Chapter 3
Systems Development Cycle and
Project Conception
Project Management for Engineering,
Business, and Technology
Prepared by
John Nicholas, Ph.D.
Loyola University Chicago
Systems Development Cycle
Systems Life Cycle
It’s useful to think of a project end-item as a
system that moves through phases of a “life cycle”
Life Cycle Stages: Natural Organisms
All living organisms follow life-cycle stages
Conception
Birth
Growth
Maturity
Decline
Death
Life Cycle Stages: Human-Made
Systems
All human-made systems follow this cycle
1. Development/Installation
2. Operation
Termination
Life Cycle Stages: System Life Cycle
1. Development/Installation
conception, birth, and growth (Project)
2. Operation
maturity and decline
Enhancement/Replacement
Termination
• For a human-made system termination is not inevitable.
• System is kept “alive” through enhancement/ replacement.
• This, every human-made system begin as a project and
often ends with the start of a new project.
Project Methodology
Companies follow own versions of project life
cycle
Create their own “project methodology”.
Example….
Project Methodology
Product New Product Product Life Cycle
Planning Introduction Management
Front End Realization Product Life Cycle
INSTALLED
IDEAS CON- FEASI- DEFIN- DEVEL- DEPLO- GRO- MATU- DECL- BASE
CEPT BILITY ITION OPMENT YMENT WTH RITY INE SUPPORT
Gating Process
Retro- Annual
START 1 2 3 4 5 spective EXIT
Review
Review
GATES Preliminary Final Business General
Discontinued
Business Case & Project Availability
Case Commitment
Methodology used in the book:
the Systems Development Cycle
Expanded version of the system life cycle:
The Systems Development Cycle (SDC)
Systems Development Cycle
Phase A: Conception phase Phase B: Definition phase
Initiation stage Project definition
Feasibility stage System definition
Proposal preparation User and system
requirements
Phase D: Operation phase Phase C: Execution phase
System maintenance Design stage
and evaluation Production/build stage
Fabrication
Testing
Implementation stage
System System
Training
Improvement termination
Acceptance tests
Installation
(To Phase A: Termination
repeat cycle)
Systems Development Cycle: Phases
Phase A: Conception
Perceived need or problem
Initial investigation and project feasibility
Request for proposal
Project approval or denial, contract agreement
SDC Phases (cont’d)
Phase B: Definition (“Birth”)
Specify requirements in detail:
User requirements
System requirements/
system specifications
Define project to produce end-item/deliver requirements:
Project master plan
SDC Phases (cont’d)
Phase C: Execution (“Growth”)
Design/development
Procurement/fabrication
Production/building
Installation
SDC Phases (cont'd)
Phase D: Operation (“Maturity”)
Customer gains control
System developer might remain involved with
system/customer through:
Maintenance
Evaluation
Enhancement
Replacement
Phases A, B, C are “Project Life
Cycle”
Phase A: Conception phase Phase B: Definition phase
Initiation stage Project definition
Feasibility stage System definition
Proposal preparation User and system
requirements
Phase D: Operation phase Phase C: Execution phase
System maintenance Design stage
and evaluation Production/build stage
Fabrication
Testing
Implementation stage
System System
Training
Improvement termination
Acceptance tests
Installation
(To Phase A: Termination
repeat cycle)
Project Life Span, Variations
Phased Project/Program Planning
In very large projects, phases A, B, and C are
treated somewhat independently, almost like
separate projects
Each phase requires justification and approval.
Project can be cancelled in each phase. Different
contractors can be involved in each phase.
Examples: phase/gate methodology and DOD
development/production contracting
Project Life Span, Variations (cont'd)
Fast-tracking
Phases (and stages within phases) overlap so
work in successive phases (stages) happens
simultaneously.
Phase A
Phase B
Phase C
Pro: shorten project life span
Con: Increase risk of mistakes/ rework
Key Actors (Stakeholders) in SDC
Customer/Client
Party for whom project is being done
Pays for project
Has needs and requirements to be met
User
Party that operates or is beneficiary of project end-item
Might be same as customer, might not
If different, important to differentiate user from customer
System Development Organization (SDO)
Party that performs work for customer
aka developer, contractor, consultant
Key Actors in SDC (cont'd)
For most projects, customer and developer
are separate organizations or separate units
within same organization.
Sometimes they are same, but we will treat
them as separate
Key Actors in SDC (cont'd)
Customer and contractor/developer each
are organizations:
Contractor/ System
Customer Organization Development
Organization(SDO)
Top Top
management management
Managers
Project
Middle Middle
Managers
User
management management
Labor Force Labor Force
Doers
Key Actors in SDC (cont'd)
In customer organization
“User” (party with need or problem) can be at
any level
Project approval/funding happens at management
levels Contractor
Customer Organization
/ SDO
Top Top
management management
Managers
Middle Middle Project
User
management management Managers
Labor Labor
Key Actors in SDC (cont'd)
In SDO organization
Project approval happens at top
Project work performed by “labor”
Project managed by PM in middle level
Customer Organization Contractor/
SDO
Top Top
management management
Managers
Middle Middle Project
User
management management Managers
Labor Labor
Phase A: Conception
Project Conception: outline of activities
Initiation
Initial Investigation
Feasibility
RFPs
Business Case
Needs and Requirements Definition
Environmental Impact and Sustainability
Proposal Preparation
Proposal Evaluation/Project Selection
Contract Agreement and Negotiation
Initiation
Every project starts in somebody’s mind as a
need or problem, or as a solution to
somebody else’s need or problem.
An “idea” develops based on perceived
problem, opportunity, or need
Idea can originate anywhere in customer or
contractor organizations
Initiation (cont'd)
To determine if idea has merit instigate an
initial (usually brief) investigation
Data sources
Interviews Usually
Background research customer
Documentation does this
Initiation (cont'd)
Focus of initial investigation:
Symptoms, problems, needs
Objectives
Preliminary alternatives; estimated costs,
benefits, strengths, weaknesses
People and groups effected
Initiation (cont'd)
Customer’s decision-to-proceed criteria:
The needs are real and funding is available
Project is consistent with goals and resources
of organization
Project has priority with respect to other needs
Project has value in terms of new technology,
organizational reputation, market share,
profits, etc.
RFP (Request for Proposal)
If customer decides to proceed with idea,
next step is to contact an SDO (developer or
contractor) to
investigate idea further, or
do the work and deliver the solution/end-item
RFP (Request for Proposal)
Contact between customer and Contractor/SDO
initiated with the RFP
Also called RFB, RFQ, or RFT (bid, quote, or tender)
Customer
SDO
Top RFP
mgt
Proposal
RFP
Purposes
Describe customer’s needs, problems, or idea
Solicit suggestions/solutions from SDO
Inform SDO how to respond to RFP (where to
send proposal, to whom, and what to include in
proposal)
RFP
Can be informal (e.g., email, phone call), or
formal (written document)
Formal is better
RFP
Contents
1. Statement of Work (SOW)
2. Proposal requirements
3. Contractual provisions
4. Technical Information or Data
5. Proposal Evaluation Criteria
RFP Contents
1. Statement of Work (SOW)
Description/background of problem, need, or general type
solutions to be investigated
Scope of work to be performed
work/deliverables to be included
work/deliverables to be excluded
work restrictions
criteria of acceptance for deliverables, results or end-items
Requirements for results or end-item; e.g.,
specifications and standards
how results and work will be measured
expected relationship between user and contractor
expected completion date
constraints on cost of work to be performed
RFP Contents
2. Proposal Requirements
Conditions placed on proposal
proposal contents and format
data requirements
sample forms to include
submission location and deadline
All proposals should “look” same
RFP Contents
3. Contractual Provisions
Type of contract to be awarded and contractual
provisions
Fixed-price
Cost-plus
Incentives
Special considerations
RFP Contents
4. Additional Information or Data
Name of contact person for requesting additional
data—as necessary to enable SDO develop
solution and prepare proposal or price quote
Technical information to support the SOW
5. Proposal Evaluation Criteria
Criteria and weights (relative importance) for each
to be used in assessing the criteria
RFP
Send RFP’s to multiple contractor/SDOs in
hope of receiving multiple proposals
RFPs Contractor/
SDO’s
Customer
RFP
Send RFP’s to multiple contractor/SDOs in
hope of receiving multiple proposals
Proposals
SDO’s
Customer
Why is this process important?
• Clarification of user requirements
• Selection of best contractor
• Sets tone for project: systematic,
organized, well-defined
Q: Where to send RFPs?
Where to send RFP?
Customer sends RFP’s to
Contractor/SDO’s on bidder’s list
Contractor/SDO’s recommended by other
customers
Contractor/SDO’s requesting an RFP (as
advertised in Commerce Business Daily or trade
newsletters)
Qualified Contractor/SDO’s based upon RFI’s
(requests for information)
Example RFP
Requirements for “Machine”:
Will be tested in front of Army officers
Must be able to carry for one hour a passenger
besides pilot, the two of them weighing not less than
350 lbs.
Must show average speed of 40 miles per hour in ten-
mile test
Must carry enough fuel for 125 miles
Must have “demountability” (built in such a way it can
be taken apart and later reassembled without too
much difficulty, so it can be transported on an army
truck)
Must submit with bid 10 percent of price of machine as
sign of good faith!
Example RFP (cont'd)
What is this a request for?
What is the “Machine”?
Example RFP (cont'd)
Answer:
This is a Request for Bid from U.S. Army for
“Flying Machine,” Nov. 1907
Responses received: Forty-one!
Only three included required 10 percent deposit;
two of these drop out
Only one bidder is actually capable of meeting
the requirements…
The Wright Brothers
The Wright Brothers
Orville
Wilbur
Feasibility Study
Most projects are preceded by detailed
study/analysis to compare costs with
benefits/outcomes
Study considers “feasibility” of idea or
proposed work given proposed benefits
constrained resources
Feasibility study might be done by customer
during initial investigation…
Feasibility Study (cont'd)
Alternatively, might be done by
Contractor/SDO
Regardless, somewhere in the Conception
Phase a feasibility study is performed to
justify the “idea” or proposed solution
Feasibility Study (cont'd)
Sometimes, outcome of study is a “Business
Case” to convince customer/sponsor to
authorize and undertake the project. Typical
contents:
Cost-benefit analysis: estimated project costs
compared to the benefits
Estimated project duration when financial return
depends on the timescale
Financial aspects such as the funding approach
Risks, issues, and a preliminary risk management
plan
Assumptions
Feasibility Study (cont'd)
Steps in Feasibility Study
1. Gain full understanding of user’s problem, need,
and current situation
Perform needs analysis to fullest extent possible
Feasibility Study
Articulating User Needs
Ask user to define the need clearly
Ask user a complete set of questions about need
Do necessary research to understand the need
better
Reformulate need as best you can
Ask user to respond to reformulation, and revise
accordingly
Resulting “actual needs” are often different than
original “stated needs”
Feasibility Study
Example
Stated need:
“We need a ledger system.”
BUT…A ledger system can be purchased at
OfficeMax for $99! Will that system enable
your organization (say, 18,000 employees
with offices in 23 states and 9 countries) to
close its books in three-days?
Most likely not.
Feasibility Study
Actual need:
“We need a system that will enable our
organization to close the books in three days.”
Feasibility Study
Pitfalls in Defining and Addressing Needs
Some needs are ever-changing
Some needs are only vaguely perceived
Solutions are identified prematurely
Needs identified are for wrong users
Multiple users exist, each with differing needs
User’s needs are distorted by “expert”
Gold-plating of needs
Filtering of needs
Father-knows-best approach
Steps Feasibility Study
1. Gain full understanding of user’s problem, need,
and current situation
2. Document current system
Use schematic diagrams showing inputs, outputs,
elements, attributes, flows, etc.
Summarize all information collected (or note
where it can be found)
3. Devise alternative solutions
4. Analyze the alternatives
Use models to assess alternatives’ ability to meet
objectives as specified by user criteria
5. Include solution in proposal, technical section
6. In some cases, feasibility involves analysis of
environmental impacts (EI) (next slide)
Environmental Impact
Typical contents of an EI Statement include
Summary of proposed development and/or management plans.
Alternative sites and technologies to the proposed project
Description of project’s existing site and surrounding area
Potential project impacts, such as on
Quality of air, soil, watersheds, wetlands, flood plains
Fisheries; sensitive plants; sensitive, endangered, or threatened
species
Scenic resources; societal and aesthetic experiences
Heritage resources (sites, structures, buildings, districts, objects)
Historical resources (logging, ranching, grazing, mining,
recreation)
Adverse impacts that cannot be avoided
Long term impacts on resources.
Ways to prevent, minimize or offset impacts; ways to monitor
actual impacts
Sustainability
Many industries have taken strides to incorporate environmental
and social responsibility into the role of project management.
The feasibility study might include guidelines or considerations.
Examples in construction include guidelines for:
Passive ventilation systems
Whole building heat recovery systems
Renewable/recycled materials
Reduce landfill waste: crush/reuse aggregates (stone, etc.)
Use suppliers who accept returns/exchanges, reuse
packaging, and use reclaimed/recycled building products
Minimize dust from concrete/mortar; avoid air/water pollution
The study should ensure that the project and its outcomes
comply with local, state, and federal environmental laws.
Contractor/SDO’s SDO Decision to
Respond to RFP
Contractor/SDO considers whether
Competition has head start
SDO has funds, facilities, etc., to devote to
project
Value of project in terms of work reputation,
profitability, etc., is worth it
Contract can be won
Proposal?
Project is doable for SDO
RFP
SDO
Customer
SDO Decision to Respond (cont'd)
Issues
Contractor sends proposal with no hope of
winning contract
Customer sends RFP with no intent of awarding
contract
Unsolicited proposal (no RFP)
Project Proposal
The proposal is one of most important
documents in project life span.
Purposes:
1. Sales
SDO describes to customer what it will do
Proposal must “sell” customer
Getting contract depends on proposal
2. Contract
Customer assumes SDO will be able to deliver on
what is said in proposal
If both customer and SDO sign off on proposal,
contract is created to deliver whatever SDO proposed
Preparation of Proposal
Who Prepares Proposal?
Preparation of Proposal
Could be…
Sales/marketing
Technical staff
Proposal specialists
Ideally: all of these
Select Proposal Manager
Best person is would-be PM (usually not feasible)
Professional proposal manager
Preparation of Proposal (cont'd)
Review RFP
Always start with RFP
Use RFP as checklist
Customer uses RFP criteria to weed-out
proposals
Outline SOW based on:
Proposed work in SOW in RFP
Results of feasibility study
Preparation of Proposal (cont'd)
Prepare Preliminary Project Plan (Work,
Time, Cost)
Use basic planning tools to determine necessary
work, time, and cost for completion date and price
in proposal
Preparation of Proposal (cont'd)
Involve Key People (Future Project Team)
Determine who would be key people in project
and include them in creating proposal especially
SOW, technical section
Preparation of Proposal (cont'd)
Issue: Who Pays for Proposal?
Usually SDO, sometimes customer pays cost for
contract winner
Falls under “overhead”
Contents of Proposal
Standard Contents
Executive Summary
Technical Section (Statement of Work)
Cost and Payment Section
Legal Section
Management/Qualifications Section
Contents of Proposal
Standard Contents
Executive Summary
Should be more personal than proposal
Briefly state contractor’s qualifications and experience
Draw attention to unique features of proposal, price,
and contractor’s ability to do project
Identify “contact” person with contractor
One of most important sections of the proposal
Contents of Proposal (cont'd)
Standard Contents
Technical Section (Statement of Work)
Gives scope of work and planned approach
Based upon WBS and includes major project phases,
key tasks, milestones, and reviews
Contains schedule when end-items will be delivered
Describes realistic benefits in detail to demonstrate that
user needs will be fulfilled
Recognizes and discusses any problems or limitations
to approach
Is specific to avoid misunderstandings and demonstrate
method and appropriateness of approach, but not too
specific
Contents of Proposal (cont'd)
Standard Contents
Cost and Payment Section
Breakdown of projected hours for direct, indirect, and
special activities, associated labor charges and
materials expenses, and price of project
Addresses contractual arrangement and method of
payment
Contents of Proposal (cont'd)
Standard Contents
Legal Section
Contains anticipated, possible, or likely problems and
provisions for contingencies
Example – appropriate procedures for handling changes
due to scope of project or cost inflation, and for terminating
project
Contents of Proposal (cont'd)
Standard Contents
Management/Qualifications Section
Background of contractor organization, related
experience and achievements, and financial
responsibility
Organization of management, and resumes of project
manager and key project personnel
Very important section…
Contents of Proposal (cont'd)
Management/Qualifications Section (cont’d)
Very important section.
Customer might select SDO based upon this and not
SOW!
Contents of Proposal (cont'd)
Proposal Must Reflect RFP
Start with RFP, then include other “standard”
content
Sales and Contract
Must be worded and appear such that customer
will want to “buy.” But should not promise anything
that cannot be delivered
Contents of Proposal (cont'd)
Avoid “Giveaways”
Too detailed proposal tells everything
No need to hire SDO
Customer can do on its own, or hire another SDO
to do it
Customer Review of Proposal
Customer evaluates
Cost
Benefits
Success of Likelihood
Contractor Reputation
Narrow the List
Often a handful of good proposals remain
after many others have been discarded.
These go to negotiation.
Negotiation
Purpose of contract negotiation: Customer
and SDO meet to
Clarify terms (ensure common understanding)
Reach Agreement on requirements, schedule,
price, and/or performance obligations
Negotiation (cont’d)
Ideally, the would-be PM is involved. She
must know:
Terms of contract and areas open to negotiation
(What’s Fixed, What’s Flexible?)
Customer’s situation (how much does customer
need project?)
Competition (Who are competitors and what are
they saying to customer?)
Basic Kinds of Contractual
Agreements
Different contractual agreements offer different advantages to the
customer and contractor, depending on the nature of the project.
(These are discussed in Chapter 12)
The basic agreements are:
Fixed Price Contract—Price paid by the customer for the
project is fixed regardless of the costs incurred by the contractor.
Cost-Plus Contract—Price paid by the customer is based on
the costs incurred in the project plus the contractor’s fee.
Incentive Contract—Price paid by the customer depends on the
contractor’s performance in comparison to the target price,
schedule, or technical specification: the contractor either
receives a bonus for exceeding the target, or must pay the
customer a penalty for falling short of the target.
Contract Statement of Work
Contract contains a contract statement of
work (CSOW) that defines the expected
performance of the project in terms
Scope of work and Requirements
End results
Schedules
Costs and price
Payment schedules
Ways to handle changes or variations
Each party’s responsibilities and liabilities.
Work Requisition
Work requirements as specified in the
CSOW are divided among the involved
departments of the contractor/SDO’s
SDO and/or other contractors
Each department or contractor receives a
work requisition or work order that
describes the work expected of it and
authorizes it to begin work.
Project initiation, proposal
preparation, and authorization process.
