Project Charter and PM Plan Differences

Submitted by Lorenz on Fri, 09/27/2013 - 03:13

Hi friends.

I understand that the preliminary budget, schedule, milestones and scope may be defined in project charter, and progressively elaborated in the PM plan. My questions are:

1) In the project charter, where do the initial estimates on budget, schedule, and scope come from? We haven't created a WBS and all other estimation at this point.

2) There will be discrepancy between the figures (estimates) in the project charter and the PM plan. Since the project charter is static, how do we deal with the differences in both documents? Example: In project charter, the preliminary cost is $100,000, but after going through the planning processes, we figured that the cost estimate is now $500,000. Do we leave these information as it is? Do we update the project charter to reconcile the differences? Is the project now considered as over-budget at this point (planning)?

I hope you can give time to help clear my doubts. Thank you in advance.

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Focused2013

Fri, 09/27/2013 - 18:55

 Keep in mind the Project Charter is very high level. The two most important things that the Project Charter does is give the PM his or her power to run the project and it authorizes the project to start. Any financial information may simply be a reflection of what the client (if you are an external PM) or the company (internal PM) has available to spend on the project. This becomes a constraint for you as the PM to work with when you need to acquire resources for the project. 

Focused2013

Fri, 09/27/2013 - 19:00

 If you found that your project was going to cost 5 times the estimated costs you would meet formally with the project sponsor and perhaps key stakeholders to discuss your findings immediately. If the costs were unforeseen and justifiable you may perhaps outline the changes to the change control board for approval. This may likely result in a new charter as the original would not have been adequately prepared to be 5 times over budget. 

 

In some scenarios, you as the PM signed off on that Project Charter and could be fired and the project terminated for such a cost overrun. 

Lorenz

Sat, 09/28/2013 - 07:28

 Thanks for your sound response. Does it mean that it is either the project works around the budget stated in the project charter, or the project should be terminated as soon as we find out that we will need 5x the initially-thought budget allocation?

Would it be possible that the sponsors realize that they were wrong with the initial budget estimation and still move forward with the project? If that is the case, do we need a new project charter? Thanks for the thoughts.

Focused2013

Sat, 09/28/2013 - 10:41

 Many times the selected PM will be part of formulating the Project Charter. The Project Sponsor is responsible for funding the project and the money available is discussed up front. From that even though it is early in the project you are able to put some high level figures together for the project. If for example you are building a hospital similar to one you have done before you will have historical information available from which to derive the high level estimate.  As as the PM you are signing off on the Charter saying that you believe the Project can be done according to the outlined high level schedule and budget. It is your responsibility to inform them at the time if you believe that some items may not be able to be met. 

 

Once you do sign off on the Charter and the project starts you do typically have access to contingency reserves to offset things such as construction delays due to weather and also management reserves. However these reserves may amount to only 10% of the total budget. 

 

This is is where further study will help you. Crashing or fast tracking the project etc and other concepts come into play if you find you are in danger of not meting the schedule or budget. You always have the option to request more money but it may not look good for the PM. You should exhaust other options first. 

 

This is is why any additional requests for the project need to go through evaluation against scope, schedule, and budget. Unnecessary changes should not be implemented but there will be times changes are necessary or demanded by the client where you or the change control board will need to reflect the change against budget, scope, or schedule and you need to get approval from the client or sponsor. 

 

 

A projeect can can be terminated at any time for any reason. 

Lorenz

Sun, 09/29/2013 - 03:53

 Thanks @Focused2013.

By the way, shouldn't risks due to weather (unknown unknown) be charged to management reserves and not to contingency reserves? Thanks.

Focused2013

Sun, 09/29/2013 - 09:52

 Yes, you are correct.