Archive for December, 2009

Management Team Wants Versus Needs

– December 17, 2009Posted in: Agile, Application Development, Scrum

Mike Cottmeyer of Leading Agile wrote an excellent post, posing a question: Why wouldn’t a management team embrace a set of methodologies so focused on giving them what they need the most?

I took a few minutes to digest the question and then compared it to my prior experiences implementing Agile on a management level. Though I have seen the desire of a management team to embrace Agile, allowing more value to be delivered, I also saw them take pause and throw up roadblocks. At the moment they believed the top-down command and control structure would be weakened by bottom-up empowered teams, delivering value suddenly didn’t appear to be as important. Though I appreciate the necessity of a management team to provide strategic vision, I believe tactical implementation should be left to those outside the group. The hierarchy of wants, not needs, for the management team differs from the implementation team, if we want to admit it or not.

The key question asked is why wouldn’t a management team embrace a set of methodologies or approaches so focused on giving them what they need the most? My answer is I believe it is because delivering value is NOT necessarily what they WANT, it is what they NEED.

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Tags: Agile, Deliver, Maslow, Need, Value, Want

My First Year In A Directive PMO

Derek Huether

– December 10, 2009Posted in: Agile, Application Development, PMP, Scrum

Today I realized I’ve been supporting and advising a Federal Government PMO for a whole year. Prior to that, I was the Manager of Software Engineering at an online company that had recently gone public. I was the sole PMP (Project Management Professional) and sole Agile Evangelist. Upon my leaving that company, I told my superiors they really needed a PMO if they wanted to offer consistent results, measurable improvements, and increase stakeholder satisfaction. It was hard at first to shift gears, away from a private profit-driven organization, to Federal governance-driven organization. At the private company, it was all “being creative” to meet unrealistic goals set by those not versed in best practices. Since there were no other PMPs, I felt like the lone sheriff in the Wild West. Now that I’m dealing with the government, I’m surrounded by other PMPs. There is policy, process, and governance. Everyone knows their jobs very well. They know best practices.

So you can differentiate the type of PMO I work in compared to others, I’ve included the 3 basic types below with their definitions.

There are 3 basic types of Project Management Office (PMO) organizations are [1] supportive, [2] controlling, [3] directive.

1. Supportive PMO generally provides support in the form of on-demand expertise, templates, best practices, access the information and expertise on other projects, and the like. This can work in an organization where projects are done successfully in a loosely controlled manner and where additional control is deemed unnecessary. Also, if the objective is to have a sort of ‘clearinghouse’ of project management info across the enterprise to be used freely by PMs, then the Supportive PMO is the right type.

2. Controlling PMO has the desire to “reign in” the activities – processes, procedures, documentation, and more – a controlling PMO can accomplish that. Not only does the organization provide support, but it also REQUIRES that the support be used. Requirements might include adoption of specific methodologies, templates, forms, conformance to governance, and application of other PMO controlled sets of rules. In addition, project offices might need to pass regular reviews by the Controlling PMO, and this may represent a risk factor on the project. This works if a. there is a clear case that compliance with project management organization offerings will bring improvements in the organization and how it executes on projects, and b. the PMO has sufficient executive support to stand behind the controls the PMO puts in place.

3. Directive PMO goes beyond control and actually “takes over” the projects by providing the project management experience AND resources to manage the project. As organizations undertake projects, professional project managers from the PMO are assigned to the projects. This injects a great deal of professionalism into the projects, and, since each of the project managers originates and reports back to the Directive PMO, it guarantees a high level of consistency of practice across all projects. This is effective in larger organizations that often matrix out support in various areas, and where this setup would fit the culture.

Definition Source: http://ezinearticles.com/?expert=John_Reiling

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Tags: Advise, Agile, Government, PMO, PMP, Waterfall

The Best Kind Of Contract To Manage Is…(3 of 3)

Derek Huether

– December 3, 2009Posted in: Project Management

Unfortunately, there is no ONE best type of contract to manage. The risk the vendor and customer share is determined by the contract type. The best thing you can do is understand the risks and benefits of each. There are three categories of contracts: Fixed-Price, Cost-Reimbursable, and Time and Material (T&M). In this 3 part series, I defined the contracts in each category. Hopefully, it will help you on the PMP exam and out in the real world.

Time and Materials (T&M) is a hybrid type of contractual arrangement that contains aspects of both cost-reimbursable and fixed-price contacts. They are often used for staff augmentation, acquisition of experts, and any outside support when a precise statement of work cannot be quickly prescribed.

These types of contracts resemble cost-reimbursable contracts in that they can be left open ended and may be subject to a cost increase for the buyer. The full value of the agreement and the exact quantity of items to be delivered may not be defined by the buyer at the time of the contract award. Thus, T&M contracts can increase in contract value as if they were cost-reimbursable contracts. Many organizations require not-to-exceed values and time limits placed in all T&M contracts to prevent unlimited cost growth. Conversely, T&M contracts can also resemble fixed unit price arrangements when certain parameters are specified in the contract. Unit labor or materials rates can be preset by the buyer and seller, including seller profit, when both parties agree on the values for specific resource categories, such as senior software engineers at specified rates per hour, or categories of materials at specified rates per unit.

Image courtesy of Marc Lemmons via Flickr

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Tags: Contracts, Controlling, Cost, Material, Planning, PMP, T&M, Time

Risks and Benefits of Cost-Reimbursable Contracts

Derek Huether

– December 2, 2009Posted in: Project Management

As I mentioned in my previous post, Fixed-Priced Contracts, there is no ONE best type of contract to manage. The risk the vendor and customer share is determined by the contract type. The best thing you can do is understand the risks and benefits of each. There are three categories of contracts: Fixed-Price, Cost-Reimbursable, and Time and Material (T&M). In this second installment of a 3 part series, I will define the contracts in the cost-reimbursable category. It will hopefully help you on the PMP exam and out in the real world.

Cost-reimbursable is a contract category involving payments (cost reimbursements) to the seller for all legitimate actual costs incurred for completed work, pus a fee representing seller profit. Cost-reimbursable contracts may also include financial incentive clauses whenever the seller exceeds, or falls below, defined objectives such as costs, schedule, or technical performance targets. Three of the more common types of cost-reimbursable contracts in use are Cost Plus Fixed Fee (CPFF), Cost Plus Incentive Fee (CPIF), and Cost Plus Award Fee (CPAF).

A cost-reimbursable contract gives the project flexibility to redirect a seller whenever the scope of work cannot be precisely known and defined at the start and needs to be altered, or when high risks may exist in the effort. Frankly put, if the buyer doesn’t know what they want, this type of contract allows the project to move forward without the risk to the seller.

Cost Plus Fixed Fee (CPFF) reimburses the seller for all allowable costs for performing the contract work, and they then receive a fixed fee payment calculated as a percentage of the initial estimated project costs. The fee is paid only for competed work and does not change regardless of seller performance. The fee amounts do not change unless the project scope changes.

Cost Plus Incentive Fee (CPIF) reimburses the seller for all allowable costs for performing the contact work and receives a predetermined incentive fee based upon achieving certain performance objectives as set forth in the contract. In CPIF contracts, if the final costs are less or greater than the original estimate costs, both the buyer and seller share costs from the departures based upon a prenegotiated cost sharing formula, e.g., an 80/20 split over/under target costs based on the actual performance of the seller.

Cost Plus Award Fee (CPAF) reimburses the seller for all legitimate costs, but the majority of the fee is earned, based on the satisfaction of certain broad subjective performance criteria. This performance criteria is defined and determined by the buyer and and incorporated into the contact. The determination of the fee is based solely on the subjective determination of seller performance by the buyer, and is generally not subject to appeals.

Image Source: Pictofigo

The Best Kind Of Contract To Manage Is…

Derek Huether

– December 1, 2009Posted in: Project Management

Unfortunately, there is no ONE best type of contract to manage. The risk the vendor and customer share is determined by the contract type. The best thing you can do is understand the risks and benefits of each. There are three categories of contracts: Fixed-Price, Cost-Reimbursable, and Time and Material (T&M). In this 3 part series, I will define the contracts in each category. Hopefully, it will help you on the PMP exam and out in the real world.

Fixed-Price is a category of contract involving setting a fixed total price for a defined scope of work to be provided. Fixed-price may also incorporate financial incentives for achieving or exceeding selected project objectives, such as schedule delivery dates, cost and technical performance, or anything that can be quantified and subsequently measured. Sellers under fixed-price contracts are legally obligated to complete such contracts, with possible financial damages if they do not. Under the fixed-price arrangement, buyers must precisely specify the products or services being procured. Changes in scope can be accommodated, but generally at an increase in contact price.

Firm Fixed Price Contracts (FFP) are the most commonly used contract type. It is favored by most buying organizations because the price for goods is set at the outset and not subject to change unless the scope of work changes. Any cost increase due to negative performance is the responsibility of the seller, who is obligated to complete the effort.

Fixed Price Incentive Fee Contracts (FPIF) are arrangements which give the buyer and seller some flexibility whereby allowing for deviation from performance, with financial incentives tied to achieving agreed to metrics. Typically such financial incentives are related to cost, schedule, or technical performance of the seller. Performance targets are established at the outset, and the final contract price is determined after completion of all work, based on the seller’s performance. Under FPIF contracts, a price ceiling is set, and all costs above the price ceiling are the responsibility of the seller, who is obligated to complete the work.

Fixed Price with Economic Price Adjustment Contracts (FP-EPA) are used whenever the seller’s performance period spans a considerable period of years, as is desired with many long-term relationships. FP-EPA is a fixed-price contract, but with a special provision allowing for predefined final adjustments to the contract price due to changed conditions, such as inflation changes, or cost increases (or decreases) for specific commodities. The EPA clause must relate to some reliable financial index which is used to precisely adjust the final price. The FP-EPA contract is intended to protect both buyer and seller from external conditions beyond their control.

Next in my series on Contracts, I’ll define Cost-Reimbursable and Time and Material Contracts (T&M)

Image Source: Pictofigo

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