Methodology For Tradeoff Analysis

Any process for managing time, cost, and performance trade-offs should emphasize the systems approach to management by recognizing that even the smallest change in a project or system could easily affect all of the organization's systems. A typical systems model is shown in Figure 16-4. Because of this, it is often better to develop a process for decision-making/trade-off analysis rather than to maintain hard-and-fast rules on tradeoffs. The following six steps may help:

• Recognizing and understanding the basis for project conflicts

• Reviewing the project objectives

• Analyzing the project environment and status

• Identifying the alternative courses of action

• Analyzing and selecting the best alternative

• Revising the project plan

The first step in any decision-making process must be recognition and understanding of the conflict. Most projects have management cost and control systems that compare actual versus planned results, scrutinize the results through variance analyses, and provide status reports so that corrective action can be taken to resolve the problems. Project managers must carefully evaluate information about project problems because it may not always be what it appears to be. Typical questions to ask are:

• Is the information pertinent?

• Is the information current?

FIGURE 16-4. The systems approach.

• Who has determined that this situation exists?

• How does he know this information is correct?

• If this information is true, what are the implications for the project?

The reason for this first step is to understand the cause of the conflict and the need for trade-offs. Most causes can be categorized as human errors or failures, uncertain problems, and totally unexpected problems, as shown below:

• Human errors/failures

• Impossible schedule commitments

• Poor control of design changes

• Poor project cost accounting

• Machine failures

• Test failures

• Failure to receive a critical input

• Failure to receive anticipated approvals

• Uncertain problems

• Too many concurrent projects

• Labor contract expiration

• Change in project leadership

• Possibility of project cancellation

• Unexpected problems

• Overcommitted company resources

• Conflicting project priorities

• Cash flow problems

• Labor contract disputes

• Delay in material shipment

• "Fast-track" people having been promoted off the project

• "Temporary" employees having to be returned to their home base

• Inaccurate original forecast

• Change in market conditions

• New standards having been developed

The second step in the decision-making process is a complete review of the project objectives as seen by the various participants in the projects, ranging from top management to project team members. These objectives and/or priorities were originally set after considering many environmental factors, some of which may have changed over the lifetime of the project.

The nature of these objectives will usually determine the degree of rigidity that has been established between time, cost, and performance. This may require reviewing project documentation, including:

• Project objectives

• Project integration into sponsor's objectives and strategic plan

• Statement of work

• Schedule, cost, and performance specifications

• Resources consumed and projected

The third step is the analysis of the project environment and status, including a detailed measurement of the actual time, cost, and performance results with the original or revised project plan. This step should not turn into a "witch hunt" but should focus on project results, problems, and roadblocks. Factors such as financial risk, potential follow-up contracts, the status of other projects, and relative competitive positions are just a few of the environmental factors that should be reviewed. Some companies have established policies toward trade-off analysis, such as "never compromise performance." Even these policies, however, have been known to change when environmental factors add to the financial risk of the company. The following topics may be applicable under step 3:

• Discuss the project with the project management office to:

• Determine relative priorities for time, cost, and performance

• Determine impact on firm's profitability and strategic plan

• Get a management assessment (even a hunch as to what the problems are)

• If the project is a contract with an outside customer, meet with the customer's project manager to assess his views relative to project status and assess the customer's priorities for time, cost, and performance.

• Meet with the functional managers to determine their views on the problem and to gain an insight regarding their commitment to a successful project. Where does this project sit in their priority list?

• Review in detail the status of each project work package. Obtain a clear and detailed appraisal by the responsible project office personnel as to:

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