Managing Projects as Investments: Earned Value to Business Value

Every project is an investment; however, traditional project management methodologies do not support assessment of the business value that enables senior management to maximize decision making. The next evolution in project management, therefore, will be to manage projects as investments.Managing Projects as Investments: Earned Value to Business Value provides tools and metrics to enable planning, measuring, evaluating, and optimizing projects.

This book shifts the paradigm. It builds on traditional scope-cost-schedule tools, adding a critical new focus on the expected value of projects and programs. The enhancements in processes and metrics allow senior management and PMOs to guide the entire organization on the basis of business benefits, and to ensure that decisions ranging from project selection to resource assignment facilitate those goals. The author shows how framing projects as investments enables significant improvement in project performance. He provides metrics that allow you and your team to track and maximize performance based on ROI.

Demonstrating the importance of recognizing an enabler project in a program, and why its value and cost of time are so great, the book provides the tools to determine right-sized staffing levels for project-driven organizations. It includes a comprehensive but easy-to-understand explanation of both basic and advanced earned value metrics, their shortcomings, and how they can be improved and shows you how to optimize contract terms on projects in a way that can avoid misaligned customer/contractor goals.

Table of Contents

Redefining projects 
Value drivers 
Planning and tracking projects as investments 
Traditional project tracking 
Project success and failure 
Of deadlines and budgets 
Procrustean bed of deadlines 
Quantifying the triple constraint model 
COST side of the project investment triangle 
Finance departments and overhead burdens 
SCOPE side of the project investment triangle 
Product scope: Main generator of project value 
Project scope: A secondary generator of the project value 
Customer value and internal value 
Implications of various contract types 
Project investment metrics 
Expected project profit planning formula 
Expected project profit at completion formula 
Examples of expected project profit calculation 
Summary points 
Endnotes 

Of time and timing 
Simple example of the complexities of managing time 
Examples of impact of time on projects 
Impact of time on emergency response projects 
Impact of time on enabler projects 
Impact of time on contractual enabler projects 
Ignoring the cost of time 
Time as an externality 
Summary points 
Endnotes 

Tracking projects by investment value 
Expected value versus actual value 
DIPP: A formula to analyze termination of a project investment 
Simple DIPP: Setting the baseline for expected project
profitability 
DIPP Progress Index (DPI): Tracking project value against
baseline DIPP 
Case for this new approach to planning projects 
Summary points 
Endnotes 

Managing project time 
Critical path is—uh—critical! 
Activity identification and duration estimating 
Hard and soft dependencies 
Basics of the CPM algorithm 
Critical path drag 
Managing change 
Riding a changing schedule 
Answers and explanations 
A tragic example from history 
Summary points 
Endnotes 

Optimizing the schedule with drag and drag cost 
Drag cost 
True cost of project activities 
Resource elasticity and the DRED 
Using the DRED with true cost 
Cautionary note on using the DRED 
Assessing optimization of the CPM schedule 
Three-point estimating 
Monte Carlo systems 
Summary points 
Endnotes 

Combining project investment tools 
Step : Determine expected monetary value of the project 
Kindb // : PM
Contents ix
Step : Develop a value breakdown structure (VBS) 
Estimating the value-added of the training project to the
immunization program
Estimating the value-added of activities in the training project
Step : Determine value/cost of time on the project
Step : Computing drag cost of optional activities
Step : Calculating net value-added of optional activities 
Uncertainty principle in schedule optimization 
Final word on the schedule optimization process 
Using critical path drag to recover a schedule 
Computing critical path drag on a schedule subset 
Summary points 
Endnotes 

Of resources and rightsizing 
How we got to this point 
Resource availability and project CPM schedule 
Resource unavailability and activity duration estimates 
Role of the functional manager 
Utilization rate metric 
Maintaining the resource library 
Working around lack of a resource library 
Resource leveling 
Time-limited resource leveling 
Resource-limited resource leveling 
The cost of leveling with unresolved bottlenecks (the CLUB) 
Elusive goal: Stable staffing levels for a project-driven organization 
Rightsizing staffing levels for a project-driven organization 
Summary points 

Fundamentals of earned value 
What earned value is and isn’t 
Just what is earned value? 
Fundamental basis of earned value tracking 
Basic earned value cost tracking formulas 
Basic earned value schedule tracking 
Flaws in earned value schedule tracking 
Gaming the SPI
Fixing the SPI 
Earned schedule tracking 
Tracking the DIPP through earned value 
How to use the DIPP to redeem projects 
Summary points

Advanced earned value 
Earned value based on milestones 
Tracking CPI based on labor 
To complete performance index (TCPI) 
Critical ratio cost index 
Earned value based on milestones 
Combining earned value metrics with the DIPP 
Summary points 

Conclusion 
Appendix 
Glossary 
Index 
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