Common Objective Contracts (COC) system offers a complete conceptual framework for managing projects, which is missing in the existing project management methods (Gantt, Critical Path, Critical Chain) which focus on scheduling alone. The method explains why so many projects do not meet their goals and provides management tools that allow to carry out the objectives of the majority of the projects in the real world. This application development is based upon the traditional TOC methods and also upon an addition of preliminary step to the five focusing steps method suggested by Goldratt. About 80% of the projects are missing their completion date by an average of 65%. Most of them suffer also from a significant budget overrun. All existing project management methods have failed to improve these dismal statistics.
For a while it seemed that the critical chain method was a breakthrough that might solve the problem, but in reality – the Critical Chain Method is implemented in a very small fraction of projects, mostly those where delayed completion is extremely expensive. It is not usually applied in "ordinary" projects in the "real world" because it is not suitable for them. Existing project management methods (Critical Path and Critical Chain) are built for situations in which the project manager controls all project resources so he/she can tell them what to do and when, and schedule them in accordance to the project's needs. Such a control exists only in a fraction of the projects in the real world.
Most of the "ordinary projects", those engaged in construction of buildings and factories, roads and railways, infrastructures, laying pipelines and the like, are performed through a massive purchase of goods and services. This purchase of design services, materials, goods, and construction services is done through dozens of contracts. Each of these contracts dictate the rules by which the two sides of the contract should behave. At its best, this allows achieving many local optimums where each party receives from the other side what was agreed in the contract between them. As TOC has already taught us - a system in which many of its components are aimed to achieve a local optimum, cannot provide global optimum. Indeed, in most projects, there are many cases where if a party to a contract aims to maximize its benefits from the contract it signed, it is forced to act against the objectives of the project as a whole.
An even bigger problem concerning existing project management methods is that they are targeted to achieve a partial and wrong objective. Both "critical path" and "critical chain" try to bring the project being completed on the date set in advance. Although in many cases the completion on a pre-determined date is not a bad thing, it is only a part of the real and complete project objective. As a result, it does not guarantee a successful project, as not achieving this date does not necessarily constitute a failure. In order to allow a TOC improvement process, it is necessary to define the objective of the full project using a single quantifiable parameter. This parameter should be measurable and optimizable.
This is contrary to the common paradigm regarding project management that determines that the purpose of the project manager is to deliver the full scope of the project, within quality, budget and time frame. This paradigm presents four different "goals", neither one of them is the real purpose of the project. The project is being built in order to live in, to drive on, to be rented to someone or alike, not in order to be completed on time, quality, scope and budget. Without a unifying formula that allows to lower one of the four "goals", increase another, and examine the impact of these changes on the overall project value (which is not any of the four), we have very limited ability to make calculated decisions. In other words, it is necessary to create an objective function.
COC offers a way to do this. Creating a single objective function for the entire project, along with a method for the subjugation of the various contracts to this function, allows to change the system of many local optimizations to a global one. This article reviews the main problems arising from the way in which most projects are currently being managed and presents a TOC solution to those problems. This solution can be seen as a complementary to Critical Chain scheduling but in fact, it is complementary to Critical Path as well. It is expected to improve the outcome of projects using both methods.
The suggested change to the five focusing steps. Although in the solutions developed by Goldratt he used the technique of creating an objective function, he skipped this step in his definition of the five focusing steps of TOC, possibly because these functions were simple and seemed obvious to him. This Hyde Park Session attempts to demonstrate that this is not always the case and that this preliminary step should not be skipped. Furthermore – it seems that the thinking process becomes clearer when using an even earlier step – which is to define the system for which you are trying to find an Objective Function.