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3.2 Project Organization
LEARNING OBJECTIVES
1. Identify the various functions represented on a project.
2. Analyze and evaluate the influence of organizational structure on project functions.
3. Design a project organizational chart for various project complexity profiles.
There is no single organizational approach to projects. Each project is organized to accomplish the work
effectively and efficiently. Several factors influence the organizational approach to execute a project.
The complexity profile of a project, the culture of the parent organization, the preferences of the project
manager, the knowledge and skills of the team, and a parent organization with a project management
office are examples of factors that influence the project’s organization.
In developing the project organizational structure, the project manager considers the span of control
for each manager. The span of control represents the number of people reporting to a manager. For
example, the project manager does not want all the engineers on a project reporting to the engineering
manager and assigns senior engineers to report to the engineering manager with other engineers
reporting to the senior engineers.
The engineering manager can organize the engineering reporting structure so that the various
engineering discipline managers would report to him or her. For example, the structural, electrical, and
mechanical engineering team leaders would report to the engineer manager. On a larger, more complex
project, the engineer manager may establish area team leaders and have the structural, electrical, and
mechanical engineers report to an area team leader. If the project is geographically dispersed, with the
engineering office staff in different cities working on the project, then structuring the engineering
function by area provides better coordination and control (see Figure 3.1 “Decreasing Span of Control
by Increasing Levels of Reporting”).
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Figure 3.1 Decreasing Span of Control by Increasing Levels of Reporting
The organization on the left has seventy-one engineers reporting to the same person. The organization
on the right creates two additional positions and reduces the span of control to thirty-seven and thirtyfour, respectively.
Most projects have similar functions that are important to successfully managing the project. Included
among these are the following:
Sponsor
Project manager
Controls
Procurement
Technical management
Quality
Administration
Figure 3.2 Typical Project Organization
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On smaller projects, more than one function can be managed by one person. On larger projects, large
teams may be needed to accomplish the work within the function.
Project Sponsor
The project sponsor is outside the day-to-day operations of the project and has the organizational
authority to provide resources and overcome barriers for the project. The project sponsor is typically a
leader in the parent organization with an interest in the outcome of the project. As a leader in the
parent organization, the project sponsor can provide input into the project scope and other documents
that define project success. The guidance and support from the project sponsor enhances the ability of
the project to successfully meet the parent organization’s objectives.
Southern Training Center Organization
A training organization in South Carolina assigned a project sponsor to every project. For smaller
projects, the regional manager fulfilled the role of project sponsor. On larger, more complex
projects, the operations manager was the project sponsor. The vice president was the project
sponsor of the three or four most complex projects, and the president was the project sponsor only
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on projects with a high degree of political risk. This approach to assigning project sponsors assured
that each project had an organizational advocate that could address barriers and provide direction
and resources. The project sponsor, in this organization, developed a relationship with a senior
representative of the client organization, reviewed monthly reports, and conducted thorough
quarterly reviews.
Project Manager
Project managers often have the breadth of responsibility associated with corporate chief executive
officers (CEOs). The project manager facilitates the start-up of a project and develops the staff,
resources, and work processes to accomplish the work of the project. He or she manages the project
effectively and efficiently and oversees the closeout phase. Some projects are larger than major
divisions of some organizations, with the project manager responsible for a larger budget and managing
more risk than most of the organizational leaders. A mining company that builds a new mine in South
Africa, an automobile manufacturer that creates a new truck design, and a pharmaceutical company
that moves a new drug from testing to production are examples of projects that may consume more
resources in a given year than any of the organization’s operating divisions.
The function of the project manager can vary depending on the complexity profile and the
organizational structure. Defining and managing client expectations and start-up activities, developing
the scope, and managing change are functions of the project manager. On some projects, the project
manager may provide direction to the technical team on the project. On other projects, the technical
leadership might come from the technical division of the parent organization.
Although the functional responsibilities of the project manager may vary, the primary role is consistent
on every project. The primary role of the project manager is to lead, to provide a vision of success, to
connect everyone involved in the project to that vision, and to provide the means and methods to
achieve success. The project manager creates a goal-directed and time-focused project culture. The
project manager provides leadership.
Project Control
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In general, project controls is both the planning function and the function that tracks progress
against the plan. Project control provides critical information to all the other functions of the project
and works closely with the project manager to evaluate the cost and scheduling impact of various
options during the life of a project.
Sometimes accounting functions such as payroll, budgeting, and cash management are included within
project controls. On larger projects, accounting functions are typically separate because the accounting
culture tracks expenses to the nearest penny, and cost estimating and tracking by project controls can
often be off by hundreds and sometimes thousands of dollars. The lack of definitive information
necessitates the development of cost estimates within ranges that are often inconsistent with
accounting practices. Separating these two functions allows each to operate within their own accuracy
comfort zone. The following are typical activities included within the project controls function:
Estimating
Tracking costs
Analyzing trends and making projections
Planning and scheduling
Managing change
Tracking progress against schedule
The project controls team gathers this information from all the functions on the project and develops
reports that enable each functional manager to understand the project plan and progress against the
plan at both the project level and the functional level. On large complex projects, some project
managers will assign project controls professionals to work within the major functions as well as the
project management office. This approach allows each function to plan and track the function’s work in
more detail. The project controls manager then coordinates activities across functions.
Project Procurement
The approach to purchasing the supplies and equipment needed by the project is related to the
complexity profile of the project. A small project with a low complexity level may be able to use the
procurement services of the parent organization. In an organization where project resources reside in
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various departments, the departments may provide the supplies and equipment each team member of
the project may need.
Southern College Procurement Organization
A college in South Carolina chartered a number of projects to increase the energy efficiency of the
college. The project team included members from various college departments. Each department
paid for the time, travel expenses, and supplies needed by the team member from their
department. Each team member continued to use the computers and administrative support in
their department for project work. The costs for this support was not included in the project budget
nor tracked as a project expense. Equipment purchased by the project that was installed to reduce
the energy consumption of the college was purchased through the college procurement department
and charged to the project.
More complex projects with greater procurement activity may have a procurement person assigned to
the project. This same South Carolina college retrofitted a warehouse to create a new training center for
industry. A procurement person was assigned to the project to manage the contract with the
construction firm remodeling the space, the purchase and installation of the new training equipment,
and the purchase of the supplies needed by the project team. All the procurement activity was charged
to the project. The procurement person reported to the project manager for better communication on
what the project needed and when it needed it. The procurement person participated as a member of
the project team to understand and provide input into the costs and scheduling decisions. The
procurement person reported to the college procurement manager for developing and implementing
project procurement processes that met college procurement policies and procedures.
Figure 3.3
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The procurement manager is part of the project team.
On larger, more complex projects, the procurement team has several responsibilities. The team is
responsible for procuring the supplies and equipment (such as office supplies and computers) needed
for the project team and the supplies and equipment (such as the training equipment) needed to
execute the project. On a typical construction project, the procurement team would rent a construction
trailer, office supplies, and computers for the project team to establish a construction office at the
construction site. The procurement team would also purchase the concrete, rebar, steel, and other
material needed to construct the building.
Procurement for Mining Project in South America
On the large mining project in South America, during the initiation phase of the project, the
procurement department arranged for office space and supplies for the engineering teams in
Canada, Chile, and Argentina and construction offices at the construction site in Argentina. As the
design and engineering progressed, the procurement team managed bids for the major equipment
and bids for the preparation of the construction site. The procurement team managed the logistics
associated with transporting large equipment from Europe, North America, and Asia to the job site
in rural Argentina. After the completion of the project, the procurement team managed the deposal
of project property.
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On large, complex projects, the procurement team manages at least three types of relationships with
companies doing business with the project.
Commodity Procurement
The largest number of purchased items for most projects are commodity items. Commodities are items
that can be bought off the shelf with no special modification for the project. These items are typically
bid and the lowest prices that can meet the schedule of the project will win the contract. The
procurement team assures the company that wins the bid can perform to the contact specifications and
then monitors the progress of the company in meeting the projects requirements. Concrete for the
project and the cranes leased to the project are examples of commodities. The key to success in
managing commodity suppliers is the process for developing the bids and evaluating and awarding the
contracts.
Procurement from Vendors
The second type of relationship is the vendor relationship. The terms supplier and vendor are often
used interchangeably. In this text, suppliers provide commodities, and vendors provide custom services
or goods. Suppliers bid on specialized equipment for the project. Engineers will specify the
performance requirements of the equipment, and suppliers that have equipment that meets the
requirements will bid on the project. The engineering team will assist in the evaluation of the bids to
assure compliance with specifications. The lowest bid may not win the contract. Sometimes the longterm maintenance costs and reliability of the equipment may indicate a high price for the equipment.
The key to success is the development of clear performance specifications, good communication with
potential bidders to allow bidders to develop innovative concepts for meeting the performance
requirements, and a bidding process that focuses on the goals of the project.
Partnerships
The third type of project procurement relationship is the partnership. Sometimes the partnership is
legally defined as a partnership, and sometimes the success of each partner is so closely tied together
that the relationship operates as a partnership. On the South American project, the project team
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partnered with an Argentinean construction company to access the local construction practices and
relationship with local vendors. This was a legal partnership with shared profits. The partner also
designed and procured some large mining equipment on which the success of the project and the
company building the mining equipment depended. With this type of relationship, a senior manager on
the project is assigned to coordinate activities with the partner, and processes are put in place to
develop shared goals, align work processes, and manage change.
Figure 3.4 Procurement Manager Relationships
Technical Management
The technical management on the project is the management of the technology inherent in the project
—not the technology used by the team to manage the project. The technical complexity on a project can
vary significantly. The technological challenges required to build a bridge to span a five-hundred-meter
canyon are significantly different from those required to span a five-thousand-meter body of water. The
technological complexity of the project will influence the organizational approach to the project. The
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technological complexity for a project reflects two aspects: the newness of the technology and the
team’s familiarity with the technology. The newness refers to the degree to which the technology has
been accepted in the industry. The more accepted the technology is in the industry usually means that
more knowledge and experience will be available to the team. Familiarity refers to the experience the
project team has with the technology. The less familiarity the team has with the technology, the more
energy and resources the team will expend on managing the technological aspect of the project. For
projects with high levels of project technology, a specialist may be hired to advise the technology
manager.
Indiana Steel Company
A steel company in Indiana purchased a new coal injection technology that would improve the
quality of steel, reduce the cost to produce the steel, and reduce air and water pollution. The
contract to design and construct the new plant was awarded to an engineering and construction
company. No one on the engineering and construction team had experience with the coal injection
technology. The client’s team understood the technology and provided guidance to both the project
engineering and construction teams. The client owned the coal injection technology, and the
engineering and construction team brought the project management technology.
Project Quality
Project quality is often part of the technical manager’s responsibility. On large projects or projects with
a high degree of technical complexity, the quality is sometimes a separate function reporting to the
project manager. The project quality manager focuses on the quality of the project work processes and
not the quality of the client’s product. For example, if the project is to design and construct an
automobile factory, the quality manager focuses on the project work processes and meeting the
technical specification of the equipment installed by the project team. The project quality manager is
not responsible for the quality of the car the plant produces. If the plant functions to the defined project
specifications, the quality of the plant output is the responsibility of the plant quality department, and it
may take several months for the plant to refine the work processes to meet the design specifications of
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the car.
On a construction project, the quality manager may test steel welders to assure the welders have the
skills and that the welds meet project specifications. On a training project, the quality manager may
review the training curriculum and the qualification of the instructors to assure the training provides
the knowledge and skills specified by the client. On a drug development project, the quality manager
may develop processes to assure the water and other raw material meet specifications and every
process in the development process is properly documented.
Project Administration
The administrative function provides project specific support such as the following:
Accounting services
Legal services
Property management
Human resources (HR) management
Other support functions found in most organizations
In most organizations, support for these functions is provided by the parent organization. For example,
people assigned to the project will get human resources (HR) support from the HR department of the
parent organization. Salary, benefits, and HR policies for employees assigned to the project will be
supported out of the HR department. The parent organization will provide accounting functions such as
determining the cost of cash, taxes, year-end project reports, and property disposal at the end of the
project.
The project manager on smaller, less complex projects will have sufficient knowledge about these issues
to coordinate with the parent organization’s functional leaders. On more complex projects, the project
may have an administrative manager responsible for coordinating the administrative functions of the
projects. On larger, more complex projects, an administrative function may be established as part of the
project team, with many of the functions assigning a resource to the project. In all cases, the
administrative function on a project is closely related to the legal and organizational responsibilities of
the parent organization and close coordination is important.
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South American Mining Project
The South American mine project has major design work to accomplish in three different design
offices: Vancouver, Santiago, and Argentina. The project manager and the leadership team reside
in Santiago, Chile. During the design stage of the project, the engineering manager in each
engineering office is leading the work with project controls, procurement, and administration, each
assigning resources to support the engineering activities at each location. The project engineer
manager assigned the engineering work based on the capabilities of the office and coordinates the
work between offices. The procurement, project controls, and administrative leaders assign
resources to support the work in each office. For example, the project controls manager assigned a
planner in each office to support the engineering manager in that office to develop and track the
schedule. The project planner in Vancouver supports the development of the engineering schedule
in Vancouver and communicates and coordinates with the planning activities in the other locations
When the project construction activities started, project controls, procurement, and administrative
resources moved from supporting engineering to supporting the construction activity. The project
organizational structure changed as the engineering manager and the engineering effort changed
from primarily designing the project to supporting the construction effort, by answering
construction questions and developing solutions to construction challenges. The procurement
effort changes from managing the bidding and contracting activities to managing the logistics.
Figure 3.5 Organization for Major International Project
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KEY TAKEAWAYS
Key functions on a project include sponsor, project manager, controls, procurement,
technical, quality, and administration.
The project sponsor has the organizational authority to provide guidance and resources and
can overcome barriers for the project.
The project manager is the project leader with broad responsibilities for all phases of the
project and for meeting project goals and client expectations.
The project controls manager is responsible for controlling the project processes, including
cost estimating and tracking, developing schedules, tracking progress against schedules,
managing changes to the schedule or budget, and analyzing trends.
The procurement manager is responsible for obtaining the services and materials needed to
complete the project. This is accomplished by purchasing commodities, managing
contractors who provide services and products, and working with partners.
The technical manager deals with the issues related to the technology of the project.
The quality manager monitors the project’s processes—not the quality of the product of the
project—and takes steps to assure they are done correctly and meet specifications.
Project administration manages accounting, legal, property, and human resources.
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EXERCISES
1. Materials or services whose quality is standardized and that are usually purchased based
on lowest price are __________.
2. Major components of a project that are specialized and that require the provider to help with
solving problems and share in the profits are provided by ____________
3. Worker benefits would be managed by the ________ function.
4. Tracking costs and comparing them to the project budget is handled by the ___________
function.
5. Buying concrete for a bridge project would be handled by the __________ function.
6. Checking to see that the work performed on the project is done consistently and up to
specifications is managed by the ________ function.
7. The number of people who report to a manager is referred to as the _____ __ ______
(three words).
8. If employees are responsible for estimating costs, to whom would they report?
9. Refer to Figure 3.1 “Decreasing Span of Control by Increasing Levels of Reporting”. How
many additional employees were added to decrease the span of control of the engineering
manager, and how was this accomplished?
10. Refer to Figure 3.4 “Procurement Manager Relationships”. How do partnerships affect the
complexity of the project? Describe an example of a situation where the partnership could
affect the complexity of the project.
11. How is procurement from suppliers different from buying commodities?
12. Refer to Figure 3.3. To whom does the procurement manager report? Provide an example
of a situation where this reporting relationship might increase the complexity of the project.
Project Organization
Refer to the descriptions of the project functions and determine which manager would take care
of each of the following problems. If you think the problem requires the attention of more than
one function, explain why.
1. One of the project team members has filed a sexual harassment suit against another team
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member of equal rank. ___________
2. A contractor is installing equipment that is substandard. ___________
3. The computer software used to make a step improvement in the client’s operations has a
significant bug in it. ___________
4. The client wants to use higher-quality materials in the project than was originally agreed on.
___________
5. Your organization has announced budget cuts but you cannot afford to lose anyone at this
crucial stage in the project. ___________
6. A contractor has complained that the procurement manager has a conflict of interest with a
competing contractor. ___________
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