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Project
organizations consist of many different functions,
such as marketing, finance, engineering, etc.
A project manager may be chosen from any of
these functions.
The engineering activity is the first step
(Planning Study) of project or product development.
As discussed in the last section, other engineering
phases often follow. The goal is to achieve
sufficient detail to obtain an "investment
grade" estimate. Some businesses perform their
engineering function, while others seek outside
assistance. Many businesses-for example a
company whose strength is in manufacturing
and marketing-purchase these services from
another company ("outsourcing"). Whichever
path is chosen, effective project management
is essential. As a minimum, this means all
costs must be included in the project budget
and control of scope changes is essential.
If a project has a relatively complete scope
definition, based on past experience, for
example, outsourced services are generally
purchased via a fixed price (lump sum) contract.
This is because changes to the scope are not
anticipated and resulting cost or time impacts
are minimal. For a project without past experience
(new product development, for example), costs
or durations can be expected to change because
of the uncertainty of the reference scope
basis. These services are usually done on
a reimbursable (cost plus) basis, whether
outsourced or in-house.
Familiarity with these types of contracts
- fixed price and reimbursable - is essential
in preparing the project plan and procuring
further services for manufacture or construction.
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