PMO Projection Charter

Developed By: Khaled Samy Hall

Management Consultant – Entrepreneur
Email: Khaled.samy@hotmail.com
LinkedIn: Khaled Samy Hall
Twitter: Khaledhall
Phone: +965 66397555
 PMO Projection Charter

PMO Projection Charter

Proposed PMO Implementation

Table of Contents
Executive Summary ....................................................................................................................................................... 3
1- Introduction .......................................................................................................................................................... 4
a. Background ....................................................................................................................................................... 4
b. The Subject........................................................................................................................................................ 4
c. The Purpose ...................................................................................................................................................... 4
2- Methods and Assumptions ................................................................................................................................... 4
a. Scope of the PMO Projection case .................................................................................................................... 4
b. Financial Metrics ............................................................................................................................................... 4
c. Benefits ............................................................................................................................................................. 5
d. Costs .................................................................................................................................................................. 6
e. Major Assumptions ........................................................................................................................................... 6
3- Business Impacts ................................................................................................................................................... 6
a. Overall Results .................................................................................................................................................. 6
b. Benefits ............................................................................................................................................................. 6
c. Costs .................................................................................................................................................................. 6
4- Cash Flow Analysis ................................................................................................................................................ 7
5- Sensitivities, Risks and Contingencies ................................................................................................................... 8
6- Recommendations and Conclusions ..................................................................................................................... 9
Bibliography .................................................................................................................................................................... 10
Exhibit 1: Clarifications................................................................................................................................................ 11

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 PMO Projection Charter

PMO Projection Charter: Proposed PMO Implementation

To: Name, CEO, <THE COMPANY>

From: Name, Title, Department
Date: Date

Executive Summary
Executive summary is the last part to write, in this section you need to brief about the whole charter parts
representing the PMO charter benefits, costs, ROI and payback.

You should add an exhibit about your numbers either the net profit or the cumulative cash flow, something similar
to the below exhibit.

<THE COMPANY>
Proposed PMO Implementation
Currency $

Cumulative Net CF
400,000.000

350,000.000

300,000.000

250,000.000

200,000.000

150,000.000

100,000.000

50,000.000

0.000

(50,000.000)

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 PMO Projection Charter

1- Introduction
a. Background
The background may include a small brief about the company such as its products or services, markets and position.

It is worth to highlight the projects portfolio, include the number of projects and total investment. Also ensure to
mention the reasons why the company wishes to implement these projects.

Here you should present the company business objectives these could be the strategic objectives that the projects
portfolio contributes to achieve them, something like “Improving productivity in several targeted areas”

In this paragraph you will close the Background part by highlighting the project management benefits that they are
the treatments of the projects pains or gaps in current project management exercises.

b. The Subject
In this part you will brief about the charter and the document you are building. This is part summarize what exactly
the decision makers expected to find in this charter.

c. The Purpose
In this part, you will provide the reasons why you are proposing this document

2- Methods and Assumptions

a. Scope of the PMO Projection case
Time
Here you will highlight the period of your ROI analysis.

Organizations
Name the departments that the PMO will manage their projects.

Technology
In case you are expecting to use any technology to help you running the PMO, such as EPM software you have to
mention that in the Technology part.

b. Financial Metrics
Brief the financial metrics you are going to use in your financial analysis, I propose the below metrics

Net cash flow

It is the combined result of all estimated inflows and outflows. Net cash flow is presented in $ for the analysis period.
Cumulative net cash flow for each year of the analysis period is also presented in the cash flow summary.

Net Present Value (NPV)

The value of cash flows discounted at a specific rate. NPV is presented in $ for the analysis period.

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Simple ROI
The “Return on Investment”, taken as projected gains from this investment (net of investment costs), divided by
investment costs. ROI is presented as a percentage, in which all values over 0% represent a net gain from
investment.

Payback Period
The number of years required for the initial investment costs to be recovered from the gains.

c. Benefits
Important benefits under the PMO implementation, you need to present them in this part with short description
how the PMO will result this benefit. Example:

Resource Utilization
The PMO projection charter estimates increases in overall resources productivity. The value of this impact derives
from using the EPM software along with resource assignments and availability from improved visibility of progress of
all project initiatives competing for similar resources.

Market Image
Achieving projects successfully within estimates and expectations will result <THE COMPANY> helps building a good
reputation and market image.

Examples of other benefits to examine:

Projects Prioritization

Development Cost Improvement

Time to Market

Risk Reduction

Avoid Additional Resources

Communications Improvement

Deliver Successful Projects

Improved Work Environment

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 PMO Projection Charter

d. Costs
In this part you will provide your cost model, something similar to the below model:

COST IMPACTS Initial Costs Operating Costs

● Salary
● Benefits
Personnel
● Overhead &
Administrative costs
● Server purchase
● Software license
● Software license purchase
EPM Software maintenance
● System Implementation
● Server maintenance
● User training

Consultancy
Services
● PMO consultancy services

e. Major Assumptions
Provide all the assumptions you need the decision makers take into consideration. Example “The project managers
representing PMO employees are hired prior to PMO implementation”.

3- Business Impacts
a. Overall Results
I always use cash flow analysis for building such case and it helps me calculate the ROI.
In this part explains the financial results of the cash flow analysis, you so may mention something like; the projection
analysis predicts a positive net cash flow of more than $ 8.3 million over the three year analysis period.

b. Benefits
You will go through every benefit and highlight the $ that will result from implementing the PMO.

Example:

Based on implementing project management disciplines with tools, we assume a minimum of 2% Resource
Utilization return. Thus, $ 383,832 applied labor effort gained towards project portfolio work. The 2% resource
utilization gain will come from more projects completed and accelerated ROI from existing projects.

c. Costs
In this part you will explain all the expected costs consequences of implementing the PMO proposal.

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4- Cash Flow Analysis

You may use same template as the below sheet to calculate the cash flow, basically you need to define your cash in
and cash out in terms of benefits and costs

Table: Projected cash flow results expected under PMO implementation

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 PMO Projection Charter

<THE COMPANY>
Proposed PMO Implementation
Currency $

Annual Cash Flow)

200,000.000

150,000.000

100,000.000

50,000.000

0.000

(50,000.000)

<THE COMPANY>
Proposed PMO Implementation
Currency $

Cumulative Net CF
400,000.000

350,000.000

300,000.000

250,000.000

200,000.000

150,000.000

100,000.000

50,000.000

0.000

(50,000.000)

5- Sensitivities, Risks and Contingencies

This part helps the decision makers to find out the sensitivity and risk elements that have impact on the PMO results
in terms of financial outcomes. These elements are under monitoring so any changes may take place, a contingency
plan to be run.

I always use Crystal Ball to define the sensitivity and risks elements; the Crystal Ball uses Monte Carlo Simulation.
Please visit http://www.oracle.com/technetwork/middleware/crystalball/downloads/index.html

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You may get sensitivity analysis and risk analysis reports same as the below graphs

Diagram: Sensitivity Analysis

Diagram: Risk Analysis

6- Recommendations and Conclusions

This is the last part of the document, you will provide the decision makers your recommendations based on the final
results of the whole analysis.

Example: Based on the analysis presented above, we recommend <THE COMPANY> executives accept the
implementation of the PMO.

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Bibliography
Gerald I. Kendall, S. C. (April 2003). Advanced Project Portfolio Management and the PMO: Multiplying ROI at Warp
Speed. J. Ross Publishing.

Schmidt, D. M. (n.d.). Business Case Analysis. Retrieved 7 21, 2008, from Solution Matrix: www.solutionmatrix.com

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Exhibit 1: Clarifications
PMO
PMO is a Program Management Office, this office responsible for the management of a program. More recently, the
corporate office is responsible for managing all projects in a corporation, a company, or a business unit. The PMO
sets standards for project management and ensures a consistent methodology across all projects.

PMO is also called a Project Management Office that is more likely to be dedicated to a single large project. A
Program Management Office generally spans management of multiple projects.

Is the PMO a cost center or profit center?

A profit center is a unit of a company that generates revenue in excess of its expenses. It is expected that, through
the sale of goods or services, the unit will turn a profit.
A cost center is a unit inside a company that generates expenses with no responsibility for creating revenue. The
only expectation a cost center has is to lower expenses whenever possible while staying with a specific budget that is
determined at the corporate level.

It is clear from the previous definitions that the PMO is and will remain a cost center same as IT, Finance, HR and so
on due to the fact that these departments have no responsibility for generating any revenue but only supporting the
business and reducing the expenses whenever possible.

Cash Flow
Cash flow (also called net cash flow) is the balance of the amounts of cash being received and paid by a business
during a defined period of time, sometimes tied to a specific project

Payback period
Payback period in business and economics refers to the period of time required for the return on an investment to
"repay" the sum of the original investment

Return on Investment (ROI)

Rate of return (ROR), also known as return on investment (ROI), rate of profit or sometimes just return, is the ratio of
money gained or lost (realized or unrealized) on an investment relative to the amount of money invested. The
amount of money gained or lost may be referred to as interest, profit/loss, gain/loss, or net income/loss. The money
invested may be referred to as the asset, capital, principal, or the cost basis of the investment. ROI is usually
expressed as a percentage rather than a fraction

Discounted Cash Flow

The discounted cash flow (or DCF) approach describes a method of valuing a project, company, or asset using the
concepts of the time value of money. All future cash flows are estimated and discounted to give their present values

Net Present Value (NPV)

Net present value or net present worth (NPW) is defined as the total present value (PV) of a time series of cash
flows. It is a standard method for using the time value of money to appraise long-term projects

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