Case Study: Small Project Cost Estimating

In the Kerzner (2003) case study, Small Project Cost Estimating at Percy Company, Paul spends his first five years out of collage performing cost estimates for the Manufacturing Division of Percy Company. Percy issues fixed cost estimates for its projects, as indicated by the lengthy and costly procedure used to generate accurate quotes. Paul was promoted to a new position within the project office. His new responsibility was to coordinate all estimates for all divisions of Percy. During this time he did not perform any cost estimating.

After a year in the project office, Paul was assigned to a small projects division. The first five estimates that Paul created were accurate. However, the sixth estimate was off by $20,000, causing an expensive cost overrun. The case study asks to answer the question, “Why did the overrun occur?”

Discussion Questions on Project Risk

Risks can be categorized in three categories: known knowns, known unknowns, and unknown unknowns. After categorizing risks, the project manager should then mitigate those risks.

Can all risks be mitigated? Explain.

Discussions on Project Procurement

During the procurement execution stage of a project, the project manager must determine whether to make or buy a product. The project manager must also assist in the selection of vendors to supply products/components necessary to complete the project. What criteria should be analyzed before reaching the make or buy decision?

Discussion Questions on Project Execution

Project execution affords the opportunity to adhere the project plan and its various components. What are the key elements of project execution?

The key elements of project execution are the project scope, the project schedule and the project budget. The scope defines the work that must be done in order to achieve the objectives of the project. The scope items are broken down in WBS elements and time phased to develop a project schedule. Costs for each activity in the WBS are rolled back up to form the project budget.

Properly Initiating a Project

During the first week of University of Phoenix’s Project Management Capstone course, students learn about three areas involved with properly initiating a project: project proposals, project selection methods and project chartering (University of Phoenix, 2009). Each organization develops strategic plans and many of the strategies are implemented through tactical projects. Departments within the organization develop proposals based on the strategies and the organization selects the proposals based on priority and potential benefit to the organization. Once a project is selected, the project sponsor creates and issues a project charter and the assigned project manager plans, executes and closes the project, successfully meeting the objectives outlined in the charter. At least that is how project initiation is supposed to work. But what would happen if the objectives were not clearly outlined? If the sponsor did not issue a charter, could that negatively affect the project? What if there was no sponsor? This paper examines the potential negative impact of improperly initiating an information technology (IT) project and provides recommendations for improving the project initiation process.

Discussion Questions on Project Risk

Project risks can/cannot be eliminated if the project is carefully planned. Explain.

Project risks cannot be eliminated by careful project planning. A risk by definition is an event that might occur. If you are certain it will or will not occur, it isn’t a risk! However, through careful planning a project team can reduce the likelihood or impact of a risk.

Discussion Questions on Project Network Construction

Define activity, event, and path as used in network construction. What is a dummy activity?

According to Kerzner, an event is the starting or end point for a group of activites. An activity is the work required to proceed from one event or point in time to another. A path any sequence of activities and paths. Dummy activities are artificial activities use to show dependencies between events but do not consume resources or time like a typical activity.

Lying and Deception in Project Contract Negotiations

Is it unethical to lie during contract negotiations? How about deceptive negotiating tactics? Are they unethical? Business people do it all the time—they hide their true intentions or stretch the truth in order to win. The United States Court of Appeals recognizes that “both sides presumably try to get the best deal” and that “no particular demand in negotiations could be termed dishonest” (Shell, 1991). If everyone is doing it, what is the problem?

Risk Management in Project Contracting

Risk management is an important part of the project contracting process. Cooper (2005) positions contracts as a tool to help allocate or transfer risk in business transactions. The contract is intended as an “agreements between parties for the conduct of specific actions or functions, in return for consideration” (Cooper 162). Through a properly executed and managed contract, both the customer and its vendors are able to more effectively manage risks related to development projects.