Metrolink Oxford Road Southern Extension (MORSE)
Introduction to Project MORSE
Transport for Greater Manchester (TfGM) has approval to design and build a new Metrolink Oxford Road Southern Extension (MORSE) line that will be 3.4 miles (5.44km) long & will run from St Peters Square Station to a new 500 place Park and Ride facility on Platt Fields Park. The project is expected to be completed within 104 weeks (2 years) and has a budget allocation of £45m. There could be problems with those affected by the new route: motoring organisations, retailer outlets, residents, users of Platt Fields, and parts of the university itself. TfGM will hire a project management consultancy for the project (you), and so this is an opportunity to consider the MORSE design and prepare a Project Management Plan (PMP) explaining how your team would deliver this project in a timely, efficient, and cost effective manner. Actual delivery of the project will be carried out using external contractors that you will select and manage. Each task assigned to your team must be submitted to the Project Board for evaluation and approval; your team will also deliver oral presentations to the Board to give them confidence that you can successfully deliver this project to schedule and budget whilst identifying and managing all relevant risks and key stakeholders.
Project Management Plan (PMP)
Each team has been provided with a Microsoft Excel MORSE Project Management Plan (PMP) that must be used to complete each of the tasks set. The PMP contains the following six worksheets:
1. Team Details: Enter your team number and team member details.
2. Schedule Activities: A list of activities that you must develop into a schedule to complete the project. You do not need to develop a network diagram or show the critical path for the project.
3. Budget: A task list and some initial estimates are provided so that you can develop a budget for the project; the estimates are deemed to be accurate at this point in time.
4. Risk Management Plan (RMP): You will develop a RMP that identifies the main risks to the project. You will also develop mitigation plans that will either eliminate the risk or reduce its impact if it does occur. The RMP is a dynamic document that you should continue to develop as the project proceeds.
5. Stakeholder Management Plan (SMP): You will develop a SMP that identifies key project stakeholders & explains how they will be fully engaged and managed. The SMP should include for example: (a) Internal Stakeholders: Includes groups/individuals with or working for TfGM, council representatives, local government departments, the design team, and other employees and consultants engaged on the project. You should consider the Local Highway Authority, Local Traffic Authority, Local Planning Authority, and the Environmental Health Department. You should work with other TfGM departments that will contribute to the project but will not be included in your budget, including: purchase and delivery of additional trams, recruitment of additional drivers and other staff, marketing, prepare and issue new timetables, agree and publish new ticket pricing, project end, and official opening ceremony. (b) External Stakeholders: Includes groups central to the stakeholder liaison strategy, e.g. the public, the university and its students, statutory utilities (gas, electricity, and water), and representative groups (motorist organisations, trade unions, local traders, and residents fronting the project).
6. Project Board Report (PBR): For Task 1 you will submit schedule and budget summaries, including any assumptions made to support your estimates, together with responses to 4 questions on risk and stakeholder management posed by the Board. For Task 2 you will deal with an ‘event’. You will then submit updated schedule and budget summaries and highlight any major differences with your Task 1 estimates; you should also identify the effectiveness (and possible shortcomings) of your Risk and Stakeholder Management Plans at this stage of the project. For Task 3 you will deal with another ‘event’, make updates to the schedule and budget and submit a Project Board Report and Lessons Learned for Project MORSE.
Task 1: Developing a Project Management Plan (PMP) and Supporting Presentation
Task 1 involves developing and submitting a Project Management Plan (PMP) for the following activities:
a. Project Schedule: A schedule of activities that will indicate when you expect to complete the project. You do not need to develop a network diagram or show the critical path for the project.
b. Budgetary Estimate: An estimate of how much you expect the project to cost when completed.
c. Risk Management Plan (RMP): You should identify risks relevant to Project MORSE together with detailed actions that will help to mitigate the risks. The RMP should continue to develop as the project progresses.
d. Stakeholder Management Plan (SMP): The SMP should identify key stakeholders and explain how they will be engaged and managed. The SMP should continue to develop as the project progresses.
e. Project Board Report (and accompanying PowerPoint presentation): You should provide the Project Board with an executive summary of your schedule and budgetary estimate together with your responses, including supporting comments, to the following four questions:
1. What are the 3 main risks associated with using the contractors you have selected?
2. Aside from potential contractor risks, what do you perceive to be the one main risk associated with delivering Project MORSE on time and to budget?
3. Who are the three main stakeholders for Project MORSE?
4. What detailed plans have you put in place to manage these three stakeholders?
You must select the external contractors who you think are best able to complete Project MORSE from the options provided in the Excel PMP; you can choose any combination of contractors from those available but remember your team will be responsible for managing them until the project is complete. The initial design work can start on 2nd June 2025 (Week 1); Project MORSE is expected to be completed week-beginning 24th May 2027 (Week 104); the new line is expected to open on 31st May 2027 (Week 105). Any delay in the schedule will cause reputational damage to TfGM and inconvenience to our customers. Although, entering revenue-earning service earlier could be desirable, if that can be done without sacrificing quality. Design teams will prepare the design, assemble specifications, invite competitive tenders, and place orders with your chosen contractors. Although you do not need to budget or plan resources for this work, you should include the design activities in your schedule. The tasks that need to be done by the contractors are included in the PMP worksheet titled ‘Schedule Activities’. A few notes to support you:
· A number of scheduled activities exclude labour costs and only provide costs for materials. For these activities, budgets should be based on a worker costing £1,000 per week, regardless of trade. Estimates of the labour force required to do each task are provided in the PMP.
· Where one or more contractor names are mentioned, we have discussed the project with them and they have provided us with an estimate of both cost and schedule expressed in weeks. The Project Board believes these estimates to be correct at the time of issue to your project team.
Strategic concerns: Your team should consider the following TfGM strategic concerns for Project MORSE:
· TfGM has recently installed a new design software package. All design staff has recently undergone re-training to familiarise themselves with the software; a number of staff have complained that the software is not very user-friendly, which could have an impact on their ability to deliver the design for Project MORSE on time.
· M Chester Ltd have formed a strategic partnership with TfGM but some of the work carried out by their labour resource on previous projects has been defective and so a lot of re-work has been required to correct the problems; this has caused significant cost increases for both materials and labour against their original estimates.
· TfGM has not previously placed contracts with Chester Street Supplies but the company has a good reputation for delivering its work on time and at the estimated cost.
· Fences Co Ltd typically delivers on time but the actual costs incurred for the last three contracts placed with TfGM were underestimated by between 15% and 30%.
· Tarmac Inclusive Limited is currently under investigation for financial malpractice by the UK Serious Fraud Office. The findings from the investigation are expected to be published in October 2026.
· Signs ‘R’ Us has delivered some top quality work for TfGM over a number of years but the company has recently been beset with union issues and the possibility of strike activity due to labourers having to work extra hours whilst wages have remained stagnant.
· Steven Jones Power Supplies has promised to deliver all future projects for TfGM up to the year 2028 at a lower cost than any competing contractor if they are awarded the contract for Task 2.16.
· It is rumoured that Cables&Wires are in financial difficulties and that it has recently received a bank loan to help keep it afloat; Cables&Wires state that it might have to increase its estimated quotes but it is unclear by how much the increase will be. TfGM is also concerned that Cables&Wires could look to reduce its costs through employee redundancies, which could impact on their ability to deliver work on time.
· Sparks Limited has a good reputation for delivering work at the estimated cost but has a habit of not completing the work on time.
· Cable Supplies Ltd has stated that it might be possible to reduce the time to complete Tasks 2.31 to 2.35 by 6 weeks but that this would result in a potential cost increase of between £500,000 and £1,000,000 depending on the type of contract TfGM is willing to negotiate.
· Administration Is Our Business is rumoured to be on the verge of going bankrupt although the TfGM Project Board has not been able to find any evidence to support this rumour.
Risk concerns - Risk concerns discussed at a recent design workshop meeting included:
· Tracksetta UK will be the prime contractor for laying the track. They are operating under a framework contract with TfGM and so are the only choice for this project. They are highly experienced and trustworthy. However, they will be working in an extended shift pattern to deliver the track laying in 40 weeks, rather than the 50 which would be considered average for a 4-mile line of urban light railway. This has not been tried before. Also, how the local community will respond to the 9am-9pm construction work is unknown.
· The current state of underground services along the planned route might require substantial work to bear the load of heavy and regular trams.
· Local planning authority approvals to the detailed design might be difficult to obtain.
· Despite considerable public consultation, cycling pressure groups, the University, and local businesses in the vicinity affected by Project MORSE might not support the proposed works during the construction phase. There is a group called ‘Friends of Platt Fields’ that are particularly unhappy about the park-n-ride scheme. They have formed a local resident’s group and will need special consideration.
· Due to concurrent engineering (i.e. beginning construction before design activities have been completed) on recent TfGM projects, Task 1.20 (Design freeze) has been introduced as an activity in the schedule. If design activities are delayed then there is a risk that construction activities might have to begin before the design activities are completed and signed off by the Project Board. This could lead to problems such as the need to undertake some re-work of certain activities during the construction phase.
· A number of retail premises along the proposed route might suffer financial losses during the construction period, and so there might be a need to consider a bespoke ‘hardship’ payment mechanism. This may be challenging though – how can you assess the actual losses to a shopkeeper? They are very likely to over-estimate these.
· There will be a need to restrict and coordinate delivery times to certain retail premises during the construction phase. There is a risk that the temporary traffic management provision proves insufficient and that local highway authority approval is not granted, thereby resulting in a longer programme for delivery.
· Testing and commissioning might be difficult to be approved in time, resulting in delayed commencement of service provisions.
Useful Supporting Information to help prepare for the on-line test in week 12 and to help with completing your Project Management Plan (PMP)
Project Planning
Project planning is a proactive, dynamic process & the essence of good decision-making; it establishes a baseline to measure performance against, assures targets are achievable, specifies products, activities & resources required, identifies risks & opportunities, helps management to think ahead & make decisions, ensures expectations of all organisational functional disciplines/stakeholders are met, & aids communication between stakeholders so that time, cost, & quality objectives can be met. Planning also enables us to estimate project duration & when activities can start/end without delaying the project, identify ‘critical’ activities that cannot be delayed, identify ‘bottlenecks’ & activities that could be targeted if there is a need to reduce project duration, & to develop cash flow budgets.
Project Management Plan (PMP)
A Project Management Plan (PMP), also known as a Project Charter, defines a project and the way it is planned to be delivered. A project should not begin until a PMP has been approved by a suitable authority, usually a Project Board. The Project Sponsor owns the project business case, which is used to: (1) evaluate the cost and risk of alternative options; (2) provide justification for undertaking a project; (3) provide a rationale for the preferred solution. The purpose of a PMP is to agree what has to be achieved by the project, how it is to be achieved, who will be involved, how it will be reported and measured, and how information will be communicated. A PMP should evolve and be updated frequently as the project progresses. The key parts of a PMP are:
· Executive summary: A high level overview of the key elements of the project.
· Project scope definition: The scope defines what work is included / excluded in the project; it comprises the totality of outputs, outcomes and benefits and the work required to produce them. Scope management is the process whereby outputs, outcomes and benefits are identified, defined, and controlled. The output of scope management is a specification that is presented as a product breakdown structure (PBS) showing the project deliverables and a work breakdown structure (WBS) showing the work required to produce the deliverables. The PBS helps to scope the work, focuses the team on project outcomes & quality requirements for the deliverables, helps to define what is really meant by simple statements of activity, and aids communication with stakeholders. A WBS provides a visual perspective of activities to be done, illustrates interrelationships, provides a structure for data aggregation, and provides a basis for performance measurement.
· Project schedule: Defines the schedule of the project showing when activities are planned to take place and when key moments in the project, including project start and end, are scheduled.
· Budget/cost estimate: An estimate of the expected cost of the project.
· Risk Management: Identifies all relevant risks to the project and how they will be managed / mitigated.
· Stakeholder Management: Identifies the key stakeholders, their attitude and influence over the project, and how the project team plans to engage and communicate with them.
Project Scheduling and Resourcing
If the schedule is correctly planned & the work completed on time then the project should be completed within budget and at the right level of quality. Projects are scheduled in advance: (1) to provide the opportunity to think ahead about the work & foresee & overcome many problems; (2) to measure actual progress against the plan and understand if you are on, ahead of, or behind schedule; adjustments can be made accordingly so that the project is delivered on time; and (3) to show other stakeholders what you intend to do and when you expect it to happen. Critical Path Analysis/Method (CPA/CPM) is used to calculate the earliest and latest dates for each activity and the overall duration of the project. A list of tasks and the links between them can be used to develop a Network Diagram that shows the planned sequence of work & outlines the: (1) project activities to be completed; (2) logical sequence of activities during the project life cycle; (3) interdependencies between activities, people, & resources; (4) duration of activities & the project duration; (5) length of time an activity can be delayed by; and (6) activities that are more sensitive to delay (critical activities). The terminology used in network diagrams is: (1) Activity: an element of a project that requires time & could require other resources; (2) Merge activity: an activity with one or more activities preceding it; (3) Parallel activity: activities that can occur at the same time; and (4) Burst activity: an activity with one or more activities following it.
The forward pass in a network diagram involves starting with the first task & following each path forward through the network to calculate when each task could start & finish; if two or more activities are linked to the following task then the longer duration activity is carried forward. The backward pass in a network diagram involves starting with the last task & following the paths through the network backwards, calculating when each task must start & must finish; if two or more activities are linked to the following task then the shorter duration activity is carried forward. The Critical Path is the longest route through the network: these tasks must happen on time if the project is to be delivered on time. Other tasks have Float: these tasks can be delayed without delaying the overall project; Total Float is the amount of float that individual activities can be delayed without affecting the project finish.
Resources include people with required/different skill sets, equipment/machinery, time required to complete activities, capital to fund activities, & facilities to ensure that there is sufficient capacity to deliver a project. The benefits of resource scheduling are that if completed before the project starts then we can consider realistic alternatives if resources cannot be met, we can gauge the impacts of unforeseen events such as staff reduction and equipment breakdown, we can assess trade-offs between cost and time, and we can assess flexibility in resources & reduce peak demand in a project, thus reducing (or redistributing) costs at specific points in the project. We sometimes have to smooth our resources when resources are sufficient but demand varies over the project life cycle; we can resolve this issue by delaying non-critical activities using float to lower peak demand and optimising resource utilisation while scheduling limited resources efficiently can reduce project costs, minimise potential delay, and reduce fluctuations, i.e. unnecessary peaks and troughs in labour resources. Resource conflicts can be resolved by levelling the schedule by using available float or extending the project end date, by changing/refining the plan, by increasing resources, or by reducing project scope. We can reduce non-constrained project durations by:
1. Adding resources: This is relatively easy but additional workers increases complexity of communication, requires additional training, and costs money.
2. Outsourcing (sub-contracting) activities: We could use more advanced technologies and expertise to accelerate project completion and free up resources but confidentiality and other reasons might make outsourcing not possible while it can also be expensive and unreliable.
3. Scheduling overtime: This increases utilisation of staff and equipment but also increases costs and can only be used as a short-term solution.
4. Splitting long activities into shorter, more manageable activities.
We can accelerate a resource-constrained project by: (1) fast-tracking: adjust project logic and complete critical activities in parallel; (2) critical-chain project management: an alternative to critical path method that focuses on resources and emphasises reducing bottlenecks; (3) reducing project scope: reassess the project requirements and differentiate between essential and desirable criteria; this could save time and money but might reduce project value; and (4) compromising quality: rarely used, particularly if there are safety issues.
Budgeting, Cost Control, and Earned Value Management (EVM)
Budgeting and cost control consists of the estimating of costs, the setting of an agreed budget, and the management of actual and forecast costs against the agreed budget. Cost control uses the following terms:
· Update Date: The date on which an update of the budget was carried out. Updates normally occur when changes to the project scope are approved by the Project Board.
· Budget: The original and approved estimated cost of a task; i.e. how much the task was expected to cost.
· Actual Costs (AC): Money that has been spent on a specific task (or the project as a whole) at that point in time & so AC will increase whenever money is spent. If a task has not started & no money has been spent then AC to date will be zero. If a task is part complete then AC will equal the amount of money spent up to the update date.
· Estimate at Completion (EAC): How much an activity will cost before work has started; EAC will change as work progresses and costs are incurred, i.e. we will continue to re-estimate costs as the work progresses.
· Estimate to Complete (ETC): Similar to EAC but relates to work that has actually been started. If a task is forecast to cost £1,000 when it is completed and we have spent £250 then the ETC will be £1,000 - £250 = £750.
Indirect costs or overheads are costs associated with the project such as those for night security, rent, utility charges, and protective hoardings that do not relate to a specific task.
Earned Value Management (EVM) evaluates a project by integrating the criteria of time, cost, and value, i.e. as well as comparing actual and budgeted costs, EVM integrates the element of time in determining what was accomplished (value realised) to draw conclusions about the current status of the project. Thus, EVM requires that not only the measurement of planned expenditure and the actual cost incurred, but also the value of the work actually accomplished (the earned value) at the cost rates set out in the original budget. Since EVM provides information about the efficiency with which budgeted money is used relative to the value realised, forecasts about the estimated cost and schedule to project completion can also be made. EVM can provide the following benefits to projects:
1. Allows problems to be identified and corrected at an early stage in a project, typically when it is only 15-20% complete. Evidence suggests that the percent overrun at the 20% completion point will be within 10% of the percent overrun at project completion, with things typically getting worse.
2. Imposes discipline of planning the entire project at cost, schedule, and technical levels at varying levels of detail before starting the work. Early tracking of variances provides quick insight into future impacts.
3. Provides a disciplined, standardised approach to project measurement and terminology.
4. Provides an objective analysis of performance by linking it to cost, schedule, and completion of technical requirements.
5. Improves the delivery and management of a project by encouraging the use of collaborative working relationships between different organisational departments.
EVM should only be used on projects where the benefits outweigh the cost. It is most suitable for projects that have defined deliverables, are longer in duration (typically six to twelve months or longer), have strict budget limits and/or have little or no dependence on other projects managed under separate contracts. EVM is less suited for work that provides intangible benefits, for projects with open-ended or undefined objectives (not measurable), and for projects that are short in duration (cost of implementation outweighs benefits). Despite this, using EVM on short-term projects can be beneficial because the huge volume of performance metrics generated can be used to measure larger projects. Projects with tight budgetary constraints would also benefit from the use of EVM as it highlights cost overruns early and sometimes even before they occur. The EVM process consists of 7 steps:
1. Developing the work breakdown structure (WBS): Information for individual tasks that need to be performed on the project and the individual work packages is provided by the WBS that enables people to be allocated to the task requirements. The project network derived from the WBS enables the correct sequencing of tasks to be identified and provides the basis for developing a time-phased budget, which enables the project team to determine the timing of the budget expenditures required to complete the individual tasks. The WBS should be developed by dividing the planned work into smaller components, known as work packages and planning packages. The WBS must match the entire content of the project and be to a level of detail that reflects its size, complexity, and level of risk: the greater these are, the greater the level of detail required.
2. Developing the schedule: Work is time phased on a schedule for each task and a budget applied. The schedule is developed by using information on the scope of the work to be undertaken, broken down to the activity level, activity interrelationships and durations, resource requirements, and assigned responsibilities. A robust schedule is essential for developing a realistic baseline plan, helping define priorities & providing status reports, aiding the identification and impact analysis of problem areas, and providing support for any corrective actions required.
3. Assigning work (resource loading): Work is assigned by aligning the organisational breakdown structure (OBS) to the WBS to create control accounts that enable actual costs to be accumulated and compared to the budgeted cost of work performed (BCWP). A control account manager (CAM) manages the work and tracks and reports EV data for all work defined within their control account; this includes analysing EV metrics, past work activity, future work plans, conducting risk management and mitigation as required, and reporting on variances. Work packages are used to plan near-term work while planning packages are used for planning far-term work.
4. Defining how accomplishments will be measured: The method used for each work package is determined before the project begins: Incremental Milestones, 0/100 Technique, Equivalent Units Technique, Percent Complete Technique, 50/50 Technique (or X%/Y%), and Level of Effort (LOE) are the main methods used.
5. Establishing the performance measurement baseline (PMB): The PMB unifies technical scope, schedule, and budget into an overall plan that will be used to monitor and control all aspects of the project.
6. Defining the EV data measurements for collecting actual costs: The actual cost associated with performing the work is essential for determining the cost position of a project. The basic data used to collect costs are Budgeted Cost of Work Scheduled (BCWS) (also known as Planned Value (PV)), Budgeted Cost of Work Performed (BCWP) (also known as Earned Value (EV)), Actual Cost of Work Performed (ACWP) (also known as Actual Cost (AC)), Budget at Completion (BAC), and Latest Revised Estimated (LRE).
7. Performance measurement: Project performance is measured using indices such as Schedule Variance (SV), Cost Variance (CV), Variance at Complete (VAC), Budgeted Cost of Work Remaining (BCWR), Cost Performance Index (CPI), Schedule Performance Index (SPI), the To-Complete Cost Performance Index (TCPI), the CPI Forecast, and the CPI-SPI Forecast.
In order to have a firm basis for project control, the PMB must incorporate approved changes in a timely manner. Causes of change include late or poor quality material and equipment furnished by others, defective/incomplete drawings and specifications, ambiguous contract wording, conflicting documentation, & changed project objectives. To control any changes it is important to: (1) define the scope of work clearly in the contract; (2) formally identify who is authorised to initiate changes; (3) ensure that contract terms are clear by using standard corporate terminology from other similar projects; (4) analyse change patterns; (5) set a monetary (£) threshold for changes; (6) document change history and costs; (7) assign trained personnel; (8) provide technical/schedule/cost reserves for changes; and (9) evaluate all impacts of changes.
Re-baselining: Every project baseline will change at some point due to the addition of new work to contract or use of management reserve (MR). Valid reasons to re-baseline include the addition of major new work, project scope changes by the customer, or a new approach to solving a problem. Re-baselining to eliminate large variances should be avoided. It is unlikely that most contractors will re-baseline based on a new approach to solving a problem until close to contract completion; they will continue to report favourable variances until effort nears completion just in case unanticipated cost overruns occur in the future or in case the ‘technical breakthrough’ ends up not working.
EVM drawbacks: Effective use of EVM lies in providing accurate and up-to-date information, particularly in terms of the percentage of work packages completed. The calculated EV is only as accurate as project team members allow it to be through developing & enforcing an honest reporting system. Another drawback is that it is difficult to establish accurate or meaningful EVM results because project teams often report stronger results than might be warranted, in the interest of sending the right signals about the status of the project, while pressure might also come from project managers as they find themselves under pressure from top management to show steady results. A further problem with EVM relates to the link between performance accomplished & the level of difficulty, e.g. EVM figures might show that a work package is 80% complete but there is no way of knowing whether the completed work was ‘easy’ while the remaining 20% of the work is ‘difficult’; if this is the case, it is likely that both cost and schedule might overrun. Finally, re-baselining makes it difficult to establish how well the project is progressing against the original baseline; organisations need to maintain clear records so that direct comparisons can be made.
Management reserve (MR) is money that sits outside the PMB to cover unanticipated but in-scope changes. The amount of MR set aside depends on the level of risk and so should be set accordingly by the project manager. MR should not be used to cover unfavourable cost variances. However, overrun items do not always clearly fall into ‘overrun or unanticipated but in scope’, and so MR is sometimes used to cover variances. Any use of MR to offset or ‘heal’ a cost growth overrun should be preceded by thorough examination of the course of action. Two good reasons to use MR are: (1) if the contract is cost plus, the contract is near completion, and/or risk is low. MR is used to cover a cost overrun because it is quicker to use funds/authorisation available rather than use the paperwork process of adding cash for the cost overrun, then reducing cash for unused MR; (2) if contract is cost plus and MR balance is more than sufficient for remaining contract work. MR is sometimes used to cover a small scope increase change made to the effort because the cost and time involved in processing an engineering change request is prohibitive.
Risk, Uncertainty, and Opportunity Management
Risk is is an uncertain event or set of circumstances that, should it occur, will impact on the achievement of the project’s objectives either positively (opportunity) or negatively (threat). A broader definition is that risk is any uncertain event whose outcome will adversely affect the cost, schedule or performance of any project outcome. Risk is thus a combination of the probability and impact of occurrence, with probability being the likelihood of the event occurring while impact is the consequence if it does happen. Risk cannot be ignored: risk is often viewed as the additional foreseen events that might affect the outcome of a project and so it needs to be allowed for and effectively managed. However, it is likely that identified risks will not occur, or will at least have a reduced impact if they do occur, if an effective risk management strategy is developed. Indeed, it is more likely that a project will be impacted by ‘unknown unknowns’ and so organisations need to make allowance for unforeseen events. If the project is similar to previous projects, there is less uncertainty in terms of projected outcomes because of the knowledge and experience gained from these projects; if a risk event occurs in such projects, the potential to reduce its adverse impact is greatly enhanced because of the prior knowledge of the appropriate responses in such situations. Conversely, if a project is distinctly unique, then there is high uncertainty about projected project outcomes and the adverse impact of the occurrence of a risk event could be much more severe. While it is not possible to completely eliminate risk events in projects, it is possible to mitigate their impact. This is the focus of risk management.
Uncertainty covers the occurrence of threats and the identification and realisation of opportunities. Examples of uncertainty include fuel costs, schedule delay that has no identified cause, and the reduction or growth in material costs due to poor estimates. Uncertainty exists throughout the project life cycle but is most prevalent during the very early stages when some or all of the following conditions are likely to apply:
· There is a lack of clear specification of what is required from the project.
· The project has a high degree of novelty or team members lack the experience to develop robust cost and schedule estimates.
· There are multiple stakeholders, each with their own ideas on what the project outcomes/outputs should be.
· The project is highly complex and has a number of interdependencies.
· Time constraints mean that there has been limited analysis of the processes involved in the activity.
· Roles and responsibilities are poorly defined so that there is no clear leadership within the team.
· Organisational priorities continually change so that projects appear to be in a continual state of flux.
Internal risks originate in the project’s internal environment and are often related to poor management decisions. Another type is the risk associated with technical issues related to the product, process, and the project activities. Internal risks are usually controllable in that their occurrence can be reduced by thorough planning at the project outset, e.g. accurately defining project requirements and continuously monitoring and updating them throughout the project life cycle will mitigate the impact of internal risks. External risks originate from sources external to the project such as competitors, suppliers, customers, stakeholders, government bodies, and protest groups; project participants typically have little control over these risk events.
Risk management (RM) planning: RM is the planned & systematic approach to the identification & quantification of risks, appraisal & selection of options for managing & controlling these risks, & implementation of the selected options. The RM plan should describe the philosophy, organisational structures & procedures used to manage risks, uncertainties & opportunities throughout the life of a project. The plan should ensure provision is made for clear responsibility, early identification & escalation of RM issues, proactive RM, embedded mitigation, and regular (independent) auditing & reviews of the process. The plan should be regularly updated to reflect where a company is in the life cycle of a project. The RM approach can be considered successful if against a project’s existing baseline:
· No significant performance risks emerge that have not already been identified and managed.
· The magnitude of likely project lateness or performance failure is sufficiently low to give confidence of success and is actually reducing with project progress. This can be shown by the statistical analysis of schedule risks.
· Total project exposure to risk is consistent with the risk contingency, is at a sufficiently low level to give confidence of project success, and is reducing with project progress.
The RM process consists of 4 cyclic steps that should be ongoing throughout the project life cycle: (1) risk identification; (2) risk assessment (or analysis); (3) risk planning; and (4) risk management.