Project Charter

Project Charter refers to a statement of objectives in a project. This statement also sets out detailed project goals, roles and responsibilities, identifies the main stakeholders, and the level of authority of a project manager. It acts as a guideline for future projects as well as an important material in the organization's knowledge management system. The project charter is a short document that would consist of new offering request or a request for proposal. This document is a part of the project management process, which is required by Initiative for Policy Dialogue (IPD) and Customer Relationship Management (CRM).

The Role of Project Charter:

Following are the roles of a Project Charter: It documents the reasons for undertaking the project. Outlines the objectives and the constraints faced by the project. Provides solutions to the problem in hand. Identifies the main stakeholders of the project.

Benefits of Project Charter:

Following are the prominent benefits of Project Charter for a project: It improves and paves way for good customer relationships. Project Charter also works as a tool that improves project management processes. Regional and headquarter communications can also be improved to a greater extent. By having a project charter, project sponsorship can also be gained. Project Charter recognizes senior management roles. Allows progression, which is aimed at attaining industry best practices.

Elements in Project Charter:

Since project charter is a project planning tool, which is aimed at resolving an issue or an opportunity, the below elements are essential for a good charter project. For an effective charter project, it needs to address these key elements: Identity of the project. Time: the start date and the deadline for the project. People involved in the project. Outlined objectives and set targets. The reason for a project charter to be carried out, often referred to as 'business case'. Detailed description of a problem or an opportunity. The return expected from the project. Results that could be expected in terms of performance. The expected date that the objectives is to be achieved. Clearly defined roles and responsibilities of the participants involved. Requirement of resources that will be needed for the objectives to be achieved. Barriers and the risks involved with the project. Informed and effective communication plan. Out of all above elements, there are three most important and essential elements that need further elaboration.

Business Case

This outlines the need for a project charter to take place. A business case should set out the benefits gained from carrying out a project charter. Benefits need not only be in terms of finance such as revenue, cost reduction, etc., but also the benefit that the customer receives. Following are the characteristics of a good business case: The reasons of undertaking the project. The benefits gained from undertaking the project now. The consequences of not doing the project. The factors that would conclude that it fits the business goals.

Project Scope
As the name denotes, it refers to the scope that the project will give the business if they undertake the project. Before doing a project, the following concerns need to be addressed: The within scope and out of scope needs to be considered. The process that each team will focus upon. The start and end points for a process. Availability of resources. Constraints under which the team will work. Time limitations . The impact on the normal workload if the project is to be undertaken.

The Need for a Good Communication Plan:

The need for a good communication plan is at its utmost necessity when it comes to planning a project. Project managers need to work on building a good communication plan which will help in meeting the overall objectives of a Project Charter. When creating a communication plan, the project manager needs to take the following into consideration: Who - responsibility of each individuals participating in the project. What - the motive and the reason for communication plan. Where - location where the receiver could find information. When - the duration and the frequency of the communication plan. How - the mechanism which is used to facilitate the communication. Whom - The receivers of the communication.

Conclusion:
The project charter is not only a tool that is used for planning projects but also a communication mechanism that acts as a reference. A well-planned project with an effective communication plan will definitely bring in success for the project undertaken at hand. Therefore, the Project Charter should be one of the frequently referred documents in a project and the entire project team needs to be aware of the content of the Project Charter. This is a key element for a successful project.

Project Contract Types

In the world of business, contracts are used for establishing business deals and partnerships. The parties involved in the business engagement decide the type of the contract. Usually, the type of the contract used for the business engagement varies depending on the type of the work and the nature of the industry. The contract is simply an elaborated agreement between two or more parties. One or more parties may provide products or services in return to something provided by other parties (client). The contract type is the key relationship between the parties engaged in the business and the contract type determines the project risk. Let' have a look at most widely used contract types.

Fixed Price (Lump Sum)

This is the simplest type of all contracts. The terms are quite straightforward and easy to understand. To put in simple, the service provider agrees to provide a defined service for a specific period of time and the client agrees to pay a fixed amount of money for the service. This contract type may define various milestones for the deliveries as well as KPIs (Key Performance Indicators). In addition, the contractor may have an acceptance criteria defined for the milestones and the final delivery. The main advantages of this type of contract is that the contractor knows the total project cost before the project commences.

Unit Price
In this model, the project is divided into units and the charge for each unit is defined. This contract type can be introduced as one of the more flexible methods compared to fixed price contract. Usually, the owner (contractor/client) of the project decides on the estimates and asks the bidders to bid of each element of the project. After bidding, depending on the bid amounts and the qualifications of bidders, the entire project may be given to the same service provider or different units may be allocated to different service providers. This is a good approach when different project units require different expertise to complete.

Cost Plus
In this contract model, the services provider is reimbursed for their machinery, labour and other costs, in addition to contractor paying an agreed fee to the service provider. In this method, the service provider should offer a detailed schedule and the resource allocation for the project. Apart from that, all the costs should be properly listed and should be reported to the contractor periodically. The payments may be paid by the contractor at a certain frequency (such as monthly, quarterly) or by the end of milestones.

Incentive

Incentive contracts are usually used when there is some level of uncertainty in the project cost. Although there are nearly-accurate estimations, the technological challenges may impact on the overall resources as well as the effort. This type of contract is common for the projects involving pilot programs or the project that harness new technologies. There are three cost factors in an Incentive contract; target price, target profit and the maximum cost. The main mechanism of Incentive contract is to divide any target price overrun between the client and the service provider in order to minimize the business risks for both parties.

Retainer (Time and Material - T&M)

This is one of the most beautiful engagements that can get into by two or more parties. This engagement type is the most risk-free type where the time and material used for the project are priced. The contractor only requires knowing the time and material for the project in order to make the payments. This type of contract has short delivery cycles, and for each cycle, separate estimates are sent of the contractor. Once the contractor signs off the estimate and Statement of Work (SOW), the service provider can start work. Unlike most of the other contract types, retainer contracts are mostly used for long-term business engagements.

Percentage of Construction Fee

This type of contracts is used for engineering projects. Based on the resources and material required, the cost for the construction is estimated. Then, the client contracts a service provider and pays a percentage of the cost of the project as the fee for the service provider. As an example, take the scenario of constructing a house. Assume that the estimate comes up to $230,000. When this project is contracted to a service provider, the client may agree to pay 30% of the total cost as the construction fee which comes up to $69,000.

Conclusion
Selecting the contract type is the most crucial step of establishing a business agreement with another party. This step determines the possible engagement risks. Therefore, companies should get into contracts where there is a minimum risk for their business. It is always a good idea to engage in fixed bids (fixed priced) whenever the project is short-termed and predictable. If the project nature is exploratory, it is always best to adopt retainer or cost plus contract types.

Project Activity Chart

When it comes to a project, the entire project is divided into many interdependent tasks. In this set of tasks, the sequence or the order of the tasks is quite important. If the sequence is wrong, the end result of the project might not be what the management expected. Some tasks in the projects can safely be performed parallel to other tasks. In a project activity diagram, the sequence of the tasks is simply illustrated. There are many tools that can be used for drawing project activity diagrams. Microsoft Project is one of the most popular software for this type of work. In addition to that, Microsoft Vision (for Windows) and Omni Graffle (for Mac) can be used to draw activity diagrams.

The Workflow
Have you seen process flow diagrams? If yes, then activity diagrams takes the same shape. Usually there are two main shapes in activity diagrams, boxes and arrows. Boxes of the activity diagram indicate the tasks and the arrows show the relationships. Usually, the relationships are the sequences that take place in the activities. Following is an example of activity diagram with tasks in boxes and relationship represented by arrows.

This type of activity diagram is also known as activity-on-node diagram. This is due to the fact that all activities (tasks) are shown on the nodes (boxes). Alternatively, there is another way of presenting an activity diagram. This is called activity-on-arrow diagram. In this diagram, activities (tasks) are presented by the arrows. Compared to activity-on-node diagrams, activity-on-arrow diagrams introduce a little confusion. Therefore, in most instances, people often use activity-on-nodes diagrams. Following is an activity-on-arrow diagram:

How to Draw Activity Diagram?

Creating an activity diagram is easy. You can use a paper-based material such as a post it note or software for this purpose. Regardless of the medium used, the process of creating the activity diagram remains the same. Following are main steps involved in creating an activity diagram:

Step 1:
First of all, identify the tasks in the project. You can use WBS (Work Breakdown Structure) for this purpose and there is no need to repeat the same. Just use the same tasks breakdown for the activity diagram as well. If you use software for creating the activity diagram (which is recommended), create a box for each activity. Illustrate all boxes in the same size in order to avoid any confusion. Make sure all your tasks have the same granularity.

Step 2:
You can add more information to the task boxes, such as who is doing the task and the timeframes. You can add this information inside the box or can add it somewhere near the box.

Step 3:
Now, arrange the boxes in the sequence that they are performed during the project execution. The early tasks will be at the left hand side and the tasks performed at the later part of the project execution will be at the right hand side. The tasks that can be performed in parallel should be kept parallel to each other (vertically). You may have to adjust the sequence a number of times until you get it right. This is why software is an easy tool for creating activity diagrams.

Step 4:
Now, use arrows to join task boxes. These arrows will show the sequence of the tasks. Sometimes, a 'start' and an 'end' box can be added to clearly present the start and the end of the project. To understand what we have done in the above four steps, please refer to the following activity diagram:

Conclusion

Activity diagrams can be used for illustrating the sequence of project tasks. These diagrams can be created with a minimum effort and gives you a clear understanding of interdependent tasks. In addition, the activity diagram is an input for the critical path method.