Related Case Studies
Management Case Studies,
• Quantum Telecom
• Concrete Masonry
• Margo Company
• Project Overrun
• The Two-Boss Problem
• Denver International
• Airport (DIA)
Related Workbook Exercises (from
Workbook and PMP ®/CAPM ® Exam
Study Guide, 10th Edition)
• The Statement of Work
• Technology Forecasting
• The Noncompliance Project
• Multiple Choice Exam
• Crossword Puzzle on Scope
PMBOK® Guide, 4th
Section for the PMP®
PMBOK® Guide, 4th Edition
Chapter 5 Scope Management
5.2 Define Scope
The most important responsibilities of a project manager are planning,
integrating, and executing plans. Almost all projects, because of their relatively short duration and often prioritized control of resources, require
formal, detailed planning. The integration of the planning activities is
* Case Study also appears in Workbook.
necessary because each functional unit may develop its own planning documentation with little regard for
other functional units.
Planning, in general, can best be described as the function of selecting the enterprise objectives and
establishing the policies, procedures, and programs necessary for achieving them. Planning in a project
environment may be described as establishing a predetermined course of action within a forecasted environment. The project’s requirements set the major milestones. If line managers cannot commit because
the milestones are perceived as unrealistic, the project manager may have to develop alternatives, one of
which may be to move the milestones. Upper-level management must become involved in the selection
The project manager is the key to successful project planning. It is desirable that the project manager
be involved from project conception through execution. Project planning must be systematic, flexible
enough to handle unique activities, disciplined through reviews and controls, and capable of accepting multifunctional inputs. Successful project managers realize that project planning is an iterative process and must
be performed throughout the life of the project.
One of the objectives of project planning is to completely define all
required (possibly through the development of a documented project
PMBOK Guide, 4th Edition
so that it will be readily identifiable to each project participant. This
5.2 Define Scope
is a necessity in a project environment because:
If the task is well understood prior to being performed, much of the work can be preplanned.
If the task is not understood, then during the actual task execution more knowledge is gained that,
in turn, leads to changes in resource allocations, schedules, and priorities.
The more uncertain the task, the greater the amount of information that must be processed in order
to ensure effective performance.
These considerations are important in a project environment because each project can be different from
the others, requiring a variety of different resources, but having to be performed under time, cost, and performance constraints with little margin for error. Figure 11–1 identifies the type of project planning
required to establish an effective monitoring and control system. The boxes at the top represent the planning activities, and the lower boxes identify the “tracking” or monitoring of the planned activities.
There are two proverbs that affect project planning:
Failing to plan is planning to fail.
The primary benefit of not planning is that failure will then come as a complete surprise rather than
being preceded by periods of worry and depression.
Without proper planning, programs and projects can start off “behind the eight ball.” Consequences of
poor planning include:
Project initiation without defined requirements
Search for the guilty
Punishment of the innocent
Promotion of the nonparticipants
The project planning and control system.
STATES OF NATURE
• COMPANY LEVEL
• SYSTEM LEVEL
There are four basic reasons for project planning:
To eliminate or reduce uncertainty
To improve efficiency of the operation
To obtain a better understanding of the objectives
To provide a basis for monitoring and controlling work
Planning is a continuous process of making entrepreneurial decisions with an eye to the future, and
methodically organizing the effort needed to carry out these decisions. Furthermore, systematic planning
allows an organization of set goals. The alternative to systematic planning is decision-making based on history. This generally results in reactive management leading to crisis management, conflict management,
and fire fighting.
11.1 VALIDATING THE ASSUMPTIONS
Planning begins with an understanding of the assumptions. Quite often, the assumptions
are made by marketing and sales personnel and then approved by senior management as
part of the project selection and approval process. The expectations for the final results are
based upon the assumptions made.
Why is it that, more often than not, the final results of a project do not satisfy senior
management’s expectations? At the beginning of a project, it is impossible to ensure that
the benefits expected by senior management will be realized at project completion. While
project length is a critical factor, the real culprit is changing assumptions.
Assumptions must be documented at project initiation using the project charter as a
possible means. Throughout the project, the project manager must revalidate and challenge
the assumptions. Changing assumptions may mandate that the project be terminated or
redirected toward a different set of objectives.
A project management plan is based upon the assumptions described in the project
charter. But there are additional assumptions made by the team that are inputs to the project management plan.1 One of the primary reasons companies use a project charter is that
project managers were most often brought on board well after the project selection process
and approval process were completed. As a result, project managers were needed to know
what assumptions were considered.
These are assumptions about the external environmental conditions
that can affect the success of the project, such as interest rates, market
conditions, changing customer demands and requirements, changes in
technology, and even government policies.
1. See A Guide to the Project Management Body of Knowledge®, 4th ed., 2008, Figure 4-4.
These are assumptions about present or future company assets that can
impact the success of the project such as the capability of your enterprise project management methodology, the project management
information system, forms, templates, guidelines, checklists, and the ability to capture and
use lessons learned data and best practices.
11.2 GENERAL PLANNING
PMBOK® Guide, 4th Edition
Chapter 5 Scope Management
1.6 General Management
Knowledge and Skills
Planning is determining what needs to be done, by whom, and by when,
in order to fulfill one’s assigned responsibility. There are nine major components of the planning phase:
● Objective: a goal, target, or quota to be achieved by a certain time
Program: the strategy to be followed and major actions to be taken in order to
achieve or exceed objectives
Schedule: a plan showing when individual or group activities or accomplishments
will be started and/or completed
Budget: planned expenditures required to achieve or exceed objectives
Forecast: a projection of what will happen by a certain time
Organization: design of the number and kinds of positions, along with corresponding duties and responsibilities, required to achieve or exceed objectives
Policy: a general guide for decision-making and individual actions
Procedure: a detailed method for carrying out a policy
Standard: a level of individual or group performance defined as adequate or
An item that has become important in recent years is documenting assumptions that
go into the objectives or the project/subsidiary plans. As projects progress, even for shortterm projects, assumptions can change because of the economy, technological advances,
or market conditions. These changes can invalidate original assumptions or require that
new assumptions be made. These changes could also mandate that projects be canceled.
Companies are now validating assumptions during gate review meetings. Project charters
now contain sections for documenting assumptions.
Several of these factors require additional comment. Forecasting what will happen may
not be easy, especially if predictions of environmental reactions are required. For example,
planning is customarily defined as either strategic, tactical, or operational. Strategic planning is generally for five years or more, tactical can be for one to five years, and operational
is the here and now of six months to one year. Although most projects are operational, they
can be considered as strategic, especially if spin-offs or follow-up work is promising.
Forecasting also requires an understanding of strengths and weaknesses as found in:
The competitive situation
Research and development
The management structure
If project planning is strictly operational, then these factors may be clearly definable.
However, if strategic or long-range planning is necessary, then the future economic outlook
can vary, say, from year to year, and replanning must be done at regular intervals because
the goals and objectives can change. (The procedure for this can be seen in Figure 11–1.)
The last three factors, policies, procedures, and standards, can vary from project to
project because of their uniqueness. Each project manager can establish project policies,
provided that they fall within the broad limits set forth by top management.
Project policies must often conform closely to company policies, and are usually similar in nature from project to project. Procedures, on the other hand, can be drastically different from project to project, even if the same activity is performed. For example, the
signing off of manufacturing plans may require different signatures on two selected projects
even though the same end-item is being produced.
Planning varies at each level of the organization. At the individual level, planning is
required so that cognitive simulation can be established before irrevocable actions are
taken. At the working group or functional level, planning must include:
Agreement on purpose
Assignment and acceptance of individual responsibilities
Coordination of work activities
Increased commitment to group goals
At the organizational or project level, planning must include:
Recognition and resolution of group conflict on goals
Assignment and acceptance of group responsibilities
Increased motivation and commitment to organizational goals
Vertical and lateral communications
Coordination of activities between groups
The logic of planning requires answers to several questions in order for the alternatives and constraints to be fully understood. A list of questions would include:
Prepare environmental analysis
Where are we?
● How and why did we get here?
Is this where we want to be?
● Where would we like to be? In a year? In five years?
List alternative strategies
● Where will we go if we continue as before?
● Is that where we want to go?
● How could we get to where we want to go?
List threats and opportunities
● What might prevent us from getting there?
● What might help us to get there?
● Where are we capable of going?
● What do we need to take us where we want to go?
Select strategy portfolio
● What is the best course for us to take?
● What are the potential benefits?
● What are the risks?
Prepare action programs
● What do we need to do?
● When do we need to do it?
● How will we do it?
● Who will do it?
Monitor and control
● Are we on course? If not, why?
● What do we need to do to be on course?
● Can we do it?
One of the most difficult activities in the project environment is to keep the planning
on target. These procedures can assist project managers during planning activities:
Let functional managers do their own planning. Too often operators are operators,
planners are planners, and never the twain shall meet.
Establish goals before you plan. Otherwise short-term thinking takes over.
Set goals for the planners. This will guard against the nonessentials and places
your effort where there is payoff.
Stay flexible. Use people-to-people contact, and stress fast response.
Keep a balanced outlook. Don’t overreact, and position yourself for an upturn.
Welcome top-management participation. Top management has the capability to
make or break a plan, and may well be the single most important variable.
Beware of future spending plans. This may eliminate the tendency to underestimate.
Test the assumptions behind the forecasts. This is necessary because professionals
are generally too optimistic. Do not depend solely on one set of data.
Don’t focus on today’s problems. Try to get away from crisis management and fire
Reward those who dispel illusions. Avoid the Persian messenger syndrome (i.e.,
beheading the bearer of bad tidings). Reward the first to come forth with bad news.
11.3 LIFE-CYCLE PHASES
Project planning takes place at two levels. The first level is the corporate cultural approach; the second method is the individual’s approach. The corpoChapter 2 Project Life Cycle and
rate cultural approach breaks the project down into life-cycle phases, such as
those shown in Table 2–6. The life-cycle phase approach is not an attempt to
2.1 Characteristics of Project
put handcuffs on the project manager but to provide a methodology for uniPhases
formity in project planning. Many companies, including government agencies, prepare checklists of activities that should be considered in each phase. These checklists
are for consistency in planning. The project manager can still exercise his own planning initiatives within each phase.
A second benefit of life-cycle phases is control. At the end of each phase there is a
meeting of the project manager, sponsor, senior management, and even the customer, to
assess the accomplishments of this life-cycle phase and to get approval for the next phase.
These meetings are often called critical design reviews, “on-off ramps,” and “gates.” In
some companies, these meetings are used to firm up budgets and schedules for the followon phases. In addition to monetary considerations, life-cycle phases can be used for manpower deployment and equipment/facility utilization. Some companies go so far as to
prepare project management policy and procedure manuals where all information is subdivided according to life-cycle phasing. Life-cycle phase decision points eliminate the
problem where project managers do not ask for phase funding, but rather ask for funds for
the whole project before the true scope of the project is known. Several companies have
even gone so far as to identify the types of decisions that can be made at each end-of-phase
review meeting. They include:
PMBOK® Guide, 4th Edition
Proceed with the next phase based on an approved funding level
Proceed to the next phase but with a new or modified set of objectives
Postpone approval to proceed based on a need for additional information
Consider a company that utilizes the following life-cycle phases:
Testing and commissioning
The conceptualization phase includes brainstorming and common sense and involves
two critical factors: (1) identify and define the problem, and (2) identify and define potential solutions.
In a brainstorming session, all ideas are recorded and none are discarded. The brainstorming session works best if there is no formal authority present and if it lasts thirty to sixty
minutes. Sessions over sixty minutes will produce ideas that may resemble science fiction.
The feasibility study phase considers the technical aspects of the conceptual alternatives and provides a firmer basis on which to decide whether to undertake the project.
The purpose of the feasibility phase is to:
Plan the project development and implementation activities.
Estimate the probable elapsed time, staffing, and equipment requirements.
Identify the probable costs and consequences of investing in the new project.
If practical, the feasibility study results should evaluate the alternative conceptual
solutions along with associated benefits and costs.
The objective of this step is to provide management with the predictable results of
implementing a specific project and to provide generalized project requirements. This, in
the form of a feasibility study report, is used as the basis on which to decide whether to
proceed with the costly requirements, development, and implementation phases.
User involvement during the feasibility study is critical. The user must supply much
of the required effort and information, and, in addition, must be able to judge the impact of
alternative approaches. Solutions must be operationally, technically, and economically feasible. Much of the economic evaluation must be substantiated by the user. Therefore, the
primary user must be highly qualified and intimately familiar with the workings of
the organization and should come from the line operation.
The feasibility study also deals with the technical aspects of the proposed project and
requires the development of conceptual solutions. Considerable experience and technical expertise are required to gather the proper information, analyze it, and reach practical
Improper technical or operating decisions made during this step may go undetected or
unchallenged throughout the remainder of the process. In the worst case, such an error
could result in the termination of a valid project—or the continuation of a project that is
not economically or technically feasible.
In the feasibility study phase, it is necessary to define the project’s basic approaches
and its boundaries or scope. A typical feasibility study checklist might include:
Evaluate market potential
Evaluate cost effectiveness
Evaluate technical base
● A more specific determination of the problem
● Analysis of the state-of-the-art technology
Assessment of in-house technical capabilities
Test validity of alternatives
Quantify weaknesses and unknowns
Conduct trade-off analysis on time, cost, and performance
Prepare initial project goals and objectives
Prepare preliminary cost estimates and development plan
The end result of the feasibility study is a management decision on whether to terminate
the project or to approve its next phase. Although management can stop the project at several
later phases, the decision is especially critical at this point, because later phases require a major
commitment of resources. All too often, management review committees approve the continuation of projects merely because termination at this point might cast doubt on the group’s judgment in giving earlier approval.
The decision made at the end of the feasibility study should identify those projects that
are to be terminated. Once a project is deemed feasible and is approved for development,
it must be prioritized with previously approved projects waiting for development (given a
limited availability of capital or other resources). As development gets under way, management is given a series of checkpoints to monitor the project’s actual progress as compared to the plan.
The third life-cycle phase is either preliminary planning or “defining the requirements.” This is the phase where the effort is officially defined as a project. In this phase,
we should consider the following:
General scope of the work
Objectives and related background
Contractor end-item performance requirements
Reference to related studies, documentation, and specifications
Data items (documentation)
Support equipment for contract end-item
Customer-furnished property, facilities, equipment, and services
Schedule of performance
Exhibits, attachments, and appendices
These elements can be condensed into four core documents, as will be shown in
Section 11.7. Also, it should be noted that the word “customer” can be an internal customer, such as the user group or your own executives.
The table below shows the percentage of direct labor hours/dollars that are spent in
Percent of Direct
The interesting fact from this table is that as much as 50 percent of the direct labor hours
and dollars can be spent before execution begins. The reason for this is simple: Quality must
be planned for and designed in. Quality cannot be inspected into the project. Companies that
spend less than these percentages usually find quality problems in execution.
11.4 PROPOSAL PREPARATION
There is always a question of what to do with a project manager between assignments. For
companies that survive on competitive bidding, the assignment is clear: The project manager writes proposals for future work. This takes place during the feasibility study, when
the company must decide whether to bid on the job. There are four ways in which proposal
preparation can occur:
Project manager prepares entire proposal. This occurs frequently in small companies. In large organizations, the project manager may not have access to all available data, some of which may be company proprietary, and it may not be in the best
interest of the company to have the project manager spend all of his time doing this.
Proposal manager prepares entire proposal. This can work as long as the project
manager is allowed to review the proposal before delivery to the customer and
feels committed to its direction.
Project manager prepares proposal but is assisted by a proposal manager. This is
common, but again places tremendous pressure on the project manager.
Proposal manager prepares proposal but is assisted by a project manager. This is
the preferred method. The proposal manager maintains maximum authority and
control until such time as the proposal is sent to the customer, at which point the
project manager takes charge. The project manager is on board right from the start,
although his only effort may be preparing the technical volume of the proposal and
perhaps part of the management volume.
11.5 KICKOFF MEETINGS
The typical launch of a project begins with a kickoff meeting involving the major players
responsible for planning, including the project manager, assistant project managers for certain areas of knowledge, subject matter experts (SME), and functional leads. A typical
sequence is shown in Figure 11–2.
There can be multiple kickoff meetings based upon the size, complexity, and time
requirements for the project. The major players are usually authorized by their functional
areas to make decisions concerning timing, costs, and resource requirements.
Some of the items discussed in the initial kickoff meeting include:
Wage and salary administration, if applicable
Letting the employees know that their boss will be informed as to how well or how
poorly they perform
TYPICAL PROJECT LAUNCH
PM & APMS
(& SMES &
PM & APMS
(& SMES &
PM & APMS
(& SMES &
⫹ WBS DICTIONARY)
Typical project launch.
Initial discussion of the scope of the project including both the technical objective
and the business objective
The definition of success on this project
The assumptions and constraints as identified in the project charter
The project’s organizational chart (if known at that time)
The participants’ roles and responsibilities
For a small or short-term project, estimates on cost and duration may be established
in the kickoff meeting. In this case, there may be little need to establish a cost estimating
schedule. But where the estimating cycle is expected to take several weeks, and where
inputs will be required from various organizations and/or disciplines, an essential tool is
an estimating schedule. In this case, there may be a need for a prekickoff meeting simply
to determine the estimates. The minimum key milestones in a cost estimating schedule are
(1) a “kickoff ” meeting; (2) a “review of ground rules” meeting; (3) “resources input and
review” meeting; and (4) summary meetings and presentations. Descriptions of these
meetings and their approximate places in the estimating cycle follow.2
2. R. D. Stewart, Cost Estimating (New York: Wiley, 1982), pp. 56–57.
The Prekickoff Meeting
The very first formal milestone in an estimate schedule is the estimate
kickoff meeting. This is a meeting of all the individuals who are
expected to have an input to the cost estimate. It usually includes individuals who are proficient in technical disciplines involved in the work to be estimated; business-oriented individuals who are aware of the financial factors to be considered in making the estimate;
project-oriented individuals who are familiar with the project ground rules and constraints;
and, finally, the cost estimator or cost estimating team. The estimating team may not
include any of the team members responsible for execution of the project.
Sufficient time should be allowed in the kickoff meeting to describe all project ground
rules, constraints, and assumptions; to hand out technical specifications, drawings, schedules, and work element descriptions and resource estimating forms; and to discuss these
items and answer any questions that might arise. It is also an appropriate time to clarify
estimating assignments among the various disciplines represented in the event that organizational charters are not clear as to who should support which part of the estimate. This
kickoff meeting may be 6 weeks to 3 months prior to the estimate completion date to allow
sufficient time for the overall estimating process. If the estimate is being made in response
to a request for quotation or request for bid, copies of the request for quotation document
will be distributed and its salient points discussed.
The Review of Ground Rules
Several days after the estimate kickoff meeting, when the participants
have had the opportunity to study the material, a review of ground rules
meeting should be conducted. In this meeting the estimate manager
answers questions regarding the conduct of the cost estimate, assumptions, ground rules, and
estimating assignments. If the members of the estimating team are experienced in developing resource estimates for their respective disciplines, very little discussion may be needed.
However, if this is the first estimating cycle for one or more of the estimating team members,
it may be necessary to provide these team members with additional information, guidance,
and instruction on estimating tools and methods. If the individuals who will actually perform
the work are doing the estimating (which is actually the best arrangement for getting a realistic estimate), more time and support may be needed than would experienced estimators.
Several weeks after the kickoff and review of ground rules meetings,
each team member that has a resources (man-hour and/or materials)
input is asked to present his or her input before the entire estimating
team. Thus starts one of the most valuable parts of the estimating process: the interaction
of team members to reduce duplications, overlaps, and omissions in resource data.
The most valuable aspect of a team estimate is the synergistic effect of team interaction. In any multidisciplinary activity, it is the synthesis of information and actions that produces wise decisions rather than the mere volume of data. In this review meeting the
estimator of each discipline area has the opportunity to justify and explain the rationale for
his estimates in view of his peers, an activity that tends to iron out inconsistencies, overstatements, and incompatibilities in resources estimates. Occasionally, inconsistencies,
overlaps, duplications, and omissions will be so significant that a second input and review
meeting will be required to collect and properly synthesize all inputs for an estimate.
The Resources Input and
Summary Meetings and
Once the resources inputs have been collected, adjusted, and “priced,”
the cost estimate is presented to the estimating team as a “dry run” for the
final presentation to the company’s management or to the requesting
organization. This dry run can produce visibility into further inconsistencies or errors that
have crept into the estimate during the process of consolidation and reconciliation. The final
review with the requesting organization or with the company’s management could also
bring about some changes in the estimate due to last minute changes in ground rules or budget-imposed cost ceilings.
11.6 UNDERSTANDING PARTICIPANTS’ ROLES
Companies that have histories of successful plans also have employees who fully understand their roles in the planning process. Good up-front planning may not eliminate the
need for changes, but may reduce the number of changes required. The responsibilities of
the major players are as follows:
Project manager will define:
Goals and objectives
Ground rules and assumptions
Time, cost, and performance constraints
● Line manager will define:
● Detailed task descriptions to implement objectives, requirements, and milestones
● Detailed schedules and manpower allocations to support budget and schedule
● Identification of areas of risk, uncertainty, and conflict
● Senior management (project sponsor) will:
● Act as the negotiator for disagreements between project and line management
● Provide clarification of critical issues
● Provide communication link with customer’s senior management
Successful planning requires that project, line, and senior management are in agreement with the plan.
11.7 PROJECT PLANNING
PMBOK® Guide, 4th Edition
Chapter 5 Project Scope
5.2 Define Scope
Successful project management, whether in response to an in-house project
or a customer request, must utilize effective planning techniques. The first
step is understanding the project objectives. These goals may be to develop
expertise in a given area, to become competitive, to modify an existing facility for later use, or simply to keep key personnel employed.
The objectives are generally not independent; they are all interrelated, both implicitly
and explicitly. Many times it is not possible to satisfy all objectives. At this point, management must prioritize the objectives as to which are strategic and which are not. Typical
problems with developing objectives include:
Project objectives/goals are not agreeable to all parties.
Project objectives are too rigid to accommodate changing priorities.
Insufficient time exists to define objectives well.
Objectives are not adequately quantified.
Objectives are not documented well enough.
Efforts of client and project personnel are not coordinated.
Personnel turnover is high.
Once the objectives are clearly defined, four questions must be considered:
What are the major elements of the work required to satisfy the objectives, and
how are these elements interrelated?
Which functional divisions will assume responsibility for accomplishment of these
objectives and the major-element work requirements?
Are the required corporate and organizational resources available?
What are the information flow requirements for the project?
If the project is large and complex, then careful planning and analysis must be accomplished by both the direct- and indirect-labor-charging organizational units. The project organizational structure must be designed to fit the project; work plans and schedules must be
established so that maximum allocation of resources can be made; resource costing and
accounting systems must be developed; and a management information and reporting system
must be established.
Effective total program planning cannot be accomplished unless all of the necessary
information becomes available at project initiation. These information requirements are:
The statement of work (SOW)
The project specifications
The milestone schedule
The work breakdown structure (WBS)
The statement of work (SOW) is a narrative description of the work to be accomplished. It includes the objectives of the project, a brief description of the work, the funding constraint if one exists, and the specifications and schedule. The schedule is a “gross”
schedule and includes such things as the:
Written reports (data items)
Written reports should always be identified so that if functional input is required, the
functional manager will assign an individual who has writing skills.
The last major item is the work breakdown structure. The WBS is the breaking down
of the statement of work into smaller elements for better visibility and control. Each of
these planning items is described in the following sections.
11.8 THE STATEMENT OF WORK
PMBOK® Guide, 4th Edition
5.2.3 Scope Definition
126.96.36.199 Project Scope Statement
188.8.131.52 Contract Statement of
The PMBOK® Guide addresses four elements related to scope:
Scope: Scope is the summation of all deliverables required as part
of the project. This includes all products, services, and results.
● Project Scope: This is the work that must be completed to
achieve the final scope of the project, namely the products, services, and end results. (Previously, in Section 2.7, we differentiated between project scope and product scope.)
Scope Statement: This is a document that provides the basis for making future
decisions such as scope changes. The intended use of the document is to make sure
that all stakeholders have a common knowledge of the project scope. Included in
this document are the objectives, description of the deliverables, end result or
product, and justification for the project. The scope statement addresses seven
questions: who, what, when, why, where, how, and how many. This document validates the project scope against the statement of work provided by the customer.
Statement of Work: This is a narrative description of the end results to be provided under the contract. For the remainder of this section, we will focus our attention on the statement of work.
The statement of work (SOW) is a narrative description of the work required for the
project. The complexity of the SOW is determined by the desires of top management,
the customer, and/or the user groups. For projects internal to the company, the SOW is
prepared by the project office with input from the user groups because the project office
is usually composed of personnel with writing skills.
For projects external to the organization, as in competitive bidding, the contractor may
have to prepare the SOW for the customer because the customer may not have people
trained in SOW preparation. In this case, as before, the contractor would submit the SOW
to the customer for approval. It is also quite common for the project manager to rewrite a
customer’s SOW so that the contractor’s line managers can price out the effort.
In a competitive bidding environment, there are two SOWs—the SOW used in the proposal and a contract statement of work (CSOW). There might also be a proposal WBS and
a contract work breakdown structure (CWBS). Special care must be taken by contract and
negotiation teams to discover all discrepancies between the SOW/WBS and CSOW/CWBS,
or additional costs may be incurred. A good (or winning) proposal is no guarantee that the
customer or contractor understands the SOW. For large projects, fact-finding is usually
required before final negotiations because it is essential that both the customer and the
The Statement of Work
contractor understand and agree on the SOW, what work is required, what work is proposed,
the factual basis for the costs, and other related elements. In addition, it is imperative that
there be agreement between the final CSOW and CWBS.
SOW preparation is not as easy as it sounds. Consider the following:
The SOW says that you are to conduct a minimum of fifteen tests to determine the
material properties of a new substance. You price out twenty tests just to “play it
safe.” At the end of the fifteenth test, the customer says that the results are inconclusive and that you must run another fifteen tests. The cost overrun is $40,000.
The Navy gives you a contract in which the SOW states that the prototype must be
tested in “water.” You drop the prototype into a swimming pool to test it.
Unfortunately, the Navy’s definition of “water” is the Atlantic Ocean, and it costs
you $1 million to transport all of your test engineers and test equipment to the
You receive a contract in which the SOW says that you must transport goods
across the country using “aerated” boxcars. You select boxcars that have open tops
so that air can flow in. During the trip, the train goes through an area of torrential
rains, and the goods are ruined.
These three examples show that misinterpretations of the SOW can result in losses of
hundreds of millions of dollars. Common causes of misinterpretation are:
Mixing tasks, specifications, approvals, and special instructions
Using imprecise language (“nearly,” “optimum,” “approximately,” etc.)
No pattern, structure, or chronological order
Wide variation in size of tasks
Wide variation in how to describe details of the work
Failing to get third-party review
Misinterpretations of the statement of work can and will occur no matter how careful
everyone has been. The result is creeping scope, or, as one telecommunications company
calls it, “creeping elegance.” The best way to control creeping scope is with a good definition of the requirements up front, if possible.
Today, both private industry and government agencies are developing manuals on SOW
preparation. The following is adapted from a NASA publication on SOW preparation3:
The project manager or his designees should review the documents that authorize
the project and define its objectives, and also review contracts and studies leading
to the present level of development. As a convenience, a bibliography of related
studies should be prepared together with samples of any similar SOWs, and compliance specifications.
A copy of the WBS should be obtained. At this point coordination between the
CWBS elements and the SOW should commence. Each task element of the preliminary CWBS should be explained in the SOW, and related coding should be used.
3. Adapted from Statement of Work Handbook NHB5600.2, National Aeronautics and Space Administration,
The project manager should establish a SOW preparation team consisting of personnel he deems appropriate from the program or project office who are experts in
the technical areas involved, and representatives from procurement, financial management, fabrication, test, logistics, configuration management, operations, safety,
reliability, and quality assurance, plus any other area that may be involved in the
Before the team actually starts preparation of the SOW, the project manager should
brief program management as to the structure of the preliminary CWBS and the
nature of the contemplated SOW. This briefing is used as a baseline from which to
The project manager may assign identified tasks to team members and identify
compliance specifications, design criteria, and other requirements documentation
that must be included in the SOW and assign them to responsible personnel for
preparation. Assigned team members will identify and obtain copies of specifications and technical requirements documents, engineering drawings, and results of
preliminary and/or related studies that may apply to various elements of the proposed procurement.
The project manager should prepare a detailed checklist showing the mandatory
items and the selected optional items as they apply to the main body or the appendixes of the SOW.
The project manager should emphasize the use of preferred parts lists; standard
subsystem designs, both existing and under development; available hardware in
inventory; off-the-shelf equipment; component qualification data; design criteria
handbooks; and other technical information available to design engineers to prevent deviations from the best design practices.
Cost estimates (manning requirements, material costs, software requirements, etc.)
developed by the cost estimating specialists should be reviewed by SOW contributors. Such reviews will permit early trade-off consideration on the desirability of
requirements that are not directly related to essential technical objectives.
The project manager should establish schedules for submission of coordinated
SOW fragments from each task team member. He must assure that these schedules
are compatible with the schedule for the request for proposal (RFP) issuance. The
statement of work should be prepared sufficiently early to permit full project
coordination and to ensure that all project requirements are included. It should be
completed in advance of RFP preparation.
SOW preparation manuals also contain guides for editors and writers4:
Every SOW that exceeds two pages in length should have a table of contents conforming to the CWBS coding structure. There should rarely be items in the SOW
that are not shown on the CWBS; however, it is not absolutely necessary to restrict
items to those cited in the CWBS.
4. See note 3.
The Statement of Work
Clear and precise task descriptions are essential. The SOW writer should realize
that his or her efforts will have to be read and interpreted by persons of varied background (such as lawyers, buyers, engineers, cost estimators, accountants, and specialists in production, transportation, security, audit, quality, finance, and contract
management). A good SOW states precisely the product or service desired. The
clarity of the SOW will affect administration of the contract, since it defines
the scope of work to be performed. Any work that falls outside that scope will
involve new procurement with probable increased costs.
The most important thing to keep in mind when writing a SOW is the most likely
effect the written work will have upon the reader. Therefore, every effort must be
made to avoid ambiguity. All obligations of the government should be carefully
spelled out. If approval actions are to be provided by the government, set a time
limit. If government-furnished equipment (GFE) and/or services, etc., are to be
provided, state the nature, condition, and time of delivery, if feasible.
Remember that any provision that takes control of the work away from the contractor, even temporarily, may result in relieving the contractor of responsibility.
In specifying requirements, use active rather than passive terminology. Say that the
contractor shall conduct a test rather than that a test should be conducted. In other
words, when a firm requirement is intended, use the mandatory term “shall” rather
than the permissive term “should.”
Limit abbreviations to those in common usage. Provide a list of all pertinent abbreviations and acronyms at the beginning of the SOW. When using a term for the
first time, spell it out and show the abbreviation or acronym in parentheses following the word or words.
When it is important to define a division of responsibilities between the contractor, other agencies, etc., a separate section of the SOW (in an appropriate location)
should be included and delineate such responsibilities.
Include procedures. When immediate decisions cannot be made, it may be possible to include a procedure for making them (e.g., “as approved by the contracting
officer,” or “the contractor shall submit a report each time a failure occurs”).
Do not overspecify. Depending upon the nature of the work and the type of contract, the ideal situation may be to specify results required or end-items to be delivered and let the contractor propose his best method.
Describe requirements in sufficient detail to assure clarity, not only for legal reasons, but for practical application. It is easy to overlook many details. It is equally
easy to be repetitious. Beware of doing either. For every piece of deliverable hardware, for every report, for every immediate action, do not specify that something
be done “as necessary.” Rather, specify whether the judgment is to be made by the
contractor or by the government. Be aware that these types of contingent actions
may have an impact on price as well as schedule. Where expensive services, such
as technical liaison, are to be furnished, do not say “as required.” Provide a ceiling on the extent of such services, or work out a procedure (e.g., a level of effort,
pool of man-hours) that will ensure adequate control.
Avoid incorporating extraneous material and requirements. They may add unnecessary cost. Data requirements are common examples of problems in this area.
Screen out unnecessary data requirements, and specify only what is essential and
when. It is recommended that data requirements be specified separately in a data
requirements appendix or equivalent.
Do not repeat detailed requirements or specifications that are already spelled out
in applicable documents. Instead, incorporate them by reference. If amplification,
modification, or exceptions are required, make specific reference to the applicable
portions and describe the change.
Some preparation documents also contain checklists for SOW preparation.5 A checklist is
furnished below to provide considerations that SOW writers should keep in mind in
preparing statements of work:
Is the SOW (when used in conjunction with the preliminary CWBS) specific
enough to permit a contractor to make a tabulation and summary of manpower and
resources needed to accomplish each SOW task element?
Are specific duties of the contractor stated so he will know what is required, and
can the contracting officer’s representative, who signs the acceptance report, tell
whether the contractor has complied?
Are all parts of the SOW so written that there is no question as to what the contractor is obligated to do, and when?
When it is necessary to reference other documents, is the proper reference document described? Is it properly cited? Is all of it really pertinent to the task, or
should only portions be referenced? Is it cross-referenced to the applicable SOW
Are any specifications or exhibits applicable in whole or in part? If so, are they
properly cited and referenced to the appropriate SOW element?
Are directions clearly distinguishable from general information?
Is there a time-phased data requirement for each deliverable item? If elapsed time
is used, does it specify calendar or work days?
Are proper quantities shown?
Have headings been checked for format and grammar? Are subheadings comparable? Is the text compatible with the title? Is a multidecimal or alphanumeric numbering system used in the SOW? Can it be cross-referenced with the CWBS?
Have appropriate portions of procurement regulations been followed?
Has extraneous material been eliminated?
Can SOW task/contract line items and configuration item breakouts at lower levels be identified and defined in sufficient detail so they can be summarized to discrete third-level CWBS elements?
Have all requirements for data been specified separately in a data requirements
appendix or its equivalent? Have all extraneous data requirements been eliminated?
Are security requirements adequately covered if required?
Has its availability to contractors been specified?
5. See note 3.
Finally, there should be a management review of the SOW preparation interpretation6:
During development of the Statement of Work, the project manager should ensure adequacy of content by holding frequent reviews with project and functional specialists to
determine that technical and data requirements specified do conform to the guidelines
herein and adequately support the common system objective. The CWBS/SOW matrix
should be used to analyze the SOW for completeness. After all comments and inputs have
been incorporated, a final team review should be held to produce a draft SOW for review
by functional and project managers. Specific problems should be resolved and changes
made as appropriate. A final draft should then be prepared and reviewed with the program
manager, contracting officer, or with higher management if the procurement is a major
acquisition. The final review should include a briefing on the total RFP package. If other
program offices or other Government agencies will be involved in the procurement, obtain
their concurrence also.
11.9 PROJECT SPECIFICATIONS
A specification list as shown in Table 11–1 is separately identified or
called out as part of the statement of work. Specifications are used for
5.2 Define Scope
man-hour, equipment, and material estimates. Small changes in a specifi184.108.40.206 Contract Statement
cation can cause large cost overruns.
Another reason for identifying the specifications is to make sure that
there are no surprises for the customer downstream. The specifications should be the most
current revision. It is not uncommon for a customer to hire outside agencies to evaluate the
technical proposal and to make sure that the proper specifications are being used.
Specifications are, in fact, standards for pricing out a proposal. If specifications do not
exist or are not necessary, then work standards should be included in the proposal. The
work standards can also appear in the cost volume of the proposal. Labor justification
backup sheets may or may not be included in the proposal, depending on RFP/RFQ
(request for quotation) requirements.
Several years ago, a government agency queried contractors as to why some government programs were costing so much money. The main culprit turned out to be the specifications. Typical specifications contain twice as many pages as necessary, do not stress
quality enough, are loaded with unnecessary designs and schematics, are difficult to read
and update, and are obsolete before they are published. Streamlining existing specifications is a costly and time-consuming effort. The better alternative is to educate those people involved in specification preparation so that future specifications will be reasonably
PMBOK® Guide, 4th Edition
6. Statement of Work Handbook NHB5600.2, National Aeronautics and Space Administration, February 1975.
TABLE 11–1. SPECIFICATION FOR STATEMENT OF WORK
Roofing and siding
• Electrical testing
• Heat tracing
• Power systems
• Synchronous generators
• Hazardous environment
• Refrigeration piping
• Sheetmetal ductwork
• Conveyors and chutes
• Fired heaters and boilers
• Heat exchangers
• Alarm systems
• Control valves
• Flow instruments
• Level gages
• Pressure instruments
• Temperature instruments
• Centrifugal pumps
• High-speed gears
• Material handling equipment
• Mechanical agitators
• Steam turbines
• Expansion joints
• Field pressure testing
• Installation of piping
• Pipe fabrication specs
• Pipe supports
• Steam tracing
• Design drawings
• Drafting standards
• General requirements
• Project coordination
• Reporting procedure
• Vendor data
TABLE 11–1. SPECIFICATION FOR STATEMENT OF WORK
• Reinforced tanks
• Shell and tube heat exchangers
• Steam boilers
• Vessel linings
11.10 MILESTONE SCHEDULES
PMBOK® Guide, 4th Edition
Chapter 6 Time Management
Project milestone schedules contain such information as:
● Project start date
Project end date
Other major milestones
Data items (deliverables or reports)
Project start and end dates, if known, must be included. Other major milestones, such
as review meetings, prototype available, procurement, testing, and so on, should also be
identified. The last topic, data items, is often overlooked. There are two good reasons for
preparing a separate schedule for data items. First, the separate schedule will indicate to
line managers that personnel with writing skills may have to be assigned. Second, data
items require direct-labor man-hours for writing, typing, editing, retyping, proofing,
graphic arts, and reproduction. Many companies identify on the data item schedules the
approximate number of pages per data item, and each data item is priced out at a cost per
page, say $500/page. Pricing out data items separately often induces customers to require
The steps required to prepare a report, after the initial discovery work or collection of
Organizing the report
Submittal for approvals
Reproduction and distribution
Typically, 6–8 hours of work are required per page. At a burdened hourly rate of $80/hour,
it is easy for the cost of documentation to become exorbitant.
11.11 WORK BREAKDOWN STRUCTURE
The successful accomplishment of both contract and corporate objectives
requires a plan that defines all effort to be expended, assigns responsibility
to a specially identified organizational element, and establishes schedules
and budgets for the accomplishment of the work. The preparation of this plan is the responsibility of the program manager, who is assisted by the program team assigned in accordance
with program management system directives. The detailed planning is also established in
accordance with company budgeting policy before contractural efforts are initiated.
In planning a project, the project manager must structure the work into small elements
PMBOK® Guide, 4th Edition
5.3 Create WBS
Manageable, in that specific authority and responsibility can be assigned
Independent, or with minimum interfacing with and dependence on other ongoing
Integratable so that the total package can be seen
Measurable in terms of progress
The first major step in the planning process after project requirements definition is the
development of the work breakdown structure (WBS). A WBS is a product-oriented family
tree subdivision of the hardware, services, and data required to produce the end product. The
WBS is structured in accordance with the way the work will be performed and reflects the way
in which project costs and data will be summarized and eventually reported. Preparation of the
WBS also considers other areas that require structured data, such as scheduling, configuration
management, contract funding, and technical performance parameters. The WBS is the single
most important element because it provides a common framework from which:
The total program can be described as a summation of subdivided elements.
Planning can be performed.
Costs and budgets can be established.
Time, cost, and performance can be tracked.
Objectives can be linked to company resources in a logical manner.
Schedules and status-reporting procedures can be established.
Network construction and control planning can be initiated.
The responsibility assignments for each element can be established.
The work breakdown structure acts as a vehicle for breaking the work down into
smaller elements, thus providing a greater probability that every major and minor activity
Work Breakdown Structure
will be accounted for. Although a variety of work breakdown structures exist, the most
common is the six-level indented structure shown below:
Level of effort
Level 1 is the total program and is composed of a set of projects. The summation of
the activities and costs associated with each project must equal the total program. Each
project, however, can be broken down into tasks, where the summation of all tasks equals
the summation of all projects, which, in turn, comprises the total program. The reason for
this subdivision of effort is simply ease of control. Program management therefore
becomes synonymous with the integration of activities, and the project manager acts as the
integrator, using the work breakdown structure as the common framework.
Careful consideration must be given to the design and development of the WBS. From
Figure 11–3, the work breakdown structure can be used to provide the basis for:
The responsibility matrix
Coordination of objectives
Control (including contract administration)
The upper three levels of the WBS are normally specified by the customer (if part of an
RFP/RFQ) as the summary levels for reporting purposes. The lower levels are generated by
the contractor for in-house control. Each level serves a vital purpose: Level 1 is generally
used for the authorization and release of all work, budgets are prepared at level 2, and schedules are prepared at level 3. Certain characteristics can now be generalized for these levels:
The top three levels of the WBS reflect integrated efforts and should not be related
to one specific department. Effort required by departments or sections should be
defined in subtasks and work packages.
The summation of all elements in one level must be the sum of all work in the next
Each element of work should be assigned to one and only one level of effort. For
example, the construction of the foundation of a house should be included in one
project (or task), not extended over two or three. (At level 5, the work packages
should be identifiable and homogeneous.)
PMBOK® Guide, 4th Edition
risk and impact of
Figure 5–6 Sample WBS
Work breakdown structure for objective control and evaluation. Source: Paul Mali,
Managing by Objectives (New York: Wiley, 1972), p. 163. Copyright © 1972 by John Wiley & Sons.
Reprinted by permission of the publisher.
The level at which the project is managed is generally called the work package level.
Actually, the work package can exist at any level below level one.
The WBS must be accompanied by a description of the scope of effort required,
or else only those individuals who issue the WBS will have a complete understanding of what work has to be accomplished. It is common practice to reproduce
the customer’s statement of work as the description for the WBS.
It is often the best policy for the project manager, regardless of his technical expertise, to allow all of the line managers to assess the risks in the SOW. After all, the
line managers are usually the recognized experts in the organization.
Project managers normally manage at the top three levels of the WBS and prefer to
provide status reports to management at these levels also. Some companies are trying
to standardize reporting to management by requiring the top three levels of the WBS to be
the same for every project, the only differences being in levels 4–6. For companies with a
great deal of similarity among projects, this approach has merit. For most companies, however, the differences between projects make it almost impossible to standardize the top levels of the WBS.
Work Breakdown Structure
The work package is the critical level for managing a work breakdown structure, as
shown in Figure 11–4. However, it is possible that the actual management of the work
packages is supervised and performed by the line managers with status reporting provided
to the project manager at higher levels of the WBS.
Work packages are natural subdivisions of cost accounts and constitute the basic
building blocks used by the contractor in planning, controlling, and measuring contract
performance. A work package is simply a low-level task or job assignment. It describes the
work to be accomplished by a specific performing organization or a group of cost centers
and serves as a vehicle for monitoring and reporting progress of work. Documents that
authorize and assign work to a performing organization are designated by various names
throughout industry. “Work package” is the generic term used in the criteria to identify discrete tasks that have definable end results. Ideal work packages are 80 hours and 2–4
weeks. However, this may not be possible on large projects.
It is not necessary that work package documentation contain complete, stand-alone
descriptions. Supplemental documentation may augment the work package descriptions.
However, the work package descriptions must permit cost account managers and work
package supervisors to understand and clearly distinguish one work package effort from
another. In the review of work package documentation, it may be necessary to obtain
explanations from personnel routinely involved in the work, rather than requiring the work
package descriptions to be completely self-explanatory.
Short-term work packages may help evaluate accomplishments. Work packages
should be natural subdivisions of effort planned according to the way the work will be
done. However, when work packages are relatively short, little or no assessment of workin-process is required and the evaluation of status is possible mainly on the basis of work
package completions. The longer the work packages, the more difficult and subjective the
work-in-process assessment becomes unless the packages are subdivided by objective
indicators such as discrete milestones with preassigned budget values or completion
In setting up the work breakdown structure, tasks should:
Have clearly defined start and end dates
Be usable as a communications tool in which results can be compared with expectations
Be estimated on a “total” time duration, not when the task must start or end
Be structured so that a minimum of project office control and documentation (i.e.,
forms) is necessary
For large projects, planning will be time phased at the work package level of the WBS.
The work package has the following characteristics:
Represents units of work at the level where the work is performed
Clearly distinguishes one work package from all others assigned to a single functional group
Contains clearly defined start and end dates that are representative of physical
accomplishment (This is accomplished after scheduling has been completed.)
The cost account intersection.
Figure 5–6 Work Packages
Organizational Procedures Links
PMBOK® Guide, 4th Edition
Work Breakdown Structure
Specifies a budget in terms of dollars, man-hours, or other measurable units
Limits the work to be performed to relatively short periods of time to minimize the
Table 11–2 shows a simple work breakdown structure with the associated numbering
system following the work breakdown. The first number represents the total program (in
this case, it is represented by 01), the second number represents the project, and the third
number identifies the task. Therefore, number 01-03-00 represents project 3 of program
01, whereas 01-03-02 represents task 2 of project 3. This type of numbering system is not
standard; each company may have its own system, depending on how costs are to be
The preparation of the work breakdown structure is not easy. The WBS is a communications tool, providing detailed information to different levels of management. If it does
not contain enough levels, then the integration of activities may prove difficult. If too many
levels exist, then unproductive time will be made to have the same number of levels for all
projects, tasks, and so on. Each major work element should be considered by itself.
Remember, the WBS establishes the number of required networks for cost control.
For many programs, the work breakdown structure is established by the customer. If
the contractor is required to develop a WBS, then certain guidelines must be considered
The complexity and technical requirements of the program (i.e., the statement of
The program cost
The time span of the program
The contractor’s resource requirements
The contractor’s and customer’s internal structure for management control and
The number of subcontracts
TABLE 11–2. WORK BREAKDOWN STRUCTURE FOR NEW
PLANT CONSTRUCTION AND START-UP
Program: New Plant Construction and Start-up
Project 1: Analytical Study
Task 1: Marketing/Production Study
Task 2: Cost Effectiveness Analysis
Project 2: Design and Layout
Task 1: Product Processing Sketches
Task 2: Product Processing Blueprints
Project 3: Installation
Task 1: Fabrication
Task 2: Setup
Task 3: Testing and Run
Project 4: Program Support
Task 1: Management
Task 2: Purchasing Raw Materials
Applying these guidelines serves only to identify the complexity of the program.
These data must then be subdivided and released, together with detailed information, to the
different levels of the organization. The WBS should follow specified criteria because,
although preparation of the WBS is performed by the program office, the actual work is
performed by the doers, not the planners. Both the doers and the planners must be in agreement as to what is expected. A sample listing of criteria for developing a work breakdown
structure is shown below:
The WBS and work description should be easy to understand.
All schedules should follow the WBS.
No attempt should be made to subdivide work arbitrarily to the lowest possible
level. The lowest level of work should not end up having a ridiculous cost in comparison to other efforts.
Since scope of effort can change during a program, every effort should be made to
maintain flexibility in the WBS.
The WBS can act as a list of discrete and tangible milestones so that everyone will
know when the milestones were achieved.
The level of the WBS can reflect the “trust” you have in certain line groups.
The WBS can be used to segregate recurring from nonrecurring costs.
Most WBS elements (at the lowest control level) range from 0.5 to 2.5 percent of
the total project budget.
11.12 WBS DECOMPOSITION PROBLEMS
There is a common misconception that WBS decomposition is an easy task to perform. In
the development of the WBS, the top three levels or management levels are usually rollup levels. Preparing templates at these levels is becoming common practice. However, at
levels 4–6 of the WBS, templates may not be appropriate. There are reasons for this.
Breaking the work down to extremely small and detailed work packages may require
the creation of hundreds or even thousands of cost accounts and charge numbers. This
could increase the management, control, and reporting costs of these small packages
to a point where the costs exceed the benefits. Although a typical work package may
be 200–300 hours and approximately two weeks in duration, consider the impact on
a large project, which may have more than one million direct labor hours.
Breaking the work down to small work packages can provide accurate cost control
if, and only if, the line managers can determine the costs at this level of detail. Line
managers must be given the right to tell project managers that costs cannot be
determined at the requested level of detail.
The work breakdown structure is the basis for scheduling techniques such as the
Arrow Diagramming Method and the Precedence Diagramming Method. At low
levels of the WBS, the interdependencies between activities can become so complex that meaningful networks cannot be constructed.
WBS Decomposition Problems
One solution to the above problems is to create “hammock” activities, which encompass several activities where exact cost identification cannot or may not be accurately
determined. Some projects identify a “hammock” activity called management support (or
project office), which includes overall project management, data items, management
reserve, and possibly procurement. The advantage of this type of hammock activity is that
the charge numbers are under the direct control of the project manager.
There is a common misconception that the typical dimensions of a work package are
approximately 80 hours and less than two weeks to a month. Although this may be true on
small projects, this would necessitate millions of work packages on large jobs and this may
be impractical, even if line managers could control work packages of this size.
From a cost control point of view, cost analysis down to the fifth level is advantageous. However, it should be noted that the cost required to prepare cost analysis data to
each lower level may increase exponentially, especially if the customer requires data to be
presented in a specified format that is not part of the company’s standard operating procedures. The level-5 work packages are normally for in-house control only. Some companies
bill customers separately for each level of cost reporting below level 3.
The WBS can be subdivided into subobjectives with finer divisions of effort as we go
lower into the WBS. By defining subobjectives, we add greater understanding and, it is
hoped, clarity of action for those individuals who will be required to complete the objectives. Whenever work is structured, understood, easily identifiable, and within the capabilities of the individuals, there will almost always exist a high degree of confidence that
the objective can be reached.
Work breakdown structures can be used to structure work for reaching such objectives
as lowering cost, reducing absenteeism, improving morale, and lowering scrap factors. The
lowest subdivision now becomes an end-item or subobjective, not necessarily a work package as described here. However, since we are describing project management, for the
remainder of the text we will consider the lowest level as the work package.
Once the WBS is established and the program is “kicked off,” it becomes a very
costly procedure to either add or delete activities, or change levels of reporting because of
cost control. Many companies do not give careful forethought to the importance of a properly developed WBS, and ultimately they risk cost control problems downstream. One
important use of the WBS is that it serves as a cost control standard for any future activities that may follow on or may just be similar. One common mistake made by management
is the combining of direct support activities with administrative activities. For example, the
department manager for manufacturing engineering may be required to provide administrative support (possibly by attending team meetings) throughout the duration of the program. If the administrative support is spread out over each of the projects, a false picture
is obtained as to the actual hours needed to accomplish each project in the program. If one
of the projects should be canceled, then the support man-hours for the total program would
be reduced when, in fact, the administrative and support functions may be constant, regardless of the number of projects and tasks.
Quite often work breakdown structures accompanying customer RFPs contain much
more scope of effort, as specified by the statement of work, than the existing funding will
support. This is done intentionally by the customer in hopes that a contractor may be willing to “buy in.” If the contractor’s price exceeds the customer’s funding limitations, then
the scope of effort must be reduced by eliminating activities from the WBS. By developing a separate project for administrative and indirect support activities, the customer can
easily modify his costs by eliminating the direct support activities of the canceled effort.
Before we go on, there should be a brief discussion of the usefulness and applicability of the WBS system. Many companies and industries have been successful in managing
programs without the use of work breakdown structures, especially on repetitive-type programs. As was the case with the SOW, there are also preparation guides for the WBS7:
Develop the WBS structure by subdividing the total effort into discrete and logical subelements. Usually a program subdivides into projects, major systems, major
subsystems, and various lower levels until a manageable-size element level is
reached. Wide variations may occur, depending upon the type of effort (e.g., major
systems development, support services, etc.). Include more than one cost center
and more than one contractor if this reflects the actual situation.
Check the proposed WBS and the contemplated efforts for completeness, compatibility, and continuity.
Determine that the WBS satisfies both functional (engineering/manufacturing/
test) and program/project (hardware, services, etc.) requirements, including recurring and nonrecurring costs.
Check to determine if the WBS provides for logical subdivision of all project
Establish assignment of responsibilities for all identified effort to specific
Check the proposed WBS against the reporting requirements of the organizations
PMBOK® Guide, 4th Edition
There are also checklists that can be used in the preparation of
Develop a preliminary WBS to not lower than the top three levels for solicitation
purposes (or lower if deemed necessary for some special reason).
Assure that the contractor is required to extend the preliminary WBS in response
to the solicitation, to identify and structure all contractor work to be compatible
with his organization and management system.
Following negotiations, the CWBS included in the contract should not normally
extend lower than the third level.
Assure that the negotiated CWBS structure is compatible with reporting
7. Source: Handbook for Preparation of Work Breakdown Structures, NHB5610.1, National Aeronautics and
Space Administration, February 1975.
8. See note 7.
WBS Decomposition Problems
Assure that the negotiated CWBS is compatible with the contractor’s organization
and management system.
Review the CWBS elements to ensure correlation with:
● The specification tree
● Contract line items
● End-items of the contract
● Data items required
● Work statement tasks
● Configuration management requirements
Define CWBS elements down to the level where such definitions are meaningful
and necessary for management purposes (WBS dictionary).
Specify reporting requirements for selected CWBS elements if variations from
standard reporting requirements are desired.
Assure that the CWBS covers measurable effort, level of effort, apportioned effort,
and subcontracts, if applicable.
Assure that the total costs at a particular level will equal the sum of the costs of
the constituent elements at the next lower level.
On simple projects, the WBS can be constructed as a “tree diagram” (see Figure 11–5)
or according to the logic flow. In Figure 11–5, the tree diagram can follow the work or even
the organizational structure of the company (i.e., division, department, section, unit). The
second method is to create a logic flow (see Figure 12–21) and cluster certain elements to
represent tasks and projects. In the tree method, lower-level functional units may be
WBS tree diagram.
assigned to one, and only one, work element, whereas in the logic flow method the lowerlevel functional units may serve several WBS elements.
A tendency exists to develop guidelines, policies, and procedures for project management, but not for the development of the WBS. Some companies have been marginally
successful in developing a “generic” methodology for levels 1, 2, and 3 of the WBS to use
on all projects. The differences appear in levels 4, 5, and 6.
The table below shows the three most common methods for structuring the WBS:
Level of effort
The flow method breaks the work down into systems and major subsystems. This
method is well suited for projects less than two years in length. For longer projects, we use
the life-cycle method, which is similar to the flow method. The organization method is used
for projects that may be repetitive or require very little integration between functional units.
11.13 ROLE OF THE EXECUTIVE IN PROJECT SELECTION
A prime responsibility of senior management (and possibly project sponsors) is the selection of projects. Most organizations have an established
Chapter 4 Integration
selection criteria, which can be subjective, objective, quantitative, quali4.1.2 Develop Project Charter
tative, or simply a seat-of-the-pants guess. In any event, there should be a
Tools and Techniques
valid reason for selecting the project.
From a financial perspective, project selection is basically a two-part process. First,
the organization will conduct a feasibility study to determine whether the project can be
done. The second part is to perform a benefit-to-cost analysis to see whether the company
should do it.
The purpose of the feasibility study is to validate that the project meets feasibility of
cost, technological, safety, marketability, and ease of execution requirements. The company may use outside consultants or subject matter experts (SMEs) to assist in both feasibility studies and benefit-to-cost analyses. A project manager may not be assigned until
after the feasibility study is completed.
As part of the feasibility process during project selection, senior management often
solicits input from SMEs and lower-level managers through rating models. The rating
models normally identify the business and/or technical criteria against which the ratings
PMBOK® Guide, 4th Edition
Role of the Executive in Project Selection
RETURN ON INVESTMENT
WALL STREET IMPACTS
AVAILABILITY OF PERSONNEL
LIKELIHOOD OF SUCCESS
AVAILABILITY OF PERSONNEL
AVAILABILITY OF LABORATORY
LENGTH OF PRODUCT LIFE
SUITABILITY TO SALESFORCE
SIZE OF MARKET
NUMBER OF COMPETITORS
NUMBER OF XS
KEY: ⫹2 ⫽ EXCELLENT
⫹1 ⫽ GOOD
0 ⫽ FAIR
⫺1 ⫽ BAD
⫺2 ⫽ UNACCEPTABLE
⫽ NOT APPLICABLE
⫽ SCORE FOR PROJECT A
FIGURE 11–6. Illustration of a scaling model for one project, Project A. Source: William E. Souder,
Project Selection and Economic Appraisal, p. 66.
will be made. Figure 11–6 shows a scaling model for a single project. Figure 11–7 shows
a checklist rating system to evaluate three projects at once. Figure 11–8 shows a scoring
model for multiple projects using weighted averages.
If the project is deemed feasible and a good fit with the strategic plan, then the
project is prioritized for development along with other projects. Once feasibility is determined, a benefit-to-cost analysis is performed to validate that the project will, if executed
correctly, provide the required financial and nonfinancial benefits.
Benefit-to-cost analyses require significantly more information to be scruPMBOK® Guide, 4th Edition
tinized than is usually available during a feasibility study. This can be an
5.2.2 Scope Definition
220.127.116.11 Product Analysis
Estimating benefits and costs in a timely manner is very difficult.
Benefits are often defined as:
Tangible benefits for which dollars may be reasonably quantified and measured.
Intangible benefits that may be quantified in units other than dollars or may be
identified and described subjectively.
FIGURE 11–7. Illustration of a checklist for three projects. Source: William Souder, Project
Selection and Economic Appraisal, p. 68.
Role of the Executive in Project Selection
TOTAL WEIGHTED SCORE ⫽ ⌺ (CRITERION SCORE ⫻ CRITERION WEIGHT)
* SCALE: 10 ⫽ EXCELLENT; 1 ⫽ UNACCEPTABLE
Illustration of a scoring model. Source: William Souder, Project Selection and
Economic Appraisal, p. 69.
Costs are significantly more difficult to quantify. The minimum costs that must be
determined are those that specifically are used for comparison to the benefits. These
The current operating costs or the cost of operating in today’s circumstances.
Future period costs that are expected and can be planned for.
Intangible costs that may be difficult to quantify. These costs are often omitted if
quantification would contribute little to the decision-making process.
TABLE 11–3. FEASIBILITY STUDY AND BENEFIT-COST ANALYSIS
Critical Factors for Go/No-Go
Executive Decision Criteria
Can We Do It?
Usually not yet
• Ease of performance
Should We Do It?
Usually identified but partial involvement
• Net present value
• Discounted cash flow
• Internal rate of return
• Return on investment
• Probability of success
• Reality of assumptions
Benefits exceed costs by required margin
There must be careful documentation of all known constraints and assumptions that
were made in developing the costs and the benefits. Unrealistic or unrecognized assumptions
are often the cause of unrealistic benefits. The go or no-go decision to continue with a project could very well rest upon the validity of the assumptions.
Table 11–3 shows the major differences between feasibility studies and benefit-to-cost
Today, the project manager may end up participating in the project selection process.
In Chapter 1, we discussed the new breed of project manager, namely a person that has
excellent business skills as well as project management skills. These business skills now
allow us to bring the project manager on board the project at the beginning of the initiation
phase rather than at the end of the initiation phase because the project manager can now
make a valuable contribution to the project selection process. The project manager can be
of assistance during project selection by providing business case knowledge including:
Opportunity options (sales volume, market share, and follow-on business)
Resource requirements (team knowledge requirements and skill set)
Refined project costs
Benefits (financial, strategic, payback)
Project metrics (key performance indicators and critical success factors)
Benefits realization (consistency with the corporate business plan)
Organizational readiness and strengths
Technology complexity and constraints, if any9
9. For additional factors that can influence project selection decision making, see J. R. Meredith and S. J. Mantel, Jr.,
Project Management, 3rd ed., (New York: Wiley, 1995), pp. 44–46.
The Planning Cycle
11.14 ROLE OF THE EXECUTIVE IN PLANNING
Executives are responsible for selecting the project manager, and the person chosen should
have planning expertise. Not all technical specialists are good planners. Likewise, some
people that are excellent in execution have minimal planning skills. Executives must make
sure that whomever is assigned as the project manager has both planning and execution
skills. In addition, executives must take an active role during project planning activities
especially if they also function as project sponsors.10
Executives must not arbitrarily set unrealistic milestones and then “force” line managers to fulfill them. Both project and line managers should try to adhere to unrealistic
milestones, but if a line manager says he cannot, executives should comply because the
line manager is supposedly the expert.
Executives should interface with project and line personnel during the planning stage
in order to define the requirements and establish reasonable deadlines. Executives must
realize that creating an unreasonable deadline may require the reestablishment of priorities, and, of course, changing priorities can push milestones backward.
11.15 THE PLANNING CYCLE
Previously, we stated that perhaps the most important reason for structuring projects into
life-cycle phases is to provide management with control of the critical decision points in
Avoid commitment of major resources too early
Preserve future options
Maximize benefits of each project in relation to all other projects
On long-term projects, phasing can be overdone, resulting in extra costs and delays.
To prevent this, many project-driven companies resort to other types of systems, such as a
management cost and control system (MCCS). No program or project can be efficiently
organized and managed without some form of management cost and control system.
Figure 11–9 shows the five phases of a management cost and control system. The first
phase constitutes the planning cycle, and the next four phases identify the operating cycle.
Figure 11–10 shows the activities included in the planning cycle. The work breakdown structure serves as the initial control from which all planning emanates. The WBS
acts as a vital artery for communications and operations in all phases. A comprehensive
analysis of management cost and control systems is presented in Chapter 15.
10. Although this section is called “The Role of the Executive in Planning,” it also applies to line management
if project sponsorship is pushed down to the middle-management level or lower. This is quite common in highly
mature project management organizations where senior management has sufficient faith in line management’s
ability to serve as project sponsors.
Phases of a management cost and control system.
The planning cycle of a management cost and control system.
11.16 WORK PLANNING AUTHORIZATION
After receipt of a contract, some form of authorization is needed before
work can begin, even in the planning stage. Both work authorization and
4.3.2 Direct and Manage
work planning authorization are used to release funds, but for different purProject Execution
poses. Work planning authorization releases funds (primarily for functional management) so that scheduling, costs, budgets, and all other types of plans can be
prepared prior to the release of operational cycle funds, which hereafter shall be referred to
simply as work authorization. Both forms of authorization require the same paperwork. In
many companies this work authorization is identified as a subdivided work description
(SWD), which is a narrative description of the effort to be performed by the cost center
PMBOK® Guide, 4th Edition
Why Do Plans Fail?
(division-level minimum). This package establishes the work to be performed, the period of
performance, and possibly the maximum number of hours available. The SWD is multipurpose in that it can be used to release contract funds, authorize planning, describe activities as identified in the WBS, and, last but not least, release work.
The SWD is one of the key elements in the planning of a program as shown in Figure
11–10. Contract control and administration releases the contract funds by issuing a SWD,
which sets forth general contractual requirements and authorizes program management to
proceed. Program management issues the SWD to set forth the contractual guidelines and
requirements for the functional units. The SWD specifies how the work will be performed,
which functional organizations will be involved, and who has what specific responsibilities, and authorizes the utilization of resources within a given time period.
The SWD authorizes both the program team and functional management to begin
work. As shown in Figure 11–10, the SWD provides direct input to Phase II of the MCCS.
Phase I and Phase II can and do operate simultaneously because it is generally impossible
for program office personnel to establish plans, procedures, and schedules without input
from the functional units.
The subdivided work description package is used by the operating organizations to
further subdivide the effort defined by the WBS into small segments or work packages.
Many people contend that if the data in the work authorization document are different
from what was originally defined in the proposal, the project is in trouble right at the start.
This may not be the case, because most projects are priced out assuming “unlimited”
resources, whereas the hours and dollars in the work authorization document are based
upon “limited” resources. This situation is common for companies that thrive on competitive bidding.
11.17 WHY DO PLANS FAIL?
No matter how hard we try, planning is not perfect, and sometimes plans fail. Typical reasons include:
Corporate goals are not understood at the lower organizational levels.
Plans encompass too much in too little time.
Financial estimates are poor.
Plans are based on insufficient data.
No attempt is being made to systematize the planning process.
Planning is performed by a planning group.
No one knows the ultimate objective.
No one knows the staffing requirements.
No one knows the major milestone dates, including written reports.
Project estimates are best guesses, and are not based on standards or history.
Not enough time has been given for proper estimating.
No one has bothered to see if there will be personnel available with the necessary skills.
People are not working toward the same specifications.
People are consistently shuffled in and out of the project with little regard for
Why do these situations occur? If corporate goals are not understood, it is because corporate executives have been negligent in providing the necessary strategic information and
feedback. If a plan fails because of extreme optimism, then the responsibility lies with both
the project and line managers for not assessing risk. Project managers should ask the line
managers if the estimates are optimistic or pessimistic, and expect an honest answer.
Erroneous financial estimates are the responsibility of the line manager. If the project fails
because of a poor definition of the requirements, then the project manager is totally at fault.
Sometimes project plans fail because simple details are forgotten or overlooked.
Examples of this might be:
Neglecting to tell a line manager early enough that the prototype is not ready and
that rescheduling is necessary.
Neglecting to see if the line manager can still provide additional employees for the
next two weeks because it was possible to do so six months ago.
Sometimes plans fail because the project manager “bites off more than he can chew,”
and then something happens, such as his becoming ill. Many projects have failed because
the project manager was the only one who knew what was going on and then got sick.
11.18 STOPPING PROJECTS
PMBOK® Guide, 4th Edition
4.6 Close Projects
There are always situations in which projects have to be stopped. Nine
reasons for stopping are:
Final achievement of the objectives
Poor initial planning and market prognosis
A better alternative is found
A change in the company interest and strategy
Allocated time is exceeded
Budgeted costs are exceeded
Key people leave the organization
Personal whims of management
Problem too complex for the resources available
Today most of the reasons why projects are not completed on time and within cost are
behavioral rather than quantitative. They include:
Poor human relations
Poor labor productivity
No commitment by those involved in the project
The last item appears to be the cause of the first three items in many situations.
Once the reasons for cancellation are defined, the next problem concerns how to stop
the project. Some of the ways are:
Orderly planned termination
The “hatchet” (withdrawal of funds and removal of personnel)
Handling Project Phaseouts and Transfers
Reassignment of people to higher priority tasks
Redirection of efforts toward different objectives
Burying it or letting it die on the vine (i.e., not taking any official action)
There are three major problem areas to be considered in stopping projects:
Reassignment of personnel
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