8 Project Quality Management

Includes the progress for incorporating the organization's quality policy regarding planning, management, and controlling project and product quality requirements in order to meet stakeholder's objectives.

Key Concepts for Project Quality Management

Quality and grade are not the same concepts. Quality as a delivered performance or result is "the degree to which a set of inherent characteristics fulfill requirements" (ISO 9000).

Grade as a design intent is a category assigned to deliverables having the same functional use but different technical characteristics.

Prevention is preferred over inspection. The cost of preventing mistakes is generally much less than the cost of correcting mistakes.

Differences in meaning of terms:

• Prevention - keeping error out of he process. Inspection - keeping errors out of the hands of the customer.
• Attribute sampling - the result either conforms or doesn't conform. Variable sampling - the result is rated on a continuous scale that measures the degree of conformity.
• Tolerances - specified range of acceptable results. Control limits - identify the boundaries of common variation in a statistically stable process or process performance.

Cost of quality (COQ) includes all costs incurred over the life of the product by investment in preventing nonconformance to requirements, appraising the product or service for conformance to requirements, and failing to meet requirements (rework).

Failure cost are the cost of poor quality and are

• Internal - found by the project team;
• External - found by the customer.

Levels of quality management:

1. Let the customer to find the defects. Warranty issues, recalls, loss of reputation, rework costs.
2. Detect and correct the defects before the deliverables are sent to the customer as part of the quality control process. Appraisal and internal failure costs.
3. Use quality assurance to examine and designing of the project and products.
4. Incorporate quality into the planning and designing of the project and product.
5. Create a culture in the organization that is aware and committed to quality in processes and products.

Trends and Emerging Practices in Project Quality Management

• Customer satisfaction. Understand, evaluate, define, manage requirements so that customer expectations are met. Conformance to requirements + fitness to use.
• Continual improvement. Plan+Do+Check+Act (PDCA) cycle. Total Quality Management, Six Sigma, Lean Six Sigma.
• Management responsibility.
• Mutually beneficial partnership with suppliers. Win-Win.

Tailoring Considerations

• Policy compliance and auditing. Policies, tools, techniques, templates.
• Standards and regulatory compliance. Specific quality standards in the industry, governmental, legal, regulatory.
• Continuous improvement. Organizational / project level.
• Stakeholder engagement.

Considerations for Agile/Adaptive Environments

Recurring retrospectives regularly check on the effectiveness of the quality processes. Adjustment or drop.

Focus on small batches of work, incorporating as many elements of project deliverables as possible to uncover inconsistencies and quality issues earlier in the project life cycle.

7.4 Control Costs

The process of monitoring the status of the project to update the project costs and managing changes to the cost baseline.

Key benefit: the cost baseline is maintained throughout the project.

Frequency: throughout the project.

Process/ Asset Group	Input	The Process	Output	Process/ Asset Group
Project Management Plan	Cost management plan	7.4 Control Costs	Work performance information	4.5 Monitor and Control Project Work
	Cost baseline		Change requests	4.6 Perform Integrated Change Management Control
	Performance measurement baseline		Cost management plan	Project Management Plan
Project Documents	Lesson learned register		Cost baseline
7.3 Determine Budget	Project funding requirements		Performance Measurement baseline
4.3 Direct and Manage Project Work	Work performance data		Cost forecasts	Project Documents
Enterprise/ Organization	Organizational Process Assets		Assumption log
			Basis of estimate
			Cost Estimates
			Lesson learned register
			Risk register

Much of the effort of cost control involves analyzing the relationship between the consumption of project funds and the work being accomplished for such expenditures.

Cost control includes:

• Influencing the factors that create changes to the authorized cost baseline.
• Ensuring that all change requests are acted on in a timely manner.
• Managing the actual changes when and as they occur.
• Ensuring that cost expenditures do not exceed the authorized funding by period, by WBS component, by activity, and in total for the project.
• Monitoring cost performance to isolate and understand variances from the approved cost baseline.
• Monitoring work performance against funds expended.
• Preventing unapproved changes from being included in the reported cost or resource usage.
• Informing appropriate stakeholders of all approved changes and associated cost.
• Bringing expected cost overruns within acceptable limits.

7.4.1 Inputs

7.4.1.1 Project Management Plan

Includes:

• Cost management plan. How the project costs will be managed and controlled.
• Cost baseline. The cost baseline is compared with actual results for change, correction action, preventive action.
• Performance measurement baseline. For EVA.

7.4.1.2 Project Documents

Lesson learned register.

7.4.1.3 Project Funding Requirements

Projected expenditures plus anticipated liabilities.

7.4.1.4 Work Performance Data

Data on project status such as which cost have been authorized, incurred, invoiced, and paid.

7.4.1.5 Organizational Process Assets

Include:

• Existing formal and informal cost control-related policies, procedures, guidelines.
• Cost control tools.
• Monitoring and reporting methods to be used.

7.4.2 Tools and Techniques

7.4.2.1 Expert Judgement

• Variance analysis.
• Earned value analysis.
• Forecasting.
• Financial analysis.

7.4.2.2 Data Analysis

• Earned value analysis (EVA). Compares the performance measurement baseline to the actual schedule and cost performance, so we have three dimensions:
  • Planned value PV. Authorized budget assigned to scheduled work, not including management reserve. The total of the PV is also referred as the performance measurement baseline (PMB). The total planned value for the project is also known as budget at completion (BAC).
  • Earned value EV. A measure of work performed expressed in terms of the budget authorized for that work. It is often used to calculate the percent complete of a project. Progress measurement criteria should be established for each WBS component to measure work in progress.
  • Actual cost. It is the realized cost incurred for the work performed on an activity during a specific time period. It needs to correspond in definition to what was budgeted in the PV and measured in the EV.
• Variance analysis.
  • Identify cost, schedule, completion variances.
  • Cost performance measurements are used to assess the value of variation.
  • Define are corrective actions are needed.
  • Analyse the cause of variances.
  • Schedule variance: SV=EV-PV.
  • Cost variance: CV = EV - AC.
  • Schedule performance index. It measures schedule efficiency: SPI = EV/PV.
  • Cost performance index. It measures the cost efficiency of budgeted resources: CPI = EA / AC.
• Trend analysis. Graphical analysis.

• Forecasting. Estimate at completion. If it becomes obvious that the BAC is no longer viable the EAC can be forecasted. It is typically based on the actual costs incurred for work completed + estimate to complete (ETC) the remaining work.
  • EAC forecast for ETC work performed at the budgeted rate. Took current performance by the actual costs -> ETC will be accomplished at the budgeted rate. EAC = AC + (BAC - EV).
  • EAC forecast for ETC work performed at the present CPI. EAC = BAC / CPI
  • EAC forecast for ETC work considering both SPI and CPI factors. EAC = AC+[(BAC-EV)/(CPI*SPI)]
• Reserve analysis. To monitor the status of contingency and management reserves for the project to determine if these reserves are still needed or if additional reserves need to be requested. Risk analysis is also used.

7.4.2.3 To-Complete Performance Index

TCPI is a measure of the cost performance that is required to be achieved with the remaining resources in order to meet a specified management goal: the ratio of the cost to finish the outstanding work to the remaining budget. (BAC-EV)/(BAC-AC).

7.4.3 Outputs

7.4.3.1 Work Performance Information

Includes information on how the project work is performing compared to the cost baseline.

7.4.3.2 Cost Forecast

Either a calculated EAC value or a bottom-up EAC value is documented and communicated to stakeholders.

7.4.3.3 Change Requests

To the cost and schedule baselines or other components of the project management plan.

7.4.3.4 Project Management Plan Updates

All updates are going through change control process. Components:

• Cost management plan. Changes to control threshholds or specified levels of accuracy required.
• Cost baseline. Changes in response to approved changes in scope, resources, or cost estimates.
• Performance measurement baseline.

7.4.3.5 Project Documents Updates

Include:

• Assumption log. The need to revise the resource productivity or others...
• Basis of estimates.
• Cost estimates.
• Lesson learned register.
• Risk register.

Earned Value Chart and Calculations

Estimating task or project status very difficult.

Budgeted expenditures or baseline expenditures.

Earned value of work performed - value completed.

There are several conventions to aid in estimating percent completion:

• 50/50 rule. 50% completion is assumed when the task is begun, remaining 50% - when the work is complete. It is excessively generous for the task beginning and conservative toward the end of the task.
• 0/100 rule. Very conservative rule. The project always seems to be running late. The earned value line will always lag the planned value line.
• Critical input use rule. Task progress is defined by the amount of a critical inputs. Amount of poured concrete cubic meters -> status of the task of building the foundation.
• The proportionality rule. Uses time or cost as the critical input.

The before mentioned variants can be applied to tasks not to the project itself. It the project include a lot of tasks then any of the variant applied is good enough.

The concept of earned value balances planned (baseline) cost, actual cost, schedule.

• Budget at Completion (BAC).
• Estimated cost at completion (EAC).

Cost (spending) variance (CV): EV - AC. Or money budgeted to accomplish the work done on current point of time minus actual cost of this work.

The schedule variance (SV) = EV - PV. Or budgeted money for the work done minus budgeted money to be spend on the work to be done on the current time.

The time variance (TV) = ST - AT. Or planned time minus actual time.

Variances can be calculated as ratios or indexes.

Cost Performance Index (CPI) = EV/AC

Schedule Performance Index (SPI) = EV/PV

Time Performance Index (TPI) = ST/AT. It is useful when an organization wishes to compare the performance of several projects. But be careful on the degree of accuracy of calculation of percent complete.

Example:

On current moment the work is expected to be costed as of 1500. The actual expenses are 1350. The completion percent = 67%.


Variances:

Cost Variance = EV - AC = 1500 * .67 - 1350 = - 350

Schedule Variance = EV - PV = 1500 * 0.67 - 1500 = -500.

Cost performance index CPI = EV / AC = 1500*0.67/1350 = 0.74

SPI = EV / PV = 1500 * 0.67 / 1500 = 0.67.

Time scheduled ST = AT * EV / PV.

Time variance TV = AT * (SPI - 1)

Cost Schedule Index CSI = CPI * SPI = EV ^ 2/ AC / PV.


If the project will continue with current rate of expenses then

Estimated cost to complete ETC = (BAC - EV) / CPI = (1500 - 1000) / 0.74 = 676

Estimated cost at completion EAC = ETC + AC = 676 + 1000 = 2026

7.3 Determining Budget

The process of aggregating the estimated costs of individual activities or work packages to establish an authorized cost baseline.

Key benefit: it determines the cost baseline against which project performance can be monitored and controlled.

Frequency: once or at predefined points in the project.

A project budget includes all the funds authorized to execute the project.

The cost baseline is the approved version of the time-phased project budget that includes contingency reserves minus management reserves.

Process/ Asset Group	Input	The process	Output	Process/ Asset Group
Project Management Plan	Cost management plan	7.3 Determine Budget	Cost baseline	Project Management Plan
	Resource Management Plan		Project funding requirements	7.4 Control Costs
	Scope baseline		Cost estimates	Project documents
Project Documents	Basis of estimates		Project Schedule
	Cost estimate		Risk register
	Project Schedule
	Risk register
Business Documents	Business case
	Benefit management plan
12.2 Conduct Procurements	Agreements
Enterprise/ Organization	Enterprise environment factors
	Organizational process assets

7.3.1 Inputs

7.3.1.1 Project Management Plan

Includes:

• Cost management plan. How the project costs will be structured in the budget.
• Resource management plan. Rates on resources, overheads, other foreseen costs.
• Scope baseline. The project scope statement, WBS, WBS dictionary.

7.3.1.2 Project Documents

Include:

• Basis of estimates.
• Cost estimates.
• Project schedule. Planned start/finish dates, milestones, work packages, control accounts -> aggregate costs to the calendar periods.
• Risk register. How to aggregate the risk response costs.

7.3.1.3 Business Documents

• Business case. The critical success factors.
• Benefits management plan. Target benefits, timeframe for them, metrics.

7.3.1.4 Agreements

Cost related information.

7.3.1.5 Enterprise Environment Factors

Exchange rates.

7.3.1.6 Organizational Process Assets

Includes:

• Existing formal/informal cost budgeting-related policies, procedures, guidelines;
• Historical information and lesson learned repo;
• Cost budgeting tools;
• Reporting methods.

7.3.2 Tools and Techniques

7.3.2.1 Expert Judgement

Topics:

• Previous similar projects;
• Financial disciplines;
• Funding requirements and sources.

7.3.2.2 Cost Aggregation

Aggregation in accordance with the WBS -> control accounts -> entire project.

7.3.2.3 Data Analysis

Reserve analysis -> management reserves for the project: an amount of the project budget withheld for management control purposes and are reserved for unforeseen work that is within scope of the project, for unknown unknowns. It is not includes into the cost baseline but is a part of the budget. If the reserve is used the amount is included into the baseline through change control project.

7.3.2.4 Historical Information Review

For parameters (project characteristics) or analogous estimates. Regression models. Used when:

• Historical information is accurate;
• Data are quantifiable;
• Model is scale-able.

7.3.2.5 Funding Limit Reconciliation

The expenditure are under funding limits. Variances -> rescheduling of work -> out the rate of expenditure (?).

7.3.2.6 Financing

Funding methods for external financing. It can add additional requirements to the project.

7.3.3 Outputs

7.3.3.1 Cost Baseline

Approved version of the time-phased project budget, excluding management reserves. It is used as a basis to compare with actual results.

7.3.3.2 Project Funding Requirements

Total and periodic are from the cost baseline.

7.3.3.3 Project Documents Updates

• Cost estimates.
• Project schedule.
• Risk register.

7.2 Estimate Costs

It is the process of developing an approximation of the cost of resource needed to complete project work.

The key benefit: determines the monetary resources for the project.

Frequency: periodically as needed.

Process/ Org.Assets	Input	The process	Output	Process/ Org. Assets
Project Management Plan	Cost management plan	7.2 Estimate Costs	Cost estimates	Project Documents
	Quality management plan		Basis of estimate
	Scope baseline		Assumption log
Project Documents	Lesson learned register		Lesson learned register
	Project schedule		Risk register
	Resource requirements
	Risk register
Enterprise/Organization	Enterprise environment factors
	Organizational process assets

A cost estimate - a quantitative assessment of the likely costs for resources required to complete the activity, prediction. Includes the identification and consideration of costing alternatives to initiate and complete the project, cost trade-offs, risks.

Cost estimate is usually expressed in units of currency. Sometimes in time of work.

Cost estimates are refined during the project.

Cost are estimated for all resources that will be charged to the project:

• Labor
• Materials
• Equipment
• Services,
• Cost of financing (services?)
• Contingency costs

Level of details:

• By an activity
• In summary

7.2.1 Inputs

7.2.1.1 Project Management Plan

• Cost management plan. Estimating methods, level of precision, accuracy.
• Quality management plan. Activities, resources.
• Scope baseline. Project scope statement, WBS, WBS dictionary.
  • Project scope statement. Funding constraints, financial assumptions, constraints.
  • WBS. Relationships.
  • WBS dictionary. Identification of the deliverables, description of the work.

7.2.1.2 Project documents

Include:

• Lesson learned register.
• Project schedule. Type, quantity, amount of time, including non-direct (time -> interest amount).
• Resource requirements. Types, quantities.
• Risk register. Details of risks, responses.

7.2.1.3 Enterprise environmental Factors.

Include:

• Market conditions. What products, services from whom under what terms and conditions. Local/global.
• Published commercial information. Price lists, resource price estimation databases.
• Exchange rates and inflation.

7.2.1.4 Organizational Process Assets

Include:

• Cost estimating policies.
• Cost estimating templates.
• Historical information and lesson learned.

7.2.2 Tools and Techniques

7.2.2.1 Expert Judgement

• Previous similar projects;
• Information in industry, discipline, application area.
• Cost estimating methods.

7.2.2.2 Analogous Estimating

Using values from previous projects that are similar to the current:

• Scope,
• Cost,
• Budget,
• Duration,
• Measures scale.

7.2.2.3 Parametric Estimating

A statistical relationship: project parameter -> cost.

7.2.2.4 Bottom-up Estimating

1. An activity is estimated.
2. Activity estimates are summarized to the higher level.

Accuracy depends on the activities size.

7.2.2.5 Three-Point Estimating

(Most likely + Optimistic + Pessimistic)/3

(4 * Most likely + Optimistic + Pessimistic)/6

7.2.2.6 Data Analysis

• Alternatives analysis.
• Reserve analysis. Contingency reserves (allowances).
• Cost of quality.

7.2.2.7 PMIS

7.2.2.8 Decision Making

Voting.

7.2.3 Outputs

7.2.3.1 Cost Estimates

Quantitative assessment of the probable costs to complete project work + contingency amounts to account risks + management reserve for unplanned work. In summary/detail form. Assessment is applied to all resources needed to accomplish a work. Indirect costs can be included at the activity level or at higher level.

7.2.3.2 Basis of Estimates

The documentation has to provide complete understanding of how the cost estimate was derive.

Include:

• Documentation of the basis of the estimate,
• Doc-ion of all assumptions made,
• Doc-ion of any known constraints,
• Documentation of identified risks,
• Indication of the range of possible estimates.
• Indication of the confidence level of the final estimate.

7.2.3.3 Project Documents Updates

Include:

• Assumption log.
• Lesson learned register.
• Risk register.

7.1 Plan Cost Management

It is the process of defining how the project costs will be estimated, budgeted, managed, monitored, and controlled.

The key benefit: provides guidance and direction on how the project costs will be managed.

Frequency: once or at predefined points in the project.

Process/ Org.Assets	Input	The process	Output	Process/ Org.Asset
4.1 Develop Project Charter	Project charter	7.1 Plan Cost Management	Cost management plan	Project Management Plan
Project Management Plan	Schedule management plan
	Risk management plan
Enterprise/ Organization	Enterprise environment factors
	Organizational process assets

The process begins early in project planning. The cost management plan processes and their associated tools and techniques are documented in the cost management plan.

7.1.1 Inputs

7.1.1.1 Project Charter

Provides preapproved financial resources for detailed costs development. Plus the project approval requirements.

7.1.1.2 Project Management Plan

• Schedule management plan. Criteria and the activities for developing, monitoring, and controlling the schedule. Processes and controls.
• Risk management plan. The approach for identifying, analyzing, and monitoring risks. Processes and controls.

7.1.1.3 Enterprise Environmental Factors

Include:

• Organizational culture and structure.
• Market conditions.
• Currency exchange rates.
• Published commercial information. Price lists. HR averaged salaries.
• PMIS.
• Productivity differences in different parts of the world.

7.1.1.4 Organizational Process Assets

Include:

• Financial controls procedures (accounting codes, time reporting, ...)
• Historical information and lessons learned repository.
• Financial databases.
• Existing formal and informal cost estimating and budgeting-related policies, procedures, guidelines.

7.1.2 Tools and Techniques

7.1.2.1 Expert Judgement

Topics:

• Previous similar projects;
• Information in the industry, discipline, application area;
• Cost estimating and budgeting;
• Earned value management.

7.1.2.2 Data Analysis

• Alternatives analysis.
  • Self-funding,
  • Funding with equity,
  • Funding with debt.
  • ----
  • Making
  • Purchasing
  • Renting
  • Leasing

7.1.2.3 Meetings

7.1.3 Outputs

7.1.3.1 Cost Management Plan

It describes how the project costs will be planned, structured, controlled. It is documented in the cost management plan.

Can establish:

• Units of measure.
• Level of precision.
• Level of accuracy.
• Organizational procedures links. WBS -> the framework for the cost management plan. The control account: a WBS component used in the cost accounting.
• Control thresholds. Variance thresholds for monitoring cost performance.
• Rules of performance measurement. EVM rules. May:
  • Define the points in the WBS at which measurement of control accounts will be performed;
  • Establish the EVM techniques:
    • Weighed milestones,
    • Fixed-formula,
    • Percent complete.
  • Specify tracking methodologies and the EVM computation equations for calculating estimate at completion (EAC) to provide a validity check on the bottom-up EAC.
• Report formats. Report formats and frequencies.
• Additional details.
  • Description of strategic funding choices;
  • Procedure to account for fluctuations in currency rates;
  • Procedures for project cost recording.

6.6 Control Schedule

It is the process of monitoring the status of the project to update the project schedule and managing changes to the schedule baseline.

The key benefit: the schedule baseline is maintained throughout the project.

Frequency: throughout the project.

Process/ Assets Group	Input	The process	Output	Process / Assets Group
Project Management Plan	Schedule management plan	6.6 Control Schedule	Work performance information	4.5 Monitor and Control Project Work
	Schedule baseline		Change Request	4.6 Perform Integrated Change Control
	Scope baseline		Schedule management plan	Project Management Plan
	Performance measurement baseline		Schedule baseline
Project Documents	Lesson learned register		Cost baseline
	Project calendars		Performance measurement baseline
	Project schedule		Schedule forecast	Project Documents
	Resource calendars		Assumption log
	Schedule data		Basis of estimates
4.3 Direct and Manage Project Work	Work performance data		Lesson learned register
Enterprise / Organization	Organizational process assets		Project schedule
			Resource calendars
			Risk register
			Schedule data

The process concerns with:

• Determining the current status of the project schedule,
• Influencing the factors that create schedule changes,
• Reconsidering necessary schedule reserves,
• Determining if the project schedule has changed,
• Managing the actual changes as they occur.

For agile approach:

• Determining the current status of the project schedule by comparing the total amount of work delivered and accepted against the estimates of work completed for the elapsed time cycle;
• Conducting retrospectives for correcting processes and improving, if required;
• Reprioritizing the remaining work plan (backlog);
• Determining the rate at which the deliverables are produced, validated, and accepted (velocity) in the given time per iteration;
• Determining that the project schedule has changed;
• Managing the actual changes as they occur.

For contractual work the milestones are controlled. Scheduled status reviews and walkthroughs should be done to verify the contractor reports.

6.6.1 Inputs

6.6.1.1 Project Management Plan

Includes:

• Schedule management plan. Frequency to update, reserve usage, how to control;
• Schedule baseline. To compare actual with baseline.
• Scope baseline.
• Performance measurement baseline.

6.6.1.2 Project Documents

Include:

• Lesson learned register.
• Project calendars.
• Project schedule.
• Resource calendars.
• Schedule data.

6.6.1.3 Work Performance Data

• Started activities;
• Actual duration;
• Remaining duration;
• Physical percent complete;
• Completed activities.

6.6.

6.6.1.4 Organizational Process Assets

Include:

• Existing formal/informal schedule control-related policies, procedures, guidelines;
• Schedule control tools;
• Monitoring and reporting methods to be used.

6.6.2 Tools and Techniques

6.6.2.1 Data Analysis

Includes:

• Earned value analysis. To assess the magnitude of variation to the original schedule baseline;
• Iteration burndown chart. To track the work remaining to be completed in the iteration backlog. Variance with an ideal burndown (diagonal line) is analyzed. A forecast trend line is used to predict the likely variance at iteration completion.

• Performance reviews. To measure, compare, analyze schedule performance against the baseline: actual start and finish dates, percent complete, remaining duration for work in progress.
• Trend analysis. To analyze performance over time.
• Variance analysis. Analysis of variances in planned values versus actual for start/finish dates, duration, float. Also cause, degree, future implications.
• What-if scenario analysis.

6.6.2.2 Critical Path Method

Progress along the critical path -> schedule status.

6.6.2.3 Project Management Information System (PMIS)

Track planned dates versus actual dates.

6.6.2.4 Resource Optimization

6.6.2.5 Leads and Lags

Adjusting leads and lags to find way to bring project activities into alignment with the plan.

6.6.2.6 Schedule Compression

6.6.3 Outputs

6.6.3.1 Work Performance Information

6.6.3.2 Schedule Forecasts

• Earned value performance indicators,
• Schedule reserve information.

6.6.3.3 Change Requests

Schedule variance analysis/progress reports reviews/performance measures/modification of the project scope/modification of project schedule => change requests.

6.6.3.4 Project Management Plan Updates

Includes:

• Schedule management plan.
• Schedule baseline. Changes in project scope, resources, activity duration, results of schedule compression, performance issues.
• Cost baseline.
• Performance measurement baseline.

6.6.3.5 Project Documents Updates

Include:

• Assumption log.
• Basis of estimates.
• Lesson learned register.
• Project schedule.
• Resource calendars.
• Risk register.
• Schedule data.