The project charter is arguably the most important document in a project. It formally authorizes the project’s existence, and a project is typically considered officially launched once its charter is approved. Therefore, the process of Project Charter Development is crucial for successful project execution.
Creating a charter should involve the project management team, led by the project manager. Most methodologies, including PMI’s PMBOK, agree that charter development activities are performed outside the project boundary — meaning they occur before formal project initiation and are not considered part of project execution.
Purpose and Importance of the Project Charter
The project charter establishes a partnership between the performing organization and the client or sponsoring entity. For external projects, this partnership is typically formalized through a contract. In this context, the project team acts as a vendor responding to a purchase request. The project charter is used to secure internal agreements within the performing organization, ensuring that it delivers according to the signed contract.
Once approved, the charter formally initiates the project.
The project manager should be identified or appointed as early as possible — ideally during charter development and definitely before planning begins. The charter is issued by the sponsor and gives the project manager authority to allocate resources and oversee project execution.
It is highly recommended that the project manager participate in charter development to fully understand the project’s purpose and requirements. This understanding enables effective resource planning and stakeholder alignment.
Inputs to the Project Charter Process
Project Statement of Work (SOW)
A narrative description of the product, service, or result the project is intended to produce. For internal projects, this is provided by the sponsor based on business needs. For external projects, it may come from a request for proposal (RFP) or as part of a signed contract.
The SOW should reflect:
- Business need (e.g., market demand, regulatory compliance, environmental concerns)
- Product scope description
- Alignment with the strategic plan
Business Case
This document justifies the project investment by outlining:
- The business need
- A cost-benefit analysis
- Return on investment (ROI)
- Strategic alignment
The business case is often prepared by a business analyst and approved by the project sponsor. It may be driven by:
- Market demands
- Organizational needs
- Customer requests
- Technological advancements
- Legal or regulatory requirements
- Environmental or social needs
Agreements
These define initial intentions and may include:
- Contracts
- Memoranda of understanding (MOUs)
- Letters of agreement
- Service-level agreements (SLAs)
- Oral commitments or digital correspondence
Enterprise Environmental Factors
These may influence charter development:
- Organizational structure and culture
- Regulatory standards and codes
- Geographic distribution of assets
- Market conditions
- Risk tolerance
- Communication norms
- Commercial databases
- Project management information systems (PMIS)
Organizational Process Assets
These include:
- Organizational policies and standard processes
- Templates (e.g., charter templates)
- Historical information from previous projects
- Knowledge bases and risk repositories
Tools and Techniques
Expert Judgment
Involves consultation with:
- Internal departments
- Consultants
- Sponsors and stakeholders
- Professional bodies
- Industry groups
- Subject matter experts (SMEs)
- Project Management Office (PMO)
Facilitation Techniques
These help stakeholders reach consensus and make key decisions:
- Brainstorming
- Conflict resolution
- Problem-solving sessions
- Facilitated workshops
Facilitators guide the group through these techniques to generate ideas, resolve disagreements, and align expectations.
Outputs of the Process
The main output of this process is the Project Charter — a document issued by the sponsor that formally authorizes the project and empowers the project manager.
It includes:
- Project justification or business case
- Measurable objectives and success criteria
- High-level requirements
- Assumptions and constraints
- High-level project description and boundaries
- High-level risks
- Summary milestone schedule
- Summary budget
- Stakeholder list
- Approval requirements (what defines project success and who approves it)
- Assigned project manager with authority level
- Sponsor’s name and authority
Conclusion
The Project Charter is the foundation of project governance. It serves not only as a green light to proceed but also as a reference point throughout the project. It defines what must be achieved, who is responsible, and how success will be measured. Charter development is not a formality — it is a strategic activity that sets the stage for everything that follows.
