Project Management – Project, Program, Portfolio, Project Charter, Baseline Budget
1. Describe the relationship among project, program, and portfolio management and their contribution to project success. Support your ideas with relevant examples
A project is “a temporary endeavor undertaken to create a unique product, service, or result” as per the PMBOK® Guide.
A program is a group of related projects, activities and operations gathered to coordinate them in an efficient way.
A portfolio is a group of projects, programs, and operations gathered to coordinate them in an efficient way and to achieve strategic objectives of the organization.
Therefore, portfolio includes projects and programs, and program includes projects. Projects do not include operations, but programs and portfolios do.
As the project management facilitates the effective management of a unique project, program and portfolio management facilitate the effective management of various projects and programs.
Almost every organization has projects to achieve its strategic plan. However, programs or portfolios may or may not exist depending on the organization’s size and maturity level. Program and portfolio grouping is required when an organization gets larger and start to have many projects that can be grouped for better management.
All three management areas are crucial for an organization because portfolio and program managers select and analyse which projects to invest and focus within the organization from a strategic perspective, and to achieve organization’s strategic goals. Having a good strategy for project/program/portfolio management helps the organization to save time, capital, effort and resources.
For instance, George Brown College has a Project Management Center which conducts portfolio management for the entire College. All projects are gathered and listed by the managers working in the Center, and relevant projects and activities are categorized and grouped under programs. A program manager is assigned to each program to be responsible for the effective management of such program. Afterwards, relevant programs and activities are categorized and grouped under portfolios, and a portfolio manager is assigned to each portfolio.
This technique allows the Center to manage and coordinate all projects together efficiently, without dividing its time and effort into small pieces to each and every detailed project. The director of the Center and the management team monitor the portfolios and programs for the purpose of successful achievement of College’s strategic objectives, and try to ensure the optimum allocation and efficient use of the College’s resources. This is so crucial for the College because things can get out of control very easily in a big organization like George Brown if there is no effective project/program/portfolio management, and can cost the College money, time and resources.
2. What is a project charter and why should a project have a project charter? List and explain at least 6 main points included in a project charter?
According to the PMBOK® Guide, a Project Charter is ‘’a document that formally recognizes the existence of a project and provides direction on the project’s objectives and management’’. It assigns and authorizes the Project Manager as a person in charge of the management of the project. Without a Project Charter, Project Manager cannot (or should not) start working as there is no formal/official authorization for her/him.
Project Charter shouldn’t be confused with the Business Case document as the business case only provides the financial justification for a project whereas the Project Charter briefly shows what, why, how, when, how much, how long, with whom, etc. attributes of a project. Every project should have a charter to briefly addresses these questions.
Formal initiation of a project happens with the signing of the charter. The charter summarizes key points, conditions and parameters of the project by providing a brief picture of every aspect of the project. It forms a framework to develop a detailed project management plan.
There is no standard or fixed form of a Project Charter. Organizations, including PMI, have templates, but every company can create its own as long as the charter serves for its purpose.
There are many possible elements included in every charter, I will explain the 6 of them as follows:
- Purpose – Project purpose is defined under the Charter. Defining the purpose is crucial as everyone associated with the project should be on the same page about WHY we are implementing and executing this project.
- Deliverables: Every project has tangible or intangible deliverables. Project Charter lists and defines these deliverables to ensure that they will be ready at the end completion of the Project.
- Funding/Budget – Project budget can be included in the Charter to have an agreement by the project team members on a certain amount, and formally authorize the Project Manager to use and manage such amount to effectively complete the project.
- Assumptions/risks/constraints – This part requires a bit of brainstorming. We think and list our assumptions regarding the project, what we see as a risk, and what we see as constraints. Risks are highlighted by their probability to occur, and potential impact in case they occur.
- Success Criteria or Expected Benefits – This part lists down the criteria which, if completed, will bring success to the project. We can also list down the expected benefits of the project which we think, if the project is completed, will be the end benefits for the organization.
- Project Team: Every charter specifies the project team members which include the Executive Sponsor, Project Champion, Project Manager, key Subject Matter Experts or key stakeholders, and other project team members. This part gives the formal authorization and approval to the Project Manager and project team to execute and be in charge of the project.
3. Explain 3 major points on why it is necessary to develop a baseline budget for a project and list and explain a minimum of 4 items that should be included when estimating activity costs.
Project management includes managing the costs, expenses and effective use of the budget to ensure that the project is completed within an approved budget.
It’s necessary to develop a baseline budget for the following reasons mainly:
- Baseline budget helps us break down the costs and expenses, and explain the amounts we’re committed to spend. A baseline budget prevents the costs and expenses from getting out of hand. It basically provides the basis for the project cost control.
- If we need to raise funds or borrow money for the project, the baseline budget explains and justifies the reasons. When there is no baseline, it’s hard to explain the funding to the management. Project budget presents how much money is needed and when it is needed.
- By having a baseline budget, we can measure and monitor the cost performance. We need to ensure that the spending is under control and the project budget will be used effectively and efficiently. By comparing the actual money spent to the approved budget, we can determine if the project is going according to the plan or if any corrective action is needed.
Long story short, if we don’t have a baseline budget, we say ‘’We’re flying by the seat of our pants.”
Among others, we should take into account the following items when conducting a cost estimation for a project:
- Labor – Who will work in the project, how many hours they will work, what are their hourly rates? Answers to these questions should be answered or estimated to properly outline the labor costs associated with the project.
- Materials – What materials will be purchased or utilized, in what quantity? We need to outline the materials that will be used during the execution of a project to calculate or estimate the material costs to be included in the baseline.
- Indirect costs – Overhead costs can be given as an example of indirect costs that will be included in the cost baseline. Others could be insurance, rents, administration, security costs, etc.
- Facilities – Some projects require facilities to purchase or rent for the execution of the project. Facilities can be used to store materials, accommodate the project team (especially in the construction projects), assemble project deliverables, etc.