520 CHAPTER 12 / PROJECT AUDITING Project Management in Practice Auditing a Trou

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520 CHAPTER 12 / PROJECT AUDITING Project Management in Practice Auditing a Troubled Project at Atlantic States Chemical Laboratories Atlantic States Chemical Laboratories (ASCL) received a contract from an entrepreneurial firm, Oretec, to conduct a unique type of chemical analysis on special alloys they had created in their own laboratories in the interest of identifying potentially successful commer- cial alloys. The contract emphasized quality of the effort and speed of continuing laboratory analyses. The con- tract duration would be open-ended, with payment at the monthly rate of $100,000. The liaison officer from Oretec would have access to ASCLs laboratory work for observation. As work progressed, the liaison officer became more involved in the project, pressuring the team to alter their approach and skip the usual repeat-verification proce- dures in the interest of time. On two occasions, the ASCL team devised an analysis indicating that a commercially successful product could be produced. The liaison offi- cer was gratified with the effort and asked for sugges- tions on how to produce the product commercially. However, tests at Oretec indicated that these approaches would not work. As the project midpoint passed, the pressure for more and faster analyses increased even more, with the liaison officer becoming more belligerent and difficult to please. Soon thereafter, the president of ASCL received a letter from Oretec voicing a number of complaints and terminating the contract effective imme- diately. Puzzled by the unexpected displeasure of their client with no indication of trouble on the project from internal sources, the president requested a comprehen- sive audit of the project. The audit reported the following: 1. Overview Points: • The original approach to the project was sound but was altered by the client's liaison officer, nevertheless, significant findings were still made. The analyses themselves were conducted properly. There were several analytical successes during the project (each identified). Commercialization was not ASCL's responsibil- ity but the client's, even if ASCL suggested some possible processes. • There was excessive involvement of the liaison officer in the management of the project, includ- ing frequent changes of direction. • Ongoing project management decisions and changes were not documented by ASCL, nor communicated to the client. 2. Analysis of Client's Criticism (about half of the criticisms were valid, details described). 3. Further Points of Note: • The commercialization processes proposed by ASCL have, in fact, been successfully used in similar instances. The client's tests indicating their unacceptability are incorrect. The reports provided by ASCL and criticized by the client as incomplete were redirected by the liaison officer to be prepared quickly and informally. The reports of project analysis suc- cess would not have been understandable to the client's management, only to technical person- nel or the liaison officer. • ASCL management gave insufficient guidance/ support to the project leader in his relations with the client. 4. Recommendation: Establish a formal procedure for identifying high-risk projects at the contract stage and then monitor them carefully for deviations from plan. The factors contributing to making this a high- risk project were inadequate funding, insufficient time, low chance of success, an unsophisticated client, and excessive access to ongoing project activities by the client. Questions: 1. Was this a good use of the audit concept? 2. What was the major problem in this project? 3. In spite of the recommendation, ASCL had already had a "problem project" list and system in place. Why do you think it may not have caught this particular project? Will the new procedure do any better? Source: J. Meredith, consulting project.

Explanation / Answer

1. Yes, the audits are conducted to find out problems area in the products, as and when the issues occur. Though audits are meant to identify/prevent the problems creeping up in the project, but audits are equally effective in finding the area of concerns in the troubled project.

2. Major Problems in the Project:

3. The recommendations are effective and would definitely help the successful completion of the project. Having been implemented earlier, there wouldn’t have been the conflicts. Risk identification plays a vital role in smooth execution of the project. After risk identification, there can be risk mitigation plan to minimize the impact of the risk on the contractor.

With the new procedure in place, there is high chance that project can be successfully completed.

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