Project Management Involved Formation Research Paper

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[. . .] It is essential to realize that a mega project such as A380 t requires extensive risk management analysis, which include risk identification and risk management plan before the project implementation. The delay led to another shift in project delivery schedule. The company announced that project delay was attributed to aircraft wiring problems. (Robertson 2006, Clark 2006).

Communication problem was another factors leading to A380 crisis. The management did not formerly communicate the problems to appropriate stakeholders on time. It was already too late before the management actually communicated the problem to the appropriate stakeholders. Realistically, the Airbus did not have experienced in building a complex aircraft such as A380. Thus, the company did not integrate effective risk and time management in the project life cycle. The company did not accommodate the time constraints associated with big project into the project time management. Based on the delay in completing the project and escalation in the project costs, the A 380 project was far from being a successful project. The report illustrates features of a successive project.

Criteria of a Successive Project

Schwalbe, (2010) argues that a project manager must continue to develop his knowledge and skills to achieve a success in a project, and it is important to learn from the mistakes of former projects failure. The important criteria attributed to a project before a project could be ranked as being successful are as follows:

First, the project is a success if it meets the scope, time, and the costs budgeted for the project. The A380 would have been categorized as a successful project if it meets the time scheduled for the project. More importantly, a project has achieved a project success if the project is able to satisfy the customers. It is essentially to realize that a project could meet the initial scope, time, and cost goals, however, if customers were not happy with the project, a company might lose large amount of revenue from the project. (Project Management Institute, 2008). Conversely, a project might not meet the initial scope, time, and cost goals, and eventually customer could still be very satisfied with the project. This is the example of A 380 project where the company did not meet the costs and time goals, however, customer were still happy with the project when the project had finally completed. Airbus A380 total orders were 262, the company has finally delivered 101 orders, and 101 orders are still in operations. (Airbus, 2012).

More importantly, a project has been able to achieve a success if the results of the project meets its main objective, which include provide a good return on investment. Although, it is essential to realize that A380 project was a mega project, which development costs run into billion of dollars. It would take several years before the company could realize the return on investment (ROI). With the increase in the project costs and longer time to complete the project, it might take longer years for the company to record a ROI from the project. (Boom, 2009).

Based on the crisis identified, the paper provides the strategy in estimating and managing project costs as well as enhancing risk management. The report also investigates the strategy to translate planning into execution.

Project Planning and Implementation

Integration of strategic planning is very critical for a project success. Strategic planning is the most critical tool that a business manager used to identify a project that would deliver value to a company. The strategic planning assists an organization to study opportunities and threats within the business environment as well as predicting trends, which assists a business manager to identify and select a particular project.

Project Selection Technique

To select a project, an organization must identify project that would be part of its strategic planning process. Moreover, organizations should narrow down the project and select a project that would deliver the most financial benefits, which will deliver values to stakeholders.

Major techniques used in selecting a project are to use net preset value analysis. Net present value (NPV) is a financial tool used to calculate the expected return or monetary gains from an investment. The gain or loss that could be realized from a project could be calculated using the expected cash inflow and outflow associated to the project. A positive value of a project is the only criterion for the project selection; an organization should only choose a project that provides the positive NPV. The reason for choosing positive NPV is that the return from an investment will be greater that the costs of capital. Typically, a project with higher NPV is to be preferred than a project with lower NPV. Despite the benefits of NPV in the project selection, NPV is not sufficient alone to select a mega project such as A380 because the A 380 project was generally being influenced by several factors.

Weighting scoring model is an important tool that a business leader should use in selecting a project. Weighting scoring model is a systematic process of selecting a project based on many criteria, which include:

Ability to meet the business objective

Having a strong customer support

Provide a positive NPV

Has low risks and meet the goal, time and scope.

Using a realistic level of technology,

Having a strong internal sponsor.

The report assigns percentages to each criteria based on their importance to the project. Table 1 provides an example of weighting scoring model for a project selection.

Table 1: Weighting scoring model

A

B

C

D

Criteria

Weight

Ability to meet the business objective

25%

90

90

50

20

Having a strong internal sponsor.

15%

70

90

50

20

Having a strong customer support

15%

50

90

50

20

Using a realistic level of technology

10%

25

90

50

70

Provide a positive NPV

20%

50

70

50

50

Has low risks and meet the goal, time and scope.

10%

20

50

50

90

Weighted Project Scores

56

78.5

50

41.5

From the table, it is revealed that project 2 delivers highest weighted average score out of all the four projects. Having using the weighting scoring model, the next stage is to estimate and manage the costs associated to a project.

Cost Estimation and Cost Management

A cost estimate is very important before embarking on a project. The cost estimation is an accounting technique to estimate the total amount of money needed to complete a project. A cost accounting technique is an effective tool to estimate the costs of a project. Nikolaos et al. (2005) argues that a detailed cost accounting methodology is an important tool in estimating the costs of a project. Since a mega project such as A380 project could be influenced by inflation and other economic factors, there is a need to estimate the costs based on the current economic condition since 70% of the aircraft manufacturing costs are committed during the project development lifecycle. The cost analysis should be carried out when estimating the costs and sensitivity analysis should be carried out for the cost estimation. (Schoemaker, Randall, 2002).

A costs management is a strategy to keep the project on budget. A cost management plan is critical to ensure that the project costs are not more than the amount budgeted for the project. Airbus management failed to implement effective cost management plan to make the put the project on budget.

"To address costs that that threaten to rise beyond the initial projections, the project manager should consider how available resources can be reallocated. This can be a very useful cost management strategy that keeps the project on budget while addressing potential shortcomings." (Villanova University 2012 P. 2).

The risk management is also very important in the project lifecycle. An organization needs to design risk register to manage risks associated with a project lifecycle. A risk register is a management tool used to manage risk in a project. A risk register lists all the risks associated with a project rank the risks based on their level of importance to a project. Having identified all the risks associated to a project, a project manager could use different tools to manage the risks. The risk matrix could be used to rank the risk based on their importance. A sample of a risk matrix is presented in the box below.

Risk Scoring Matrix

Impact

High / Critical

3

3

6

9

Medium / Serious

2

2

4

6

Low / Marginal

1

1

2

3

1

2

3

Low / Improbable

Medium / Could happen

High / Probable

Probability

Probability Categories

Description

Prob

Scale Value

H

Probable

>70%

3

M

Could happen

30-70%

2

L

Improbable

<30%

1

To manage the risk "the Project Manager shall review and update the Project Risk Log/Register/Schedule as part of the monthly/stage reporting. The Project Manager shall prepare risk management reports to support review of risk status and treatment. The Project Manager shall also liaise with the Cost Manager in order to update contingency costs for project cost at completion forecast." (Imperial… [END OF PREVIEW]

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