management control of projects management control systems chapter 16 september 2014iwan pudjanegara...
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Iwan Pudjanegara SE., MM. 1
Management Control of Projects
Management Control Systems
Chapter 16
September 2014
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Nature of Projects
A Project is a set of activities intended to accomplish a specified end result of sufficient importance to be of interest to management.
Projects incl. Construction projects, acquisitions & divestitures, rearranging a plant, developing & marketing a new product, financial restructuring, etc.
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Nature of Projects
A project begins when mgt 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 when it has been canceled.
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Contrast with Ongoing Operations
Single Objective Organization Structure Focus on the Project Need for Trade-Offs Less-Reliable Standards Frequent Changes in Plans Different Rhythm Greater Environmental Influence Exceptions
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The Control Environment
Project Organization StructureA project organization is a temporary
organization, because a team is assembled for conducting the project, and is disbanded when the project has been completed.
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The Control Environment
A Matrix Organization: if members of the project team are employees of the sponsoring organization, they have two “bosses” (the project manager & the manager of the functional department) to which they are permanently assigned.
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Contractual Relationship
Fixed-Price Contracts Cost-Reimbursement Contracts Contrasts in Contract Types Variations
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Information Structure
Work Packages : the smallest element in which information is structured in a project control system.oThe way in which these work packages are
aggregated is The Work Breakdown Structure.oA work package is a measurable increment of
work, usually of fairly short duration (1 month or so), should have an unambiguous and identifiable completion point (= a milestone)
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Information Structure
Indirect Cost AccountsCost accounts are established for
administrative and support activities.Estimated costs usually are stated as per
unit of time (e.g. a month).Revising the information structure in
midstream is difficult, time-consuming, and frustration task.
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Nature of the Project Plan
1) Scope : states the specifications of each work package and the name of the person or organization unit responsible.
2) Schedule : states the estimated time required to complete each work package and the interrelationship among work packages.
3) Cost : stated in the project budget (= control budget)
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Network Analysis
Network Analysis Techniques (Tools available for constructing the time schedule for the project) :PERT = Program Evaluation and
Review TechniqueCPM = Critical Path Method
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Network Analysis
PERT & CPM has 3 basic steps :1. Estimating the time required for each
work package
2. Identifying the interdependencies among work packages
3. Calculating the critical path
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Project Execution
Basically, both the sponsor and the project manager are concerned with...:1. Is the project going to be finished by the
scheduled completion date?
2. Is the completed work going to meet the stated specifications?
3. Is the work going to be done within the estimated cost?
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Project Execution(Nature of Reports)
Trouble ReportsProgress ReportsFinancial ReportsQuantity of ReportsPercent CompleteSummarizing ProgressPunch ListSeptember 2014
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Project Execution(Use of Reports)
Trouble ReportsProgress ReportsCost to Complete : the additional
costs required to complete the project
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Project Evaluation
The evaluation of projects has 2 separate aspects :1) An evaluation of performance in
executing the project carried out shortly after the project has been completed.
2) An evaluation of the results obtained from the project may not be feasible until several years later.
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Project Evaluation(Evaluation of Performance)
The evaluation of performance in executing the project has 2 aspects:1) An evaluation of project mgt to assist in
decisions regarding project managers, including rewards, promotions, constructive criticism, or reassignment.
2) An evaluation of the process of managing the project to discover better waysof conducting future projects.
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Project Evaluation(Evaluation of Performance)
Cost Overruns: when actual costs exceed budgeted costs.Actual costs were too high or budgeted
costs were too low.At best, the budget estimates what the
cost should have been based on the information that was available at the time it was prepared.
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Project Evaluation(Evaluation of Results)
The project should be important enough to warrant the considerable expenditure of effort that is involved in a formal evaluation.
The results usually should be quantifiable (measurable).
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Project Evaluation(Evaluation of Results)
The effects of unanticipated variables should be known, and they should not swamp the effect of changes in the assumptions on which the project was approved.
Results of the evaluation should have a good chance of leading to action.
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