreed
C = TIME x MATERIAL
Q = Roughly specified
T = Fix (cycle period)
C = Fixed bandwidths
Q = Fix (incentive criteria)
T = To be agreed
Advantages
for customer
Exactly knows
the budget, i.e.no
financial risk
(favorite model)
Flexibility (select
specialized providers
with best cost/benefit
ratio)
Appropriate for
long-term business
relationships with
trusted providers
Share the business
risks with the provider
(e.g. in pilot projects)
Advantages
for provider
None (high risk,
if scope/requirements
are not clearly defined)
Concentration (can offer
core services and thus
keep the risk comparably
low)
Almost no risk and
high planning security
(favorite model)
Taking risk regarding the
benefits of the own services
shows confidence and thus
may win the contract
Contract types
FIXED PRICE
UNIT PRICE
TIME AND
MATERIAL
INECNTIVE

Types of projects contracts (service contracts)
TQM setting
C = Fix (lump sum)
T = To be agreed
C = Fix (per sub-project/product)
T = To be agreed
C = TIME x MATERIAL
Q = Roughly specified
T = Fix (cycle period)
C = Fixed bandwidths
Q = Fix (incentive criteria)
T = To be agreed
Advantages
for customer
Exactly knows
the budget, i.e.no
financial risk
(favorite model)
Flexibility (select
specialized providers
with best cost/benefit
ratio)
Appropriate for
long-term business
relationships with
trusted providers
Share the business
risks with the provider
(e.g. in pilot projects)
Advantages
for provider
None (high risk,
if scope/requirements
are not clearly defined)
Concentration (can offer
core services and thus
keep the risk comparably
low)
Almost no risk and
high planning security
(favorite model)
Taking risk regarding the
benefits of own services
shows confidence and thus
may win the contract
Contract types
FIXED PRICE
UNIT PRICE
TIME AND
MATERIAL
INCENTIVE

Understanding the roles of
project contract and charter
 Project contract and
project charter are
closely linked documents
 Both share the agreed
business case and the
proposed range of services
and / or products to be
delivered
Project
Contract
Project
Charter
• Legal Purposes
• External Document
• PM Purposes
• Internal Document

Understanding the roles of
project contract and charter
 Project contract and
project charter are
closely linked documents
 Both share the agreed
business case and the
proposed range of services
and / or products to be
delivered
Project
Contract
Project
Charter
• Legal Purposes
• External Document
• PM Purposes
• Internal Document
both contain
the accepted PROPOSAL:
proposed deliverables
estimated effort
agreed schedule
project rules and orga

In complex projects
many contracts may exist but exactly one charter
THE PROJECT
The PM
internal
team
members

In complex projects
THE PROJECT
The PM
internal
team
members
Project
Charter

In complex projects
Hardware
Vendor (HV)
THE PROJECT
Project
Contract
HV
The PM
Project
Charter
internal
team
members

In complex projects
Software
Vendor (SV)
Hardware
Vendor (HV)
Consulting
Partner A (CPA)
Consulting
Partner B (CPB)
THE PROJECT
Project
Contract
SV
Project
Contract
HV
Project
Contract
CPA
Project
Contract
CPB
The PM
Project
Charter
internal
team
members
external
team
members

Content of a Project Charter
The term project charter is
used in different ways.
To our understanding the
charter includes both, the
scope statement as well as the
statement of work!
 Purpose and Problem Statement
 Project Deliverables
 Project Scope and Goals
 Project Milestones and Rough Schedule
 Existing Constraints and Known Risks (Threats)
 Project Organization:
- Project Structure (Org Chart)
- Project Roles (Responsibility Matrix)
- Project Reporting (Communication Plan)
- Change and Escalation Procedures
Picture Source: www.lowesforpros.com

Example project org chart (role-based structure)
STEERING COMMITTEE
Project Sponsor(s)
Project
Manager
Functional Lead
Topic A
(Sub-Project /Team
Manager)
Functional Lead
Topic B
(Sub-Project /Team
Manager)
Functional Lead
Topic C
(Sub-Project /Team
Manager)
Functional Lead
Topic D
(Sub-Project /Team
Manager)
Team
Topic A
(Expert Roles)
Team
Topic B
(Expert Roles)
Team
Topic C
(Expert Roles)
Team
Topic D
(Expert Roles)
Project Management
Office
(Communication/
Logistics)
ADVISORY BOARD
Associated Senior Experts

Responsibility matrix – the RACI model
Who is responsible?
Who is accountable?
R
A
Who is consulted?
Who is informed?
C
I
Person who is assigned
with the task and will do the work
Person who is the ultimative owner
and takes the final decision
Person who must be asked
before decision/action is been taken
Person who must be informed that
decision/action has been taken

Responsibility matrix – example form
Picture source: http://cdn.information-management.com/media/assets/

Responsibility matrix – analysis
Horizontal analysis:
No R‘s or A‘s who will do it?
More than 1 A confusion
Lots of R‘s too many
people involved
Lots of C‘s and I‘s Do they really
all need to
know?

Responsibility matrix – analysis
Vertikal analysis:
Lots of R‘s too much work
No empty space too much work
No R‘s or A‘s can function be elimianted?
Too many A‘ is accountability on right evel?
Horizontal analysis:
No R‘s or A‘s who will do it?
More than 1 A confusion
Lots of R‘s too many
people involved
Lots of C‘s and I‘s Do they really
all need to
know?

Mission clear, contracts closed, charter written?
Then go and spread the word!
Picture source: http://mathdaily.files.wordpress.com/2010/03/

Thank you very much!
presentation by
Frank Habermann
founder of Becota and Professor of Business
http://de.linkedin.com/in/frankhabermann/en

If you have enjoyed this presentation,
please let us know!
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