Project Management and Performance
Risk
Project Management and Performance
Syllabus tag: KASNEB CPA | Advanced Level | CA31 Leadership and Management | Topic 10 Project Management and Performance
Lesson objectives
By the end of this topic, you will be able to:
- Explain the project life cycle and the iron triangle
- Construct a network and identify the critical path
- Compute float and apply PERT
- Apply earned value analysis
- Explain why projects fail
Why this matters
Strategy is delivered through projects. This topic supplies the techniques for controlling one — and the earned value method answers a question conventional reporting cannot: is a project that has spent 90% of its budget 90% complete?
The iron triangle
Every project is constrained by time, cost and quality or scope, with the three interdependent.
Compressing the timescale raises cost, reduces quality, or both. Adding scope without adjusting time or budget guarantees one of the other two will give. The manager's task is not to optimise all three but to know which the sponsor will trade.
Scope creep — uncontrolled additions to scope without corresponding adjustment — is the commonest cause of overrun, and it happens through many small accommodations rather than one decision.
The life cycle
Initiation — define the objective, appoint the sponsor and manager, prepare the business case. Planning — scope, schedule, budget, resources, risk, quality. Execution — deliver, monitor, manage change. Closure — handover, final report, post-implementation review.
The post-implementation review is the stage most often skipped, and the one that determines whether the organisation learns anything. A company that completes twenty projects and reviews none repeats its mistakes twenty times.
Network analysis
A network shows activities, their durations and their dependencies. The critical path is the longest path through it, and therefore the shortest time in which the project can finish.
Worked example. Activities and durations in weeks:
| Activity | Preceded by | Duration |
|---|---|---|
| A | — | 6 |
| B | — | 4 |
| C | A | 8 |
| D | B | 5 |
| E | C | 3 |
| F | D | 7 |
| G | E and F | 2 |
Path lengths:
- A → C → E → G = 6 + 8 + 3 + 2 = 19 weeks
- B → D → F → G = 4 + 5 + 7 + 2 = 18 weeks
The critical path is A-C-E-G and the project duration is 19 weeks.
Float on the B-D-F path = 19 − 18 = 1 week. Those activities can slip by a week in total without delaying completion.
Two consequences:
- Activities on the critical path have zero float. Any delay to A, C, E or G delays the whole project
- Management attention belongs on the critical path, and shortening a non-critical activity achieves nothing
Note that the critical path can change. Delay B-D-F by more than a week and it becomes critical instead, which is why the network is recalculated as actuals come in.
PERT
Where durations are uncertain, PERT uses three estimates:
Expected time = (Optimistic + 4 × Most likely + Pessimistic) / 6
For 8, 12 and 22 weeks: (8 + 48 + 22) / 6 = 13 weeks
Standard deviation = (Pessimistic − Optimistic) / 6 = 2.33 weeks
The most likely estimate is weighted four times, but note that the expected time of 13 exceeds the most likely of 12, because the pessimistic tail is longer than the optimistic one. That asymmetry is the point: projects have more ways to run late than to run early.
Earned value analysis
Three figures:
- BCWS — budgeted cost of work scheduled: what should have been spent by now
- BCWP — budgeted cost of work performed: the budget value of what has actually been done, the earned value
- ACWP — actual cost of work performed: what has been spent
Worked example. BCWS 4,800,000; BCWP 4,200,000; ACWP 4,500,000; budget at completion 12,000,000.
| Measure | Working | Result |
|---|---|---|
| Schedule variance | 4,200,000 − 4,800,000 | 600,000 adverse |
| Cost variance | 4,200,000 − 4,500,000 | 300,000 adverse |
| Schedule performance index | 4,200,000 / 4,800,000 | 0.875 |
| Cost performance index | 4,200,000 / 4,500,000 | 0.9333 |
Estimate at completion = 12,000,000 / 0.9333 = KES 12,857,143
Projected overrun = 857,143.
What this shows that conventional reporting cannot. A cost report comparing 4,500,000 spent against 4,800,000 budgeted shows the project under budget and looks reassuring. Earned value reveals that only 4,200,000 of work has been done — the project is behind schedule and over cost, and the apparent underspend is the result of doing less, not spending less.
An index below 1 is unfavourable on either measure. Both are below 1 here.
:::checkpoint A project reports spending of KES 9,000,000 against a budget to date of KES 9,600,000, and the manager describes it as under budget. What single further figure do you need, and what might it reveal? :::
Why projects fail
- Unclear objectives or a business case nobody revisits
- Scope creep without adjustment to time or cost
- Optimistic estimation, often deliberate to secure approval
- Weak sponsorship, leaving the manager without authority to resolve obstacles
- Poor communication with stakeholders
- Risks identified and not managed
- Resources shared with operations and withdrawn when operations get busy
- No post-implementation review, so nothing is learned
The estimation point is worth stating honestly. Projects are frequently approved on estimates the proposers know to be optimistic, because a realistic estimate would not be approved. The remedy is not better arithmetic but a process in which realistic estimates are not punished.
:::checkpoint A project is approved on a twelve-month estimate that the project manager privately believes will take eighteen. Discuss the manager's position, the consequences of each course open to them, and what the organisation should change. :::