Professional project management and control techniques were not used during execution and close-out. The project encountered time and cost overruns, and project cash flows were not financed efficiently.
The Custom Woodworking Company launched project Woody 2000 in the spring of 1989. The project encountered several problems in conception and execution with substantial cost and time overrun. After the completion of the project, an external project management consultant was hired to conduct post project appraisal.
A typical project include three phases, viz., Initial, Intermediate, and Final. The first phase involves conceptualization and planning, while the intermediate phase constitutes execution and monitoring, and the final phase includes project close out. The cost and staffing is lower at the initial phase of the project. During this period, the level of uncertainty is the highest and the risks of failing to achieve the objectives are the greatest. The certainty of completion progressively gets better as the project continues. The ability of the stakeholders to influence the project is highest at the initial phase and gets lower towards the final phase.
The contribution of the project to the strategic goals of the company was never objectively quantified. ...
2. Woody project failures
The major problems identified during the audit are detailed below.
Conception & scope:
The contribution of the project to the strategic goals of the company was never objectively quantified. Gate reviews were not conducted and the cost estimation and risk mitigation efforts were half-baked.
The cost estimation for the project was done during a single meeting without considering any supplier quotes and probably without involvement of estimation professionals. Risk analysis was not done, and no contingencies were added at this stage. The project scope was not defined objectively, and seemed to have been influenced by personal bias; there was no reason to include office renovation within the scope of this production capacity enhancement project.
Planning & control:
The contingency was developed after the project was authorized, and was done without any formal assessment of risk. The monthly cash flow was done on an ad-hoc basis without the involvement of the project manager. The cash flow was developed without reckoning the project schedule and the actual spending pattern. Without this vital information, there was no way Spencer could have actually mobilized the necessary funding for this project. This cash flow was never used for the purpose of monitoring and controlling.
There was no project plan to address the key issues, and no Work Breakdown Structure (WBS) or project schedule was prepared. In absence of a baseline plan it became impossible to monitor the project progress.
There was no cost control process in place; without use of proper cost performance index, it was impossible to predict to cost overrun.
Spencer decided on a cost plus basis for contracting the work.