What We Liked
Comparing the list of chapters with those of the PMBOK Guide, the reader will note that Project Estimating, Building Projects in Organizations and Earned Value Reporting are singled out for special attention. Presenting these three topics as separate chapters makes eminent good sense. This is because estimating and earned value both encompass the time and cost knowledge areas, and in the PMBOK Guide's Chapter 2, corporate organization tends to get lost because it is grouped with project life span and project stakeholders. Indeed, we believe that given the fundamental importance of the project life span to all project work (it is after all the distinguishing feature of all projects), this topic should have its own separate chapter in the Guide.
In Chapter 2, Scope, the authors discuss project justification. As they say:
"The most credible justification is one where the identified benefits of doing the project are greater than the cost of doing the project."
Absolutely! In fact the payback should be many times the estimated cost of the project if for no other reason than the risks involved and the competing value of money spent on other more lucrative projects. So we were pleased to see seven pages dedicated to this important subject. The more so because we wonder how many project managers maintain awareness of the project benefits when they are focusing on project time and cost constraints?
Chapter 2 also dedicates ten pages to the subject of work breakdown structures (WBS) in a well-developed and realistic text. In passing we could not help smiling at the comment "The Guide to the Project Management Body of Knowledge is a little bit confusing in this area." To which we might add: And that's not the only area - even more so in the case of the 2004 Guide! However, the authors suggest:
"As a guideline but not a rule, each level of the WBS should break the previous element into four to seven new elements."
That may be possible but essentially the goal of the WBS is to identify the logical parts of the product so that each part can be managed accordingly as its own entity. It is not the intention of the WBS to equalize the work for the benefit of equity amongst the workers.
The whole of Chapter 3 is dedicated to Project Estimating and makes a valuable contribution to a subject that is difficult to master in practice. And we were pleased to see the authors advocate for estimate figures presented in terms of ranges with some percent probability of achievement. A minor lapse is that in discussing life cycle cost, the authors have referred to the project useful life when they obviously mean product useful life.
In Chapter 4 on the subject of Cost Management, we were also pleased to see the authors advocate two different reserves: "contingency reserve" and "management reserve", and explain the difference and purpose of each. That is, the contingency reserve is for money to cover identified execution risks, while the management reserve is for risks not identified, which presumably includes necessary scope changes. The authors explain that the reason for the separation is to maintain more control over how each is spent. Moreover, they insist that neither should be a part of the baseline execution-tracking budget, but rather, required sums should be transferred, and documented on an as-needed-and-approved basis.
The rest of Chapter 4 discusses the accounting side of cost management, but leaves cost tracking to the chapter on Earned Value. However, the authors do make the very critical point that:
"It is extremely important that the timing and quantity of the planned expenditures and the timing of the actual expenditures be synchronized."
Otherwise the comparison will be optimistic or pessimistic depending on the discrepancy.
Chapters 6, 7, 8 and 10, dealing with human resources, organizational, risk, and earned value management respectively, are all solid chapters. This is especially so because they deal with these topics in the context of the very real project environment rather than in the context of general management as many other writers tend to do. For example, in discussing what to do with the project team at the end of the project in the pure project organization, the authors observe:
"They achieve the goal. The project is on time and on budget, and the customer is satisfied. Everyone celebrates while they are handing out the termination notices." (The emphasis is ours.)
In discussing risk management, the authors restrict themselves to those analysis techniques that really are useful in this aspect of project management, and demonstrate why and how. For example:
"The expected value [from an expected value analysis] is extremely useful because it gives us a value that could be spent on the risk to avoid it. If the cost of avoiding a risk is less than its expected value, we should probably spend the money to avoid it. If the cost of corrective action to avoid the risk is greater than the expected value, the action should not be taken."
That's an interesting point.
In discussing various risk mitigation strategies, the authors find it necessary to distinguish between the baseline budget for the work performed to plan, and the budgets covering contingent reserves. They refer to the baseline budget as the "operating budget". That is, in those cases where money has been put into the contingency budget or the management reserve to cover risks, when such events take place, money is transferred from the appropriate reserve allocation to the "operating" budget. This is a good strategy, as we noted earlier. However, we are not sure whether "operating budget" is the best descriptor because of the danger of confusion with the same term used in general management. Perhaps "performance" or "production" budget might have been better.
2. Ibid, p16
3. Ibid, p30
4. Ibid, p33
5. Ibid, p50
6. Ibid, p62
7. Ibid, p67
8. Ibid, p156
9. Ibid, p186