Estimating Project Schedule-Time and Cost
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1 Estimating Project Schedule-Time and Cost Chapter Where We Are Now 5 2 1
2 Overview Seminar Agenda What is involved in schedule and cost management? In-depth Determining the sequence of activities Determining the project schedule Determining the critical path Handling uncertainties in time estimates Wrap up
3 Estimating Estimating Projects The process of forecasting or approximating the time and cost of completing project deliverables. The task of balancing expectations of stakeholders and need for control while the project is implemented. Types of Estimates Top-down (macro) relationships Bottom-up (micro) estimates: estimates of elements of the work breakdown structure 5 5 Why Estimating Time and Cost Are Important To support good decisions. To schedule work. To determine how long the project should take and its cost. To determine whether the project is worth doing. To develop cash flow needs. To determine how well the project is progressing. To develop time-phased budgets and establish the project baseline. EXHIBIT
4 Factors Influencing the Quality of Estimates Planning Horizon Other (Nonproject) Factors Organization Culture Quality of Estimates Project Duration People Padding Estimates Project Structure and Organization 5 7 Estimating Guidelines for Times, Costs, and Resources 1. Have people familiar with the tasks make the estimate. 2. Use several people to make estimates. 3. Base estimates on normal conditions, efficient methods, and a normal level of resources. 4. Use consistent time units in estimating task times. 5. Treat each task as independent, don t aggregate. 6. Don t make allowances for contingencies/incidents. 7. Adding a risk assessment helps avoid surprises to stakeholders
5 Top-Down versus Bottom-Up Estimating Top-Down Estimates Are usually are derived from someone who uses experience and/or information to determine the project duration and total cost. Are made by top managers who have little knowledge of the processes used to complete the project. Bottom-Up Approach Can serve as a check on cost elements in the WBS by rolling up the work packages and associated cost accounts to major deliverables at the work package level
6 Direct Costs Types of Costs Costs that are clearly chargeable to a specific work package. Labor, materials, equipment, and other Direct (Project) Overhead Costs Costs incurred that are directly tied to an identifiable project deliverable or work package. Salary, rents, supplies, specialized machinery General and Administrative Overhead Costs Organization costs indirectly linked to a specific package that are apportioned to the project 5 11 Topic 1 PROJECT TIME MANAGEMENT (Schedules) 12 6
7 A) Project Schedule (Time) Management Project Time Management includes the processes required to manage timely completion of the project. These processes interact with each other and with processes in the other Knowledge Areas (of project management). Each proces occurs at least once in every project and occurs in one or more of the project phases, if the project is divided into phases. PMI, PMBOK 4th Ed, 2008, pg Project Schedule (Time) Management in Summary Schwalbe, 2011, pg
8 Project Schedule Management Processes Activity Definition Identifying the specific activities that the project team members and stakeholders must perform to produce the project deliverables. Activity Sequencing Identifying and documenting the relationships between project activities. Activity Resource Estimating Estimating how many resources a project team should use to perform project activities. Activity Duration Estimating Estimating the number of work periods that are needed to complete individual activities. Schedule Development Analyzing activity sequences, activity resource estimates, and activity duration estimates to create the project schedule. Schedule Control Controlling and managing changes to the project schedule. 15 Activity Definition - Activity Lists and Attributes An activity list is a tabulation of activities to be included on a project schedule. The list should include: The activity name An activity identifier or number A brief description of the activity Activity attributes provide more information about each activity, such as predecessors, successors, logical relationships, leads and lags, resource requirements, constraints, imposed dates, and assumptions related to the activity. 16 8
9 Activity Definition - Milestones A milestone (on a Project) is a significant event that normally has no duration. It often takes several activities and a lot of work to complete a milestone. Milestones are useful tools for setting schedule goals and monitoring progress. Examples include completion and customer sign-off on key documents and completion of specific products. 17 Activity Sequencing Involves reviewing activities and determining dependencies. A dependency or relationship relates to the sequencing of project activities or tasks. You must determine dependencies in order to use critical path analysis. 18 9
10 Activity Sequencing - Network Diagrams Network Diagrams are the preferred technique for showing activity sequencing. A network diagram is a schematic display of the logical relationships among, or sequencing of, project activities. Two main formats are the arrow and Precedence Diagramming methods. 19 Sample Activity-on-Arrow (AOA) Network Diagram for Project X Schwalbe, Figure 6.2, page
11 Arrow Diagramming Method (ADM) Also called Activity-on-Arrow (AOA) network diagram. Activities are represented by arrows. Nodes or circles are the starting and ending points of activities. Can only show finish-to-start dependencies. 21 Precedence Diagramming Method (PDM) Activities are represented by boxes. Arrows show relationships between activities. More popular than ADM method and used by project management software. Better at showing different types of dependencies
12 Sample PDM Network Diagram Schwalbe, Figure 6.4, page Task Dependency Types The types of dependencies that could occur among project activities after you determine the reason for a dependency between activities (mandatory, discretionary, or external), you must determine the type of dependency.for example Schwalbe, Figure 6.3, page
13 Activity Resource Estimating Before estimating activity durations, you must have a good idea of the quantity and type of resources that will be assigned to each activity. Consider important issues in estimating resources: How difficult will it be to complete specific activities on this project? What is the organisation s history in doing similar activities? Are the required resources available? Are specialised resources available? Are resources required that need to come from overseas locations? 25 Activity Duration Estimating Duration includes the actual amount of time worked on an activity plus the elapsed time. Effort is the number of workdays or work hours required to complete a task. Effort does not normally equal duration. People doing the work should help create estimates, and an expert should review them
14 Schedule Development Uses the results of the other time management processes to determine the start and end dates of the project. Ultimate goal is to create a realistic project schedule that provides a basis for monitoring project progress for the time dimension of the project. Important tools and techniques include Gantt charts, critical path analysis, critical chain scheduling, and PERT analysis. 27 Schedule Development - Gantt Charts Gantt charts provide a standard format for displaying project schedule information by listing project activities and their corresponding start and finish dates in a calendar format. Symbols include: Black diamonds: Milestones Thick black bars: Summary tasks Lighter horizontal bars: Durations of tasks Arrows: Dependencies between tasks 28 14
15 Gantt Chart for Software Launch Project Schwalbe, Figure 6.6, page Sample Tracking Gantt Chart Schwalbe, Figure 6-7, page
16 Schedule Development - Critical Path Method (CPM) CPM is a network diagramming technique used to predict total project duration. A critical path for a project is the series of activities that determines the earliest time by which the project can be completed. The critical path is the longest path through the network diagram and has the least amount of slack or float. Slack or float is the amount of time an activity can be delayed without delaying a succeeding activity or the project finish date. 31 Calculating the Critical Path Develop a good network diagram. Add the duration estimates for all activities on each path through the network diagram. The longest path is the critical path. If one or more of the activities on the critical path takes longer than planned, the whole project schedule will slip unless the Project Manager takes corrective action
17 Determining the Critical Path for Project X Schwalbe, Figure 6.8, page Using Critical Path Analysis to Make Schedule Trade-offs Free slack or free float is the amount of time an activity can be delayed without delaying the early start of any immediately following activities. Total slack or total float is the amount of time an activity can be delayed from its early start without delaying the planned project finish date. A forward pass through the network diagram determines the early start and finish dates. A backward pass determines the late start and finish dates
18 Schedule Development - Buffers Buffers are additional time (???) that is added to a task or a project to accommodate the PM s uncertainty as to how long (???) the task will take to complete (??? = contingency) Buffers can be added to: individual tasks overall phases overall projects Each approach as own advantages and disadvantages 35 Topic Summary Project time management is often cited as the main source of conflict on projects, and most IT projects exceed time estimates. Main processes include: Activity definition Activity sequencing Activity resource estimating Activity duration estimating Schedule development Schedule control 36 18
19 Topic 2 PROJECT COST MANAGEMENT 37 Project Cost Management a definition Project Cost Management includes the processes required to ensure that a project team completes a project within an approved budget. Notice two crucial phrases in this definition: a project and approved budget. 19
20 Notion of Cost What is Cost? A resource sacrificed or foregone to achieve a specific objective, or something given up in exchange. usually measured in monetary units, such as dollars. 39 Project Cost Management in Summary Schwalbe, 2011, pg
21 Project Cost Management Processes Includes the processes required to ensure that the project is completed within an approved budget. Processes are: Cost Estimating Developing an approximation or estimate of the costs of the resources needed to complete a project. Cost Budgeting Allocating the overall cost estimate to individual work items to establish a baseline for measuring performance. Cost Control Controlling changes to the project budget. 41 Project Cost Management System an Example Checklist_800.jpg Accessed 31 March
22 Basic Principles of Cost Management Reserves (see page 260 of textbook) Amounts included in a cost estimate to mitigate cost risk by allowing for future situations that are difficult to predict. Contingency Reserves allow for future situations that may be partially planned for (sometimes called known unknowns) and are included in the project cost baseline. Management Reserves allow for future situations that are unpredictable (sometimes called unknown unknowns). 43 Basic Principles of Cost Management Class Exercise Buffers and Reserves Consider the following questions what are the differences between a buffer and a contingency reserve? When do we use one over the other? What would be an example of a buffer? What would be an example of a reserve? if we include both buffers and contingency reserves in our project plan are we double counting the costs? 44 22
23 Project Cost Management Processes - Cost Estimating Project Managers must take cost estimates seriously if they want to complete projects within budget constraints. It s important to know the types of cost estimates, how to prepare cost estimates, and typical problems associated with IT cost estimates. 45 Types of Cost Estimates (see page 261 of textbook) Schwalbe, Table 7.2, page
24 Cost Management Plan A cost management plan a document that describes how the organisation will manage cost variances on the project. A large percentage of total project costs are often labour costs (i.e. resources), so Project Managers must develop and track estimates for labour. 47 Cost Estimation Tools Computerized tools spreadsheets project management software used to construct cost estimates
25 Costing Example Schwalbe Figure 7.2. page Costing Example Schwalbe, Figure 7.3, page
26 Summary Project Cost Management is traditionally a weak area in IT projects, and Project Managers must work to improve their ability to deliver projects within approved budgets. Main processes include: Cost Estimating Cost Budgeting Cost Control EVM is the main means by which the cost performance of a project is understood. 51 Key Terms Apportionment methods Bottom-up estimates Contingency funds Delphi method Direct costs Function points Learning curves Overhead costs Padding estimates Phase estimating Range estimating Ratio methods Template method Time and cost databases
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