Theory of Constraints Handbook - James Cox Iii [60]
The project’s budget buffer is computed from the safety time and individual resource costs for all tasks on the Critical Chain and feeding paths (chains). If the project completes on or before its calculated due date, any funds remaining in the budget buffer would be returned to Accounting/Finance. If the project requires access to contingency funds, the PMO, or similar body, should provide them upon reasonable and logical petition unless the project is to be cancelled or delayed.
Implementing a New Project Budgeting Process
Quite obviously, for all projects completed for outside parties, an organization would not want to return revenues earned by the completion of a project by its CC due date, which can be significantly shorter than a similar project completed using traditional project management techniques. Therefore, careful attention must be paid to agreed contracts. Contracts not only should state that all revenues promised are earned upon successful completion of the project, but there also may be opportunities to earn a bonus for early project delivery. Likewise, it is not too risky to accept contractual penalties for delivery beyond the promised due date. Even better, these terms (bonus for early completion, penalties for late completion) should be suggested to organizations preparing Requests for Proposals (RFPs) so all companies responding face the same terms.
Prior to implementing a new system for allocating project costs to tasks and the establishment of project budget (cost) buffers, however, the CCPM must be implemented and working as expected. Then the 10-step change process described later and illustrated in Fig. 3-12, shown later, should be followed to ensure that potential negative unintended consequences of such a change do not occur. For example, funds from traditionally budgeted project work may be used by a resource manager to compensate for unbudgeted items such as employee recruitment or specialized training needs, and this situation should be addressed prior to implementing a new budgeting process.
Project Reporting
Communication was one of the key elements of CCPM listed early in this chapter. Parts of the internal communication plan were discussed briefly. Communicating (reporting) both internally and externally is presented in this section.
Internal Reporting
The two main aspects of internal reporting are communications among the project team members and information provided to those within the project control functions of the organization. Necessary information is generated from CC Buffer Management. Some aspects of this topic, such as the resource and scheduling buffers, were introduced in the section “Project Control.” Excessive consumption of buffers always should be reported.
Review of Project and Feeding Buffers
The most relevant information to provide inside the company is buffer consumption for all active projects. Consumption of a project buffer that does not match completion of CC tasks (the buffer burn rate) is most revealing.31 Because the project buffer serves as an additional protection for feeding buffers, the ratio of consumption compared to completion of noncritical tasks is not terribly important.
Buffer consumption over time, as revealed in “fever” charts showing which region (zone) of a buffer [green (represented as light grey in chapter figures), yellow (dark grey), or red (black)] has been penetrated at a particular status date, displays trends and charts the history of project operations. As demonstrated in Fig. 3-11, the danger zone (black area) requiring immediate action typically is wide at the beginning of a project and narrow as the project is completed to reflect the decreasing size as work is completed. The pattern of zone