The project charter is the document that formally authorizes a project. The project charter provides the project manager with the authority to apply organizational resources to project activities. A project manager is identified and assigned as early in the project as is feasible. The project manager should always be assigned prior to the start of planning, and preferably while the project is being developed.
A project initiator or sponsor external to the project organization, at a level that is appropriate to funding the project, issues a project charter. Projects are usually chartered and authorized external to the organization by an enterprise, a government agency, a company, a program organization, or a portfolio organization, as a result of one or more of the following:
■ A market demand (e.g., a car company authorizing a project to build more fuel-efficient cars in response to gasoline shortages)
■ A business need (e.g., a training company authorizing a project to build a new substation to serve a new industrial park)
■ A customer request (e.g., an electric utility authorizing a project to build a new substation to serve a new industrial park)
■ A technological advance (e.g., an electronics firm authorizing a new project to develop a faster, cheaper, and smaller laptop after advances in computer memory and electronics technology)
■ A legal requirement (e.g., a paint manufacturer authorizing a project to establish guidelines for handling toxic materials)
■ A social need (e.g., a nongovernmental organization in a developing country authorizing a project to provide potable water systems, latrines, and sanitation education to communities suffering from high rates of cholera)
These stimuli can also be called problems, opportunities, or business requirements. The central theme of all these stimuli is that management must make a decision about how to respond and what projects to authorize and charter. Project selection methods involve measuring value or attractiveness to the project owner or sponsor and may include other organization decision criteria. Project selection also applies to choosing alternative ways of executing the project.
Charting a project links the project to the ongoing work of the organization. In some organizations, a project is not formally chartered and initiated until completion of a needs assessment, feasibility study, preliminary plan, or some other form of analysis that was separately initiated. Developing the project charter is primarily concerned with documenting the business needs, project justification, current understanding of the customer's requirements, and the new product, service, or result that is intended to satisfy those requirements. The project charter, either directly or by reference to other documents, should address the following information.
■ Requirements that satisfy customer, sponsor, and other stakeholder needs, wants, and expectations
■ Business needs, high-level project description, or product requirements that the project is undertaken to address
■ Project purpose or justification
■ Assigned project manager and authority level
■ Summary milestone schedule
■ Stakeholder influences
■ Functional organizations and their participation
■ Organizational, environmental, and external assumptions and constraints
■ Business case justifying the project, including return on investment
■ Summary budget
During subsequent phases of the multiphase projects, the "develop project charter process" validates the decisions made during the original chartering of the project. If required, it also authorizes the next project phase, and updates the charter.
The project charter commissions and challenges the project team as well as the business to work with their eyes fully open to both the risks and opportunities of full integration. This means that the team is charged to plan, design, and monitor the program and/or project with an eye outward to customer expectations and requirements; cost, schedule, and quality tradeoffs (using earned value tools); reaching out to supporting functions and systems (IT, functional departments such as accounting and purchasing/acquisition, technical test equipment and tool managers); the costs of production and manufacturing of the project products and outputs; the need for strong configuration management to document and preserve the product; and other projects underway as part of the company's portfolio of projects. The team will look at the project as an investment in the company.
The charter will identify periodic stage-gate review points, the need for interfaces in those reviews, and will challenge the team to make the business case for the project at every stage-gate review.
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What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.