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10 – 13 March 2019
Jeddah Centre for Forums & Events
Implication of Economic
Conditions in Changing Project
Objectives (How to adapt to change?)
HISHAM HARIDY
BSc, MBA, PMP®, PMI-RMP®, PMI-SP®
Project Management Director
CONTENT
What is Economic Conditions?
Changing in Project Objectives
Practical Example “Adapt to Project Cost Objective”
Strategy Analysis
Macro Environment
(PESTL)
Micro environment
(Porter Five forces)
Level of competition in a certain
market
Access to Finance
Marketing
Process skills
Core Competencies
Value chain
Competitive advantage
TOWS
STRATEGIC
CHOICE
External Analysis Internal Analysis
SWOT
IMPLEMENTATION &
CONTROL
Opportunities
Threats
Strengths
Weaknesses
The organization possesses in
itself
Within the project team’s
control
Project team has little or
no control
Economic Conditions
 The present state of the economy in a country.
 Economic Conditions one of the major factors that affect
the Project Cost Performance.
 Economic Conditions affect on Business Strategy.
Economy is
Contracting
SOUND
Economy is
Expanding
Economic Conditions
ADVERSE
Healthy
of
Economy
Income
“GDP”
Unemployment Rate Inflation Rate
Interest Rate
Economic Indicators (Macro- Economic)
Fluctuation in the prices
of materials
High interest rates charged
by banks on loans and mode
of financing
Economic stability
The employment level
The bench mark
unemployment rate is 6%
Price index --- the ideal 1-
2% up to 5%
Changing in Project Objectives
“Change is inevitable, so get used to it.”
Guiding Principles
Must be enforced
Projects tend to be the
primary method for
implementing many
objectives
Aligns with organizational strategies
by selecting the right projects,
prioritizing work, and providing
needed
resources.
Cascaded
In place
Strategic alignment of objective setting occurs annually
Projects, Program, and Portfolio
PMI_PMBOK 6th Edition
Strategic Plan
 Project
 A temporary endeavor undertaken to create a unique product, service or result.
 Program
 A group of related projects managed in a coordinated way to obtain benefits
and control not available from managing them individually.
 Portfolio
 A collection of projects, programs, sub-
portfolios, and operations managed as a
group to achieve strategic objectives.
 Strategic Plan/ Strategic Business Plan
 The strategy of an organization is an
action plan to achieve its business goals
and objectives.
Project Objectives
1. MUST have at LEAST one objective.
2. Made known to all Stakeholders.
3. Communicated accurately.
4. SMART
A strategic
position to
be attained
A purpose
to be
achieved
A result to
be obtained
A product
to be
produced
A service
to be
performed.
Three Broad Objectives of A Project
• Performance and Quality.
• The most important objective of a project is to perform the
functions for which it was initiated.
Function
• The project cost is a critical project element, and meeting
project budgets is a broad objective of all projects.
Cost
• Since projects are time-limited, the project completion date is
important to meet the cost objective. “Delivery ON TIME”
Timing
Project Change Management
Where we
are?
(Measurement)
Where we
planned to
be?
(Evaluation)
How can we
get on track
again?
(Correction)
“Project deliverables must be maintained carefully and
continuously managing changes.”
Changing in Project Objectives
All strategic change in an organization happens through
project and program management
Practical Example “Adapt to Project Cost
Objective Change”
The BEST Achievable cost saving
(Optimum Project Cost).
Practical Example “Adapting Project Cost Objective”
Optimize Capital
Spending
The development benefit and the
alignment with vision
Fiscal balance Program
The Bureau of Capital and Operational
Spending Rationalization
Value
Value =
Worth
Cost
Value =
Performance of its Function
Cost
Value =
 Benefits
 Costs
Value
What the product is
worth to the
customer
Function
The Properties
and qualities of
product
Cost
The Money value
of materials used,
Labor and
indirect costs
Greater
than 1
1. A systematic application of recognized techniques which identify the
functions of the product or service, establish the worth of those functions,
and provide the necessary functions to meet the required performance at
the lowest overall cost.
2. An approach that seeks out the best functional balance between the cost,
reliability and performance of a project.
3. Offering lowest cost without detriment to value, quality, performance and
reliability.
4. Applied during any stage of a project cycle.
5. VE is applied in an organized process known as VE job plan.
Value Engineering
1 2
3
Potential Value of Value Engineering
Application
Information Phase
Function Analysis
Phase
Creative Phase
Evaluation Phase
Development Phase
Presentation Phase
1
2
3
4
5
6
Value Engineering Standard Job Plan
Understand the project
Understand and clarify the required functions.
Generate ideas to accomplish
/enhance the required functions
Select the ‘best’ alternative(s) for
improving value
A focused list of ideas to the enhancement
of quality, sustainability, functionality and
performance
Present the value recommendation to
the project stakeholders
VE Team
Priority Ideas, Rating,
Voting System
Outputs
• We can review the building from the perspective of the
owner’s maintenance staff and recommend products.
• It can produce long-term savings through reduced
maintenance.
Maintainability
• A less expensive alternative to a specified product or
system
• It may or may notinclude a difference in quality.
Cost Reduction
• A higher quality product.
• It may or may not carry a higher price but will bring
added value to the project.
Value Added
• Identify options that will allow us to strike the proper
balance between initial construction cost and long-term
operational costs.
Life-Cycle
Analysis
Example
Construction Project
450 K USD36 Months
Basic Design 62 persons
VE
131
71
4
4
0 20 40 60 80 100 120 140
Number of Ideas
Number of Accepted Proposal
Value added
Recommendations
General Recommendation
32%
0
2
4
6
8
10
Life Cycle Cost
Sustainability
Constructability
Safety
Functionality
Future Expansion
Thank you for attending!

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Implication of economic conditions in changing project objectives

  • 1. 10 – 13 March 2019 Jeddah Centre for Forums & Events Implication of Economic Conditions in Changing Project Objectives (How to adapt to change?) HISHAM HARIDY BSc, MBA, PMP®, PMI-RMP®, PMI-SP® Project Management Director
  • 2. CONTENT What is Economic Conditions? Changing in Project Objectives Practical Example “Adapt to Project Cost Objective”
  • 3. Strategy Analysis Macro Environment (PESTL) Micro environment (Porter Five forces) Level of competition in a certain market Access to Finance Marketing Process skills Core Competencies Value chain Competitive advantage TOWS STRATEGIC CHOICE External Analysis Internal Analysis SWOT IMPLEMENTATION & CONTROL Opportunities Threats Strengths Weaknesses The organization possesses in itself Within the project team’s control Project team has little or no control
  • 4. Economic Conditions  The present state of the economy in a country.  Economic Conditions one of the major factors that affect the Project Cost Performance.  Economic Conditions affect on Business Strategy. Economy is Contracting SOUND Economy is Expanding Economic Conditions ADVERSE
  • 5. Healthy of Economy Income “GDP” Unemployment Rate Inflation Rate Interest Rate Economic Indicators (Macro- Economic) Fluctuation in the prices of materials High interest rates charged by banks on loans and mode of financing Economic stability The employment level The bench mark unemployment rate is 6% Price index --- the ideal 1- 2% up to 5%
  • 6. Changing in Project Objectives “Change is inevitable, so get used to it.”
  • 7. Guiding Principles Must be enforced Projects tend to be the primary method for implementing many objectives Aligns with organizational strategies by selecting the right projects, prioritizing work, and providing needed resources. Cascaded In place Strategic alignment of objective setting occurs annually
  • 8. Projects, Program, and Portfolio PMI_PMBOK 6th Edition Strategic Plan  Project  A temporary endeavor undertaken to create a unique product, service or result.  Program  A group of related projects managed in a coordinated way to obtain benefits and control not available from managing them individually.  Portfolio  A collection of projects, programs, sub- portfolios, and operations managed as a group to achieve strategic objectives.  Strategic Plan/ Strategic Business Plan  The strategy of an organization is an action plan to achieve its business goals and objectives.
  • 9. Project Objectives 1. MUST have at LEAST one objective. 2. Made known to all Stakeholders. 3. Communicated accurately. 4. SMART A strategic position to be attained A purpose to be achieved A result to be obtained A product to be produced A service to be performed. Three Broad Objectives of A Project • Performance and Quality. • The most important objective of a project is to perform the functions for which it was initiated. Function • The project cost is a critical project element, and meeting project budgets is a broad objective of all projects. Cost • Since projects are time-limited, the project completion date is important to meet the cost objective. “Delivery ON TIME” Timing
  • 10. Project Change Management Where we are? (Measurement) Where we planned to be? (Evaluation) How can we get on track again? (Correction) “Project deliverables must be maintained carefully and continuously managing changes.”
  • 11. Changing in Project Objectives All strategic change in an organization happens through project and program management
  • 12. Practical Example “Adapt to Project Cost Objective Change”
  • 13. The BEST Achievable cost saving (Optimum Project Cost). Practical Example “Adapting Project Cost Objective” Optimize Capital Spending The development benefit and the alignment with vision Fiscal balance Program The Bureau of Capital and Operational Spending Rationalization
  • 14. Value Value = Worth Cost Value = Performance of its Function Cost Value =  Benefits  Costs Value What the product is worth to the customer Function The Properties and qualities of product Cost The Money value of materials used, Labor and indirect costs Greater than 1
  • 15. 1. A systematic application of recognized techniques which identify the functions of the product or service, establish the worth of those functions, and provide the necessary functions to meet the required performance at the lowest overall cost. 2. An approach that seeks out the best functional balance between the cost, reliability and performance of a project. 3. Offering lowest cost without detriment to value, quality, performance and reliability. 4. Applied during any stage of a project cycle. 5. VE is applied in an organized process known as VE job plan. Value Engineering 1 2 3
  • 16. Potential Value of Value Engineering Application
  • 17. Information Phase Function Analysis Phase Creative Phase Evaluation Phase Development Phase Presentation Phase 1 2 3 4 5 6 Value Engineering Standard Job Plan Understand the project Understand and clarify the required functions. Generate ideas to accomplish /enhance the required functions Select the ‘best’ alternative(s) for improving value A focused list of ideas to the enhancement of quality, sustainability, functionality and performance Present the value recommendation to the project stakeholders VE Team Priority Ideas, Rating, Voting System
  • 18. Outputs • We can review the building from the perspective of the owner’s maintenance staff and recommend products. • It can produce long-term savings through reduced maintenance. Maintainability • A less expensive alternative to a specified product or system • It may or may notinclude a difference in quality. Cost Reduction • A higher quality product. • It may or may not carry a higher price but will bring added value to the project. Value Added • Identify options that will allow us to strike the proper balance between initial construction cost and long-term operational costs. Life-Cycle Analysis
  • 19. Example Construction Project 450 K USD36 Months Basic Design 62 persons VE 131 71 4 4 0 20 40 60 80 100 120 140 Number of Ideas Number of Accepted Proposal Value added Recommendations General Recommendation 32% 0 2 4 6 8 10 Life Cycle Cost Sustainability Constructability Safety Functionality Future Expansion
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  • 21. Thank you for attending!