Project Management

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A blog that looks at all aspects of project and program finances from budgets, estimating and accounting to getting a pay rise and managing contracts. Written by Elizabeth Harrin from RebelsGuideToPM.com.

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3 Types of programme cost (that are not project costs)

How to keep a business case up to date

More schedule tasks to do before you baseline

Quarterly review time: How was your Q1?

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How to reduce your project’s carbon footprint

reduce carbon footprint

The sustainability agenda is something all aspects of business are thinking about, and project management is no exception. We all need to be working towards creating a more sustainable future, and making the right choices on our projects is definitely one way to do that.

The first step is to make sure sustainability criteria are included in your documentation templates. You can add sustainable and carbon footprint criteria to your business case templates.

Here are some suggestions for how you can consider reducing the carbon footprint on your projects.

Create a benchmark

Many companies these days have teams dedicated to energy management and sustainability, so your first point of call should be to check in to see what initiatives are already underway. If your carbon efforts are going to be officially recognised, you need to use official methods of calculating the reduction, with full transparency and a robust, proven measurement process in place.

Who in the team will be responsible for tracking and measuring carbon savings, and do you need any additional processes in place to make it happen?

A full approach like that might be overkill – if there is no expectation of having to save carbon, you might not want to go down the route of proving that you are in a measurable, transparent way. However, you can still follow the rest of the steps to brainstorm carbon-saving ideas with the team and build in carbon-friendly ways of working.

Review project tasks

Take a look at the work you are going to be doing on this project. Which tasks are going to generate a carbon calculation that can be measured? What tasks are going to generate carbon and what can you do differently?

Identify carbon reduction activities

From the work you are doing and the tasks identified, take a look at what extra actions you could to reduce the carbon impact. For example, are you planning to print a lot of leaflets or documentation? What could be delivered via a QR code or provided in digital format? What would still need to be created in paper format for a selection of users who would not be able to access digital content?

What journeys are going to be undertaken on the project? Perhaps there are some workshops that can be held virtually and training delivered online instead of in a classroom. There are many advantages to getting together in person, but you might be able to identify some elements of the project that would work remotely.

You can also look at the supply chain. Can you ask whether suppliers can deliver in a more sustainable way, such as with electric vehicles, or in recyclable packaging. What would that do to the budget, if anything?

Add tasks to the plan

Add your carbon reduction actions to your project plan. You might need to take specific actions, you might need to be more mindful of the way in which existing tasks are delivered.

Make sure each action has an identified owner.

Track and monitor progress towards your goal

Include carbon data in your reporting. If you are tracking according to your organisation’s metrics, then you might have some help from specialist teams who will know how best to report the data.

Otherwise, add some narrative to your reporting to allow you to share your success with others.

A lot of being smart with carbon on your project is just asking yourself the question: what can we do and are we doing things in the best possible way? Being aware of the challenges and helping others see that sustainability is a focus for you is key to keeping it on the agenda and making it part of the accepted ways of working.

Posted on: December 11, 2023 08:00 AM | Permalink | Comments (4)

Economic vs Financial Appraisals

economic vs financial appraisals

Let me see if I can make the difference between economic appraisals and financial appraisals interesting….

They are both covered in the UK Government’s Better Business Cases document. Here’s my take on what they both mean and why you’d want to use them.

better business cases

Economic appraisals

The document says that economic appraisals are all about value and benefits from the perspective of the stakeholders, users, and wider societal impact. They consider “all social, economic, environmental costs and all effects on public welfare.” Remember, this is a government publication, so the assumption is that projects will be for the public good. Your project might not have an effect on public welfare, but you can imagine that it will have an effect on the project’s customers or end users.

This is the core of a business case.

It includes an element of financial information as well, such as relative prices, direct and indirect costs, opportunity costs where there are any, environmental costs, and benefits however these play out. You’d also include staff time.

It would exclude inflation, tax, sunk costs (let’s hope there aren’t any of those), depreciation of assets, and other accounting treatments.

Financial appraisals

Financial appraisals are purely the monetary calculations: can we afford it? Where is the money coming from?

They consider cash flow, budgets, and accounting practices.

This would feed into a business case because there is no point in progressing a project that you can’t afford to complete or that would not provide adequate financial returns where these are measured.

A financial analysis would look at current pricing, cash-releasing benefits (like delivering a portion of the project early so it could start to ‘earn’ for you), capex and opex costs, tax payment, and inflation.

The do nothing option

A business case should also include the minimum possible approach, which is normally the ‘do nothing’ case against which to compare your alternative(s).

Complete an economic appraisal for that option, too, taking into account what stays the same and the benefit cost ratio of doing nothing.

In my experience, it’s always worth including a ‘do nothing’ option as it really makes it clear to execs what they are giving up if they choose to reject a project.

Is an economic appraisal a new thing?

I don’t think an economic appraisal is a new thing, but I think project managers are more used to seeing it be called a business case or an options analysis.

Once you have created an economic appraisal for a variety of options (including the ‘do nothing’), there is likely to be a clear option that stands out as the best course of action. If not, there might be a few to choose from with subtle differences – leave the choice up to the execs to debate in that case!

I think the thing about an economic appraisal is that it forces you to think wider than the numbers. You’re looking for social and environmental benefit, community impact, and return instead of just a simple ‘if we do this, we’ll get paid that in a year’. It’s a way of reframing the business case conversation into something that is wider and more rounded, helping teams become aware of the full impact and benefit of their initiative instead of simply the bottom line.

And I think that’s a good thing. We should be making rounded, fully informed decisions instead of simply relying on the top level numbers. We need to be aware of the full impact from idea to decommissioning and what impact that is going to have on the world around us, not just the bank account.

By adopting the language of economic appraisal instead of business case, we might be shifting the thought process into a richer dialogue with ultimately better decisions being made. What do you think? Let me know in the comments!

Posted on: October 11, 2023 08:00 AM | Permalink | Comments (0)

6 Types of Projects: Which one are you working on?

There are loads of different ways of categorising projects, but I came across a way that was new to me recently. There are 6 categories of project outlined at high level in a UK government publication about creating a project business case.

I’ve summarised them briefly below.

types of projects

1. Standard building projects

Let’s start with the building projects. A ‘standard’ building project is one that pretty much uses a building blueprint that’s already available. There are no special design considerations, no fancy extras or design features to incorporate.

Examples:

  • Office buildings
  • Residential buildings (not self-build or fancy architect-led projects)
  • Airport terminals
  • Hospitals
  • Schools

2. Non-standard building projects

Anything that is not a standard building construction project is a non-standard project. These are constructions that have special requirements or must meet certain conditions, perhaps dictated by use or space or the requirement to incorporate some high-tech feature.

The environment around the construction might also make the project non-standard. For example, if the site has some special archelogical, scientific or envrionmental significance. Or it could be that the building is going on the side of a mountain or in a cave, or something like that.

Examples:

  • High-tech facilities such as labs or research facilities (think: a polar exploration hub)
  • ‘Destination’ buildings: when we visited the Arctic Circle, we stayed in a hotel that had rooms with huge windows in the ceiling for watching the Northern Lights.

While I was in a previous role, the company acquired an old building and changed its use, but had to keep the existing façade. I’d put that project in this category as the complications around what we could and couldn’t do within the footprint of the building made everything quite a challenge.

3. Standard civil engineering projects

Straightforward civil works would use tried-and-tested techniques. There’s not much else to say about these.

Examples:

  • Roads
  • Utilities like electricity plants or water treatment facilities.
  • Railways.

4. Non-standard civil engineering projects

Do you see the pattern? Unsurprisingly, non-standard public sector and civil works include things that don’t fit the mould of the standard work. They are non-routine constructions.

Examples:

  • Upgrades and extensions like the Jubilee line extension on London’s underground system
  • Utility projects where the environment is non-standard or constrained in some way
  • Build projects like railways that require additional features or technology.

5. Development and equipment projects

If you’re not building something physical, you might be building software or doing some other kind of development. These projects move an organisation forward and help get things done. They are often the work that underpins strategy delivery and can be big or small.

All the projects I’ve ever worked on fall into this category, as I don’t work in construction or outsourcing (which we’re coming to).

Examples:

  • Software development
  • Process change
  • Provision and installation of equipment into facilities.

These could be cutting-edge tech deliveries or simply upgrading your old phone system or something equally routine.

6. Outsourcing projects

Finally, projects that have the end result that something is outsourced. That could be providing a client with cloud computing solutions or running a building for them, and typically it’s all about ‘something as-a-service’.

Examples:

  • Equipment maintenance
  • Setting up a new helpdesk for IT queries
  • Providing whatever it is you provide as a package to the client where they have outsourced provision of that service or product to you.

Do you think this is a good way to split up projects? I’m not sure that I do – there isn’t enough granularity of the ‘development’ projects for me. Maybe they are all unique and we don’t need to split them between standard and non-standard. Most of the things I’ve worked on have felt non-standard at the time.

What category of project do you work on? Let us know in the comments below!

Posted on: July 18, 2023 08:00 AM | Permalink | Comments (7)

Why do we bother with business cases?

Project documents (and there are some good templates here on ProjectManagement.com) are important to keeping projects moving, and many times, a project will start with a business case.

You might accept the need to do a business case as part of the organisational process – just something you have to do to tick a box. Maybe your organisation doesn’t use them in a formal sense, but each project has to be justified in some way – whether that’s a slide deck or even an email. There is some ‘reason to work’ that kicks off a project.

But have you ever really stopped to think about what role a business case really plays? If you do them, I think we shouldn’t take them for granted. If you don’t do them, it’s time to start.

Here are a few reasons why it is advantageous to have a business case before the work begins.

Understand the scope

The process of putting together a business case helps everyone involved understand what the scope is going to be. And if they don’t like what that looks like, they have the opportunity to influence it early so the scope better aligns with the direction they want to take.

Understand the issues

Perhaps there are concerns, issues, risks or challenges that decision makers need to be aware of – there always are. The discussions that feed into the business case help make sure that everyone is aware of what those are and what implications they might have for the work.

Fact-based decision making will give the project a better chance of success. The leadership team can weed out the ideas that won’t work before any time and effort is spent on them.

We can frame this conversation by thinking about project viability. Having a thorough discussion of the issues makes people aware of whether a project is viable and will continue to be viable throughout the delivery phases, despite any challenges that may arise.

business case

Understand progress

Finally, a good business case lays out information that is useful for managing the work, monitoring and controlling progress. For example, a schedule of stage payments or key milestones, scope elements or deliverables.

The business case isn’t the project schedule and you will need more than simply the business case, but if it is a well-thought through, well-prepared document, there will be enough in there to help set up adequate project tracking.

The document should also set out success criteria and/or benefits which give you the framework for evaluating success as the project progresses.

As a project manager, you might be thinking that putting together the business case is not really your job, and you’d be right. However, on the projects I have worked on, it’s always been easier to get up to speed and start work when I’ve been involved from the business case stage or earlier.

That doesn’t mean doing loads of work – just being interested and talked to and maybe asked an opinion about the resource information or timeline that should go into the document.

Then when I come to lead the work (assuming it gets approved), I have a better understanding of the ‘why’ behind the project and the decisions that have already been taken.

Do you have a business case template that you are happy with? If not, check out some of the templates on this site as a starting point, and adapt one to give you the information you need to start your projects from a good place.

Posted on: May 02, 2023 08:00 AM | Permalink | Comments (1)

5 More Cost Types to Include in Your Business Case

Last time I looked at 7 types of expense that are worth mentioning in your business case, to show that you’ve got a rounded handle on all the costs.

The Better Business CasesTM model that I mentioned last time goes on to describe even more different cost types that you should be aware of. I did know about some of these, but this list has some in that I wouldn’t routinely think of.

We might not need to mention or use them all in business case preparation, but it is worth having a general awareness of them, not least so you can ask your Finance colleagues smart questions!

cost for business case

1. Sunk costs

If your business case represents a Phase 2 or subsequent investment, then it’s worth mentioning the sunk costs: the money already spent on other parts of the work that you cannot get back. These might be in contracts already issued, purchase orders already raised that must be fulfilled or previous steps of the project.

They get a mention in the business case but they aren’t part of the appraisal. In other words, talk about them so that decision-makers have the whole picture, but don’t include them in the cost assessment or budget figures for this part of the project.

2. Full economic costs

This is another term I wasn’t aware of but it only means including direct, indirect and attributable costs for each option mentioned in the business case. In other words, flesh out your finances so they show the whole, true picture. Use a bottom up approach to get the real figures.

3. Attributable costs

Wondering what attributable costs are from the section above? These are generally the costs related to staff time. If your team members are caught up delivering the project in this business case, they aren’t doing work on other business cases, that might be equally or even more important. So attributable costs are things that don’t fall into the direct or indirect category but are relevant as they round out the business case.

I think too many managers forget that if you are working on Project A you can’t be working on Project B at the same time (because they expect that everything gets done, most likely!). It’s worth calling out that if you tie up a team full-time on this initiative, their costs go towards the project and their staff time is allocated.

4. Organisational development

Organisational development costs are the figures related to change management. These are definitely worth including. I can’t even remember the number of times I’ve had a project budget handed to me and there has been no allocation for training, printing, change management, travel and room hire for workshops or town halls, or anything else. Make sure your business case includes the costs of what it will take to go from the current way of working to the new way of working, including any process updates, change activity and staff development required to make proper use of the thing you are delivering. 

5. Contingent liabilities

Now, I confess to including these in business cases in the past but not knowing the correct term for them. You are probably aware of them too: they are the expenses related to future events. For example, the costs you may incur to buy yourself out of a contract early. Make a mention of those in your financials as well.

So, we have all those, as well as capital, revenue, fixed, variable, step, opportunity costs and inflation that I covered last time.

It feels like this business case is going to be weighty! Remember to draw on your sponsor, finance analyst and the finance team more broadly for support with the numbers and to make sure your maths stacks up. Ideally, they should be providing the underlying assumptions and algorithms that make up the financial parts of the business case template. As the business case is a major input to how much money you get to do the work, it’s important.

Posted on: January 24, 2023 12:00 AM | Permalink | Comments (3)
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