Dr. O. Aly
Computer Science

Abstract

The purpose of this project is to discuss the trade-off between cost, time and quality of projects. Various essential topics related to projects and project management are discussed.  The discussion begins with the distinct characteristics of the projects and operations, among which projects are temporary while operations are repetitive.  The project addressed the project cycle plan and project development tools.  Various tools for project management include project evaluation and review techniques (PERT), critical path method (CPM) and Gantt Chart.  The project management with the trade-off between time, cost and quality are addressed.  A balance of these three critical elements is required.  This project discusses the project trade-off and the correlation between time and cost.  Some argue that most businesses are cost-time bias at the expense of quality.  Various projects success factors are also discussed in this project.  Various factors cause projects to fail. These factors include misunderstanding of the project requirement, organizational influences, and risk management. Failed projects take a long time to be abandoned or corrected due to logistical problems, political thinking and lack of planning for uncertainty, and risk management.

Keywords: Project Management, Cost, Time, Quality.

Introduction

Enterprises achieve their strategic goals using various project management techniques.  Business requires good performance assessment tools for project management to make sound decision to gain and maintain a competitive edge in the market (Anuar & Ng, 2011).  Management and executives are under pressure to complete projects within a specific time, a specific budget while maintaining the quality, which is considered to be the success factors for project implementation.  This project discusses these factors for project management. It begins with the discussion of projects vs. operations, followed by the project cycle plan and project development tools.

Projects vs. Operations

A project is defined as a temporary venture to implement a unique service or product. The temporary indicates a period that has a beginning and ending, while unique indicates the service or product will be distinguished from the ones in the market (Pearlson & Saunders, 2001; PMI, 2000).  It is also defined as an organization of people dedicated to a specific purpose or object (Pinto & Slevin, 2015).   Projects consist of a set of one-time actions to shift the present event into a new one based on the strategic plan of the enterprise (Pearlson & Saunders, 2001; PMI, 2000).  Projects involve substantial, expensive, unique or high risk and must be completed within a time frame using a certain amount of investment (Pinto & Slevin, 2015).  Projects need to have well-identified objectives and sufficient resources to implement all the required tasks and activities (Pearlson & Saunders, 2001; PMI, 2000). The successful strategy of the enterprise requires two types of decisions; one for the daily operatives, and another for the strategic objectives.  Since IT plays a significant role in all projects of the enterprise, IT project management plays a critical role in the success of the business. 

Projects and operations utilize the resources of the business to transform them into profits.  Human resources and the flow of resources are required for projects and operations of the business.  A project can be divided into sub-projects to implement particular activities such as quality control testing (Pearlson & Saunders, 2001).  During this sub-division of a project, sourcing decisions are made to limit costs.  Various projects are organized at a high level, and elements of a more extensive program which provide a framework from which competing resource requirements are managed, and priorities among a set of projects are shifted.   

Projects and operations have the same elements such as labor skills, training time, worker autonomy, compensation system, material input requirements, supplier ties, raw materials inventory, scheduling complexity, quality control, information flows, worker-management communication, duration and product or service (Pearlson & Saunders, 2001).  However, each element has a different characteristic of the project and the operation.  For instance, operations require low labor skills, training time, worker autonomy, while projects require them high.  Compensation is a lump sum for projects, while hourly or weekly wage for operations. Material input requirements for operations require a high degree of certainty, while projects are uncertain.  Information flows, and worker-management communication is essential in projects, while less critical in operations. The duration is on-going for operations, while temporary for projects.  The product or service is repetitive in operation, while unique in projects.  Table 1 shows the characteristics of operations and projects (Pearlson & Saunders, 2001).

Table 1.  Projects vs. Operations (Pearlson & Saunders, 2001).

Project Cycle Plan and Project Development Tools

Enterprises develop the operations of the business based on a strategic plan that has goals and objectives (Wilson, 2015).  Resources get acquired and managed to implement the plan. The project plan is comprised of sequential steps for organizing and tracking the work of the team which implements the project, while the project management contains a set of tools to balance the competing demands for resources and ensure the completion of the work at every step and evolves throughout the project plan (Pearlson & Saunders, 2001).
            The project cycle plan organizes the activities of the project and sequences them in steps along a timeline so that the project delivers based on the requirements of the stakeholders and customers. The plan is bounded by a critical beginning and end dates and breaks the work into phases (Pearlson & Saunders, 2001).  The plan identifies the resources and time required to complete the work based on the scope of the project. The tasks are identified and assigned to team members.  The management tracks the progress and the phases of the project and coordinates the eventual transition from the project to operational status, a project that leads to the milestone of the project by delivering it.  The project progress is monitored to ensure it meets the requirements of the cost, time, and quality.  If the project does not meet the requirements, some corrections must be made, and the cycle gets adjusted as required (Copertari, 2002; Pearlson & Saunders, 2001).
            Various approaches and software tools exist for the development of the project.  Three main approaches include project evaluation and review techniques (PERT), critical path method (CPM), and Gantt Chart (Pearlson & Saunders, 2001).  PERT method identifies the tasks of the project, orders the tasks in a time sequence, identifies the interdependencies of the tasks, and estimates the time which is required to complete each task.  Tasks are divided into critical and non-critical. The critical tasks must be performed individually and together impact the total elapsed time of the project, while the non-critical tasks include slack time without impacting the duration of the entire project. Figure 1 shows an example of a PERT chart for a project plan.

Figure 1.  PERT Chart (Pearlson & Saunders, 2001).

The CPM is another project planning and scheduling tools.  CPM is similar to PERT. However, unlike PERT, CPM can identify relationships between costs and completion date of a project, the amount and value of resources which can be applied as alternatives (Pearlson & Saunders, 2001).  CPM and PERT are different in term of time estimates.  PERT develops broad estimates about the time needed to complete the tasks of the project, calculating the optimistic, most probable and pessimistic time estimates for each task.  CPC, in contrast, assumes that all time requirements for completion of each task are relatively predictable.  CPM tends to be used on projects for which direct relationships can be established between time and costs. 

Gantt charts are used mostly for displaying time relationships of the tasks of the project and for monitoring the progress toward project completion.  Gantt charts list project task with a bar for each task indicating the relative amount of time expected to complete the task (Pearlson & Saunders, 2001).  The due date for completion is regarded as a milestone and noted with diamonds.  Gantt charts are useful for planning purpose at the beginning of the project.  When the project progresses, the chart is altered to reflect the extent to which each task is completed at the time the project is monitored.  Figure 2 illustrates an example of a Gantt chart for a project.

Figure 2.  Gantt Chart (Pearlson & Saunders, 2001).

Project Management

Project management is defined as the application of skills, knowledge, techniques, and tools to implement activities to meet or exceed the needs of the stakeholders and the expectation from a project (Pearlson & Saunders, 2001).  Project management involves a continuous trade-off between cost, quality and time.  Managers and executives are confronted with a serious decision among these triangle constraints for projects implementation, involving the scope of the project.  The scope can be divided into product scope and project scope.  The product scope includes a detailed description of the quality of the product, features, and functions, while the project scope involves the work required to deliver a product or service with the intended product scope.  Time refers to the period that is required to complete a project, while cost involves all the required resources to implement the project.  Figure 3 shows the triangle of project management. 

Figure 3. Project Triangle (Pearlson & Saunders, 2001).

Any modification in any of these three sides of the project triangle can have an impact on either side or both of the other sides.  For instance, if the scope of the project increases, more time and more cost will be required to implement the additional work.  The increase in the scope after the project started is known as scope creep.  One or two of these project triangle elements can be optimized, modifying the third to maintain the balance.  For instance, a project with a fixed time and a fixed budget can restrict the scope, while a project with a short time and a broad scope need budget flexibility.  The trade-off among these project elements plays a crucial role in business, as it can lead to a disastrous event such as Titanic.  The use of substandard low-grade rivets makes ships sink when hitting an iceberg.  The history showed that the quality trade-off to using these low-grade reverts to lower the cost of some parts of Titanic causes a disastrous event.  Managers and executives are under pressure to balance among these project elements to ensure the success of the project and eventually the success of the business.

Project Trade-off and the Correlation Between Time and Cost

The nature of the underlying tradeoffs can be illustrated using a systematic approach (Copertari, 2002).  The systematic relationship between time and cost is illustrated in Figure 4 (a). If the project is delayed, it costs more money which is supported by studies such as (Anuar & Ng, 2011; Atkinson, 1999; Bowen, Cattel, Hall, Edwards, & Pearl, 2012).  This relationship is a positive correlation between time and cost.  Additional resources are required to deliver on time which can be directed to critical activities.  Limited resources should be directed to non-critical activities, which is called crashing and it has a negative correlation between cost and time.  The nature of the activities as critical and non-critical and the existing of both positive and negative correlation implies the existence of an equilibrium where an optimal project completion time is achieved at a minimum cost.  Figure 4 (b) illustrates how the time/cost tradeoff is influenced by performance.  The quality can be improved by using more resources, which increases the financial cost and will increase the time if such resources are limited.   However, if more resources are invested and the project is taken more time to complete, the cost increases, the Internal Rate of Return (IRR) of the project measuring the profitability is reduced. Thus, enterprises must maintain an optimal time/cost tradeoff that can yield optimal project performance as measured by its IRR (Copertari, 2002).

Figure 4.  Time, Cost and Performance Tradeoffs (Copertari, 2002).

Project Success Factors

Various studies discussed various factors affecting the success of projects.  (Thamhain, 2004) examined the influences of the project environment on team performance.  The result showed that a general agreement existed on the factors that drive team performance, and a large number of performance factors derived from the human side is the most significant findings.  Project success is based on the effectiveness of multi-disciplinary efforts across various teams (Thamhain, 2004).  (Hong, 2011) suggested that the initiation and planning phases of capital projects impact the outcome of completed cost, time and profitability.  (Bonner, Ruekert, & Walker Jr, 2002) examined formal and interactive control mechanisms available to upper-managers in controlling new product development (NDP) projects, and the relationship between these techniques and the NDP project performance. The findings indicated that the degree to which upper-management intervened in project-level during the project was negatively related to project performance.  The results also showed support for the notion that early and interactive decision-making on control mechanisms is critical for effective projects.

Other studies discussed cost, time and quality as success factors for project implementation and management.  (Atkinson, 1999) indicated that the Iron Triangle of time, cost, and quality is still preferred success criteria for projects.  Time is an intangible resource binding the period of the project from the start to the completion (Anuar & Ng, 2011; Pearlson & Saunders, 2001).   Time plays a significant role in the success of the project as it is regarded as a significant criterion for project success (Anuar & Ng, 2011; Bowen et al., 2012).  The longer the project takes, the potential damage is expected, the more complex and costly the corrective measures will be to the project.  Some argue that the projects with a short time frame for completion have advantages cost and performance wise, while others argue that when the projects are under time and cost pressure, the quality is profoundly affected (Anuar & Ng, 2011; Pollack-Johnson & Liberatore, 2006).  (Bowen et al., 2012) suggested that time-cost bias exist, indicating quality is last to consider.

Every project requires financial resources reflecting the costs. The cost of the project plays another significant role in the success of projects implementation (Westland, 2018; Wilson, 2015). Some suggest that when the cost increases when the duration is shortened, and vice versa.  However, most large and complex project development require substantial financial resources and schedule overrun (Anuar & Ng, 2011).  The delayed and more time projects require more financial resources (Bowen et al., 2012; Shankar, Raju, Srikanth, & Bindu, 2014).    

Products or service without quality can bring a business down.  Quality is defined as one of the components that contribute to value for money (Bowen et al., 2012).  Enterprises must pay attention to the quality of products and services.  The high failure rates of quality suggest that the knowledge of the transformation process whereby ideas are turned into successful quality products and services is far from perfect (Anuar & Ng, 2011).  Organizations are under pressure to introduce new products and adopt new processes to gain and maintain competitive advantages.  

(Anuar & Ng, 2011) analyzed three different scenarios and modeling using Microsoft Office Project tool.  The first scenario is about project fixed time with limited resources.  The second scenario is about project time reduced with minimus cost imposed.  The last scenario is about maintaining quality while reducing the project duration.  The findings of the first scenario showed that cost was controlled very tightly even though the time of the project was not required to be reduced.  These findings are similar to the findings of (Olson, Walker Jr, Ruekerf, & Bonnerd, 2001).  The findings of the second scenario showed that the reduced time of the project could reduce the cost of the project.  The findings of the last scenario showed that a shorter duration was not considered due to the risks of having quality issues  (Nidumolu, 1996) argued that the tight control of the process could result in strict adherence to time and cost estimates.  Such control impacts the functionality of the product, thereby the long-term flexibility of technology is jeopardized with the short-term user needs.

Project Failures

Various studies discussed reasons for projects management failure.  (Atkinson, 1999) identified two types of errors for project failure; Type I and Type II.  Type I errors occur when something is done wrong, while Type II errors occur when something has not been done as well as it could have been or something was missed.  (Gardiner & Stewart, 2000) examined the relationship between project budgets, cash flow cost control and schedule.  Each element plays a significant role in the net present value (NPV) of a project.  The NPV can be used as a technique to monitor the health of the project, and whether it is meeting the objectives within the time and cost identified.  The failure of a project is measured by the net present value (Gardiner & Stewart, 2000).

When a project absorbs a delay to a deliverable on the critical path, five options are available (Gardiner & Stewart, 2000).  The first option is to move the milestone date. The second option is to reduce the scope of the deliverable. The third option is to reduce the quality of the deliverable. The fourth option is to apply additional resources generally workforce or money.  The last option is to rearrange the workload.  However, another investment appraisal is not carried in most cases to assist in determining what the most appropriate action is.  The point is that the logistical problems and political thinking play a role within a project and the project managers should not ignore these facts.  These logistical problems and political thinkings play a role in taking a long time in abandoning a project or correcting a project (Gardiner & Stewart, 2000).

Understanding the requirement of the project play a significant role in the success of the project.  Thus, the lack of understanding of the requirements of the project can lead to a different outcome, delayed project, or failed project (Forsberg, Mooz, & Cotterman, 2000).  The requirement of a project begins with the customer’s needs, and not with the perception of the organization to the customer’s needs.  There is an ongoing danger of misunderstanding and ambiguity in the end-to-end chain of technical, business and project development.  This misunderstanding leads to non-essential, overspecified, unclear or missing requirements as illustrated in Figure 5, which is a cartoon.  Such projects are subject to failure.

Figure 5.  Misunderstanding Project Requirements Leads to Project Failure (Forsberg et al., 2000).

Moreover, project managers are confronted with various influencing factors including technical, organizational, and socioeconomic influences, which are relatively unique to IT projects (Pearlson & Saunders, 2001). Technical issues are related to business and budget issues.  Management which does not feel comfortable with technology often take one of these actions; either ignore the IT issues or delegate them to information system organization or focus inappropriate attention on managing the technology to counter their fear.   The managerial and socioeconomic influence involves the control systems used for non-project-based operations which do not efficiently support the project management.  The organizational culture has an impact on the leadership style of the project management, and communication between team members. The socioeconomic impact on projects includes government and industry standards, globalization, and cultural issue.

The IT projects have a higher risk than non-IT projects (Pearlson & Saunders, 2001). The term risk is not well understood among various project management. The risk is defined as the possibility of the additional cost or loss due to the alternatives are chosen.  Some alternative has a lower risk than others.  Risk can be measured and quantified by assigning a probability of occurrence and a financial consequence to each alternative.  Risk involves complexity, clarity, and size (Pearlson & Saunders, 2001).  The more complexity of the project, the higher is the risk associated with the project.  The more ambiguous the project, the higher the risk, and the bigger the size or scope of the project, the higher is the risk.  There is a positive correlation between risk and these three risk elements. 

The management of these risks can aid in turning the troubled projects into a successful one.  (Pearlson & Saunders, 2001) argued that trouble projects persist long before they get abandoned. The amount of money invested on the trouble project biases management toward continuing to fund the project even if the success of the project is questionable.  Other factors include the penalties for failure within the organization that can be high; project management is willing to go for a more extended period even if it means more resources including cost.  Emotional attachment to the project can cause prolonged projects that are subject to failure. 

Conclusion

This project discussed various essential topics related to projects and project management.  It began with the unique characteristics of the projects and operations, among which projects are temporary while operations are repetitive.  The project cycle plan and project development tools are also discussed.  Various tools for project management were also discussed.  These tools include project evaluation and review techniques (PERT), critical path method (CPM) and Gantt Chart.  Project management involves various elements including cost, time and quality. The project also discussed project trade-off and the correlation between time and cost.  Some argue that most businesses are cost-time bias at the expense of quality.  Various projects success factors were also discussed in this project, such as the balance between cost, time and quality.  Various factors cause projects to fail. These factors include misunderstanding of the project requirement, organizational influences, and risk management. Failed projects take a long time to be abandoned or corrected due to logistical problems, political thinking and lack of planning for uncertainty.  Although the success of a project is questionable, the management persists in implementing, and it takes a long time before it gets abandoned or to put under control. Various factors contribute to this phenomenon including the penalty for failing projects, lack of understanding to risk management, and the emotional attachment to the project. 

References

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