IF DETROIT IS DEAD, SOME THINGS NEED TO BE SAIDAT THE FUNERA.docx

IF DETROIT IS DEAD, SOME THINGS NEED TO BE SAID
AT THE FUNERAL
WILLIAM K. TABB
Queens College
ABSTRACT: A growing literature has long proclaimed the city
of Detroit to be “dead.” Of course
cities, unlike sentient beings, do not actually die even if they
dramatically lose industry and population
and the local government its ability to meet basic needs. How
their continuing crisis is addressed depends
on how competing interests are able to tell their story. This
essay evaluates the most significant of these
competing and complementary stories and evaluates state-
appointed Emergency Financial Manager
Kevyn Orr’s plan of adjustment that would cut the pensions of
city workers and reduce payments to
some bondholders by large amounts. What would happen will be
settled in the years to come as court
challenges are addressed. This essay evaluates explanations and
who and what is to blame. It provides
an alternative focus to the “Detroit is dead” literature and raises
concerns absent from the dominant
narratives of what is justified in a just settlement.
INTRODUCTION
When it comes to urban problems, “Detroit is consistently close
to the bottom of the league
tables” (Reese, Sands, & Skidmore, 2014, p. 113). Two decades
ago Ze’ev Chafets (1990, p. 119),

a self-described native son of “Murder Capital U.S.A,” called
Detroit “America’s first Third World
city.” That year the 1990 Census, comparing the 77 U.S. cities
with over 200,000 residents, ranked
Detroit first in poverty, or looked at from the bottom of the
rankings, it was the bottom. The city
had the highest percentage of households receiving public
assistance payments, the city with the
proportionately fewest able to support themselves, another
indication of last place. It was at the
bottom in terms of the median value of owner-occupied homes.
A generation later these statistics
persist; half the children in the city are still growing up in
poverty and, according to the FBI Uniform
Crime Report database, Detroit still has the highest crime rate
of any other large American city, the
bottom rank in pubic safety. It remains the poorest large city in
America. (An exhaustive recitation
of the city’s difficulties from eroding tax base to non-
functioning street lights, unemployment,
dysfunctional infrastructure, equipment available to police and
fire fighters, and other particulars are
catalogued in “Declaration of Kevyn D. Orr” (2013).)
A powerful consensus, expressed by an ever-lengthening
bookshelf bearing titles such as Detroit:
An American Autopsy, The End of Detroit, Lost Detroit, and
The Ruins of Detroit, suggests that the
city is “dead.” In what can be read as a valentine of lament,
George Galster (2012) tells us Detroit
has been “suicidal.” He portrays it as moving inevitably toward
an end state of “mortropolis.” Peter
Eisinger offers a similar post-mortem: “There is no more
compelling story today of the dark side of
America’s urban experience than the slow death of the city of
Detroit” (2014, p. 1). Of the many

writers who partake in the “dead Detroit” discourse, Eisinger is
one of the few who makes the
important point that urban death is not identical to biological
death. The city does not disappear.
Seven hundred thousand people still live there and, as in many
other deindustrialized cities, selective
Direct correspondence to: William K. Tabb, Queens College,
CUNY, 65-30 Kissena Blvd., Queens, NY 11367-1597. E-mail:
[email protected]
JOURNAL OF URBAN AFFAIRS, Volume 37, Number 1, pages
1–12.
Copyright C© 2015 Urban Affairs Association
All rights of reproduction in any form reserved.
ISSN: 0735-2166. DOI: 10.1111/juaf.12173
2 II JOURNAL OF URBAN AFFAIRS II Vol. 37/No. 1/2015
revitalization is possible over time. What is unlikely, unless
there is a substantive change in national
priorities, is that the low-income, crime-infested, government-
abandoned neighborhoods will be
incorporated into any such felicitous urban “rebirth.” Standard
explanations for Detroit’s death come
from conservatives, and in a counter-story from liberals. Both
conclude that not much can be done
for Detroit.
This essay interrogates issues assumed, and ignored, in both
mainstream bankruptcy narratives.
Throughout, attention will be paid to political choices made,
choices that go unrecognized and those
that in retrospect are now considered inevitable, and so not
really choices at all. Unlike the “Detroit

is dead” literature, I argue that while the city may be more
extreme in the extent of damage, it is
part of a wider phenomenon of painful urban austerity (Peck,
2012). The absent center of the Detroit
story is the ongoing distributional struggle in our cities and
local jurisdictions that is revealed in an
examination of this particular high-profile case. These outcomes
in Detroit and similarly afflicted
cities are the result of political choice made far beyond city
limits. While the article focuses on
the issues surrounding Detroit’s bankruptcy, most commentators
have invoked its story for larger
purposes. These inevitably color the narrative. As Joshua Akers
writes, “In most popular accounts and
critiques, the city of Detroit serves as a scrim . . . onto which
the hopes and ills of the commentator
are projected” (2013, p. 1075). We start by reviewing some of
the most common of such stories.
TALES OF A DEATH FORETOLD
Urban realities are conditioned by changing national priorities.
In the 1960s the federal government,
led by a liberal-labor coalition, responded to the voting strength
of the industrial belt by advancing
urban policies that included categorical grants in areas
important to the health of cities, with revenue
sharing based on the acknowledgment that many cities could not
meet the basic needs of their
citizens solely from self-generated revenues. It was understood
that continuing to raise local taxes
would lead to further erosion of the tax base as businesses and
better-off individuals left high-
tax jurisdictions, and that therefore revenue sharing was
justified to address urban problems. But
with deindustrialization and federal programs subsidizing

highway construction and home buyers,
troubled cities of the Northeast and the Great Lakes region
continued to lose population and electoral
clout to their suburbs. As the South and West grew, urban
federal spending was reduced and programs
dismantled (Tabb, forthcoming). A long period of austerity
urbanism brought a sense of inevitability
and helplessness to places like Detroit.
The dominant explanation of Detroit’s demise is that local
elected officials, and the voters who
elected them, were unwilling to make the hard choices
necessary to address their changed circum-
stances. Stepping back from the details (which will be
considered subsequently), the failure of Detroit
elucidates contrasting conservative and liberal diagnoses of
what ails America. It is possible to see
Detroit’s bankruptcy as a result of an inevitable failure of
liberalism, with its penchant to interfere
with market forces. Michigan is the home of what had been the
strongest labor union in the country.
A major force from the New Deal through the Great Society
(Amberg, 1994), the United Auto Work-
ers (UAW) was in the forefront of lobbying for progressive
social and economic legislation and of
providing support for politicians who backed such legislation;
much of it was adopted in Washington
and in large cities with progressive governments. The charge is
widely made that Michigan politi-
cians beholden to the UAW introduced and pushed policies
favoring unions and municipal workers
to the point of fiscal irresponsibility (see for example Ditmar
2009). There are those who blame
the union for pricing Detroit out of world auto markets,
bankrupting Chrysler and General Motors,
and then using its influence to persuade Barack Obama to bail

them out (Styn, 2013). Republican
presidential candidate Mitt Romney endorsed such a view,
declaring that, “The president gave the
[auto] companies to the UAW” (Politifact, 2013).
A counter-narrative reminds us that by the 1960s the multi-
story, huge plants in the city had become
obsolete, replaced by far larger single-story plants built outside
the city, often in areas with lower
wages and a non-union local labor market. Plants that remained
were upgraded, using labor-replacing
technologies. It has also been argued that Big Three
management, comfortable with its long-standing
oligopolistic position, made cars that were believed by
consumers to be inferior to the higher-quality
II If Detroit is Dead, Some Things Need To be Said at the
Funeral II 3
and lower-cost imports when the latter became available. To
analysts on the left, it is disingenuous to
blame urban disinvestment on the workers for the lack of
competitiveness of cars built in Detroit or
on the politicians, no matter how venal. These were not the
main causes of the city’s problems. The
alternative story tells of the permanent displacement of workers
as a result of technological change
and globalization of production that induced white flight from
the city. Blacks were almost totally
barred from moving to the suburbs by hostile white residents,
creating the situation of concentrated
black poverty in a diminished Detroit. It was George W. Bush’s
administration that initiated the
rescue of the auto companies, and the Obama White House that

agreed to plant closings and moving
production to China and elsewhere to lower costs. The UAW
had to agree to major wage and benefit
cuts.1
While much of the discussion continues to be motivated by
making points in support of a larger
political narrative, whether one accepts the conservative or the
liberal story, the bottom line for both
is that Detroit ends up in the same desperate position. The city
had reached the end of the line.
Conservatives dismiss giving aid out of hand. Liberals regret
that not much can be done. Either way,
Detroit is left for dead. And yet cities, unlike people and other
sentient beings, rarely die. For a city, the
question is different: What happens after its former rationale for
existence is gone? The deterioration
is painful and the suffering can persist for decades, but real
people and spaces continue to be present;
some neighborhoods do better than others. History continues. It
is possible that over time Detroit, or
at least its core and some select areas, will revitalize, as has
happened in other deindustrialized cities.
Admittedly, such a possibility is denied in most of this
literature where there is broad agreement that
what sets Detroit apart “is an inability to recover” (Reese,
Sands, & Skidmore, 2014, p. 113). But
should it be set apart so easily at a time that news reports speak
of a wave of municipal bankruptcies
“moving across the country” (PBS News Hour, 2014) and
property taxes, the major source of local
revenues, are limited in many jurisdictions by continuing
problems for so many mortgage holders?
Zillow’s Negative Equity Report (2014), based on third-quarter
2013 data, reports that one in five
American homeowners, or almost 10 million households, have a

mortgage that remains underwater,
holding back a market recovery. Five million households have
gone through home foreclosure since
the real estate market collapse began in 2007. Local
governments in a large number of places are
feeling the pain.
It is true that as Detroit’s bottom ranking suggests the “worst in
show” narrative makes the city
an outlier. But while Detroit is the greatest failure among
America’s troubled large cities, it is far
from the only locus of concentrated urban poverty, fiscal crisis,
and hardship. The Comprehensive
Annual Financial Reports for the years of the Great Recession
and recovery (2007–2011) undertaken
by Pew’s American Cities Project examine the fiscal condition
of the cities at the center of America’s
30 most populous metropolitan areas. They call attention not
only to present but to future pressures
on urban economies, detailing a number of factors—from
inadequate property tax collection to the
fiscal constraints at the state and federal levels—that impact aid
to cities. “[T]o an already shaky
fiscal picture,” Pew researchers predict still more serious
problems ahead. And, if the problem is a
general one, there are national consequences that isolating
Detroit should not be allowed to obscure.
“Addressing demands for local services, claims on existing
revenue from unfunded liabilities, and
other commitments with fewer dollars will mean tough choices
for local leaders and have serious
implications for the national economy” (Pew Charitable Trusts,
2013, p. 3). If Detroit is “dead,” there
are many cities in dangerously poor health, and the cumulative
consequences for the nation merit
careful attention rather than obituaries.

Looking at city-by-city evaluations, Richard Wolff (2013)
offers the wry suggestion that:
Detroit’s struggle with bankruptcy might find some relief, or at
least distraction, by presenting its
desperate economic and social conditions as a tourist attraction.
“Visit Detroit,” today’s advertise-
ment might begin, “see your region’s future here and now: the
streets, neighborhoods, abandoned
buildings, and the desolation. Scary, yes, but more gripping
than any imaginary ghost story.”
Chris Isidore (2013) of CNNMoney captures a common
pessimism about how our political system
responds to urban fiscal problems when he writes: “It’s virtually
impossible that Congress would
approve a Detroit bailout this time around, especially with so
many other local governments around
the country facing their own financial problems.” The votes are
simply not there, and have not been
for some time. (For a comprehensive view of the parameters see
Emily Johnson, 2014.)
Troubled cities lost population and electoral clout to suburbs
and, as the South and West grew in
voting strength, their representatives in Washington declined to
help shrinking cities in other regions.
Data from the Center on Budget and Policy Priorities show that
federal spending between 1981 and
1992 (adjusted for inflation) was reduced 82% for subsidized

housing, 63% for job training and
employment services and community development, and 40% for
social service block grant funding
(Johnson, 2002). This disinvestment problem has been building
for some time. A 1991 survey of 50
large cities by the U.S. Conference of Mayors similarly found
that during the 1980s, city budgets
increased by 95% but the federal contribution to those budgets
fell from 17% of spending in 1980
to 6% in 1990 (on federal aid to states and local governments in
this period see Hinds and Eckholm,
1990).
Central to these changes was a shift from a public philosophy—
in which the spatial unevenness of
resources to meet local needs was addressed through revenue
sharing—to a belief that all jurisdictions
must meet spending demands out of locally-sourced resources.
If basic public goods could not be
provided by city governments, the localities themselves were
blamed for incompetence and lack of
foresight, and left “to die.” While they tell different stories, to a
remarkable extent conservatives and
liberals agree that in the end Detroit’s decline is a result of
circumstances that cannot be reversed.
It is certainly true that Detroit will never resemble what it was
in the heyday of the auto industry, but
as other former industrial cities from Chicago to Pittsburgh
have demonstrated, the death of industry
does not mean that a new economic base cannot be created,
allowing a different city to evolve—even
if in such success stories city finances remain tenuous and
conflicts between downtown interests and
the neighborhoods can cause continuing tensions. To say that
Detroit is dead may be too pessimistic

when one considers the prospect for a selective revivification.
There are new investments being made
in the city that promise to make it, or at least parts of it, viable
again. This prospect is difficult to
evaluate.
What might be called the pro-renew growth coalition is engaged
in a public relations campaign
celebrating the city’s alleged comeback, an effort that has been
declared by pessimists as a challenge
“perhaps not seen since the Edsel” (Yaccino, 2014). Boosterism
after all can be expected from
politicians (Stabenow & Levin, 2013). But there is also a
developing literature that celebrates
dynamism in shrunken cities, including Detroit. Brookings
Institution scholars capture such optimism
when they look at the city and see “a passionate network of
visionaries and stubborn CEOs” catalyzing
innovation and collaboration in Detroit. They argue that
“Detroit is drawing a new geography of
innovation” and that “Detroit is an incredible living laboratory
where the future of American cities
is being demonstrated” (Katz & Bradley, 2013, pp. 116, 138,
140).
The revival story celebrates Dan Gilbert, who moved his
company, Quicken, to downtown Detroit
where he owns millions of square feet in dozens of buildings
that have been repurposed. Similarly,
Peter Karmanos brought Compuware and thousands of its
employees to a new downtown office
building. Such narratives make much of the presence of a
successful Whole Foods and find other
signs of new life in the city, or at least its downtown and
midtown areas. Others suggest that over time
the city’s remaining assets, along with rock-bottom land costs,

can attract revitalizing investment to
at least parts of Detroit, as has happened in other depressed
cities. A regrowth coalition can seize
the opportunity and find allies in the larger metropolitan area
where shared benefits are possible.
The jurisdictional divides that limited regional cooperation in
the past may be overcome by a new
sense of mutual interest (Hall & Jonas, 2014).
The limited spillover of such redevelopment has been noted in
studies of other cities involved in
similar revitalization schemes. Their limits by now are well-
understood (Smith, 1996); for example
the harbor development in Baltimore is a success in
revitalization. But cable TV’s The Wire illuminates
a different story, an” uncompromising autopsy . . . a failed
experiment, where every glimmer of
possibility leads down a fast track to disappointment and ruin”
(Gottlieb, 2014, p. 27); death of a city
imagery.
Funeral II 5
Evaluations of planning efforts by Detroit-based foundations
and the activities of private investors
reveal a bifurcated literature. On the one hand are the signs of
economic development in corporate
relocations, financial repopulation incentives, and public-
private partnerships (Solomon, 2014); on
the other, there is a continued exercise in social exclusion:
“urban shrinkage as a performance in
whiteness” (Pedroni, 2011). The final establishment of a
regional transportation agency (in 2013, on

the 23rd try since the 1970s) may provide for greater metro
Detroit integration. But urban revival
optimists maintain a narrow focus which demonstrates little
attention to the neighborhoods that are
ignored in their plans.
The optimists see rebirth in the city’s future. The pessimists are
skeptical. The concern here is
not to prognosticate. Rather it is to suggest that the question,
“Is the city alive or dead?,” misses the
more complicated story of the here-and-now of the bankruptcy
proposals the appointed Emergency
Financial Manager has made, the response from creditors and
citizens, and the way the story of the
bankruptcy is being told. These too are matters that need to be
better understood both for what they
say about Detroit—past, present and future—and for the
precedent that will be set for cities facing
similar difficulties. The details reveal a great deal that
illuminates the “death” of the city.
(RE)FRAMING DETROIT’S BANKRUPTCY
The law under which Governor Rick Snyder appointed a
financial manager for Detroit was
unpopular—and not only among Detroit residents. In 1990, the
Michigan legislature enacted Public
Act 72, which empowered the state to appoint an emergency
manager to intervene in municipalities
facing financial crisis. In 2011, the governor and legislature
enacted Public Act 4, which gave an
appointed emergency manager the authority to unilaterally
modify, reject, and terminate municipal
contracts. In a March 5, 2012 referendum Michigan voters
rejected PA 4. After the Michigan Court
of Appeals ruled in favor of the rejection, the legislature

enacted Public Act 436, effective March
28, 2013. Like PA 4, it gave emergency managers the right to
override contracts. A provision in the
new legislation immunized the law from public referendum. On
February 19, 2013, under PA 436, a
Financial Review Team appointed by Governor Snyder to
examine the city’s fiscal situation found
Detroit to be in a state of emergency. The Local Emergency
Finance Assistance Loan Board installed
a manager, Kevyn Orr, on March 14, 2013.
In an interview with the Wall Street Journal (Finley, 2013), Orr
made clear his orientation when he
spoke of Detroit’s resistance to what he thought needed to be
done. He described Detroit as having
been “dumb, lazy, happy and rich.” The city now needed to pay
for its lack of foresight. To Orr
and perhaps many readers of the Wall Street Journal, it was
understood that with both industry and
population having left the city, bankruptcy was the only
realistic solution. Public employees (who
were by implication “dumb, lazy, happy and rich”) would have
to lose benefits they were legally
entitled to receive.2 While inevitable, protests were, from Orr’s
perspective, a waste of time. The
emergency manager wanted to keep discussions “practical”; as
the protesting workers saw it, such
reasonableness was a product of the domination of finance
capital, with democracy an inconvenience.
Orr countered that, “Instead of engaging in a war of words, even
if you have to do that for public
consumption, come to me confidentially with a counter-
proposal. I haven’t heard that” (Associated
Press, 2013). From his and the governor’s perspective, such
harsh austerity was a given. This attitude
is of course similar to that of the troika functionaries in the face

of widespread protests in Greece,
Spain, and elsewhere. As in the case of Europe, analysis by
those suspicious of the “technical claims”
made by officials enforcing discipline and austerity offers a
counter narrative.
Media consideration of Detroit’s bankruptcy has for the most
part accepted the seemingly obvious
necessity of the imposition of external control over the city,
voiding the democratic rights of citizens.
The rationale is that the actions taken by an appointed manager
will be those that the city should have
taken, but did not. These decisions are controversial by
definition. The imposed program protects
some interests at the expense of others. In a profoundly
important way it determines ownership and
asset claims. In each of these cases, it is claimed, austerity will
be temporary and restart growth after
legacy debts have been removed. There is widespread
skepticism that this will be the case. Moody’s
Investors Service, for example, notes in a 2014 evaluation that
Detroit’s operating restructuring “faces
high hurdles” (Shepardson, 2014).
It is important to understand how the same neoliberal policy
regime that enabled significant debt
to build up now imposes a solution to the crises produced by
that unpayable debt (Tabb, 2014). The
headline figure of $18 billion that Detroit owed creditors was
presented as the necessity for declaring
bankruptcy. There are, however, other views based upon

alternative numbers which query the need
for bankruptcy and the solutions seemingly made necessary by
it. David Sirota (2013) offers one
such counter-narrative:
[T]he right blames state and municipal budget problems
exclusively on public employees’ retire-
ment benefits, often underfunding those public pensions for
years. The money raided from those
pension funds is then used to enact expensive tax cuts and
corporate welfare programs. After years
of robbing those pension funds to pay for such giveaways, a
crisis inevitably hits, and workers’
pension benefits are blamed—and then slashed. Meanwhile, the
massive tax cuts and corporate
subsidies are preserved, because we are led to believe they had
nothing to do with the crisis.
Ultimately, the extra monies taken from retirees are then often
plowed into even more tax cuts and
more corporate subsidies.
As Sirota suggests, examining spending and tax forgiveness
decisions helps us understand the
fuller nature of Detroit’s fiscal problems. Former Detroit News
columnist Bill Johnson, writing in
Crain’s Detroit in a 2011 article entitled “Detroit’s Corporate
Welfare Binge,” provides numbers on
how much the city spent in subsidies that have had dubious
returns. Michigan spent at least $6.65
billion in a recent year on corporate subsidies—the equivalent
of 30 cents per dollar of the state
budget (Story, 2012). Cancelling subsidies to businesses not yet
paid by the city and state, restoring
state aid, and a bridge loan would make bankruptcy
unnecessary.

Tax expenditures redistribute wealth in ways that are often not
understood by tax payers. This is
because the return to such expenditures is rarely measured;
rather it is simply asserted to be beneficial.
A review of the optimal contracting provisions where funds
subsidize the transference of property
rights; the costs, benefits, and extent to which giveaways are
justified, reveals a zero sum game in
which one jurisdiction’s victory comes at the expense of others
(Chirinko & Wilson, 2008). Using
data on industrial property tax abatement from 152 communities
in the five counties surrounding
Detroit from 1983 to 2002, researchers found that the benefits
to jurisdictions offering such incentives
are quite small relative to their cost. Tax abatements offered in
competing communities do not appear
to influence a jurisdiction’s industrial property value growth
(Kang, Skidmore, & Reese, 2013). A
comprehensive examination of thousands of local initiatives
nationwide (with more than 150,000 in
the data base) found that states, counties, and cities give
companies more than $80 billion a year
to attract and hold employers and jobs. The cost is no doubt
higher since even the most careful
compendium will miss many instances that are granted but not
priced.
No comprehensive survey exists of the number of jobs actually
created; neither the granting
authority that claims it has spent money and attracted jobs, nor
the companies involved who may not
deliver on numerical targets, have interest in follow-up. In
regard to Detroit: what is clear is that the
auto industry pioneered such negotiations with local authorities
over potential plant location; that
“even today, GM is the top beneficiary, public records

indicate.” It was followed closely by Ford and
Chrysler. Over the years, corporations have pitted local officials
against one another to get the most
lucrative packages. “States compete with other states, cities
compete with surrounding suburbs, and
even small towns have entered the race with the goal of
defeating their neighbors” (Story, 2012).
As Doug Winters, the attorney for Ypsilanti Township—a
satellite city for Detroit’s auto industry
that granted GM more than $200 million in incentives—
commented to an investigator, “They had
put basically a stranglehold on the entire state of Michigan and
other places across the country by
just grabbing these tax abatements by the billions” accompanied
by “a very thinly disguised threat
that if you don’t give us these tax abatements, then we’ll have
to go somewhere else” (Story, 2012).
Needless to say, such arrangements increase fiscal stress.
Funeral II 7
Without outside intervention or the restructuring that would
follow from bankruptcy, Detroit was
projected to have close to a $200 million negative cash flow in
Fiscal Year 2014 ($198.5 million as
projected in the city’s “Proposal for Creditors”), according to
the financial manager’s estimate. Some
of the obligations merit particular interest. Orr had set the cost
of terminating the city’s ill-considered
interest rate swaps at $345 million, a figure seen as inflated by
observers in order to strengthen the
case for default. Days before filing its bankruptcy petition the
number was lowered to $250 million,

months later to $220 million, and finally to $165 million. Judge
Steven W. Rhodes of the United
States Bankruptcy Court judged even that number too high
(Walsh, 2014a). This was because, as
Turbeville (2013) writes, “A strong case can be made that the
banks that sold these swaps may have
breached their ethical, and possibly legal, obligations to the city
in executing these deals.” Judge
Rhodes’ opinion lends support to the argument that the swap
contracts appeared to be illegal to begin
with and should therefore be invalidated.
Protestors outside the court carried signs making an additional
connection: “Bank of America
Owes Detroit for destroying our neighborhoods!” Given the cost
of acceding to bank claims, the
judge’s pronounced skepticism, and the widespread protests, a
very different approach came to be
taken by Orr. He brought suit against the banks, claiming the
deal was done “at the prompting
of investment banks that would profit handsomely from the
transactions” (Walsh, 2014b). In what
presaged a historic challenge to Wall Street, the city sought to
cancel the swaps, arguing that they
were illegal from the outset—sending shudders through the
municipal bond and financial product
markets. What is at stake are competing interpretations of what
fairness demands and the law allows.
The decision of whether the interest rate derivatives the city
was encouraged to buy by the banks
were on their face fraudulent, as the emergency financial
manager now declares (following judicial
and community pressure), will in part be decided on the basis of
understandings regarding the role
of the financial sector.

The real estate crash that produced the Great Recession,
precipitated as it was by the financial
institutions, was painful for communities across the United
States, most definitely including Detroit.
In order to keep the subprime bubble going, mortgage
originators sought out additional low-income
homeowners and urged them to remortgage their homes
irrespective of their ability to service the
loans. The incentive was that these mortgages would be bundled
into collateralized debt obligations
and passed on. The mortgage originator received payment up-
front, with the risk shifted onto those
who purchased the derivatives. The consequence of the collapse
of the real estate bubble was that
many of these underwater mortgages went into default and real
estate tax collection, a crucial source
of city revenue, fell. One may argue that the fall in property tax
revenues caused by the subprime
crisis, not the 2013 pension expenses, caused Detroit’s default.
According to Census Bureau data, non-seasonal vacant
properties increased 51% nationally, from
nearly 7 million in 2000 to 10 million in April 2010, with 10
states seeing increases of 70% or
more. High foreclosure rates contributed to these additional
vacancies. There was a redirection of
public attention to the magnitude of government—away from
the cause of these deficits and from
the plight of 10 million people who lost their homes after 2007
as a result of the subprime mortgage
collapse, foreclosures, and evictions. Because so much else had
gone wrong in Detroit, politicians
and academics tend to overlook the essential role that banks
played in its collapse.
Racial segregation and the number and rate of foreclosures

across the Detroit metropolitan area—
and in metropolitan counties in the Midwest—have been
correlated (Darden & Wyly, 2010). Seg-
regation was found to be an important contributor to the
foreclosure crisis, even after controlling
statistically for other relevant variables from housing conditions
to credit worthiness (Ruch & Massey,
2010). African-American neighborhoods were targeted more
aggressively than others for predatory
loans. At the height of the bubble nearly 50% of all loans going
to African-Americans were catego-
rized as subprime. The collapse of the bubble led to “the largest
loss of wealth for these communities
in modern history” (2012 National Fair Housing Alliance report,
as quoted in Gottesdiener, 2013).
Much of the transfer occurred through illegal practices by banks
subsequently required to pay out
large, if not sufficient, settlements for inducing people to incur
financial obligations they could not
possibly meet and causing many to lose their homes in
fraudulent foreclosures. The culpability of
the banks and the extent of their mistreatment of homeowners
are well documented (Tabb, 2012).
A similar discussion needs to happen around the issue of city
pension obligations and the
bankruptcy. The aforementioned $18 billion is long-term debt
and therefore not to be confused
with the current shortfall. Wallace Turbeville (2013), a former
Goldman Sachs investment banker,
tells us that this figure is “irrelevant to analysis of Detroit’s
insolvency and bankruptcy filing, highly

inflated and, in large part, simply inaccurate.” The real situation
is that the city needs to address its
cash flow shortfall which the emergency manager puts at only
$198 million, an amount that may also
be inflated because it is based on, as Turbeville argues,
“extraordinarily aggressive” assumptions.
As is common, and perhaps even unavoidable, the emergency
financial manager was chosen from
a firm that represented banks in bankruptcy proceedings. Orr’s
background was seen as a factor,
for example, in his claim that Detroit’s pension liabilities
accounted for $3.5 billion of the city’s
debt. This was an amount more than three and a half times the
amount reported by the actuary of
the Retirement System of the City of Detroit, a discrepancy that
raises questions in the minds of
critics as to how objective he would be in submitting a
restructuring plan to the bankruptcy court.
On the inevitable other hand, estimates made on the rather far-
fetched assumption of an 8% return
to pension fund investments have been seen as unrealistic.
Detroit, while facing the same overly
optimistic expected returns that allowed smaller contributions to
retirement funds in many places,
was not out of line in terms of the cost of its pension
obligations in relation to its revenues. The
judgment of experts at Boston College’s Center on Retirement,
a generally well-respected source,
provides comparisons showing Detroit’s pension costs
comprising 7.7% of its revenues, considerably
less than those of New York or Philadelphia, for example. It is
ranked number 65 out of 173 cities
surveyed with a funding level of 77% compared to the average
of 73% (Munnell et al., 2013).

Not only is the situation of Detroit not as bleak as is popularly
asserted, but issues of fairness also
arise. As “Buttonwood,” The Economist columnist writes,
Once a worker has retired, it is very hard to replace lost income.
Pensioners may have started
working in Detroit in the 1970s; they cannot reasonably have
anticipated the city’s current problems.
In contrast, most municipal bonds are held as part of diversified
portfolios; any loss resulting from
a writedown will cause only a small dent in the investor’s
wealth. Most bonds will have been bought
in recent years when the city’s problems had become well-
known and were reflected in its credit
rating; the city’s bonds were first classed as junk in 1992. Thus
investors were making a conscious
decision to grab a higher yield in the face of higher risks.
It was widely argued that pension obligations should be
prioritized over the claims of unsecured
bondholders of general obligation debt (Johnson, 2014).
A year after he had been appointed, Orr filed a 120-page plan of
adjustment, the legal name for
the document stating what the city says it can pay. To cut the
$18 billion debt, it called for giving
the unsecured holders of general obligation debt 20 cents on the
dollar and general pensioners 74%
of their existing monthly pensions that average a modest
$19,000 a year, but only 66% if pensioners
through their union resisted and dragged the matter out in court
hoping for a better deal. Police and
fire workers were offered 90%, with an offer of 96% if they
quickly accepted avoiding court costs
for the city. At the end of March 2014, Orr, on behalf of the

city, offered a revised version of the
city’s plan that would pay some of its bondholders and
pensioners less than originally offered (Dolan,
2014). There would then be further drawn-out legal challenges.
Under the core elements of the Orr plan, water and sewer bonds
would be paid in full, but other
bonds, including those funded with dedicated taxes, would
receive 15 cents or less on the dollar that,
like other elements of the amended plan (Attorneys for the
Debtor, 2014), may or may not be found
justified by the courts. By changing the status of the bonds—
reneging as critics maintain—Orr is
potentially damaging the promised commitment of “full faith
and credit,” not only on Detroit, but
other cities in Michigan and nationally. One way or another
precedents will be set (Alexander, 2014).
The plan rested on the most interesting accommodation in the
proposal, an extra $820 million that
would go to the pension fund and not to other creditors. This
elite intervention—made in consultation
among the governor’s representatives, nine local and national
foundations, and the Detroit Institute
of Arts (DIA)—would protect the DIA and its art collection that
would be insulated by independent
non-profit status from efforts of the creditors to force sale of its
world class holdings.
Funeral II 9
The financial press reported anger at a possible “cramdown”
that would pay unsecured bond

holders so little. The Economist’s March 1, 2014 bold-faced
headline declared, “Bondholders choke
at the city’s restructuring proposals.” But buying high-risk
bonds often brings such an outcome.
Public sector debtors had been more generous in the past out of
fear that future borrowing costs
would increase as a result of a strategy that challenged these
claims. In private bankruptcy cases
this was not an issue. How the bankruptcy plays out will set a
precedent for other deeply indebted
cities. By imposing such a settlement on bondholders, future
borrowing costs for other cities would
rise to reflect the new perception of greater risk for lenders. The
terms of the bankruptcy will
undoubtedly change and perhaps, as one pundit has written,
“Orr’s legacy will be a plan that, instead
of solving Detroit’s financial problems, will land the city in
court fighting lawsuits for years to come”
(Alexander, 2014).
Some of the city’s other creditors, like the Detroit Police
Lieutenants and Sergeants Associa-
tion, agreed to concessions fearing they would experience a
worse outcome in a cramdown by the
bankruptcy judge that would be imposed if they did not agree.
Editorial writers, and not only in
Detroit, contrasted what was happening in Detroit to what
happened in the housing market collapse
in which creditors, in that case powerful banks, did not have to
cut a deal with bankrupt homeowners.
While pensioners have to negotiate new terms, big banks did not
have to negotiate, “leaving home-
owners in the dust” (New York Times, 2014). This comparison
may be considered in terms of the
differences between Chapter 9 and Chapter 13 of the bankruptcy
code and how Michigan law is

being interpreted (Stoll et al., 2013). In any case, politics and
courtroom debate will go on for some
time and bargaining will evoke these and other arguments.
How bondholders and pensioners are treated in relation to
promises made to each requires consider-
ation of what justice demands, but also pragmatic
considerations. Many of the holders had purchased
high-yield bonds relatively recently at deep discount, given
what was understood as risk of loss. They
now demanded payment from which their speculative
investment would greatly profit. Yet any time
the expectation of the owners of financial obligations are
disappointed, powerful financial interests
protest what is declared an illegitimate redistribution of income
and wealth. In considering the issues
of bankruptcy and rights conflicts, it is important to reconsider
distribution of blame for public debt.
Understandings of the laws involved and justice claims for
priority, the (ir)responsibility of financial
institutions and their past, often illegal behavior, and the extent
of subsidies to private investors that
have proven costly to Detroit and other jurisdictions are
important considerations. To declare the
city of Detroit dead without closer attention to the next chapters
in the city’s story is insufficient.
When this is undertaken it is necessary to look back at the
allocation of responsibility for the city’s
continuing pain.
From the start, in his rejecting of Orr’s first proposal (there
have been five at this writing) Judge
Rhodes said the court “will not participate or perpetuate hasty
and imprudent financial decision-
making” and the judge indicated he would not approve
settlements, even those recommended by his

court’s own mediator, that do not resolve the city’s systemic
problems (Review and Outlook, 2014).
On September 2, 2014, the bankruptcy trial, formally a plan
confirmation hearing, began. The City
of Detroit would have to prove to Judge Rhodes’ satisfaction
that it had crafted a viable and fair plan
that corrects the financial mistakes of the past and revitalizes
services. Judge Rhodes has the power
to accept, offer modifications, or reject the plan. It is up to him
to determine whether the plan is fair,
follows the law, and has the prospect of success. If it does, he
would allow the city to emerge from
bankruptcy. At this writing, all that can be said is that there will
be perhaps as many as 80 people
testifying, that between the city and its creditors there will be
several hundred exhibits, and after
more weeks or months Judge Rhodes will issue a decision
(Bomey, 2014).
CONCLUDING THOUGHTS
This essay queries the story of the demise of Detroit. Whether
or not one finds potential in
revitalization efforts, the factors stressed in this paper should
encourage the re-examination of the
current situation of the city, particularly the framing of the
city’s bankruptcy. It has argued that
looking at the abundance of depressing statistics concerning
Detroit, it is easy to understand the
popularity of the “Detroit is dead” story. But because cities are

not like humans, they rarely die
permanently. They may fall on hard times; their governments
can cease to function in meeting their
most basic obligations. By interrogating the details and
reflecting on different accounts of the causes
of the crisis, and how these are implicit in the bankruptcy
discussion, some insight into the ongoing
distributional struggle that takes place in urban space can be
gained.
ENDNOTES
1 Romney was surely wrong in his interpretation of what Obama
had done. Not only was it President George W.
Bush who, before he left office, authorized loans to Chrysler
and GM, under Obama union workers were forced to
accept major concessions that continued after the companies
returned to profitability and, by 2013 enjoyed record
sales. Many American plants were closed as the Obama team
carried out a painful restructuring. Strategies to make
U.S.-based transnationals more competitive internationally
included greater foreign sourcing, with no particular
concern for displaced American workers.
What is impressive about the intervention by the Obama
administration, which effectively took control of what
had been America’s largest corporation, was its
uncompromising demand that GM overhaul its insulated
corporate
culture. This included requiring GM’s chief executive, Rick
Wagoner to resign. The hands-on task force appointed
by Obama also required the company to replace several
members of its board with new outside directors. GM and
Chrysler were required to cut jobs, close factories. They
emerged as leaner manufacturers, along the lines their
foreign competitors had pioneered—thanks to the government.

In the closing days of 2013, when the government sold the last
of what was once a 60% stake in GM, taxpayers
lost $10 billion of their $49.5 billion investment in the Detroit
automaker. The Center for Automotive Research in
Ann Arbor estimated that the government’s auto bailout helped
save 1.2 million jobs in the United States (Vlasic
& Lowrey, 2013). The decisiveness of the Obama administration
in carrying out a state-led industrial policy to
restructure the industry was impressive, in contrast to the
unwillingness of Congress to allocate new funds to
help the city of Detroit. President Obama did, however, instruct
administration officials to find as much money as
possible from funds already allocated to government agencies
that could be channeled to the city.
2 When word of Orr’s comments spread, retired city workers
demonstrated in front of his office demanding an
apology. The Detroit Free Press quoted Charles Jenkins, who
worked in the city’s recreation department for
30 years as saying, “You can go out there and talk nasty things
about our city, but we’re some good people,” adding
that his annual pension was less than $20,000 a year. “All
around the world, they’re talking about us like dogs,
saying what type of people we are. We’re a loving people, we’re
a happy people. Then they want to take something
from us. It don’t make sense. I worked hard. Everybody else
here worked hard.” The group of retirees organized
with the help of the American Federation of State, City and
Municipal Employees, the city’s largest employee
union, rallied outside City Hall before going upstairs to Orr’s
office. They held signs that said, “I am not lazy!” and
“I earned my pension” (Guillen & Gardner, 2013).
To paint Orr as sinister and unfeeling seems a mistake, at least
if one also pays attention to other incidents such

as his response in a New York restaurant to a disgruntled banker
who told him, “We’re going to punish you.” Orr
told the banker standing over his table about a little girl he saw
on Seven Mile Road waiting for a bus ride home
from school “that would likely take her to a blighted
neighborhood with broken streetlights. ‘None of us would let
our children live that way—and that is the life of the children in
this city,’ Orr, a father of two, recalled telling the
speechless banker, whom he declined to identify” (Livengood,
2014).
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com/visuals/negative-equity/#4/39.98/-106.92

ABOUT THE AUTHOR
William K. Tabb is Professor Emeritus of Economics at Queens
College and of Economics, Political
Science and Sociology at the Graduate Center, City University
of New York. He has been visiting
professor of economics at the University of California, Berkeley
and scholar in residence at Kansai
University, Japan. Tabb was Principal Consultant, Evaluation
Office, United Nations Development
Program study of South-South Cooperation. His books include
The Long Default: New York and the
Urban Fiscal Crisis, The Political Economy of the Black Ghetto,
The Restructuring of Capitalism
in Our Time, Economic Governance in the Age of Globalization,
Unequal Partners: A Primer on
Globalization, Reconstructing Political Economy: The Great
Divide in Economic Thought, and The
Postwar Japanese System: Cultural Economy and Economic
Transformation.
Copyright of Journal of Urban Affairs is the property of Wiley-
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without the copyright holder's
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Typeface: 10.5/12 Times New Roman MT Std
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All credits appearing on page or at the end of the book are
considered to be an extension of the copyright
page.
Library of Congress Cataloging-in-Publication Data

Gray, Clifford F.
Project management : the managerial process / Erik W. Larson,
Clifford F.
Gray.—Sixth edition.
pages cm
Previous editions published as: Project management : the
managerial
process / Clifford F. Gray, Erik W. Larson.
ISBN 978-0-07-809659-4 (alk. paper)
1. Project management. 2. Time management. 3. Risk
management. I. Larson, Erik W., 1952-
II. Title.
HD69.P75G72 2014
658.4904—dc23
2013027472
The Internet addresses listed in the text were accurate at the
time of publication. The inclusion of a
website does not indicate an endorsement by the authors or
McGraw-Hill Education, and McGraw-Hill
Education does not guarantee the accuracy of the information
presented at these sites.
www.mhhe.com
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v

About the Authors
Erik W. Larson
ERIK W. LARSON is professor of project management at the
College of Busi-
ness, Oregon State University. He teaches executive, graduate,
and undergraduate
courses on project management and leadership. His research and
consulting activ-
ities focus on project management. He has published numerous
articles on matrix
management, product development, and project partnering. He
has been honored
with teaching awards from both the Oregon State University
MBA program and
the University of Oregon Executive MBA program. He has been
a member of the
Portland, Oregon, chapter of the Project Management Institute
since 1984. In
1995 he worked as a Fulbright scholar with faculty at the
Krakow Academy of
Economics on modernizing Polish business education. He was a
visiting professor
at Chulalongkorn University in Bangkok, Thailand, and at
Baden-Wuerttemberg
Cooperative State University in Bad Mergentheim, Germany. He
received a B.A.
in psychology from Claremont McKenna College and a Ph.D. in
management
from State University of New York at Buffalo. He is a certified
project manage-
ment professional (PMP) and Scrum Master.
Clifford F. Gray
CLIFFORD F. GRAY is professor emeritus of management at
the College of
Business, Oregon State University. He continues to teach

undergraduate and grad-
uate project management courses overseas and in the United
States; he has per-
sonally taught more than 100 executive development seminars
and workshops.
His research and consulting interests have been divided equally
between opera-
tions management and project management; he has published
numerous articles
in these areas, plus a text on project management. He has also
conducted research
with colleagues in the International Project Management
Association. Cliff has
been a member of the Project Management Institute since 1976
and was one of the
founders of the Portland, Oregon, chapter. He was a visiting
professor at Kasetsart
University in Bangkok, Thailand, in 2005. He was the president
of Project Man-
agement International, Inc. (a training and consulting firm
specializing in project
management) 1977–2005. He received his B.A. in economics
and management
from Millikin University, M.B.A. from Indiana University, and
doctorate in oper-
ations management from the College of Business, University of
Oregon. He is
certified Scrum Master.
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“Man’s mind, once stretched by a new idea, never
regains its original dimensions.”
Oliver Wendell Holmes, Jr.
To my family who have always encircled me with
love and encouragement—my parents (Samuel
and Charlotte), my wife (Mary), my sons and their
wives (Kevin and Dawn, Robert and Sally) and
their children (Ryan, Carly, Connor and Lauren).
C.F.G.
“We must not cease from exploration and the end of all
exploring will be to arrive where we begin and to know
the place for the first time.”
T. S. Eliot
To Ann whose love and support has brought out
the best in me. And, to our girls Mary, Rachel, and
Tor-Tor for the joy and pride they give me. Finally,
to my muse, Neil, for the faith and inspiration he
instills.
E.W.L
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vii
Preface
Our motivation in writing this text continues to be to provide a
realistic,
socio-technical view of project management. In the past,
textbooks on project
management focused almost exclusively on the tools and
processes used to man-
age projects and not the human dimension. This baffled us since
people not tools
complete projects! While we firmly believe that mastering tools
and processes is
essential to successful project management, we also believe that
the effectiveness
of these tools and methods is shaped and determined by the
prevailing culture of
the organization and interpersonal dynamics of the people
involved. Thus, we try
to provide a holistic view that focuses on both of these
dimensions and how they
interact to determine the fate of projects.
The role of projects in organizations is receiving increasing
attention. Projects
are the major tool for implementing and achieving the strategic
goals of the orga-
nization. In the face of intense, worldwide competition, many
organizations have
reorganized around a philosophy of innovation, renewal, and
organizational
learning to survive. This philosophy suggests an organization
that is flexible and
project driven. Project management has developed to the point
where it is a pro-
fessional discipline having its own body of knowledge and
skills. Today it is nearly

impossible to imagine anyone at any level in the organization
who would not ben-
efit from some degree of expertise in the process of managing
projects.
Audience
This text is written for a wide audience. It covers concepts and
skills that are used
by managers to propose, plan, secure resources, budget, and
lead project teams to
successful completions of their projects. The text should prove
useful to students
and prospective project managers in helping them understand
why organizations
have developed a formal project management process to gain a
competitive advan-
tage. Readers will find the concepts and techniques discussed in
enough detail to
be immediately useful in new-project situations. Practicing
project managers will
find the text to be a valuable guide and reference when dealing
with typical prob-
lems that arise in the course of a project. Managers will also
find the text useful in
understanding the role of projects in the missions of their
organizations. Analysts
will find the text useful in helping to explain the data needed
for project imple-
mentation as well as the operations of inherited or purchased
software. Members
of the Project Management Institute will find the text is well
structured to meet
the needs of those wishing to prepare for PMP (Project
Management Profes-
sional) or CAPM (Certified Associate in Project Management)

certification
exams. The text has in-depth coverage of the most critical
topics found in PMI’s
Project Management Body of Knowledge (PMBOK). People at
all levels in the
organization assigned to work on projects will find the text
useful not only in pro-
viding them with a rationale for the use of project management
processes but also
because of the insights they will gain on how to enhance their
contributions to
project success.
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viii Preface
Our emphasis is not only on how the management process
works, but more
importantly, on why it works. The concepts, principles, and
techniques are univer-
sally applicable. That is, the text does not specialize by industry
type or project
scope. Instead, the text is written for the individual who will be
required to man-
age a variety of projects in a variety of different
organizational settings. In the
case of some small projects, a few of the steps of the
techniques can be omitted,
but the conceptual framework applies to all organizations in

which projects are
important to survival. The approach can be used in pure project
organizations
such as construction, research organizations, and engineering
consultancy firms.
At the same time, this approach will benefit organizations that
carry out many
small projects while the daily effort of delivering products or
services continues.
Content
In this and other editions we continue to resist the forces that
engender scope
creep and focus only on essential tools and concepts that are
being used in the real
world. We have been guided by feedback from practitioners,
teachers, and stu-
dents. Some changes are minor and incremental, designed to
clarify and reduce
confusion. Other changes are significant. They represent new
developments in the
field or better ways of teaching project management principles.
Below are major
changes to the sixth edition.
• Computer exercises and MS Project examples have been
updated to MS Project
2010, and 2013 including video tutorials to help students master
the basics of
MS Project.
• Terms and concepts have been updated to be consistent with
the fifth edition of
the Project Management Body of Knowledge (2013).

• The chapters on Agile Project Management and Careers in
Project Manage-
ment have been expanded.
• Chapter 6 utilizes a new example that clarifies the differences
between free and
total slack. Chapters 1, 2, 4, 5 and 14 have been updated.
• A description of the Activity on Arrow (AoA) method for
calculating networks
has been deleted from the text and is now available only in the
Instructor’s
Manual.
• New student exercises and cases have been added to many
chapters.
• The Blue Zuma computer exercise in Appendix 2 has been
replaced by the new
Red Zuma exercise.
• The Snapshot from Practice boxes feature a number of new
examples of project
management in action as well as new Research Highlights that
continue to pro-
mote practical application of project management.
• The Instructor’s Manual contains a listing of current YouTube
videos that cor-
respond to key concepts and Snapshots from Practice.
Overall the text addresses the major questions and issues the
authors have encoun-
tered over their 60 combined years of teaching project
management and consult-
ing with practicing project managers in domestic and foreign

environments. The
following questions represent the issues and problems
practicing project managers
find consuming most of their effort: What is the strategic role
of projects in con-
temporary organizations? How are projects prioritized? What
organizational and
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Preface ix
managerial styles will improve chances of project success?
How do project manag-
ers orchestrate the complex network of relationships involving
vendors, subcon-
tractors, project team members, senior management, functional
managers, and
customers that affect project success? What factors contribute
to the development
of a high-performance project team? What project management
system can be set
up to gain some measure of control? How do managers prepare
for a new interna-
tional project in a foreign culture? How does one pursue a
career in project
management?
Project managers must deal with all these concerns to be
effective. All of these
issues and problems represent linkages to an integrative project

management view.
The chapter content of the text has been placed within an
overall framework that
integrates these topics in a holistic manner. Cases and snapshots
are included
from the experiences of practicing managers. The future for
project managers
appears to be promising. Careers will be determined by success
in managing
projects.
Student Learning Aids
The text website (www.mhhe.com/larsongray6e) includes study
outlines, online
quizzes, PowerPoint slides, videos, Microsoft Project Video
Tutorials and web
links. The trial version of Microsoft Project software is
included on its own
CD-ROM free with the text.
Acknowledgments
We would like to thank Lacey McNeely for updating the Test
Bank and Online
Quizzes; Charlie Cook for revising the PowerPoint slides;
Oliver F. Lehmann for
providing access to PMBOK study questions; and Pinyarat
Sirisomboonsuk for
accuracy checking the text and Instructor’s Resource Manual
content.
Next, it is important to note that the text includes contributions
from numer-
ous students, colleagues, friends, and managers gleaned from
professional conver-
sations. We want them to know we sincerely appreciate their

counsel and
suggestions. Almost every exercise, case, and example in the
text is drawn from a
real-world project. Special thanks to managers who graciously
shared their cur-
rent project as ideas for exercises, subjects for cases, and
examples for the text.
Shlomo Cohen, John A. Drexler, Jim Moran, John Sloan, Pat
Taylor, and John
Wold, whose work is printed, are gratefully acknowledged.
Special gratitude is due
Robert Breitbarth of Interact Management, who shared
invaluable insights on
prioritizing projects. University students and managers deserve
special accolades
for identifying problems with earlier drafts of the text and
exercises.
We are indebted to the reviewers of past editions who shared
our commitment
to elevating the instruction of project management. The
reviewers include Paul S.
Allen, Rice University; Denis F. Cioffi, George Washington
University; Joseph D.
DeVoss, DeVry University; Edward J. Glantz, Pennsylvania
State University;
Michael Godfrey, University of Wisconsin–Oshkosh; Robert
Key, University of
Phoenix; Dennis Krumwiede, Idaho State University; Nicholas
C. Petruzzi, Uni-
versity of Illinois–Urbana/Champaign; William R. Sherrard,
San Diego State
University; S. Narayan Bodapati, Southern Illinois University at
Edwardsville;
Warren J. Boe, University of Iowa; Burton Dean, San Jose
State University; Kwasi

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x Preface
Amoako-Gyampah, University of North Carolina–Greensboro;
Owen P. Hall,
Pepperdine University; Bruce C. Hartman, University of
Arizona; Richard Irving,
York University; Robert T. Jones, DePaul University; Richard
L. Luebbe, Miami
University of Ohio; William Moylan, Lawrence Technological
College of
Business; Edward Pascal, University of Ottawa; James H.
Patterson, Indiana Uni-
versity; Art Rogers, City University; Christy Strbiak, U.S. Air
Force Academy;
David A. Vaughan, City University; and Ronald W. Witzel,
Keller Graduate
School of Management. Nabil Bedewi, Georgetown University;
Scott Bailey, Troy
University; Michael Ensby, Clarkson University; Eldon Larsen,
Marshall Univer-
sity; Steve Machon, DeVry University–Tinley Park; William
Matthews, William
Patterson University; Erin Sims, DeVry University–Pomona;
Kenneth Solheim,
DeVry University–Federal Way; and Oya Tukel, Cleveland
State University.
Gregory Anderson, Weber State University; Dana Bachman,
Colorado Christian

University; Alan Cannon, University of Texas, Arlington;
Susan Cholette, San
Francisco State; Michael Ensby, Clarkson University; Charles
Franz, University
of Missouri, Columbia; Raouf Ghattas, DeVry University;
Robert Groff, West-
wood College; Raffael Guidone, New York City College of
Technology; George
Kenyon, Lamar University; Elias Konwufine, Keiser University;
Rafael Landaeta,
Old Dominion University; Muhammad Obeidat, Southern
Polytechnic State
University; Linda Rose, Westwood College; Oya Tukel,
Cleveland State Univer-
sity; and Mahmoud Watad, William Paterson University.
In the sixth edition we continue to commit to improving the
text content and
improving instruction of project management. We are grateful
to those reviewers
who provided helpful critiques and insights on the fifth edition,
which helped us
prepare this revision. The reviewers for the sixth edition include
Victor Allen,
Lawrence Technological University; Mark Angolia, East
Carolina University; Alan
Cannon, University of Texas at Arlington; Robert Cope,
Southeastern Louisiana
University; Kenneth DaRin, Clarkson University; Ron Darnell,
Amberton Uni-
versity; Jay Goldberg, Marquette University; Mark Huber,
University of Georgia;
Marshall Issen, Clarkson University; Charles Lesko, East
Carolina University;
Lacey McNeely, Oregon State University; Donald Smith, Texas
A&M University;
Peter Sutanto, Prairie View A&M University; Jon Tomlinson,

University of North-
western Ohio. We thank you for your many thoughtful
suggestions and for making
our book better. Of course we accept responsibility for the final
version of the text.
In addition, we would like to thank our colleagues in the
College of Business at
Oregon State University for their support and help in
completing this project. In par-
ticular, we recognize Prem Mathew and Ping-Hung Hsieh for
their helpful advice and
suggestions. We also wish to thank the many students who
helped us at different stages
of this project, most notably Neil Young, Saajan Patel,
Katherine Knox, Dat Nguyen,
Lacey McNeely and David Dempsey. Mary Gray deserves
special credit for editing
and working under tight deadlines on earlier editions. Special
thanks go to Pinyarat
(“Minkster”) Sirisomboonsuk for her help in preparing the last
four editions.
Finally, we want to extend our thanks to all the people at
McGraw-Hill/Higher
Education for their efforts and support. First, we would like to
thank Thomas
Hayward and Wanda Zeman for providing editorial direction,
guidance, and
management of the book’s development for the sixth edition.
And we would also
like to thank Jane Mohr, Heather Ervolino, Nichole Birkenholz,
Arpana Kumari,
and Janean Utley for managing the final production, design,
supplement, and
media phases of the sixth edition.
Erik W. Larson

Clifford F. Gray
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xi
Note to Student
You will find the content of this text highly practical, relevant,
and current. The
concepts discussed are relatively simple and intuitive. As you
study each chapter
we suggest you try to grasp not only how things work, but why
things work. You
are encouraged to use the text as a handbook as you move
through the three levels
of competency:
I know.
I can do.
I can adapt to new situations.
Project management is both people and technical oriented.
Project manage-
ment involves understanding the cause-effect relationships and
interactions
among the sociotechnical dimensions of projects. Improved
competency in

these dimensions will greatly enhance your competitive edge as
a project
manager.
The field of project management is growing in importance and
at an expo-
nential rate. It is nearly impossible to imagine a future
management career that
does not include management of projects. Résumés of
managers will soon be
primarily a description of the individual’s participation in and
contributions to
projects.
Good luck on your journey through the text and on your future
projects.
Chapter-by-Chapter Revisions for the Sixth Edition
Chapter 1: Modern Project Management
• New Snapshot: Project Management in Action 2013.
• Makes stronger case for why project management is essential
skill set for
anyone’s career.
• New Snapshot: A Dozen Examples of Projects Given to
Recent College
Graduates.
Chapter 2: Organization Strategy and Project Selection
• New Snapshot: Does IBM’s Watson’s Jeopardy Project
Represent a Change in
Strategy?
• New Snapshot: HP’s Strategy Revision.

• Expanded discussion on the importance of project sponsors.
• Revamped description of how project risks are assessed
during the proposal
phase.
• New case: Fund Raising Project Selection Case.
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xii Note to Student
Chapter 3: Organization: Structure and Culture
• New Snapshot: Google-y.
• New case: Horizon Consulting.
Chapter 4: Defining the Project
• A new central example of a Work Breakdown Structure
(WBS).
• Discussion of Process Breakdown Structure (PBS).
• Inclusion of “power/interest” map for assessing stakeholders.
Chapter 5: Estimating Project Times and Costs
• New Snapshot: Reducing Estimating Error.
• Introduction to Reference Class Forecasting methodology.
• New case: Post Graduation Adventure.
Chapter 6: Developing a Project Schedule

• A new central example that clarifies the differences between
free and total
slack.
• A description of the Activity on Arrow (AoA) method for
calculating networks
has been deleted from the text and is now available only in the
Instructor’s
Manual.
Chapter 7: Managing Risk
• New Snapshot: Playing Soccer in the Desert.
• New case: Sustaining Project Risk Management during
Implementation.
Chapter 8 Appendix 1: The Critical-Chain Approach
• New Snapshot: Critical Chain Applied to Airplane Part
Arrivals.
Chapter 9: Reducing Project Duration
• New Snapshot: Smartphone Wars.
Chapter 10: Leadership: Being an Effective Project Manager
• New case: The Blue Sky Project.
• New ethical dilemmas mini-case: Old Princeton Landing.
Chapter 11: Managing Project Teams
• Expanded discussion on project vision.
Chapter 12: Outsourcing: Managing Interorganizational

Relations
• New Snapshot: The Boeing 787 Dreamliner.
• New Snapshot: U.S. Department of Defense’s Value
Engineering Awards 2013.
• New case: Shell Case Fabricators.
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Note to Student xiii
Chapter 15: International Projects
• More extensive discussion of financial risks associated with
international
projects.
• New Snapshot: Project X–Namibia, Africa.
• New exercise assessing relative safety of different countries.
Chapter 17: An Introduction to Agile Project Management
• Elaborates on the role of product owner in Scrum.
• Includes all the principles of Agile Manifesto.
• Introduces the use of Sprint and Release Burndown charts to
monitor progress
on Agile projects.
• Discusses the use of hybrid models that combine elements of
Agile and

Waterfall.
Chapter 18: Project Management Career Paths
• New Snapshot: Ron Parker.
• Discussion on how to take advantage of opportunities at a
university to de-
velop project management skills.
• Expanded discussion of the value of certification.
• New Snapshot: Grooming the Next Generation at Intel.
Appendix 2: Computer Project Exercises
• The Blue Zuma computer exercise in Appendix 2 has been
replaced by a new
Red Zuma exercise.
• A video tutorial that demonstrates step by step how to
complete and answer
the original Blue Zuma exercise is available online for students.
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xiv
Brief Contents
Preface vii

1. Modern Project Management 2
2. Organization Strategy and Project
Selection 24
3. Organization: Structure and Culture 66
4. Defining the Project 100
5. Estimating Project Times and
Costs 128
6. Developing a Project Plan 160
7. Managing Risk 204
8. Scheduling Resources and Costs 250
9. Reducing Project Duration 304
10. Leadership: Being an Effective Project
Manager 338
11. Managing Project Teams 374
12. Outsourcing: Managing
Interorganizational Relations 418
13. Progress and Performance
Measurement and Evaluation 456
14. Project Closure 510
15. International Projects 538
16. Oversight 572

17. An Introduction to Agile Project
Management 590
18. Project Management Career Paths 614
APPENDIX
One
Solution
s to Selected Exercises 627
Two Computer Project Exercises 641
GLOSSARY 658
ACRONYMS 667
PROJECT MANAGEMENT
EQUATIONS 668
INDEX 669
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xv
Contents
Preface vii
Chapter 1
Modern Project Management 2
What Is a Project? 6
The Project Life Cycle 8
The Project Manager 9
Being Part of a Project Team 10
Current Drivers of Project Management 11
Project Governance 15
Alignment of Projects with Organizational
Strategy 16
Project Management Today: A Socio-Technical
Approach 17
Summary 18

Chapter 2
Organization Strategy and Project
Selection 24
The Strategic Management Process: An
Overview 26
Four Activities of the Strategic Management
Process 29
The Need for a Project Portfolio Management
System 32
Problem 1: The Implementation Gap 32
Problem 2: Organization Politics 33
Problem 3: Resource Conflicts and Multitasking 34
A Portfolio Management System 36
Classification of the Project 36
Selection Criteria 37
Financial Criteria 37
Nonfinancial Criteria 39
Applying a Selection Model 42

Sources and Solicitation of Project
Proposals 43
Ranking Proposals and Selection of Projects 44
Managing the Portfolio System 46
Balancing the Portfolio for Risks and Types of
Projects 48
Summary 49
Appendix 2.1: Request for Proposal (RFP) 63
Chapter 3
Organization: Structure and Culture 66
Project Management Structures 67
Organizing Projects within the Functional
Organization 68
Organizing Projects as Dedicated Teams 71
Organizing Projects within a Matrix Arrangement 74
Different Matrix Forms 75
What Is the Right Project Management
Structure? 79
Organization Considerations 79

Project Considerations 79
Organizational Culture 81
What Is Organizational Culture? 81
Identifying Cultural Characteristics 83
Implications of Organizational Culture for
Organizing Projects 86
Summary 89
Chapter 4
Defining the Project 100
Step 1: Defining the Project Scope 102
Employing a Project Scope Checklist 102
Step 2: Establishing Project Priorities 106
Step 3: Creating the Work Breakdown Structure 108
Major Groupings Found in a WBS 108
How WBS Helps the Project Manager 109
A Simple WBS Development 109
Step 4: Integrating the WBS with the
Organization 113

Step 5: Coding the WBS for the Information
System 113
Process Breakdown Structure 116
Responsibility Matrices 117
Project Communication Plan 118
Summary 122
Chapter 5
Estimating Project Times and Costs 128
Factors Influencing the Quality of Estimates 130
Estimating Guidelines for Times, Costs, and
Resources 131
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xvi Contents

Top-Down versus Bottom-Up
Estimating 133
Methods for Estimating Project Times and
Costs 135
Top-Down Approaches for Estimating Project Times
and Costs 135
Bottom-Up Approaches for Estimating Project Times
and Costs 139
A Hybrid: Phase Estimating 141
Level of Detail 143
Types of Costs 144
Refining Estimates 146
Creating a Database for
Estimating 149
Summary 150
Appendix 5.1: Learning Curves for Estimating 155
Chapter 6
Developing a Project Plan 160
Developing the Project Network 161
From Work Package to Network 162
Constructing a Project Network 164

Terminology 164
Basic Rules to Follow in Developing Project
Networks 164
Activity-on-Node (AON)
Fundamentals 165
Network Computation Process 169
Forward Pass—Earliest Times 169
Backward Pass—Latest Times 171
Determining Slack (or Float) 173
Using the Forward and Backward Pass
Information 175
Level of Detail for Activities 176
Practical Considerations 176
Network Logic Errors 176
Activity Numbering 176
Use of Computers to Develop Networks 177
Calendar Dates 180
Multiple Starts and Multiple Projects 180
Extended Network Techniques to Come Closer to

Reality 180
Laddering 180
Use of Lags to Reduce Schedule Detail and Project
Duration 180
An Example Using Lag Relationships—The Forward
and Backward Pass 185
Hammock Activities 186
Summary 187
Chapter 7
Managing Risk 204
Risk Management Process 205
Step 1: Risk Identification 207
Step 2: Risk Assessment 210
Probability Analysis 213
Step 3: Risk Response Development 214
Mitigating Risk 214
Avoiding Risk 215
Transferring Risk 216
Retaining Risk 216

Contingency Planning 216
Technical Risks 218
Schedule Risks 220
Cost Risks 220
Funding Risks 221
Opportunity Management 221
Contingency Funding and Time Buffers 222
Budget Reserves 223
Management Reserves 223
Time Buffers 224
Step 4: Risk Response Control 224
Change Control Management 225
Summary 229
Appendix 7.1: PERT and PERT Simulation 239
Chapter 8
Scheduling Resources and Costs 250
Overview of the Resource Scheduling Problem 251
Types of Resource Constraints 253
Classification of a Scheduling Problem 255

Resource Allocation Methods 255
Assumptions 255
Time-Constrained Project: Smoothing Resource
Demand 255
Resource-Constrained Projects 257
Computer Demonstration of Resource-
Constrained Scheduling 262
The Impacts of Resource-Constrained Scheduling 268
Splitting Activities 268
Benefits of Scheduling Resources 270
Assigning Project Work 270
Multiproject Resource Schedules 271
Using the Resource Schedule to Develop a Project
Cost Baseline 273
Why a Time-Phased Budget Baseline Is Needed 273
Creating a Time-Phased Budget 274
Summary 279
Appendix 8.1: The Critical-Chain Approach 293
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Contents xvii
Chapter 9
Reducing Project Duration 304
Rationale for Reducing Project Duration 305
Options for Accelerating Project
Completion 307
Options When Resources Are Not Constrained 308
Options When Resources Are Constrained 310
Project Cost–Duration Graph 313
Explanation of Project Costs 313
Constructing a Project Cost–Duration Graph 314
Determining the Activities to Shorten 314
A Simplified Example 316

Practical Considerations 318
Using the Project Cost–Duration Graph 318
Crash Times 319
Linearity Assumption 319
Choice of Activities to Crash Revisited 319
Time Reduction Decisions and Sensitivity 320
What if Cost, Not Time, Is the Issue? 321
Summary 323
Chapter 10
Leadership: Being an Effective Project
Manager 338
Managing versus Leading a Project 339
Managing Project Stakeholders 340
Influence as Exchange 344
Task-Related Currencies 345
Position-Related Currencies 346
Inspiration-Related Currencies 346
Relationship-Related Currencies 346
Personal-Related Currencies 347

Social Network Building 347
Mapping Dependencies 347
Management by Wandering Around (MBWA) 349
Managing Upward Relations 350
Leading by Example 352
Ethics and Project Management 355
Building Trust: The Key to Exercising
Influence 357
Qualities of an Effective Project Manager 359
Summary 362
Chapter 11
Managing Project Teams 374
The Five-Stage Team Development Model 377
Situational Factors Affecting Team
Development 378
Building High-Performance Project Teams 380
Recruiting Project Members 380
Conducting Project Meetings 383
Establishing a Team Identity 387
Creating a Shared Vision 388
Managing Project Reward Systems 391

Orchestrating the Decision-Making
Process 392
Managing Conflict within the Project 394
Rejuvenating the Project Team 398
Managing Virtual Project Teams 399
Project Team Pitfalls 403
Groupthink 403
Bureaucratic Bypass Syndrome 404
Team Spirit Becomes Team Infatuation 404
Going Native 404
Summary 405
Chapter 12
Outsourcing: Managing Interorganizational
Relations 418
Outsourcing Project Work 419
Best Practices in Outsourcing Project Work 423
Well-Defined Requirements and Procedures 424
Extensive Training and Team-Building Activities 426
Well-Established Conflict Management Processes

in Place 427
Frequent Review and Status Updates 427
Co-Location When Needed 429
Fair and Incentive-Laden Contracts 430
Long-Term Outsourcing Relationships 431
The Art of Negotiating 432
1. Separate the People from the
Problem 433
2. Focus on Interests, Not Positions 434
3. Invent Options for Mutual Gain 435
4. When Possible, Use Objective Criteria 435
Dealing with Unreasonable People 436
A Note on Managing Customer Relations 437
Summary 440
Appendix 12.1: Contract Management 449
Chapter 13
Progress and Performance Measurement and
Evaluation 456
Structure of a Project Monitoring Information
System 457

The Project Control Process 458
Monitoring Time Performance 459
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xviii Contents
Development of an Earned Value Cost/Schedule
System 462
What Costs Are Included in Baselines? 465
Methods of Variance Analysis 465
Developing a Status Report: A Hypothetical
Example 467
Assumptions 467
Baseline Development 467
Development of the Status Report 468

Indexes to Monitor Progress 473
Performance Indexes 473
Project Percent Complete Indexes 474
Technical Performance Measurement 475
Software for Project Cost/Schedule Systems 475
Additional Earned Value Rules 476
Forecasting Final Project Cost 476
Other Control Issues 479
Scope Creep 479
Baseline Changes 481
The Costs and Problems of Data Acquisition 482
Summary 483
Appendix 13.1: The Application of Additional
Earned Value Rules 499
Appendix 13.2: Obtaining Project Performance
Information from MS Project 2010 506
Chapter 14
Project Closure 510
Types of Project Closure 512

Wrap-up Closure Activities 513
Creating the Final Report 516
Post-Implementation Evaluation 517
Team Evaluation 517
Individual, Team Member, and Project Manager
Performance Reviews 520
Retrospectives 522
Why Retrospectives? 522
Initiating the Retrospective Review 523
Use of an Independent Facilitator 524
Selection of a Facilitator 524
Roles of a Facilitator 524
Managing a Retrospective 525
Overseeing a Post-Project Retrospective 526
Utilization of Retrospectives 529
Archiving Retrospectives 529
Concluding Retrospective Notes 530
Summary 530
Appendix 14.1: Project Closeout Checklist 533
Appendix 14.2: Euro Conversion—Project Closure
Checklist 535

Chapter 15
International Projects 538
Environmental Factors 540
Legal /Political 540
Security 541
Geography 542
Economic 542
Infrastructure 544
Culture 545
Project Site Selection 547
Cross-Cultural Considerations: A Closer Look 548
Adjustments 549
Working in Mexico 552
Working in France 553
Working in Saudi Arabia 555
Working in China 556
Working in the United States 557
Summary Comments about Working in Different
Cultures 559
Culture Shock 560
Coping with Culture Shock 562

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