project budgeting & cost management manual slidessaharapcc.skills4success.co/spcc/pm/pbc/03....

4/28/2015

1

PROJECT BUDGETING & COST MANAGEMENT

INTRODUCTION

4/28/2015

2

Tutor Profile

Dr. Michael Lane

PhD, MSc (1st hons.), BSc, MMII Grad Dip., PMP®

3

Course Agenda

Day 1

�Module 1: - Nature of projects� Topic 1: - Project characteristics

� Topic 2: - Management of projects

� Topic 3: - Critical success factors

� Topic 4: - Skill sets

� Topic 5:- Organization structures

� Topic 6:- Project management lifecycles

�Module 2: - The PMBOK Standard� Topic 1: - PMBOK

� Topic 2: - Standard cost management processes

Day 2

�Module 3: - Project Objectives� Topic 1: - Initiation – setting up the project

� Topic 2: - Planning product scope (specification)

� Topic 3: - Planning Project Scope (WBS)

� Module 4: - Planning Timelines�Topic 1: - Build schedule�Topic 2: - Optimize schedule

� Module 5: - The Project Cost� Topic 1: - Project cost management

� Topic 2: - Project cost estimation

� Topic 3: - Establish the budget

Day 3

4

4/28/2015

3

Course Agenda

Day 4

�Module 6: - Risk Management� Topic 1: - Project Risk Planning

� Topic 2: - Project Risk Identification

� Topic 3: - Project Risk Analysis

� Topic 4: - Project Risk Responses

�Module 7: - Controlling Project Costs� Topic 1: - Cost control structures

� Topic 2: - Key communication concepts

Day 5

�Module 8: - Tracking & Forecasting

Project costs� Topic 1: - Earned Value Management

5

Pre-course check?

�Describe the concept of a project -- 20%

�What mechanisms can be put in place by

an organization to enable effective governance

of project work -- 30%

�How would you create a project budget -- 30%

�How can a manager determine whether

or not a project is progressing effectively -- 20%

6

4/28/2015

4

What is a project?

An academic exercise performed in school?

“A temporary endeavor undertaken to create a unique product or service.” (Project Management Institute ©)

A sequence of unique, complex, and connected activitieshaving one goal or purpose and that must be completed by a specific time, within budget, and according to specification.

8

4/28/2015

5

Project characteristics

Temporary – have a start and end

Complex – must have some level of planning

Uncertain – need to consider risk

Lifecycle – goes through a series of phases

Progressive Elaboration – it’s a journey!!

9

Business operations – regular work activities

� Core reason for organization

� Regular – repetitive – consistent

� Planned/executed/monitored

� Homogenous resources (mostly)

� Semi-permanent goal – eternal…

� Stability

� It’s about efficiency & productivity

10

4/28/2015

6

Project context in relation to regular work

� Core reason for organization� Regular – repetitive – consistent� Planned/executed/monitored� Homogenous resources (mostly)� Semi-permanent charter– eternal…� Stability� It’s about efficiency & productivity

� Specific one-off initiative

� Unique elements

� Started/Planned/executed/monitored/Closed

� Heterogenous resources

� Charter sets out mission

� Unstable

� It’s about effectiveness – choosing the correct tasks/approaches

11

What is a project?

A sequence of unique, complex, and connected activities having

one goal or purpose and that must be completed by a specific

time, within budget, and according to specification.

12

4/28/2015

7

Scope = 10 functions

Time = 30 September 2014 Cost = 1 million Euro

13

So Project Management requires…..

� Unique elements

� Started/Planned/executed/monitored/Closed

� Heterogenous resources

� Charter sets out mission

� Unstable

� It’s about effectiveness – choosing the correct tasks/approaches

�Integrate connected activities

�Using skills

�To be effective –use appropriate tools and techniques

�And balance the triple constraints

�While considering parties engaged with the project –Stakeholders

�Throughout the different phases of the lifecycle

14

4/28/2015

8

Connected Activities

�Stakeholders influence scope

�Scope impacts schedule

�Schedule & scope impact cost (but cost can impact schedule & scope)

�Staff impact cost, schedule & communications

�Quality impacts scope .. & schedule & cost & staff……..

�What about Risks? Or any subcontracts?

�And so on…..

15

Project Management Skills

�Project management expertise �“technical” PM skills such as project schedule development

�Domain knowledge�Application area – regulatory constraints etc.

�General management skills�Budgeting, procurement, strategic thinking

�Project environment

�Physical environment / corporate culture / customer culture…company politics ?

�People skills�Leadership / motivation / negotiation / influencing / general behavioural skills

16

4/28/2015

9

Tools and techniques

�Tools�Project Management Information Systems

�Specific project element support tools – risk management system

�Techniques�Stakeholder Analysis technique

�Qualitative risk analysis

�Scheduling techniques – critical path method / PERT

�Project controlling systems – Earned Value Management (EVM)

�Templates and forms�Project Charter

�Work Breakdown Structure

�Change Request Form

17

Stakeholders

�Any individuals/groups who influence or are impacted/influenced by the project.

�Stakeholder Analysis Technique�Identify stakeholders (may break into primary/secondary/tertiary)

�Categorize stakeholders according to impact and interest in project

18

4/28/2015

10

Issues with Project Stakeholders

�Conflicting objectives

�Confidentiality issues

�Organizational culture (hierarchical v collaborative)

�Communication problems : �among team members

�between the project manager and team members

�between the project team and top management

�between project manager and client

�Change management conflicts

19

Project Lifecycles

�Collection of project phases that comprise the totality of work performed from start to completion of a project

�Project phase

�Related activities

�Usually performed by a specific role or skill set

�Usually result in a specific deliverable

�May often involve pre-phase qualification (or entry criteria)

�Post-phase audit (or quality review)

20

4/28/2015

11

Generic Project Management Lifecycle

�Conception (Initiation)�Feasibility, Scope of Work, Estimation of cost and

resources, Risk analysis, Appointment of Project Manager (PM)

�Definition�Detailed planning: product/service specifications, schedule,

budget…. issue contracts. Results in detailed Project Plan

�Implementation�Execution, Monitoring and Control

�Closure�Customer acceptance, Internal reviews, Payments

21

Project Life Cycles – The importance of phase reviews

22

4/28/2015

12

Types of Lifecycle

�Sequential �Waterfall (in software engineering)

�Well known and stable requirements

�Iterative�Revisit phases as requirements are refined

�Requirements reasonably understood with certain risks

�Adaptive�Requirements volatile

�Project activities respond to emerging requirements

23

Lifecycle influence on level of project manager control

Time

InitialPhase

FinishStart

Intermediate Phases(one or more)

FinalPhase

Cost andStaffing

Level

24

4/28/2015

13

Project Success & Failure

�Many Projects Fail….

�What is project failure & success ?

�Many projects use the triple constraints to define success:�Finished on time

�Finished under budget

�Finished with all requirements met and delivered as agreed

�What do you think makes a project successful ?

25

26

Exercise 1 – pg. 22

Project critical success factors

� (A) List off the items you believe enable a project to be managed successfully.

� (B) Explain why you agree (or do not agree) that the ABC Corporate Olympics project is set up for success.

4/28/2015

14

Successful

Project

Effective Project

Management

Technical Expertise

Proven Technology

Achievable Scope,

Schedule, Budget

Strong Governance

Structure

Quality Assurance

Strong Executive

Sponsorship

Change Management

Why Projects Succeed – one view

Critical Success Factor!

27

Project Management Governance

�Project Management Organization Structures

�Projects – Programmes – Portfolios

�Project Management Office

�Roles and Responsibilities

�Project authorization thresholds

28

4/28/2015

15

The Pure Project Organization

�Advantages�Effective and efficient for large projects

�Resources available as needed

�Broad range of specialists

�short lines of communication

�Drawbacks�Expensive for small projects

�Specialists may have limited technological depth

�May require high levels of duplication for certain specialties

29

Functional Project Organization

�Advantages

�technological depth

�Drawbacks

�lines of communication outside functional department slow

�technological breadth

�project rarely given high priority

30

4/28/2015

16

Matrix Project Organization

�Advantages�flexibility in way it can interface with parent

organization�strong focus on the project itself�contact with functional groups minimizes projectitis�ability to manage fundamental trade-offs across

several projects

�Drawbacks�violation of the Unity of Command principle�complexity of managing full set of projects�conflict

31

PORTFOLIO

PROJECT

PROJECT MANAGEMENT OFFICE

Key organizing structures within the project framework

32

4/28/2015

17

OrganizationStructure?

Project Management

Governance

Portfolio Management

Project Delivery

Organizational Strategy:Alignment verification, funding & investments, long-term vision

Cross-Project Coordination: Project prioritization, project

Go/Hold/Kill decisions, resource allocation

Delivery Facilitation: Clearing obstacles, tracking & baseline integrity, team enablement

Value Assurance:Collaboration with customers, assuring quality, delivering business value

33

PROGRAM

A group of projects managed in a co-ordinated way to obtain benefits that are not available by managing them separately.

Benefits of a programme:

�Ensures that collectively all project objectives are in line with client expectations;

�Defines dependencies and interfaces between projects;�Prioritises resource allocation between projects;�Regulates the need for external vendors;�Gives consistency of project risk management;�Provides a focus for stakeholder management and reporting;�Integrates outputs of all projects

34

4/28/2015

18

Project Management Office (PMO)

35

F u n c tio n s o f a P ro je c t O f fic e ��

D e ve lo p m e n t F u n c tio n s R e c ru itin g p ro je c t m a n a g e rs f ro m w ith in th e o rg a n iz a tio n .

H ir in g p ro je c t m a n a g e rs e x te rn a lly .

D e f in in g a p ro je c t m a n a g e r tra in in g p a th a n d e n su r in g th a t i t is fo llo w e d .

P ro v id in g m e n to rs fo r n o v ic e p ro je c t m a n a g e rs .

E s ta b lish in g a m u tu a l a s s is ta n c e p ro g ra m fo r p ro je c t m a n a g e rs .

C o n d u c tin g p ro je c t re v ie w s to d e te rm in e if a p ro je c t m a n a g e r n e e d s h e lp .

E v a lu a tin g p ro je c t m a n a ge rs a t th e c o m p le tio n o f e a c h p ro je c t a n d re c o m m e n d in g

s te p s fo r im p ro v e m e n t.

S u p p o rt F u n c tio n s P ro v id in g a n e sc a la tio n p a th fo r p ro je c t is su e s .

D e v e lo p in g p ro c e d u re s to h e lp p ro je c t m a n a g e rs w h o a re a ls o te a m p a rtic ip a n ts

b a la n c e th e d e m a n d s o n th e m .

P ro v id in g a s s is ta n c e to p ro je c t m a n a g e rs w h o a re re q u ire d to m a n a g e m u ltip le

p ro je c ts .

P ro v id in g a c e n tra l so u r c e o f d a ta g a th e r in g fo r c o s ts a n d t im e .

P ro d u c in g s ta n d a rd r e p o r ts o n th e s ta tu s o f p ro je c t s s u c h a s p e rfo rm a n c e a g a in s t

b u d g e t o r sc h e d u le .

E s ta b lish in g s ta n d a rd s fo r in it ia tin g a n d c lo s in g p ro je c ts .

P ro v id in g a m e c h a n ism fo r m a n a g in g c h a n g e s to p ro je c t sc o p e .

E s ta b lish in g a p ro c e s s to d e f in e p r io r it ie s a m o n g p ro je c ts .

H e lp in g p ro je c t m a n a g e rs n e g o tia te fo r n e e d e d re s o u rc e s .

Im p le m e n tin g p ro je c t m a n a g e m e n t to o ls su c h a s s o f tw a re o r m e th o d o lo g ie s .

P ro v id in g a fo ru m fo r m e d ia tio n w h e n a p ro je c t m a n a g e r a n d a c u s to m e r d is p u te

a s p e c ts o f th e p ro je c t su c h a s sc o p e c h a n g e s

P ro v id in g te m p la te s fo r p ro je c t m a n a g e m e n t d e liv e ra b le s su c h a s th e p ro je c t

c h a r te r o r p ro je c t p la n .

C o n tro l F u n c tio n s P ro v id in g l in e m a n a g e m e n t fo r p ro je c t m a n a g e rs .

A s s ig n in g p ro je c t m a n a g e rs to p ro je c ts .

D e f in in g m a n d a to ry p ro je c t re q u ir e m e n ts su c h a s s ta tu s re p o r ts , te a m m e e tin g s , o r

p ro je c t p la n s .

R e v ie w in g p ro je c t m a n a g e m e n t d e liv e ra b le s to e n su re th a t th e y a r e p ro d u c e d a n d

to v a lid a te th e ir q u a li ty .

E s ta b lish in g p ro je c t m a n a g e m e n t s ta n d a rd s .

36

4/28/2015

19

Critical Success Factors

�Project Mission - clear goals

�Top Management Support - management keen to provide resources and authority

�Project planning - Detailed roadmap of execution steps

�Client consultation - active listening between stakeholders

�Personnel - selection and training of effective team members

�Technical tasks - availability and expertise to use relevant technology

�Client acceptance - end users embrace outputs from project (change mgmt)

�Monitoring & Feedback - effective control mechanism to feedback project progress

�Communication - delivering information to correct stakeholders

�Problem solving - issue management - handling changes effectively

37

38

STRATEGIC FACTORS

�CLEARLY DEFINED OBJECTIVES

�SENIOR MANAGEMENT SUPPORT

�CLEARLY DEFINED ROADMAP

4/28/2015

20

39


Discuss governance of ABC Olympics project addressing each of the points identified?

40

Nature of Projects Summary

�Module 1: - Nature of projects

�Topic 1: - Project characteristics

�Topic 2: - Management of projects

�Topic 3: - Critical success factors

�Topic 4: - Skill sets

�Topic 5:- Organization structures

�Topic 6:- Project management lifecycles

4/28/2015

21

41

Module 2 – Project Management Standard

�Topic 1: - The PMBOK ANSI standard

�Topic 2: - PMBOK Framework

�Topic 3: - Accreditation & use of standard

42

Topic 1 – Project Management Standard-

PMBOK

• Project Management Institute (PMI)

• 400,000+ Members

• Project Management Professional

• 500,000+ qualified as PMP worldwide

4/28/2015

22

43

Project Management Body of Knowledge (PMBOK)

�ANSI Standard

�Currently Accepted practices of Project management across different application areas across the globe

�Updated at regular intervals based upon volunteer observation of industry (currently 5th edition)

44

Topic 2: The PMBOK Framework

�Not a cookbook method

�Presents various practices that may be applied

�Remember! Project management is about being effective – choose appropriate approach

�Practices described in the context of project management processes

4/28/2015

23

45

Project Management Process

�A process has input (s)

�A process applies steps involving tools and techniques in order to transform the input (s)

�Into Outputs

�The PMBOK presents currently accepted practices as the techniques within processes

46

The PMBOK Framework – Process Groups

�Five Process Groups that represent different categories of processes:

�Initiating

�Planning

�Executing

�Monitoring & Controlling

�Closing

4/28/2015

24

47

The PMBOK Framework - Knowledge Areas

�Ten Knowledge Areas that represent different aspects of project management :

�Integration�Scope

�Time

�Cost

�Risk

�Communications

�Human Resources

�Procurement

�Stakeholder Management

�Quality

48

Module 2 : Project Management Standard PMBOK

-

4/28/2015

25

49

Topic 3 – Accreditation process

�Project Management Institute (PMI)

�400,000+ Members

�Project Management Professional

�500,000+ qualified as PMP worldwide

50

Topic 3 – Project Management Professional

• 4500+ hours experience

• 32 hours of formal PM education

• 4 hour – 200 Question examination• Multiple choice

• Based on PMBOK

• Continuing education

• professional development units (PDUs)

4/28/2015

26

52

Day 2 – Project planning: setting up to establish cost

�Topic 1: - Setting up the Project �The Charter

�Topic 2: - Product Scope Planning�The Scope Statement

�Topic 3: - Project Scope Planning�The Work Breakdown Structure (WBS)

4/28/2015

27

53

Module 3 – Scope management – project

commencement

• The Project Goal

• Why is the project being done?

• The associated high-level requirements that will lead to achievement of the goal.

• What must be achieved in order to meet the goal?

54


Describe the ABC Corporate Olympics goal. Discuss the high-level list of requirements associated with this goal.

4/28/2015

28

55

Project Scope management

• The goal is established

• High-level requirements have added clarity

Feasibility studies completed

Now….

Additional detail required before project approval to establish cost centre

56


• We have the Why

• We have the What

Let’s expand requirements

Define as SMART objectives

4/28/2015

29

57

SMART

S - Specific. This proposes that the objective should be clear. This will help comprehension of the objective thus supporting common understanding between stakeholders. What exactly is to be done. Other information may include who it is being done for. However, an additional tenet here is to KEEP IT SIMPLE! (Sometimes an extra S is added to the beginning of the acronym in order to highlight this point).M - Measureable. Make it quantifiable and ensure that progress in working on the achievement can be gauged.A - Achievable. Are there sufficient resources available to address the objective. Is the objective possible or just an aspiration?R - Relevant. In the case of project objectives, does the objective address an aspect of the overall project goal.T - Timebound. There must be a specific timeframe assigned to the objective. One recommended way to incorporate this is to conclude the objective with the words “by the xx/xx/xx”.

58


• Goal (Why) ; Smart Objectives (What)

• Would you be happy with just this much information when asked to approve a body of work?

• What additional information would you require?

• Who is involved in the project ?

4/28/2015

30

�Primary: - Core stakeholders who make a direct contribution to the project and these may generally include the sponsor, the owner, the funder, the ‘doing’ team and the customer.

�Secondary: - These are individuals or organisations that act as vendors or suppliers to the project, external entities or those that give support to the project team.

�Tertiary: - This group constitutes of the rest of those that contribute to the project. In this category would be the media or various individual citizens.

Who - Project Stakeholders

59

Identify StakeholdersStep 1: Identify all potential Project Stakeholders

(roles, departments, contact etc. )

e.g. management, customer, suppliers, etc.

Step 2: Classify stakeholders

(interests, influence )

60

4/28/2015

31

Identify StakeholdersStep 3: Classify attitude and determine how to manage

61

62


Identify the stakeholders involved with the ABC project

4/28/2015

32

63

The Progressive Elaboration of Scope

High level project background, description, budget, duration, rationale & goal

SMART Objective 1

Deliverable

Milestone Milestone

Deliverable

Milestone

SMART Objective 2

Deliverable

Milestone Milestone

64

Project approval – the considerations

• What � Deliverables

• What if � High-level Risks

• How much � High-level budget

• When � High-level schedule

• Other issues – constraints, success metrics……

4/28/2015

33

65

Project approval – the Project Charter

�Why are we doing the project? The rationale.�What it is about - a high-level description.�What are the approximate costs of this work - make sure I know the maximum!�What is the overarching project goal and the core objectives to be achieved�What deliverables are to be produced in order to meet each core objective�What are the major risks to this work?�Is there any high-level timeline - an overall deadline or a set of milestones�Are there project commitments, assumption or agreements already in place ?�Do we have an idea of the makeup of the project team - the particular skill sets that will be required?�Who are the stakeholders that will impact upon this project or who will be impacted by this project?

66


Draw up a project charter for the ABC Corporate Olympics Project

4/28/2015

34

67

Topic 2 – Detailed Scope Planning

ALL that is needed for the project

AND

ONLY what is needed for the project

Product Scope & Project Scope

Topic 2 – Planning out the scope

68

4/28/2015

35

Management Plans

� Project Scope Management Plan

� Schedule Management Plan

� Quality Management Plan� Process Improvement Plan� Staffing Management Plan� Communication

Management Plan� Risk Management Plan� Procurement Management

Plan

Components

� Milestone List� Resource Calendar� Schedule Baseline� Cost Baseline� Scope Baseline� Quality Baseline� Risk Register

Project Management Plans

69

70

Topic 2 – Product Scope

• Begin with the requirements

• Clarify requirements management plan

• Establish source (stakeholders)

• Employ elicitation/collection techniques

• Document clearly, managing conflicts

• Basis for detailed product scope

• Basis for ongoing scope control

4/28/2015

36

71

Topic 2 – Requirements management plan

• May be informal

• Determine approach (team/budget etc.)

• Describe stability/volatility of requirements

• Known constraints/conflicts

72

Topic 2 – Source of requirements

• Expand stakeholder register

• Align stakeholders with different tactics for requirements (and expectations) management

• Customers obvious source

• What about end-users?

• Regulatory bodies?

• Internal quality control constraints?

4/28/2015

37

73

Topic 2 – Collection/elicitation techniques

interviews: Useful when addressing specialists, experts or key stakeholders in order to surface latent requirements. (Use open or semi-structured questions).

focus groups: Using a facilitator to encourage selected subject matter experts to collaborate

facilitated workshops: Many different types of workshops may be put in place to surface requirements.

Questionnaires & surveys: Most appropriate where the requirements are reasonably logical.

Observations: This technique may involve non-intrusive mechanisms (such as video monitoring) or immersive participation. Immersive participation may lead to the revelation of tacit knowledge by experts

Prototyping: constructing an experimental system rapidly and inexpensively for end-user demonstration and evaluation

Benchmarking: Project analysts may look at the overall goal and determine the best practices on how to achieve that goal among that industry in order to establish requirements for the project.

Context diagrams: Such diagrams graphically show the flow of information and materials through systems or processes in order to describe requirements or identify current deficiencies that will lead to requirements.

Document Analysis: Analysis of project related documentation such as business process flows, processing rules, organizational policy documents, regulatory documents, quality manuals etc.

74

Topic 2 – Documentation

• Differ between industries

• Depends upon complexity of requirements

• Manual documentation with clear revisioning

• Complex requirements oriented document management systems to capture requirements evolution and rationales

4/28/2015

38

75

Topic 2– requirements traceability matrix

Breakout Exercise 6 (pg 49)

Review the project charter for the ABC Corporate Olympics. Develop a list of business requirements for this project and populate a requirements traceability matrix with the list

Topic 2: - Develop the Scope StatementScope Statement contains: -� Project and Scope Objectives which include the measurable

success criteria of the project

�Product Scope Description which describes the characteristics of the product, service or results that the project has to create

� Project Boundaries to define what is in and out

�Project Deliverables that defines the product of the project

� Product Acceptance Criteria which defines how the product will be accepted

� Project Constraints

� Factors which limit options (for example, budget can limit staffing or scope)

� Project Assumptions

� Factors which for planning purposes, are considered to be true, real or certain

� Project Organisation� Initial Defined Risks � Scheduled Milestones� Order-of-Magnitude Cost Estimates� Project Requirements Management� Approval Requirements that are mandated by the stakeholders

Project Justification

Project Product

Project Deliverables

Project Objective

Assumptions/Limitations

Overall Project Priority: High Medium Low

Comments:

Approved By: _____________________________

Project Manager : _____________________________ Date: ____/____/______

76

4/28/2015

39

Product scope – The Scope Statement product characteristics

Different industries have different scope specification templates.

Due to complexity of systems, software engineering has many sections – functionality

Optional discussion

Devise a detailed template of the attributes that would be needed to specify in detail the requirements for the ABC project.

77

Project scope – The Work Breakdown Structure (WBS)

100% Rule – capture and plan for ALL the work of the project

“A DELIVERABLE-ORIENTED HIERARCHICAL DECOMPOSITION OF ALL THE WORK OF THE

PROJECT”

A BRAIN DUMP !

May be driven from the deliverables

Incorporates quality and management activities including tests/meetings/certifications etc.

78

4/28/2015

40


The customer or end-user will often recognize the product scope

The components and deliverables of the project or service being produced by the project

The customer or end-user may often not have knowledge of the details of the project scope - HOW the deliverables are produced – the myriad of additional tasks required.

ABSOLUTELY VITAL THAT PROJECT PLANNING ESTABLISHES THE PRODUCT AND PROJECT SCOPE CORRECTLY – OMISSIONS IN THESE AREAS WILL INVALIDATE OTHER PLANS

�(schedule, budget, quality, communications etc.)

79


Level 3 WBS

Level 2 WBS (How to do level 1 or Why we are

doing level 3)

Level 1 WBS

Road Bike Project

1. Frame

1.1. Review existing models

1.1.1 Establish Review Criteria

1.1.2 Conduct worldwide

review

1.2 Select Frame

2. Wheels

2.1 Determine technical

requirements

2.2 Conduct endurance tests

80

4/28/2015

41

81

Tabular WBS

Add durations, start dates and/or dependencies = schedule !

82

Topic 3: - Schedule – Gantt (or bar) chart

4/28/2015

42


WBS Construction mechanisms:

�Guidelines

�Analogous

�Top-down (most-recognized approach)

�Bottom-up (completely new – scrambling for details)

�Mind-mapping

83

Work Breakdown Structure via a Mind Map

84

4/28/2015

43

85


Construct a work breakdown structure for the ABC Corporate Olympics Project


Work Package (lowest level)

�Can assign time to the work

�Can assign a cost against the work

�Can control the work

What about progressive elaboration? ROLLING WAVE PLANNING

�Do not decompose elements where details can only emerge during the project implementation

86

4/28/2015

44

Work Breakdown Structure Dictionary

WBS DictionaryDocument that supports the WBS and includes the detailed content of

the components in a WBS as well as acting as the control accounts: -�Code of account identifier�Description of work�Responsible organisation�List of schedule milestones�Associated schedule activities�Resources required�Cost estimates�Quality requirements�Acceptance Criteria �Technical reference�Contract information

87

88

Day 2 Review

�Topic 1: - Setting up the Project �The Charter

�Topic 2: - Product Scope Planning�The Scope Statement

�Topic 3: - Project Scope Planning�The Work Breakdown Structure (WBS)

4/28/2015

45

90

Day 3 – Developing the project budget

�Module 5: - Planning Timelines�Topic 1: - Build schedule�Topic 2: - Optimize schedule

�Module 6: - Planning Project Cost� Topic 1: - Project cost management



4/28/2015

46

Topic 1: Schedule development

Main processes to be performed in developing a schedule are:

�Decompose work packages to low-level activities (if necessary)

�Determine dependencies between activities

�Determine the resources to be used to perform activities

�Estimate activity durations

�Establish Project Duration

�Present duration/schedule to management and optimize if required

91

Scheduling �� Work package decomposition

�May further decompose work packages to lower level activities

�One approach is to establish activities that are performed by one resource category or role

�Activity list should contain an ID and name

�Activities may also have “attributes” assigned to them such as:�Constraints (start no earlier than)

�Dependencies

�Leads or lags

�Any assumptions about the activity

92

4/28/2015

47

Topic 1: - Scheduling �� Identify dependencies

�Mandatory dependencies: �Hard logic, these are inherent in the nature of the work being

done.�E.g. You must pour foundations before you build the walls

�Discretionary dependencies: �They are based on knowledge of

�best practice – activities are sequenced with knowledge of what is considered best practice

�some unusual aspect of the project – where a specific sequence is desired, even though there are other acceptable sequences

�preferred activity sequences – based on previous experience of a successful project performing the same type of work�E.g You may determine that unit tests should be written before IT system code is

developed so that programmer fully understands the technical design that they are implementing

�External dependencies: �Dependencies on aspects of other projects or with non-project

activities.

93

Scheduling �� Presenting dependencies

�Gantt charts useful for reporting status

�Do not clearly show dependencies� May use milestones� May linked Gantt charts

�Clearer presentation of dependencies provided by Network or Logic diagram

�Task 1 clearly seen as predecessor to Task 2�Task 2 is dependent upon Task 1

94

4/28/2015

48

Scheduling �� Presenting dependencies

What will the logic diagram look like ?

95

96


Construct a network diagram

4/28/2015

49

Time management - Estimation techniques

Estimation is critical to effective scheduling

�May influence decomposition of work packages

�May provoke application of discretionary dependencies

�May indicate number of resources to apply to an activity

�Estimate activity durations – if estimations are poor, then it is very likely schedule will be incorrect.

�Will definitely determine Project Duration

�Will support what activities to optimize

97

Time management – Resource Estimation

�Category and number or resources needed for each activity

�May incorporate both material and human resources

�Incorporates or integrates with other aspects of resource planning

�Procurement policies and procedures?

�Staffing management (and recruitment)?

�Resource availability (skillsets)

�Material resource lead times

�Resource estimation techniques�Expert opinion

�Analysis of previous similar projects

�Published estimates (benchmarks) e.g. unit costs etc.

98

4/28/2015

50

Time management – Duration Estimation

�Use activity list and resource requirements

�If possible, estimation should be carried out by the activity implementer(s)

�Methods�Historical information – past schedules

�Expert judgement

�Analagous estimates

�3-point: Best case, most likely, worst case

�Parametric approach

�Must incorporate resource calendar (for availability)

�Units of time being applied (days/weeks/months…)

�Note… also possible to add “contingency reserve” to particularly risky activities.

99

Time management – Duration Estimation

�Remember the Triple constraints of projects�Do not confuse TIME with COST

�Do not confuse DURATION with EFFORT

�A task may be estimated to take 5 Days effort

�If one person is assigned to the task and if this person is only available to the project on a Monday, then how long is the task duration?�Week 1 – Monday (1 day’s work completed.

�Week 2 – Monday (8 days later, the second day of effort is applied)

�Week 3 – Monday (15 days later, the third day of effort is applied)

�Week 4 – Monday (22 days later, the fourth day of effort is applied)

�Week 5 – Monday (29 days later, the fifth and final day of effort is applied)

�Task Duration is estimated to be 29 days

100

4/28/2015

51

Scheduling �� Estimate project duration

�Activity on Arrow (AOA) or Arrow Diagramming Method�Moving from event to event (or milestone to milestone)

�Dummy activities required to represent multiple dependencies

�A little more complex than AON

�Formed initially as part of the PERT method (Program Evaluation Review Technique)

�Activity on Node (AON) or Precedence Diagramming Method�Moving from left to right so clearly show dependencies

�No looping (or iterations)

�Shows leads and lags

�Four dependency relationships:� Finish – Start (Most straightforward)

� Start – Start (Dependent node must start at same time as predecessor)

� Finish – Finish (Dependent node must finish at same time as predecessor)

� Start – Finish (Dependent node starts once predecessor is completed (Reflects lean concepts of PULL and

Just-in-time)

101

Scheduling �� Estimate project duration

�AON basis for Critical Path Method:

�Build logic or network diagram (AON) – description inserted on each node

� Insert activity duration on each node

�Conduct a forward pass, inserting early start and early finish for each node� Early start of first node is first day of project

� Early finish of a node is calculated by adding the duration to the node’s early start

� Early start of a node is equal to the early finish of the latest predecessor node (assuming finish to start)

� Early finish of last node presents the earliest that the project can be finished – the Project Duration

�Conduct a backward pass, inserting late finish and late start for each node� Late finish of final node is equal to the project duration (early finish of final node)

� Late start of a node is calculated by subtracting the node duration from the late finish

� Late finish of a predecessor node is established by taking the earliest successor late start

�Establish the float for each node by subtracting the early finish from the late finish.

�Establish the critical path by linking all nodes that have Zero Float

102

4/28/2015

52

Scheduling �� Schedule optimization

�Project durations may need to reduced for various reasons:� Customer demand

� Dependent projects / operational needs

� Cost reduction (e.g. reduced indirect costs)

�Understanding float can be helpful to schedule optimization� Zero float = critical task (any delay to the task => a delay to the project duration)

� Total float = the amount of time a task may be delayed before it impacts project duration

� Free float = the amount of time a task may be delayed before it impacts successor tasks

� Project float = the amount of time a project may be delayed before impacting upon other dependencies

�Optimization techniques� Fast-tracking

� Crashing

� May be potential to also look at scope (reduced quality?)

103

104


Establish the project critical path and optimize the project

4/28/2015

53

105

Module 6: Planning Project Cost

�Topic 1: - Project cost management

�Topic 2: - Project cost estimation

�Topic 3: - Establish the budget

Module 5: Cost Management

�Establish a time-phased budget�WBS presents all the work packages

�Schedule presents packages decomposed to activities with start and end dates

�Now costs may be estimated for those activities based upon resources and effort

�The allocation of these costs over time represents a time-phased budget.

�Costs are not prices!! They are about forecasting the overhead of doing the project.

�Cost Management involves:�Building a cost management plan

�Estimation of project costs

�Establishment of project budget

�Controlling project using budget to measure variances from the plan.

106

4/28/2015

54

Topic 1: Fundamental Terms

�Profits: This refers to revenues minus expenditures. Therefore, in order to manage profit issues, a company must increase revenues or reduce expenditures. Profit margin is the ratio of revenues to profits -i.e. if revenues of 100,000 result in profits of 10,000, then the profit margin is 10%.

�Cashflow analysis: Must understand when the money is required to perform a project. Too many projects with high early cashflow needs that are undertaken at the same time may limit an organization’s ability to support them all.

�Tangible costs: Those costs that may be measured in money terms.

�Intangible costs: Not easily measured in money terms

�Sunk costs: Monies that have already been spent. Such costs should not influence decisions on how to proceed on a project at the money is gone.

107

Topic 1: Cost Management Planning

�Plan and document core cost management processes for the project

�Currency

�Levels of precision

�Budget variance assessment procedures including escalations

�Cost change management processes

�Estimation techniques to be used

108

4/28/2015

55

Topic 1: Cost Management Planning

�Direct costs: all permanent equipment, materials, labour and other resources involved in the implementation of a project:

�Indirect costs: related to items that do not become a permanent part of the facilities but are required for the orderly completion of the project. They include things like management fees, consultancy fees, insurance, taxes, etc

109

Topic 1: Cost Estimation

�Cost Estimation Levels

� Order of magnitude methods are generally made very early on in a project’s life cycle when little data is available. They are sometimes referred to as a “ballpark figure” or a broad gauge. The accuracy of such an estimate is typically -50% to +200%. They are primarily useful for setting expectations and determining if a project is financially feasible.

� Budgetary estimate: This is used to allocate money for the project budget and provides an increased level of accuracy - typically -10% to +25%.

� Definitive estimate: This is an accurate estimate of project costs (if one considers it possible to have an accurate estimate !). This is used to support many purchasing decisions and will reflect suppliers pricelists etc. - it is typically -5% to +10%.

�Progressive Elaboration

110

4/28/2015

56

Topic 1: Cost Estimation Techniques

�Order of magnitude methods

�Top-down estimating

�Bottom-up estimating

�Parametric estimating

�Software tools

�Calculation methods

�Cost Estimation Levels

111

Topic 1: - Estimation Methodologies

�Watch overconfidence – avoid optimism

�Risks must be incorporated into estimate

�Use expertise – and interview where appropriate

�Remember – the expert may provide the estimate, but once adopted in the plan, it is OWNED by the Project manager

112

4/28/2015

57

Topic 1: - Estimation Methodologies

�Range of Estimates

�Optimistic

�Most Likely

�Pessimistic

�Level of Confidence with Estimates

�What should you expect the duration to be?

113

Topic 1: - Estimation errors

�Reasons for poorly established cost estimates:

�Poorly developed WBS. If the WBS does not contain all the work of the project, (i.e. additional necessary tasks surface during execution and closure), then the missing work will not have been used as part of the total cost forecast.

�Incorrect task durations in project scheduling

�Misidentification of skills and resources required to execute tasks

�Poor estimation techniques applied (either overconfident/aggressive or “padding” work)

�Not accounting for risks (contingency allowances)

�Poor overhead awareness

�Not accounting for costs escalation/inflation

114

4/28/2015

58

Topic 1: - Cost Estimation

Reserve Analysis / Contingency

�A separately planned quantity used to allow for future situations which may be planned for only in part

�Sometimes called “known unknowns”

�Intended to cover the normal fluctuations in resource requirements to accomplish project objectives

�Usually estimated as a percentage of base costs, or calculated by deriving Expected Monetary Values for all major risks

�May be incorporated in the cost and schedule baseline, or called out as a separate cost element (incorporated into the critical chain reserve)

115

Topic 1: - Cost Estimation

Management Reserve

�A separately planned quantity used to allow for future situations which are impossible to predict

�Sometimes called “unknown unknowns”

�Often are used to accommodate unplanned requirements that are within project scope, or additional requirements not within project scope

�Requires a change to project cost baseline

�Typically identified as a separate cost element

116

4/28/2015

59

Topic 1: - Cost Aggregation

Develop a Responsibility Assignment Matrix (RAM):

Overlay the Organization Breakdown Structure (OBS) upon the

Work Breakdown Structure (WBS), allocating responsibilities accordingly.

�OBS – a chart describing the organizations that comprise the overall project participants (or team)

�WBS – a chart that presents the decomposition of the entire project scope into “work packages”.

�RAM – a chart that presents the planned responsibilities that each participating organization has to each work package.�Different forms of charts : RACI; PARIS; PARIO …..

117

118

Responsibility Assignment Matrix – the RACI chart

4/28/2015

60

RAM Discussion – use exercise 9 details (p. 71)� Using the data in exercise 9, develop an RACI chart for the project. (Resource on table = “R” in the

RACI chart).

� Regardless of the task, assume the following allocation of work based upon the party that is responsible:

No. Responsible Accountable Consult Inform

1 Infrastructure 4 2,3 5,6

2 Architect 4 1,3 6

3 Team 4 2 1,5,6

4 PM 4 2 7

5 Services 4 2,3 1

6 Support 4 2,3 1

7 Finance 4 1

119

Topic 1: - Overall funding based on cost estimates

120

4/28/2015

61

Overall cost estimation discussion

� How do we get work package costs?

� Using RACI chart you just developed – allocate the costs for each activity.

� Assume the following weekly cost for each type of resource

� Let us assume the following:

� (R) - responsible for a task - 100% of their cost

should be assigned to the activity

� (A) - accountable for a task - 5% of their cost

should be assigned to the activity.

� (C) - consulted about a task - 30% of their cost

should be assigned to the activity.

� (I) - informed about a task - 10% of their cost should be assigned to the activity

No. Responsible Weekly cost

1 Infrastructure $5000

2 Architect $10,000

3 Team $25,000

4 PM $4000

5 Services $4000

6 Support $3000

7 Finance $4000

121

Topic 2: - Project Costs – progressive elaboration

Project = $1 Million

Del 1

WP 1 WP2

Del 2

WP3 WP4

WP Activity Cost WP Activity Cost

1 1 $40,000 2 7 $20,000

1 2 $10,000 2 8 $4,000

1 3 $80,000 3 9 $40,000

1 4 $90,000 3 10 $70,000

2 5 $5,000 3 11 $25,000

2 6 $7,000 4 12 $90,000

4 13 $95,000

CharterTop-level estimateProject = $1 Million

Build WBS – Bottom-up EstimateWP1 = $250,000WP2 = $40,000Deliverable 1 = $290,000WP3 = $150,000WP4 = $190,000Deliverable 2 = $340,000

Project = $630,000

Proj

Del 1

WP 1

Activities 1,2,3,4

WP2

Activities 5,6,7,8

Del 2

WP3

Activities 9,10,11

WP4

Activities 12, 13

More detailed (activity level) estimateWP1 = $220,000; WP2 = $36,000; Deliverable 1 = $256,000WP3 = $135,000; WP4 = $185,000; Deliverable 2 = $320,000Project = $576,000

A

B

C

D

122

4/28/2015

62

Topic 2: - Project Budget – the Planned Value

Proj

Del 1

WP 1

Activities 1,2,3,4

WP2

Activities 5,6,7,8

Del 2

WP3

Activities 9,10,11

WP4

Activities 12, 13


1 1 $40,000 2 7 $20,000

1 2 $10,000 2 8 $4,000

1 3 $80,000 3 9 $40,000

1 4 $90,000 3 10 $70,000

2 5 $5,000 3 11 $25,000

2 6 $7,000 4 12 $90,000

4 13 $95,000

Activity

5Activity

9

Activity

7

Activity

6

Activity

11

Activity

12

Activity

8

Activity

4

Activity

1

Activity

13

Activity

2

ENDSTARTActivity

3Activity

10

January February March April May

By start of February, we plan to have completed activities 5, 3, 7 and 6;By start of March, 9,10, 8 and 12;By start of April, 1, 4 and 11;By start of may, 2 and 13.

123

Topic 2: - Project Budget – the Planned Value

Proj

Del 1

WP 1

Activities 1,2,3,4

WP2

Activities 5,6,7,8

Del 2

WP3

Activities 9,10,11

WP4

Activities 12, 13


1 1 $40,000 2 7 $20,000

1 2 $10,000 2 8 $4,000

1 3 $80,000 3 9 $40,000

1 4 $90,000 3 10 $70,000

2 5 $5,000 3 11 $25,000

2 6 $7,000 4 12 $90,000

4 13 $95,000

ActivityActivity

5

$5,000

Activity 9

$40,000

Activity 7

$20,000

Activity 6

$7,000

Activity 11

$25,000

Activity 12

$90,000

Activity 8

$4,000

Activity 4

$90,000

Activity 1

$40,000

Activity 13

$95,000

Activity 2

$10,000

ENDSTART

Activity 3

$80,000

Activity 10

$70,000


By start of February, we plan to have completed activities 5, 3, 7 and 6This means we intend to spend $112,000 during January.By start of March, we intend to spend an additional $204,000 for a total to that point of $316,000

$112,000 $316,000 $471,000 $576,000Cumulative Spending ��

124

4/28/2015

63

Topic 2: - Planned Value – the budget

January 1 $0February 1 $112,000March 1 $316,000April 1 $471,000May 1 $576,000

Jan Feb Mar Apr May1 1 1 1 1

$100,000

$500,000

$400,000

$300,000

$200,000

$600,000

x

x

x

x

125

126


You have developed an overall cost for each work package.

Use this information, combined with the schedule

established in exercise 9 to develop the project budget.

4/28/2015

64

127

Day 3 – Review

�Module 5: - Planning Timelines�Topic 1: - Build schedule�Topic 2: - Optimize schedule

�Module 6: - Planning Project Cost� Topic 1: - Project cost management



4/28/2015

65

129

Day 4

Module 6: - Risk Management

�Topic 1: - Project Risk Planning�Topic 2: - Project Risk Identification �Topic 3: - Project Risk Analysis�Topic 4: - Project Risk Responses

Module 7: - Cost control

�Topic 1: - Project Cost control structures�Topic 2: - Project Communication – change control

Topic 1: - Risk Management

“Any uncertain event that if it occurs, that can result in either

negative or positive consequences for the project.”

�In projects risk management is PROACTIVE

130

4/28/2015

66

Topic 1: - Risk Management – key processes

�Identify the risks

�Analyze the risks – determine the risks that need proactive management

�Formulate responses to selected risks

�Monitor and control risks during project

131


Important that PM understands the attitude to risk within the project

environment

�Utility theory – risk averse / seeking / neutral?

�What constitutes a big risk ?

�May differ from project to project (or org. to org.)

132

4/28/2015

67


Risk Management Plan - this describes how risk processes should be performed.

Focus is not on the what (actual project risks) – it is on the how (approaches and rule used to address risk)

Items addressed may include:

�Methodology

�Roles & Responsibilities (pertaining to risk)

�Budgeting

�Timing (how often risks will be reviewed etc.)

�Scoring & Interpretation

�Thresholds

�Reporting & Tracking

133


134

4/28/2015

68

Topic 1: - Risk Analysis Management� Level of importance or “ranking” of risks

135

136


Criteria and thresholds for risk impacts on the ABC Corporate Olympics project

4/28/2015

69

Topic 2: - Risk Identification Techniques� Interviews

�Group creativity techniques (brainstorming)

�Classification / Checklists

�Classification / Risk Breakdown Structure

�Work Breakdown Structure analysis

�Root cause analysis

�SWOT analysis.

�Delphi technique

�Critical success factor analysis

�Review of any uncertainty related to general project management knowledge areas:

� communications

� Quality

� Staffing (recruitment/team performance etc)

� Procurement (contracts/supplier performance etc.)

� stakeholder expectations

137

Topic 2: - Risk Identification – the register

Risk ID Description Category Trigger LifecyclePhase

138

4/28/2015

70

Topic 3: - Risk Analysis� Probability – determine what the likelihood is of a particular identified risk materializing. This is a

qualitative “gut-feel” proposal of the chances of the risk occurring. Often labelled as low, medium high.

Probability Description

0% No chance of happening – no risk exists and should not have been considered

1-30% Low

31 – 65% Medium

66 – 99% High

100% This is not a risk – it is an issue and it is going to happen.

139

Topic 3: - Risk Analysis - impact� Impact– determine what the impact to the project would be, should the risk occur. This is a qualitative

“gut-feel” of the risk impact and is proposed by considering the risk in relation to the criteria and scoring thresholds established for project risk impact. Often labelled as low, medium high but can have additional levels of granularity.

� Sometimes, project impact is presented as figures

� 0.1 = very low

� 0.2 = low

� 0.3 = medium

� 0.4 = high

� 0.5 = very high

These are still just “gut-feel” – there is no probability or statistical theory being applied here – it is just a numerical way to present the scales and in some risk radar systems, the numerical impact rating will be multiplied by the proposed likelihood percentage to present overall risk ranking.

However, it really is just about combining the approximate likelihood and impact or a risk to determine its ranking based upon a pre—agreed scoring threshold for risk ranking.

140

4/28/2015

71

Topic 3: - Risk Analysis– expanded register

Risk ID Desc. Category Trigger LifecyclePhase

Probability

Impact

Rank

Bus-01 …… B …. Design H H H

141

142

Exercise 12: Page 92

Identify and analyze 10 risks for the ABC corporate olympics project.

4/28/2015

72

Topic 4: - Risk Responses

�Reduction

�Transference

�Avoidance

�Acceptance

�Passive

�Active

143

144


Formulate responses to each of the risks identified earlier. Populate your register with the data.

4/28/2015

73

Monitor risks� Monitor residual risks

�Continue to identify new risks that emerge

�Track risk responses

�Modify risk rankings as the lifecycle progresses

145

146



4/28/2015

74

Topic 1: - Project cost control structures

�Traditional control structures

�Monitor project performance and identify variances from plan

�Establish control points

�For each control point check:

� No. of tasks started versus those planned to be started at that point in the plan

� No. of tasks completed versus those planned to be completed at that point in the plan

� No. of milestones achieved versus those planned to be achieved at that point in the plan

147

Topic 1: - Structures to support spending analysis

�Must have project authorization code – cost code

�May have project cost code linked to a series of control accounts

�Control account covers one or more work packages –usually associated with work being performed by a particular dept.

�May compare planned costs (from project budget) to actual spending (as reported to accounts department and tracked using control account codes).

148

4/28/2015

75

Topic 1: - Prerequisites for control�Work Breakdown Structure (WBS)

�clarifies work

�Organizational Breakdown Structure (OBS)�establishes all the various departments/roles engaged in project. By

merging the

�Responsibility Assignment Matrix (RAM)� - merge WBS and the OBS: framework for what roles are performing

what work.

�Project Schedule

�Time-phased Baseline Budget

�Cost/Resource Control Plan�control accounts that are used to control the schedule

�Change Control Plan

149

Topic 1: - Project cost control structures

�The quality of a product is equivalent to the quality of the process used to develop it.

�Improve the process – you improve the product

�Effective process management involves:

�Process definition

�Process Training

�Process enforcement

�Project Management is a process !!

150

4/28/2015

76

Topic 1: - Overall funding based on cost estimates

151

Topic 2: - Decision making for success

� Effective and Efficient Communication

�Effective communication involves provision of:

�correct information

�To correct receivers (stakeholders)

�At the correct time

�Efficient communication

�Provide all the information required and only the information required

4/28/2015

77

Information systems

“… the timely and appropriate generation, collection, dissemination,

storage, and ultimate disposition of project information.”

�Needs careful communications planning

Communications Planning�Details of stakeholder (position; company address; name; project attitude; email

address; mobile/office phone ….)

�Stakeholder communication requirements - purpose of communication

�Format of communication

�Level of detail required

�Communication channel/medium to be used

�Storage mechanisms used

� Is information accessed through “push” or “pull” mechanisms

�Frequency of communication

�Escalation procedures (if necessary )

�Responsible communicator (owner)

�Plan may also contains details on workflows and various aspects impacting upon virtual team issues.

4/28/2015

78

Key communications considerations

�Basic communications models – it is about transfer of information from a sender to a receiver

� Important to overcome misunderstandings

� Important to overcome NOISE

�Always seek clarity�SMART objectives to support information transfer

�Must consider FEEDBACK mechanisms – seek clarifications� Active Listening

� Workflow

Key communications considerations�Information retention:

�5% of what we hear

�10% of what we read

�20% of what we see and hear

�30% of what we see applied (as in a demonstration of a concept in action)

�40% of what we discuss with others

�75% of what we apply in our context

�90% of what we teach to others.

�Effective communication:�5-10% effective achieved by content of message

�40-45% achieved through paralinguistics (pitch and tone of voice)

�50% achieved through kinesics (body language, eye contact etc.)

4/28/2015

79

Meetings – key considerations (Verzuh)

�Prepare agenda and distribute ahead of meeting�everyone should come prepared

�Punctuality – commence/complete on time� avoid long meetings (one hour if practical)

�Park items where necessary�stay on track

�Involve everybody – encourage participation� silence does not mean agreement

�Minutes - record decisions & action assignments

158


Develop a communications management plan for the ABC Corporate Olympics project.

4/28/2015

80

Topic 2: Key communications workflow - change

159

160

Day 4 Review

Module 6: - Risk Management

�Topic 1: - Project Risk Planning�Topic 2: - Project Risk Identification �Topic 3: - Project Risk Analysis�Topic 4: - Project Risk Responses



4/28/2015

81

162

Day 5

Module 8: - Tracking & forecasting costs

� Project control – Earned Value Management

4/28/2015

82

Topic 1: - Controlling the project using cost data

�The time-phased budget (often called the “S curve”) gives us our planned value

�This presents how much we intend to have spent at any particular point in the project timeline.

�It may be used to determine how project work is performing at a particular

point in time.

163


�How do we use this cost information?

�One measurement technique is to compare the cost of all activities that have been planned to be completed with the actual costs incurred by the project to date (The ACTUAL COSTS).

�How do we determine Actual Costs ?

�The accounts department(s) may have a project cost code to collate project-related costs

�An internal time management system may use project codes to allow team members attribute their time to different projects.

164

4/28/2015

83

Topic 1: - Using Actual costs

A project has been planned so that all tasks are to be completed

between January and May 1

�What is the overall planned value of this project?� Yes – it is $576,000. This is also known as the Budget at Completion (BAC)

�What is the planned value on March 1?� It is $316,000

�In checking the project on March 1, the PM contacts the accounts department and is informed that the project has incurred costs of $350,000 so far.

What is the status of this project on March 1?

Planned Value (PV) = $316,000; Actual Costs (AC) = $350,000


165

Topic 1: - Using Actual costs

Comparing the cost of tasks that we planned (PV) up to a particular date and the actual charges or costs incurred to that point is failing to consider everything that may have happened on the project.

WHAT ABOUT ACHIEVEMENTS!!!

Our main comparison figure should be the cost of the actual work performed –not the work planned. We called this the Earned Value (EV) up to the check point.

How does one calculate the Earned value up to a point in time. This is achieved by multiplying the planned value for every activity in the project by the %complete of that activity at the checkpoint date.


166

4/28/2015

84

Topic 1: - Calculating Earned ValueWP Activity Cost WP Activity Cost

1 1 $40,000 2 7 $20,000

1 2 $10,000 2 8 $4,000

1 3 $80,000 3 9 $40,000

1 4 $90,000 3 10 $70,000

2 5 $5,000 3 11 $25,000

2 6 $7,000 4 12 $90,000

4 13 $95,000

ActivityActivity

5

$5,000

Activity 9

$40,000

Activity 7

$20,000

Activity 6

$7,000

Activity 11

$25,000

Activity 12

$90,000

Activity 8

$4,000

Activity 4

$90,000

Activity 1

$40,000

Activity 13

$95,000

Activity 2

$10,000

ENDSTART

Activity 3

$80,000

Activity 10

$70,000


By start of February, we plan to have completed activities 5, 3, 7 and 6This means we intend to spend $112,000 during January.By start of March, we intend to spend an additional $204,000 for a total to that point of $316,000

$112,000 $316,000 $471,000 $576,000Cumulative Spending ��

On March 1, the PM checks with the team on completion rates:TASKS PLANNED TO BE COMPLETED BY MARCH 1:Activity 5 – 50% complete. EV = $5000*0.5 = $2,500 (Woops !); Activity 9 – 0% complete.Activity 3, 7, 6, 10, 8 and 12 are 100% complete. EV = $273,500ADDITIONAL FUTURE TASKS THAT HAVE BEEN ADDRESSED:Also - although not planned to start until after March 1, some activities have been completed: Activities 4,11 and 13 – 100% (EV $210,000). This means that total EV on March 1 is: $483,500

167


�March 1 Status – we need to check our variances against actual accomplishments.

�Planned Value (PV) = $316,000; Actual Costs (AC) = $350,000

�Earned Value (EV) = $483,500

�Cost Variance (CV) = EV – AC = $483,500 - $350,000 = $133,500

�Schedule Variance (SV) = EV – PV = $483,500 - $316,000 =

$167,500

�Project is under budget and ahead of schedule on March 1!

168

4/28/2015

85

169


Present the project status using the EVM technique

Course Agenda

Day 1

�Module 1: - Nature of projects� Topic 1: - Project characteristics

� Topic 2: - Management of projects

� Topic 3: - Critical success factors

� Topic 4: - Skill sets

� Topic 5:- Organization structures

� Topic 6:- Project management lifecycles

�Module 2: - The PMBOK Standard� Topic 1: - PMBOK

� Topic 2: - Standard cost management processes

Day 2

�Module 3: - Project Objectives� Topic 1: - Initiation – setting up the project

� Topic 2: - Planning product scope (specification)

� Topic 3: - Planning Project Scope (WBS)

� Module 4: - Planning Timelines�Topic 1: - Build schedule�Topic 2: - Optimize schedule

� Module 5: - The Project Cost� Topic 1: - Project cost management



Day 3

170

4/28/2015

86

Course Agenda

Day 4

�Module 6: - Risk Management� Topic 1: - Project Risk Planning

� Topic 2: - Project Risk Identification

� Topic 3: - Project Risk Analysis

� Topic 4: - Project Risk Responses

�Module 7: - Controlling Project Costs� Topic 1: - Cost control structures

� Topic 2: - Key communication concepts

Day 5

�Module 8: - Tracking & Forecasting

Project costs� Topic 1: - Earned Value Management

171

Thank you for your Participation

☺☺☺☺

project budgeting & cost management manual slidessaharapcc.skills4success.co/spcc/pm/pbc/03....

Documents