Framework: An Integrated Approach to Portfolio, Program and Project
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I. INTRODUCTION TO TOTAL COST MANAGEMENT - CHAPTER 2 - THE TOTAL COST MANAGEMENT PROCESS MAP
2.2 Total Cost Management Process Map
.1 Total Cost Management
This section builds on the information provided in the previous section by illustrating how the generic Plan-Do-Check-Assess (PDCA) model is implemented in the total cost management process map.
As defined earlier, total cost management is the sum of the practices and processes that an enterprise uses to manage the total life cycle cost investment of resources in its portfolio of strategic assets. Furthermore, the maximum value of TCM can only be realized when the enterprises practices are applied logically in an integrated process. The TCM process map is a generic outline of that integrated process.
Figure 2.2-1 shows the TCM process map (the numbers in parenthesis correspond to chapters and sections of the Framework that cover each step). The figure shows how the PDCA model is applied recursively (i.e., in a nested manner) in TCMthe basic process is applied for each asset and group or portfolio of assets, and then again for each project being performed to create, modify, maintain, or retire those assets.
Figure 2.2-1 Total Cost Management Process Map
The two levels of the TCM process in Figure 2.2-1 are referred to respectively as the Strategic Asset Management and Project Control processes. Project Control is a recursive process nested within the "do" or project implementation step of the strategic asset management process. An enterprise will have a portfolio of assets in various stages of their life cycles, and during each assets life cycle, many projects will be performed to create, modify, or terminate that asset.
.2 The Strategic Asset Management Process Cycle
Strategic Asset Management (SAM) refers to the macro process of managing the total life cycle cost investment of resources in an enterprises portfolio of strategic assets. The portfolio will contain many assets in various stages of their life cycles (including those assets that are nothing more than ideas). Although investments are made in an asset through the performance of a project or program, SAM is not concerned with day-to-day project tasks; SAM focuses instead on initiating and managing the overall portfolio of projects in a way that addresses the strategic objectives of the enterprise.
The PDCA steps of the strategic asset management process cycle include:
Section 2.3 further defines the SAM process map and the specific steps in its process cycle.
.3 The Project Control Process Cycle
Project Control is the recursive process cycle nested within the "do" step of the Strategic Asset Management process cycle. A project is a temporary endeavor an enterprise undertakes to create, modify, maintain, or retire an asset. During the life of a project, various resources are invested in the asset by the project team. Ultimately, a usable or operational asset is returned to the enterprises asset portfolio at the completion of the project.
The PDCA steps of the project control process cycle include:
Section 2.4 further defines the project control process map and the specific steps in its process cycle.
.4 Parallels Between Strategic Asset Management and Project Control Process Cycles
Strategic Asset Management and Project Control are both recursive PDCA processes. Many of their sub-processes are the same as will be described in Sections 2.3 and 2.4. For example, cost estimating is a planning sub-process in strategic asset management with an emphasis on stochastic estimating methods, while in project control, cost estimating emphasizes deterministic methods. Decision analysis, value analysis and engineering, risk analysis, and resource planning are some other sub-processes that are practiced in both the strategic asset management and project control process cycles. In the Framework, these parallel sub-processes are described only one time for brevity (e.g., the value engineering process is grouped with Project Control processes).
.5 Enterprise Organization for Total Cost Management
There is no one best organizational approach to achieve successful TCM implementation. Organizational approaches will be as varied as the strategic objectives of enterprises. However, all organizations should be focused on customer needs and on the entire life cycle of strategic assets rather than on short term functional considerations.
People are every enterprises most important strategic asset. Organizational or human resource development can be viewed as a portfolio of projects undertaken to continually improve the work life and performance of each person in the enterprise. Narrow functional task training alone does not address the needs of TCM. For instance, a person who understands both stochastic strategic asset management cost estimating methods and deterministic project control estimating methods will be a more valuable asset than a person who understands only one type of cost estimating approach.
2.2.2 Process Maps for Total Cost Management
The process map for Total Cost Management was shown previously in Figure 2.2-1. At a more practical level, TCM is a combination of the process maps for Strategic Asset Management and Project Control as described in Sections 2.3 and 2.4.
2.2.3 Inputs to Total Cost Management
.1 Investment of Costs or Resources. Costs refer to any investment of resources in the enterprise's strategic assets. Resources may include time, monetary, human, and physical resources. An alternate definition of costs is economic resources used in achieving an objective.
.2 Strategic Objectives and Requirements for Asset and Project Investments. The TCM process takes place within the overarching context of the enterprise. Enterprise management establishes objectives and performance requirements for its assets and processes. TCM is concerned with the deployment of business strategy, not its formulation.
.3 Working Environment Considerations. (See Chapter 11.) TCM processes are enabled or constrained by technologies such as information and communication management and organizational development management. Also, the enterprise exists and processes take place within society where concerns for culture, environment, health and safety must be addressed.
2.2.4 Outputs from Total Cost Management
Managed Asset Portfolio. The end products of the TCM process are new, modified, maintained, or retired assets that achieve the enterprises strategic performance objectives and requirements.
Managed Project Portfolio. For larger enterprises, projects will be in progress at all times. While individual projects have a beginning and end, the enterprise must consistently manage the project process to assure that all projects achieve the enterprises objectives and requirements.
2.2.5 Key Concepts for Total Cost Management
The following key concepts and terminology are described in this section:
.1 Strategic Asset Management. (further described in Section 2.3) Refers to the TCM process as applied at an enterprise wide level to manage costs of the enterprises entire strategic asset portfolio.
.2 Project Control. (further described in Section 2.4) Refers to the TCM process as applied at an individual project level to manage costs of creating, modifying, maintaining, or retiring individual strategic assets.
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