The range of practical formats for the project order extends from a simple verbal call (“Maier, you take over the project ‘0815’!”) to a contract of several hundred pages that is negotiated between the lawyers of the contracting parties over months, if not years, e.g. for the award of major projects in the aerospace or defence sector.
It is therefore not surprising that the existing PM guidelines list quite different contents that a project order should have and a confusing variety of templates for this document circulates on the Internet.
If you have to formulate a project order, e.g. as a client or project manager, you are faced with the task of compiling the required content completely. The following considerations should help you to identify the points necessary for your project order and to formulate them in the correct level of detail.
I will only present the project-related aspects. A project order is at the same time a contract between client and contractor. Since the type of contract can vary greatly depending on the project environment and project organization, I will not discuss the contractual aspects here.
Why a project order?
The most important purpose of a project order is to authorize the work in the project and to ensure that the management can control the projects of their company. If, for example, a designer has a brilliant idea for a new product and starts to develop it without a corresponding project order, this “submarine project” damages his company in two ways:
Work that takes place without management approval impairs the performance of the organizational unit because it reduces the available resource capacity.
Management cannot manage projects about which it is not informed in a way that is beneficial to the company.
Therefore, no project may be started without a project order from an authorized authority.
In addition, the project order should define the basics of project implementation. The clearer this is done, the less friction losses there will be in the cooperation of the project participants.
The path from the idea to the project order
If the client gives the project manager the order to carry out the project, this is on the one hand the starting point of the project and on the other hand the completion of the project preparation or project initiation. The process models of the PM guidelines, in particular the PMBOK® Guide (PMI, 2008), PRINCE2™ (OGC 2009), PM3 (GPM, 2009) and DIN 69901 (DIN, 2009), describe the path from the idea to the project order with different terms and in different stages. However, three essential states for the project mandate can be defined across the board:
Stage 1: Project idea / project mandate / project initiation
Someone within an organizational unit has an idea for a change. This could be, for example, a salesperson who receives a new customer requirement, an engineer who proposes a new material, or a board member who wants to open up new markets. But an idea for a change does not become a project. Even the board member does not automatically have the authority to initiate a project. Within the organization, this idea must first be communicated to the authority that is empowered to decide whether or not to pursue the idea. This can be, for example, a staff unit (which decides on projects), the board of directors, the project portfolio manager or the managing director. If the idea convinces the decision maker, he will assign someone to check the feasibility of the idea and design the project order. This first assignment is called “project initiation” in PM3, “project idea” in DIN 69902-5 and “project mandate” in PRINCE2. The PMBOK Guide only mentions this preliminary stage.
Stage 2: Draft project order / project description
Before a final project order can be submitted to the steering committee for approval, a number of intermediate documents are required, such as a specification of the project results or the business case. PRINCE2 devotes an independent process (Starting up a Project) to the preparation of the project, which is explicitly not part of the project and is the joint responsibility of the client and contractor. The result of this process is the draft project order, which PRINCE2 calls “project description”.
The PMBOK Guide does not describe how to prepare the project, but requires the following input to create a project order: Statement of work, business case, contract (for external projects), factors of the business environment, input and output values of organisational processes. Creating these documents or obtaining this information is also a considerable effort.
Although DIN 69901 and PM3 describe individual processes, processes and results that must be carried out before the project order is created, they do not draw a clear line between activities before the project and those in the project. Accordingly, there is no clearly designated draft document for the project order.
Stage 3: Project Order / Project Charter / Project Lead Document
There is some consistency between the different standards only when the final project contract is drawn up. The costs for this are part of the project for all process models. There is also agreement that the project order must be approved by the client before the project manager can begin with the implementation of the project.
Before this release by the client, the project order is often called a “project proposal”. This is always the case when the contractor defines the project himself and submits it to the client only for approval and release of the budget.
The project order in the PM guidelines
All common guidelines for project management describe the project order, but in different forms. The main reason for this inconsistency is that the guidelines already differ in their basic approach. While PM3, the standard work of GPM, pursues a knowledge-based approach and accordingly sets the framework for the design of the project order very broadly, the British PM system PRINCE2™ with the so-called “project management documentation” provides in detail the obligatory contents for the project order. The PMBOK® Guide (US-American standard) lies between PM3 and PRINCE2 with regard to the formulation of the project order, called “Project Charter” there, as it integrates it on the one hand into the fixed framework of its process model, but does not handle the integration of project management into the company organisation as strictly as PRINCE2.
If several organizational units are involved in the project, the first thing you need to do is clarify which requirements have to be met by the project order on the basis of mandatory standards! Note: Even within a company, the different departments can work according to different PM standards.
As a basis for the following explanations I have used the PM guidelines mentioned on the one hand, on the other hand I have tried to answer from my experience the typical questions that a project manager asks himself when writing a project order.