Published here January, 2006.

Introduction | The Business Case and Application for (Execution) Funding
Work Packages and the WBS | Request for Capital | The Project's Execution Phase
Use of the Earned Value Technique | The Cost Baseline

The Business Case and Application for (Execution) Funding

It is important to note that project cost control is most effective when the executive management responsible has a good understanding of how projects should unfold through the project life span. This means that they exercise their responsibilities at the key decision points between the major phases. They must also recognize the importance of project risk management for identifying and planning to head off at least the most obvious potential risk events.

In the Project's Concept Phase

  • Every project starts with someone identifying an opportunity or need. That is usually someone of importance or influence, if the project is to proceed, and that person often becomes the project's sponsor.
  • To determine the suitability of the potential project, most organizations call for the preparation of a "Business Case" and its "Order of Magnitude" cost to justify the value of the project so that it can be compared with all the other competing projects. This effort is conducted in the Concept Phase of the project and is done as a part of the organization's management of the entire project portfolio.
  • The cost of the work of preparing the Business Case is usually covered by corporate management overhead, but it may be carried forward as an accounting cost to the eventual project. No doubt because this will provide a tax benefit to the organization. The problem is, how do you then account for all the projects that are not so carried forward?
  • If the Business case has sufficient merit, approval will be given to proceed to a Development and Definition phase.

In the Project's Development or Definition Phase

  • The objective of the Development Phase is to establish a good understanding of the work involved to produce the required product, estimate the cost and seek capital funding for the actual execution of the project.
  • In a formalized setting, especially where big projects are involved, this application for funding is often referred to as a Request for (a capital) Appropriation (RFA) or Capital Appropriation Request (CAR).
  • This requires the collection of more detailed requirements and data to establish what work needs to be done to produce the required product or "deliverable". From this information, a plan is prepared in sufficient detail to give adequate confidence in a dollar figure to be included in the request.
  • In a less formalized setting, everyone just tries to muddle through.
Introduction  Introduction

Home | Issacons | PM Glossary | Papers & Books | Max's Musings
Guest Articles | Contact Info | Search My Site | Site Map | Top of Page