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Project Management
 Project and Programme Management
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Project
Management
Ninth Edition

DENNIS LOCK
© Dennis Lock 2007

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or
transmitted in any form or by any means, electronic, mechanical, photocopying, recording or
otherwise without the prior permission of the publisher.

Published by
Gower Publishing Limited
Gower House
Croft Road
Aldershot
Hampshire GU11 3HR
England

Gower Publishing Company

Suite 420
101 Cherry Street
Burlington,
VT 05401-4405
USA

Dennis Lock has asserted his moral right under the Copyright, Designs and Patents Act, 1988, to be
identified as the author of this work.

British Library Cataloguing in Publication Data

Lock, Dennis
Project management. – 9th ed.
1. Project management
I. Title
658.4'04

ISBN-13: 978-0-566-08772-1 (pbk)

978-0-566-08769-1 (hardback)

Library of Congress Cataloging-in-Publication Data

Lock, Dennis.
Project management / by Dennis Lock. -- 9th ed.
p.cm.
Includes bibiliographical references and index.
ISBN 978-0-566-08769-1 (hardback) -- ISBN 978-0-566-08772-1 (pbk) 1. Project
management. I. Title.
T56.8.L6 2007
658.4'04--dc22
2006037664

Printed and bound in Great Britain by MPG Books Ltd. Bodmin, Cornwall
 Contents

List of Figures xiii

Acknowledgments xix
Preface to Ninth Edition xxi

Chapter 1 Introduction to Project Management 1

Brief history of project management 1
Different types of projects 5
Project life cycles and life histories 7
Customers, clients, contractors and end users 12
Associations representing the profession of project management 13
References and further reading 15

Chapter 2 Factors for Project Success or Failure 17

Success or failure factors in relation to the initial project definition 17
Factors for success or failure during the project fulfilment (execution) period 19
Triangle of objectives and trade-offs between cost, performance and time 21
Perceptions of project success or failure beyond the three primary objectives 24
Identifying and ranking the stakeholders 25
Benefits realization 26
References and further reading 27

Chapter 3 Defining the Project Task 29

Importance of initial project definition 29
Projects which are difficult or impossible to define 29
Feasibility studies to improve early project definition 32
Checklists 32
Enquiries and proposals for new projects 34
Defining the project scope 37
Contractor’s strategy and design specification 39
Specifications for internally funded projects 41
Developing and documenting the project specification 46
PROJECT MANAGEMENT

Chapter 4 Estimating the Project Costs 49

Introduction to cost estimating 49
Classification of costs as direct or indirect 51
Estimating accuracy 51
Classification of estimates according to confidence 52
Estimating accuracy in relation to prices and profits 53
Version control of project cost estimates 54
Top-down or bottom-up? 55
Compiling the task list 55
Level of detail in project cost estimating 57
Estimating formats 57
Estimating manufacturing costs 61
Estimating project labour costs 63
Personal estimating characteristics 66
Estimates for material and equipment costs 67
Reviewing the cost estimates 68
References and further reading 69

Chapter 5 First Steps in Planning the Timescale 71

General introduction to project planning 71
What makes an ideal project plan? 75
Museum project: a case example 75
Distinction between planning and scheduling 81
References and further reading 81

Chapter 6 Financial Appraisal and the Business Plan 83

Project feasibility analysis 83
Different viewing platforms for the project investor and the project
contractor 84
Introduction to project financial appraisal methods 86
Simple payback method 87
Discounted cash flow 89
How much confidence can we place in the data? 92
Project funding 95
References and further reading 97

Chapter 7 Risk 99
Introduction to project risk management 99
Identifying the possible risks 100
Risk appraisal and analysis 100
Risk register 104

vi
 CONTENTS

Methods for dealing with risks 105

Insurance 107
Planning for a crisis 112
References and further reading 113

Chapter 8 Project Authorization 115

Introduction to project authorization 115
Project authorization criteria for the project owner 116
Authorization documents issued by the project owner 118
Project registration and numbering 120
Project authorization in a contracting organization 121
Authorizing work without a contract or customer’s order 123
References and further reading 125

Chapter 9 Project Organization Structures 127

Effective organization and communications 127
Organization charts 127
Emergence of project management in a developing company 129
Project matrix organizations 133
Project teams and task forces 137
Organization of central administration functions 139
Which type of project organization is best? 140
Organizations with more than one project manager 144
References and further reading 148

Chapter 10 Organization of Management Change and IT Projects 149

Special characteristics of management change projects 149
Case example: the Coverite plc office relocation project 150
PRINCE2™ 154
References and further reading 154

Chapter 11 Key People in the Organization 155

Project manager 155
Director of projects or programme manager 159
Project engineer 159
Project support office 161
References and further reading 162

Chapter 12 Work Breakdown and Coding 165

WBS concept 165
Coding systems 170
Benefits of a logical coding system 173

vii
PROJECT MANAGEMENT

Choosing a coding system 175

What happens when the customer says ‘You shall use my coding system!’? 176
References and further reading 177

Chapter 13 Completing the Breakdown Structures 179

Developing a project organization breakdown structure 180
Relationship between the project WBS and OBS 183
Introducing the cost breakdown structure 185
References and further reading 186

Chapter 14 Detailed Planning: An Introduction to Critical

Path Networks 187
Gantt charts: their advantages and limitations 187
Background to critical path analysis 188
Different network notation systems 188
Critical path analysis using arrow diagrams 190
Critical path analysis using precedence notation 196
Case example: furniture project 199
More complex network notation 203
References and further reading 207

Chapter 15 Detailed Planning: Critical Path Networks in Practice 209

Developing the network logic 209
Level of detail in network planning 212
Interface events and activities 215
Milestones 215
Estimating task durations 216
Is the predicted timescale too long? 218
Case example: the museum project 218
A case for drawing networks from right to left 226
Network analysis as a management tool 227
References and further reading 228

Chapter 16 Principles of Resource Scheduling 229

What are resources and which of them can be scheduled? 229
Role of network analysis in resource scheduling 231
Resource scheduling case example: the garage project 231
Float (or slack) 240
Two fundamental priority rules for resource scheduling 245
Summary: the elements of a practicable schedule 247
References and further reading 248

viii
 CONTENTS

Chapter 17 Scheduling People (and Other Reusable Resources) 249

Choosing which resources to schedule 249
Choice of resource units 251
Rate-constant and non rate-constant usage of resources 252
Specifying resource availability levels 253
Using different calendars for resource scheduling 254
Seven logical steps of project resource scheduling 256
References and further reading 257

Chapter 18 Scheduling Materials 259

Manufactured parts and materials scheduling compared with general
project scheduling 259
Identifying and quantifying common parts for manufacturing projects 260
Case example: a filing cabinet project 261
Line of balance 264
Computer solutions for scheduling manufacturing materials 272
Using purchase control schedules to schedule equipment for capital projects 272
References and further reading 274

Chapter 19 Scheduling Cash Flows 275

Cash flow scheduling in general 275
Scheduling cash flows in different kinds of projects 276
Using project management software to schedule cash outflows 281
Using the computer to schedule cash inflows 283
Conclusion 283

Chapter 20 Computer Applications 285

Choosing suitable software 285
Special network logic required for computer applications 291
Preparing for the first computer schedule 292
Case example: the garage project 299
Data entry errors 303
Network plotting 306
Time analysis of the garage project network 306
Resource scheduling for the garage project 308
Standard and customized output reports 313
Updating the schedules and reports 316

Chapter 21 Managing Project Start-up 317

Preliminary organization of the project 317
Correspondence and other documents 318

ix
PROJECT MANAGEMENT

Engineering standards and procedures 322

Physical preparations and organization 323
Getting work started 325
Issuing detailed planning and work instructions 327

Chapter 22 Aspects of Commercial Management 331

Contracts 331
Purchase orders 334
Terms of trade used in international business (Incoterms 2000) 337
Pricing a contact proposal 338
Contract payment structures 340
Timing of payments 343
Financial viability of participating organizations 344
References and further reading 344

Chapter 23 Managing Procurement 345

Purchasing cycle 345
Roles in the purchasing organization for a large international project 346
Purchase specification: defining what has to be bought 349
Supplier selection 357
Purchase requisition and order 361
Expediting 364
Special timing of orders and deliveries 364
Purchase quantities 366
Purchase order amendments 367
Correlation between specification, enquiry, requisition and order numbers 367
Project or stock purchasing? 368
Marking and labelling goods before transit 369
Goods receipt 369
Stores administration 370
Vendors’ documents 372
Materials management as a shared or common service 373
References and further reading 374

Chapter 24 Managing Progress 375

Progress management as a closed-loop control system 376
‘Management by’ styles 376
Updating schedules and records 379
Collecting progress information 380
Statistical checks 383
Managing the progress and quality of bought-in materials and equipment 383

x
 CONTENTS

Managing subcontractors and agency employees 387

Routine priority allocation in manufacturing projects 389
When the news is bad 390
Corrective measures 391
Immediate action orders 392
Construction site organization and management 395
Project meetings 396
Progress reports 401
References and further reading 402

Chapter 25 Managing Changes 403

Impact of changes in relation to the project life cycle 403
Origin and classification of changes 403
Authorization arrangements 406
General administration 408
Estimating the true cost of a change 411
Forms and procedures 414
Version control for modified drawings and specifications 422
Emergency modifications 424

Chapter 26 Managing Project Costs 429

Principles of cost control 429
Controlling variable costs 430
Controlling fixed costs and overhead cost recovery 431
Additional cost control factors 433
Total cost approach 434
Checklist of cost management factors 436
Setting and resetting cost budgets 437
Cost collection methods 438
Audits and fraud prevention measures 442
Comparing actual costs against planned costs 443
References and further reading 443

Chapter 27 Earned-Value Analysis and Cost Reporting 445

Milestone analysis 445
Earned-value analysis 450
Earned-value analysis prediction reliability and implications 455
Evaluating cost performance for materials and bought-in equipment 457
Effect of project changes on earned-value analysis 458
Project ledger concept 459
Predicting profitability for a whole project 459

xi
PROJECT MANAGEMENT

Post mortem 464

References and further reading 464

Chapter 28 Managing Multiple Projects, Programmes and Portfolios 465

Project management or programme management? 465
Managing a portfolio of management change and IT projects 466
Multi-project resource scheduling 467
Project resource scheduling in the corporate context 473
References and further reading 474

Chapter 29 More Advanced or Less Frequently Used Techniques 475

Line of balance charts in construction projects 475
Dealing with network plans for large projects 477
PERT 478
Standard networks 480
Templates (standard network modules) 482

Chapter 30 Managing Project Closure 491

Reasons for closing a project 491
Formal project closure 492
Final project cost records 494
Disposal of surplus material stocks 494
Final project definition: the end of a continuous process 494
As-built condition of a manufacturing or capital engineering project 495
As-built condition of a multiple manufacturing project 497
As-built condition of a project that is interrupted before completion 498
Managing files and archives 500

Bibliography 503
Contents Comparison Between the Eighth and Ninth Editions 507
Index 511

xii
 List of Figures

1.1 Whistle-stop journey through project management history 2

1.2 Four project types 5
1.3 Project life cycle 8
1.4 More comprehensive example of a project life history 9
1.5 Demonstration of how the chapters in this book broadly follow a project
life history 12
1.6 Examples of project relationships 13
2.1 Perceptions of success or failure during a project life history 18
2.2 Barnes’s original triangle of objectives and some derivatives 21
2.3 Matrix of stakeholders’ objectives 26
3.1 Definition of a large project from initial concept to completion 30
3.2 Part of a project definition checklist 33–4
3.3 Initial task checklist for a management change project 35–6
3.4 An action plan for screening and progressing sales enquiries 38
4.1 Typical summary layout of a project cost estimate 50
4.2 Project cost estimate arranged by the work breakdown structure 58
4.3 Useful format for general cost estimating 59
4.4 Format for estimating the costs of materials and bought-out equipment
on larger projects 60
4.5 General purpose format for indicating the price of a small project 61
5.1 Project planning environment 72
5.2 Checklist for an ideal plan (shown checked early in the project life cycle) 76
5.3 Museum project: Gantt chart 78
5.4 Museum project: linked Gantt chart with date cursor set at week 15 79
5.5 Museum project: checklist comparing diary and linked Gantt chart plans 80
6.1 Luxury service apartments project: cost/benefit patterns 85
6.2 Boiler replacement project: payback calculation 88
6.3 Boiler replacement project: payback graphs 88
6.4 Table of discount factors for calculating net present values 89
6.5 Boiler replacement project: net present value calculation 90
6.6 Tollbridge project: net present value calculation 92
6.7 Histogram and probability curve from Monte Carlo Analysis 94
6.8 Chart comparing project cost and benefits after Monte Carlo analysis 95
7.1 Ishikawa fishbone diagram 101
PROJECT MANAGEMENT

7.2 Part of a failure, mode and effect matrix (FMEA) 102

7.3 Matrix for qualitative risk classification 102
7.4 Qualitative risk assessment matrix 103
7.5 Part of a failure, mode effect and criticality analysis matrix (FMECA) 104
7.6 Format of a risk register (or risk log) 105
7.7 Risk and insurance in project management 107
8.1 Example contents of a project initiation document (PID) 119
8.2 Project register 120
8.3 Works order example for a manufacturing project 122
8.4 Project authorization form used by a mining engineering company 123
8.5 Typical project engineering cost/time relationship 124
9.1 Organigram conventions 128
9.2 Example of a manufacturing organization 132
9.3 Project cycle 133
9.4 Functional matrix for a single project in a manufacturing company 134
9.5 Matrix organization for several simultaneous manufacturing projects 135
9.6 Matrix organization for mining, petrochemical or construction projects 136
9.7 Project team organization 138
9.8 Project team v balanced matrix 144
9.9 Hybrid organization 145
9.10 Project with more than one project manager 146
9.11 Joint venture organization 147
10.1 Coverite plc: development of the relocation project organization 151
11.1 Possible management roles in a matrix organization 161
11.2 Possible management roles in a multi-team organization 162
12.1 Simplified WBS for an automobile project 166
12.2 WBS for a national charity fundraising week 167
12.3 Part of the first three WBS levels for a very large mining project 168
12.4 Work breakdown for a project to build a new railway 169
12.5 Two alternative WBS patterns for a large wedding project 170
12.6 WBS and coding structure for a radiocommunications project 172
12.7 Detail from the work breakdown for the radiocommunications project 172
12.8 Project coding system used by a heavy engineering company 174
12.9 Project coding system used by a mining engineering company 175
13.1 Organigram of Cuttit Ltd 182
13.2 Lawnmower project: OBS 182
13.3 Lawnmower project: upper WBS levels 183
13.4 Lawnmower project: WBS in relation to the OBS (with cost account examples) 184
13.5 Lawnmower project: analysis of a cost account code (chosen at random) 185
13.6 WBS meets OBS and CBS 186
14.1 Main elements of arrow logic 191
14.2 Tree project using arrow notation 192
14.3 Example of arrow network time analysis 193
14.4 Three different methods for showing times on arrow networks 195
14.5 An activity in precedence notation 196
14.6 Tree project using precedence notation 198
14.7 Example of precedence time analysis 199

xiv
 LIST OF FIGURES

14.8 Furniture project: task list 200

14.9 Furniture project: activity-on-arrow network diagram 201
14.10 Furniture project: precedence network diagram 202
14.11 Furniture project: time analysis 203
14.12 Overlapping activities in arrow and precedence networks 204
14.13 Constraint options in precedence networks 206
14.14 Using dummies to clarify cluttered logic 206
15.1 Common error in arrow networks 211
15.2 Level of detail in a purchasing sequence 214
15.3 Network interfaces 215
15.4 Museum project: first precedence diagram 219
15.5 Museum project: time analysis of the initial network diagram 220
15.6 Museum project: network with crashed times 222
15.7 Museum project: time analysis after crash actions 223
15.8 Museum project: network crashed and fast-tracked 225
15.9 Museum project: time analysis after crashing and fast-tracking 226
16.1 Garage project: network diagram 234–35
16.2 Garage project: task list and time analysis 236
16.3 Garage project: bar chart and resource histogram – aggregation 237
16.4 Garage project: bar chart and resource histogram – resource-limited 239
16.5 Garage project: bar chart and resource histogram – time-limited 241
16.6 Garage project: float analysis of activity G1016 (10–16) 242
16.7 Time-limited versus resource-limited rules for resource scheduling 245
17.1 Rate constant and variable resource usage for a project task 253
17.2 The complexity of project resource scheduling 256
17.3 Seven logical steps to a practical project resource schedule 257
18.1 Filing cabinet project: exploded view of the product 261
18.2 Filing cabinet project: simple parts list 262
18.3 Filing cabinet project: family tree 264
18.4 Filing cabinet project: parts list arranged in subassemblies 265
18.5 Filing cabinet project: delivery data 265
18.6 Filing cabinet project: family tree redrawn for line of balance 266
18.7 Filing cabinet project: calculation of lead times for parts 267
18.8 Filing cabinet project: delivery commitment graph 268
18.9 Filing cabinet project: calculation for line of balance at day 4 269
18.10 Filing cabinet project: line of balance at day 4 270
18.11 Filing cabinet project: line of balance completed for day 4 271
18.12 Front page headings for a purchase control schedule 272
18.13 Complete purchase control schedule 274
19.1 Essential elements of a project cash outflow schedule 276
19.2 Project cash flow schedule for an outdoor concert 277
19.3 Essential elements of a project net cash flow schedule 278
19.4 Cash outflow schedule for a construction project 279
19.5 Net cash flow schedule for a construction project 280
19.6 Network detail needed to schedule purchase commitments and cash outflows 282
20.1 Suggested procedure for buying project management software 287
20.2 Checklist for choosing project management software 288–89

xv
PROJECT MANAGEMENT

20.3 Suggested procedure for implementing new project management software 293
20.4 Garage project: precedence network diagram 300
20.5 Garage project: cost estimates 302
20.6 Garage project: data errors 305
20.7 Garage project: summary network plotted by 4c 307
20.8 Garage project: time analysis using Microsoft Project 2000 309
20.9 Garage project: time-limited resource histograms using Primavera 311
20.10 Garage project: resource-limited resource histograms using Primavera 312
20.11 Garage project: cost report using Primavera 314
20.12 Garage project: useful cost and resource summary 315
21.1 Linear responsibility matrix 319
21.2 Document distribution matrix 320
21.3 Standard project start-up network 326
21.4 Possible column headings for a drawing schedule 329
22.1 Elements of a typical purchase order 335
22.2 Relationship between payment terms and the control needed 341
23.1 Value of purchasing in project management 346
23.2 Purchasing cycle 346
23.3 Elements of a purchasing organization for a large international project 347
23.4 Stages in the purchase of equipment for a large international project 350–52
23.5 Purchase specification: front sheet 354
23.6 Purchase specification: second sheet 355
23.7 Purchase specification: continuation sheet 356
23.8 Purchase enquiry request 358
23.9 Common arrangement for inviting and considering bids 360
23.10 Bid summary example 362
23.11 Purchase requisition 363
24.1 A familiar sign: but will this project start and finish on time? 375
24.2 Control loop 376
24.3 Materials shortage list format 378
24.4 Combined work-to list and progress questionnaire 381
24.5 Inspection and expediting report 385
24.6 Immediate action order 393
24.7 Construction site organization 396
24.8 Combined meeting agenda and action sheet 399
25.1 Cost of a given change in relation to project life cycle phases 404
25.2 Some origins of project changes 405
25.3 Decision tree for change requests 408
25.4 General-purpose change register 410
25.5 Car project: estimated modification cost 412
25.6 Project variation order 416
25.7 Engineering change request 418
25.8 Production permit or concession 419
25.9 Engineering query note 421
25.10 Inspection report 423
26.1 Project cost elements in the context of cost control 430
26.2 Typical project cost/time patterns and the impact of fixed costs 432

xvi
 LIST OF FIGURES

26.3 Three ways of recording the cost of project materials 439

26.4 Weekly timesheet 441
27.1 Comparison of actual costs against a time-scaled budget 446
27.2 Project cost and achievement comparison using milestones 448
27.3 Data for a milestone chart 449
27.4 Earned-value analysis for an engineering department 454
27.5 Cost/profit prediction graph 461
27.6 Tabulated project cost report 463
28.1 Programme of projects in a large contracting company 466
28.2 Managing a multi-project model 470
29.1 Five-house project: Gantt chart 476
29.2 Five-house project: line of balance chart 476
29.3 Eighty-house project: line of balance chart 477
29.4 Rolling wave planning 478
29.5 Breaking down a large project plan into subnetworks 479
29.6 Transfer line project: early example of standard network module (template) 483
29.7 Transfer line project: procurement and machining template 484
29.8 Templating case example: template library principle 485
29.9 Templating case example: standard start template TCSAA and template B 486
29.10 Templating case example: template D and standard finish template TCSFF 487
29.11 Templating case example: template library browser 488
29.12 Templating case example: network diagram 488
29.13 Templating case example: network fragment 488
29.14 Templating case example: Gantt chart produced by 4c 489
30.1 Project closure notice with checklist 493
30.2 Build schedule sheet 499

xvii
This page intentionally left blank
 Acknowledgements

I
am grateful to the following people and organizations who have helped in different but valuable
ways in the preparation of this edition and its immediate predecessor:

4c Systems Limited
Dr Martin Barnes
Professor Sally Brailsford
Association for Project Management
Alan Fowler
Primavera
Robert Pow
Welcom Software

Artemis Views is a registered trademark. Deltek Open Plan™ is a registered trademark of Deltek.
Primavera Project Planner is a registered trademark. PRINCE2 is a trademark of the Office of Government
Commerce. Windows and PowerPoint are trademarks of Microsoft Corporation. 4c is a trademark of
4c Systems Limited.
This page intentionally left blank
 Preface to Ninth Edition

T
he changes for each new edition of Project Management are fuelled largely by my continued
learning and experience. This knowledge originated from my experiences as a manager working
in a number of quite different industries, augmented by a number of successful and fulfilling
consultancy assignments. I have enjoyed the schadenfreude frisson of learning from the mistakes of
others, and equally from the humiliating embarrassments of my own errors. A rich source in more
recent years has come from the challenge of teaching well over 1000 post-graduate management
students from all parts of the world, an experience that (apart from one unpleasant encounter with
a cohort of ten surly English MBA aspirants) has proved wholly and mutually challenging and very
rewarding.
Somewhere embedded in all this learning experience is the advice that I receive from time
to time from reviewers, almost all of whom have been encouraging and supportive. A few have
even been so kind as to offer free advice. One kind reviewer of the eighth edition suggested that
my chapter sequence should be changed to observe more strictly the life cycle pattern of a typical
project. This book has always vaguely been modelled on the start-to-finish progress path of a project,
but I am very grateful to that reviewer for his good advice. As a direct result I have taken this book
apart and rebuilt it so that it now sticks far more faithfully to the project life cycle phases from initial
project idea to final closure. This closer adherence to the project life cycle has allowed the chapters
to follow in a continuous, almost seamless flow and for that reason it was no longer necessary to
divide the book into the separate parts used in earlier editions.
Every new edition seems to grow in size. That has never been my direct intention, but it still
happens every time. I perform my own brand of liposuction to remove surplus fat, and I excise
material that no longer enjoys being flavour of the month. This time, for instance, I have saved
considerable space by consolidating the two former cost estimating chapters into one, by merging
three computing chapters into one, and by condensing the three previous purchasing chapters into
one. Nothing of any substance has been lost through these consolidations which, together, should
have reduced the number of chapters from the former 25 to 20. Yet the book has instead grown to 30
chapters, and the number of illustrations has increased from 164 to very nearly 200. These statistics
indicate the extensive scope of this revision.
Work breakdown structure and coding is now given more prominence as a separate chapter and
the new chapters subjects include:

• factors for project success or failure;

• first steps in planning the timescale;
• financial appraisal and the business plan;
• organization of business change and IT projects;
• key people in the organization;
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