Preface

This book is about quantitative methods in project management. Quantitative methods provide the basis for calculating value, setting up the project metrics that will be the measures of success, and helping the project manager understand the numerical values of risks to be addressed. Quantitative Methods in Project Management is for the project professional and day-to-day practitioner. Although grounded in theory, the objective of this book is to convey usable concepts and techniques that are workable every day in project life. Throughout the chapters, you will find sufficient introductory material set in a project manager's context to understand and apply the ideas without recourse to formal instruction. In Chapter 1, the concept that business value is the motivator for projects is addressed. A framework, called the "project balance sheet," is introduced and a loose workflow of quantitative skills is described.

Chapter 2 provides an introduction to probability and statistics. Really successful project managers apply these concepts routinely to set achievable expectations and manage risk. Probability and statistics are essential to "underpromising and overdelivering." Chapter 3 covers estimating methods, of which there are several, and the work breakdown structure. Good estimates cover all the scope, and all the scope is defined in the work breakdown structure. Quantitative decision making is addressed in Chapter 4. Therein, we tee-up the idea that good decisions are the outcome of decision policy implemented with rational decision making supported by risk-adjusted numerical analysis. Decision trees and tables are the tools of decision analysis. Risk adjustments in budgeting are exactly the topic of Chapter 5, wherein capital budgeting is discussed. Capital budgeting is, in effect, cash budgeting, and cash is the real source of value in business, despite the popular focus on earnings. So Chapter 5 is key material for the informed project manager.

Most project managers face a profit and loss (P&L) statement in day-to-day life. P&Ls are expense statements, largely a product of the company's cost accounting system, and are provided routinely to managers. However, the P&L does not convey value, only expense. Consequently, the P&L must be coupled with the project management "earned value" system to provide the numerical basis for understanding accumulating value. Expense accounting is the topic of Chapter 6. In Chapter 7, quantitative time management is addressed. Of course, time and cost are correlated: an increase in time is often the driver for an increase in cost. However, there are many quantitative aspects to time management that are discussed apart from cost management. Special topics in quantitative project management are covered in Chapter 8, including hypothesis testing, regression analysis, probability-impact analysis, Six Sigma, and QFD analysis. Six Sigma is a coined term that refers to a determined effort to reduce errors, which is variance, in the products and services delivered to customers. As some practitioners of Six Sigma like to say: "Our customers experience the variance, not the mean." In Chapter 9, a short treatment of project contracting is provided. Project contracting is a risk-management tool, and Chapter 9 examines the numbers and provides insight about incentive contracts as a risk-control tool.

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