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Project Management

Project Management Fundamentals: Estimation and Project Control

Sergio Cavaliere IBM Global Business Services

Project Management Fundamentals: Estimationand Project ControlL’Aquila - January 12, 2009

Agenda

� Estimating� Basic Definitions� Estimating Approaches an Techniques� Project Estimating

� Project Control� Overview� Schedule and Cost Control� Earned Value Management

� Exercises

L’Aquila - January 12, 2009 Project Management Fundamentals: Estimation and Project Control

Estimating – General Objective

� Verify common concepts

� Know best practices

� Select the Estimating Approach

� Make a Project Estimation


Estimating – Definitions - 1

� Estimating: evaluating the resources (labor, equipment, facilities) needed tocomplete project activities� Plan: An organized set of decisions about how to carry out future activities and requires input from the estimate (including shedule and resource availability)� Cost: the value of the estimate allocated as a budget available to deliver the plan (difference between cost and budget are called unresolved costs)� Cost Estimating: evaluating the cost of the resources needed to complete project activities� Cost Budgeting: allocating the costs estimated to individual project components to make them measurable and manageable� Price: The amount quote to the client

� What is an estimate?� An assessment of the likely quantitative result� Usually applied to project cost factors and schedule� Should include some indication of accuracy (e.g. +- percent)� Usually used with a modifier (e.g. preliminary, conceptual, feasibility)



SoftwareCreates project

estimate

Costs money

Black box

Historical Data o definedalgorithms

Mechanism forundertakingestimation

e.g. Monte Carlo forvariance

e.g. Top-Down for estimating

Template

Overcomesblack box tool

Use 2 or more

Tool variants

Part of anestimate strategy

Many identified

Usuallyspread sheet

RequiresEstimating input and calibration



Items to consider

� Utilization factor: amount of time a FTE (Full Time Equivalent) can be used for the length of the project

� Hours available/Year: (Exam 2.080 (52 w X 5 d X 8 h)

� Duration parameters:� Working Time: Activity duration based on number of hours a workday or a workweek� Effort Hours: Hours required to complete a task� Elapsed Time: Calendar Duration including weekends, holidays and breaks� Productivity: rate at which work is produced� Availability: resource present and ready to work� Contiguous duration: work time that is not interrupted� Interruptible duration: work time that may be interrupted� Level of Effort: computed uniform rate of activity

� Some formulas

Cost =Effort Hours

ProductivityX Unit Cost Resource duration =

Effort / Productivity

Availability


Estimating – Types of Estimates

Estimates per Phase:� Pre-bid� Offering� …

Estimates per target� Raw� Development� Technical

What an estimate has to include?

� Labor� Equipment� Software� Real estate� Supplies


Estimating – Quality of Estimate

� Correct Estimate prevents from causing troubled projects

� Types of Estimating Problems

� Absence of historical data� Incorrect project / goal definition� No accurate validation of the estimate

� Estimation is a process which requires governance

� Process Elements (lifecycle model, Data and metrics, Best Practices)� Governance (Reviews, Action Plan, Roles)


Estimating – Pricing Process

Effort Estimating is a step of a process

ConsiderAdditional

factors

Create EffortEstimate

Create Resource

Plan

Price Project4

5

2

3

Create Project

Schedule

1Metric Size MeasuresEffort Estimate

Release Strategy

Additional Factors

Factor Adjustments

Additional Factors

Project Schedule


Estimating – Estimation Life Cycle Model

Start

Indicative Estimate

ProposedEstimate

CommittedEstimate

ClosedEstimate

ClientRequest

Decision togo on

Request for detailed Proposal

Project End

Deisionmade to

close

Agreement made

Decision not tocontinue


Estimating – Committed Stage

Committed Stage Estimation Process

3.1 Confirmwork plans from

Estimates

3.3 Integrate Change Orders

3.2 Gatheractuals for the

period

3.4 EstimationCheckpoint

Review

3.6 ReviewEstimation

factors

3.5 GatherActuals forEsrimation

Factors

Project Start

Project Close

Plan Requires

Changes?

Type of Change?

Project manager

EstimatingSME


Estimating – Best Practices of Estimate

1. Quantify things2. Use more than one approach3. Use historical data and metrics4. Same metrics for project measurements and estimate5. Use recommended estimating tools6. Analyze your input and output data7. Estimates should be done by experts8. Document the assumptions9. Verify estimate with other people10. The later you will make an estimate the more accurate it will be


Estimating – Quantify things

Quantify things needed to obtain a project size

Using in aParametric

Model

Using number

and range of

artifacts

Using estimating factors

Estimation Parameters : Functionpoints, Lines of Code, UseCases

Artifacts: modules, interfaces, screens, reports, implementationclasses, data entities, etc.

Driven by technique and project type.

Many tools require the choice of a project pattern


Estimating – Use more than one approach

Use more than one estimating approach

Methods and Techniques might include:

The selected approach may involve the use of tools and/or spreadsheets:

Validate when.• All estimates agree• Otherwise analyse assumptions• By iterating, estimates from different methods start to converge• The different approaches converge

1. One ore more top-down approach2. A bottom up estimate (task by task or work product based)3. Experts involvement (Delphi)


Estimating – Approaches

Deadline Driven

1. Compute Estimate starting from the WBS2. Add Resources and dependencies and generate the schedule3. Add estimate for non included activities using historical data or expert support

Analogy

(use data of similar project types)1. Identify projects similar to the one to be estimated2. Note the effort, cost and schedule of the identified projects3. Adjust effort, cost and schedule by assessing size, complexity and other factors

Parametric

(is most commonly supported by tools)1. Confirm the size of the project using chosen parameters2. Assess productivity related to the parameters and generate effort3. Add any additional effort not included4. Convert effort into schedule and determine cost


Estimating – Approaches - 2

Artifacts and Work Distribution

(uses the number and range of artifacts and info about how iyhe effort is distributedacross the project phases)

1. Choose the artifacts and classify them by complexity2. Count the artifacts3. Calculate the build effort for each artifact according to its complexity, using

hystorical data and expert support4. Sum the build efforts5. Asses the effort for “non build” activites, using the work distribution6. Convert effort into schedule and determine costPlan Driven

(the most accurate)1. Use historical data and expert knowledge to get ALL activities to be done2. Determine the effort and allocate resources for each activity3. Convert effort into schedule and determine cost4. Add effort for resource leveling, non-productive hours, level of effort and so-on to

get the total effort


Estimating – Selecting the EstimationApproach

��

��

��

��

�� No YesUse Only to give a go/no go decision on do-ability

�� No Yes, always

�� No YesNot a primary method unless adequately calibrated

�� Yes, if tool has rilevant data YesOften a primary method in Indicative State, sometimes in Proposal

��

�� Yes Yes

If primary requires accurate historical data, otherwise can be used in validation approaches

�� Yes No�� Yes No

Should be the approach of choice when possible

(Indicative and Proposal Stage)


Estimating – Use historical data

Use actual historical data and metrics

Use harvested metrics from similar projects

Analyse both successful and troubled similar projects

Make sure that the project has similar work pattern and size

Many tools have hystorical data db as basis for Estimate calculation


Estimating – Example - a

Parametric databaseType

Fpts FP/SM

Project Name Pj no PM Type P

roje

ct F

P

coun

t (p

redi

cted

)

Act

ual

Project 1 1 John Smith ND C/S 737 56,89Project 2 2 John Smith ND web 308 22,16Project 3 3 John Smith ND C/S 108 18,13Project 4 4 John Smith Enh C/S 130 22,52Project 5 5 John Smith ND web 202 28,74Project 6 6 John Smith Enh web 306 21,82Project 7 7 John Smith ND C/S 92 12,84Project 8 8 John Smith ND C/S 525 16,49Project 9 9 John Smith Enh web 310 22,1Project 10 10 John Smith Enh C/S 615 23,81Project 11 11 John Smith ND web 415 16,2Project 12 12 John Smith ND C/S 655 18,14Project 13 13 John Smith ND web 274 15,35Project 14 14 John Smith ND web 145 48,03Project 15 15 John Smith Enh C/S 96 36,24Project 16 16 John Smith Enh C/S 128 15,47Project 17 17 John Smith Enh web 283 14,32

23,595,11

Average of all Web developmentsVariance (Standard deviation)

Productivity

Pla

tform

Parametric Estimating

From Parametric DB -> Web Portal Base

Productivity = 21,09 (SD 5,15)

My project size = 250

Expected Effort = 250/21,1 =

11,8 Staff Months

Variance will be defined with Delphi or Monte Carlo techniques


Estimating – Use same metrics

Use same metrics for project measurements and estimate

Match metrics to the estimating technique being used

1. Track at task level a plan with estimates at task level and useresults as direct input for collection of metrics

2. A plan based on estimates of FP or Artifacts can be tracked againstdelivery of these artifacts

The metrics match avoids:

a. Allocation of gathered data downwards or to other variables

b. Possible interpretive errors caused by such allocation

It is always difficult to track at task level a project that was estimated al project level


Estimating – Example - b

Use the same metrics for estimating and tracking

05

101520253035404550

1 2 3 4 5 6 7 8 9 10 11 12

PlanActual

Test Scripts Completed

Weeks


Estimating – Use tools

Use recommended estimating tools

1. Use one of several available tools (e.g. SLIM or those based on COCOMO II)

2. Avoid build an estimating worksheet to apply estimatingtechniques/approaches

3. Tools are usually based on harvested metrics and can provideexcellent estimate validation

4. Choose the tool that fits your need: see what types of project it hasbeen designed for

5. If possible choose tools where you can feed back actuals to remake and perfect estimating forecasts


Estimating – Analyze data

Analyze your input and output data

Input Data: experience level of team, complexity of solution, work pattern, productivity, size, interfaces, client

Inputs have all a degree of variance so as well the outputs

1. Verify provenance and accuracy of each input to better assess the confidencelevel (ball park estimate or based on reliable process – as for ex. Function PointAnalyis -)

2. Consider if the input data is appropriate to your project:

• Same Problem Domain

• Similar technical solution

• Similar project type (work pattern)

• Same project scope


Estimating – Statistics must be verified for validity

Top down vs Bottom-up approach: use of a large set of small numbersresults in a global variance reduction

-> Bottom-up approach is preferred

When using Top-down approach we must be sure the numbers are based on a greatvariety of experience with similar projects/tasks to reduce the risk to be off

how many projects?

how many contributors?


Estimating – Example - c

Statistics must be verified for validity - Example


Estimating – Variances

Variance is always included in estimates

� Input data are affected by variance

� Output estimates are to be delivered with variance

� Nominal values and a range

� Specific techniques are used to compute variance:

� Delphi technique� MonteCarlo technique� …


Estimating – Variance Techniques

There a number of commonly used techniques for assessing estimating variance:

� Wideband Delphi technique – consensus in meeting

� PERT technique – simple calculations

� Monte Carlo technique – graphical output

� Using an estimating tool that generates variance

� Analyzing historical data records to determine variance

� (Gut feel – NOT RELIABLE!)


Estimating – Delphi Technique

� Subject Matter Experts are engaged

� Each SME gives 3 estimates:� Low (1%)

� Nominal (50%)

� High (99%)

� Evaluations are shared and compared

� Final Estimates are generated


Assumptionsxxxx …xxxx….xxxx…..

Interim EstimateHigh …Nom….Low…..

Estimating – Delphi Technique: the process flow

Initial Meeting EstimationSession

AssessResults

PresentResults

Present Final Estimate


EstimateHigh …Nom….Low…..


Interim EstimateHigh …Nom….Low…..

HistoricalData

xxxx …xxxx….xxxx…..

No agreement

Agree

Delphi Flow


Estimating – PERT Technique

1- 4-1 distribution assumed for optimistic, most likely and pessimistic guesses:

� Nominal = 1*Optimistic + 4*Most Likely + 1*Pessimistic� Standard Deviation = (Optimistic – pessimistic) / 6

PERT Estimate = 145 +- 18,3 (ab. 68% certainty -> 1 SD of Nominal)


Estimating – Monte Carlo Technique

�Executes simulations on the basis of nominal values and theirs variances

�Supported by tools (adds-in in Excel, MS Project)

� Indicates Cumulative Frequencies by Nominal values

�Output in graph or table form


Estimating – Understanding output data

DesignRequirements Code and Test Deployment

Overestimated

Underestimated

Err

rori

n E

stim

ate

toco

mpl

ete

Higher Variance in early phases, reducing variance as the projects goes on to its completion


Estimating – Other Best Practices

• Estimates carried out by experienced people

• Always assumptions must be documented• Estimates need reviewing, updating and auditing, so an estimate report must be

produced which specifies Method Used, Results, Assumptions

Typical assumptions:• Staff experience• Productivity• Size (artifacts and FP)• Artifacts complexity• Number of external interfaces• Accuracy


Estimating – Hidden Assumptions

(typically obvious … but to be considered)

• Data conversion / load / migration

• Training environment setup

• Printing location

• Historical Data

• Administrative tasks

• Auditing

Analysing assumptions helps in identifying risks


Estimating – Preparing a Project Estimate

Roles• Independent Estimating SME (evaluator)• Project Manager (estimate total project size, effort, schedule& cost)• Estimating Practitioner• Estimating Independent Practitioner• Independent Estimating SME (approver)

Items to document• Purpose of the Estimate• Approaches used• Project Content and scope• Assumptions• Baseline Values• Active Participants• Confidence Level• Contingency


Estimating – Preparing a Project Estimate - 2

Technical Estimate • Size Estimate• Effort Estimate• Schedule Estimate• Assumptions• Resources allocated

Project Estimate• Additional roles, phases and activities• A full schedule for all activities• Overall effort• Cost to complete

Baseline Estimate• Consolidate Estimate Components• Document rationales and assumptions


Estimating – Estimate Review

Address main problems in determining the Estimate • Insufficient historical information or validation• Price not matching estimate• Incorrect Project Definition• No reassessment

Verify Estimate• Rules of thumb for quick validation• Full check list for detailed assessment• Risk Mitigation Plan in place which considers sources of variance

� ��

� � � � � ��

� � � � � � � � ��

This quote is from - "Steve McConnell", How to Defend an Unpopular Schedule, IEEE Software, Vol. 13, No. 3, May 1996

(Indicative and Proposal Stage)


Project Control – General Objective

� Verify common concepts

� Identify areas of Control

� Know Schedule and Cost Control parameters

� Know Earned Value Management


Project Control - Overview

Project Control

Budget

Scope Schedule

CustomerContract

Suppliers

Quality

Risks

ProblemManagement

IssueManagement

ChangeManagement


Project Control - Stages of Control

� Establish standards through plans and procedures

� Collect actual performance Information

� Compare actual and planned performance

� Take corrective action


Project Control - Compare Actual vs Planned

Compare Actual vs Planned using Metrics

� Resource Utilization� Number of Risk events passed or completed� Number of changes over time� Earned Value� Defect� Tasks start/finish (planned vs actual)� Milestones� Technical control point� Deliverables


Estimating follow on – Estimating in Delivery

Estimating in delivery is strictly connected to controlling• Scope and Size• Schedule• Cost• Assumptions• Risk Plan Performing• Team Performing

Differences between old and new Estimate generate new baselines• Gaps are to be identified

Cost Budget

GAP

Pert estimating approach used• Low, Expected and High values. Standard deviation and Variance• Variance = SD²

(Committed Stage)


Estimating follow on – Estimating in Delivery - 2

Reducing Variance means reducing Risks

NOTE: Estimate at Completion can increase even if Variance reduces

DesignRequirements Code and Test

Deployment

Overestimated

Underestimated

Err

rori

n E

stim

ate

toco

mpl

ete

v vv

v

Mar Apr May Jun Jul1234 1120 1013 901 8201200 1100 1000 900 8001180 1070 976 858 7801200 1266 1332 1398 14641200 1200 1200 1200 120081,00 69,44 38,03 51,36 44,44

Estimate to Complete MinimumCurrent Estimate at CompletionBaseline EstimateVariance

Effort Estimate to Complete Date of Checkpoint

Estimate to Complete MaximumEstimate to Complete Nominal

but…


Schedule and Cost Control - 1

Considering the Earned Value

� Allows objective assessment of variance

� Allows common understanding of the amount of work actually done

� Is incorporated in major project management SW packages

� Allows point-in-time analysis

� Allows forecast of future performance

� Can be determined at different levels (work element, summary, project)



Earned Value Definitions

�Budgeted Cost of Work Scheduled (BCWS): planned expenditure of each work package scheduled to be accomplished as of the status reporting date on the baseline schedule

�Actual Cost of Work Performed (ACWP): actual expenditure of each work package as of the status reporting date

�Budgeted Cost of Work Performed (BCWP): percentage complete of each work package as of the status reporting date multiplied by the baselined budget of that work package (EV)

�Budget at completion (BAC): the sum of all the baselined budgtes allocated to the project work packages



Earned Value – Variance Analysis

� Cost Variance (CV): � The difference between what was accomplished and what was spent to accomplish it

� CV = BCWP – ACWP

� Negative CV denotes overexpenditure of budget for work done

� Positive CV denotes underexpenditure of budget for work done

� Schedule Variance (SV): � The difference between what was accomplished and what was planned or scheduled to be

accomplished

� SV = BCWP – BCWS

� Negative CV denotes budget needed to catch up on work scheduled

� Positive CV denotes budget used for work accomplished earlier than planned



Earned Value – Performance Index Analysis

� Cost Performance Index (CPI = BCWP/ACWP): � Denotes past performance on the money spent as of the status reporting date

� Schedule Performance Index (SPI = BCWP/BCWS) � Denotes past performance on the money spent as of the status reporting date

� Percentage complete vs. Percentage spent: � Percentage complete (BCWP/BAC)

� Percentage spent (ACWP/BAC)



Forecasting Project Performance

� How much will it take to finish = estimate to complete (ETC): � Alternatives

� ETC = Sum of new estimates of unfinished work (may be very accurate but also very time consuming)

� ETC = Sum of budgets of unfinished work

� ETC = BAC/CPI – ACWP

� Show how much it will cost when done (EAC) � EAC = ETC + ACWP



Forecasting Project Performance

� Efficiency level required to finish within budget = To-Complete-

Performance-Index (TCPI) :� TCPI = (BAC-BCWP) / (BAC – ACWP)

� Denotes the performance required for the remaining work in order to get the project back on track (with no change)

� Is not and indicator of required overtime

� If the project is on schedule and on budget TCPI = 1

� IF TCPI > 1, efficiency required might be unachievable� Determine feasible TCPI and recalculate EAC


Earned value management implies re-estimating discrete work units

T=t Time

Budget (BCWS or PV)

$

Actual (ACWP or AC)

Work performed (BCWP or EV)

ETC

SV

CV

EAC

BAC

VAC

AC = actual costsSV = schedule varianceCV = cost varianceETC = estimate to completeEAC = estimate at completionVAC = variance at completionBAC = budget at completion

CV = EV – ACSV = EV - PV


Plan for Earned Value Management: where we are

ConsiderAdditional

factors


Create Resource

Plan

Price Project4

5

2

3

Create Project

Schedule


Release Strategy

Additional Factors

Factor Adjustments

Additional Factors

Project Schedule


Plan for Earned Value Management

� First find something that you can count and is a meaningful measure of product scope

� Define the units of work that are suitable for the project: this is represented by the WBS tailored for the solution

� Define organizational breakdown structure (OBS): teams, sub-contractors & control accounts, Define the Responsibility Assignment Matrix (RAM)

� Define the schedule or WHEN it is to be done! Spread total project effort amongst all Control Accounts

� Define the budget as the last step before project start, or by using an EVM acronym: Planned Value (PV) or Budgeted Cost for Work Scheduled (BCWS).

� Allocate the project budget to units of work (effort, costs, etc.) at the control account level.


Earned Value Management in delivery

ConsiderAdditional

factors


Create Resource

Plan

Price Project4

5

2

3

Create Project

Schedule


Release Strategy

Additional Factors

Factor Adjustments

Additional Factors

Project Schedule

Project Launch

Tracking Progress and Reestimate

Project Close


Tracking Progress with Earned Value - Build Indicators� Planned value (PV) = � of budgeted costs for each control account� Actual cost (AC) = � of timesheets + other costs� Measure progress:

� 0/100 - work packages planned to start and complete

� 50/50 - 50% earned at start, 50% upon completion� percent complete - Monthly estimate of % of work completed (subjective basis)� units complete - Places a given value for each unit completed

� interim/weighted milestones - work packages subdivided into milestones—each having a weight associated with it� level of effort - value earned with the passage of time

� Calculate earned value (progress units x rates defined when estimating)� Calculate cost variance CV = EV – AC and schedule variance SV = EV – PV� Calculate estimate to complete (ETC): estimated cost (effort + expenses)

needed to complete� ETC implies adjustments to initial estimate based on actual productivity � Calculate estimate at completion (EAC): EAC = AC + ETC


Schedule Control

Adjusting the schedule to meet objectives:

� Change the relationships among tasks so that the criticalpath is shorter (fast-tracking)

� Do tasks in parallel not in sequence� Change approach to work to create a different set of

interrelated tasks with a shorter critical path (note: this maychange the WBS)

� Change finish-start relationships to finish-finish ones� Change a date constraint so that a task on the critical pathcan start or end sooner

� Crash the network to decrease the project total durationafter alternatives and use of resources


Sample Problems - 1


Sample Problems - 2


Sample Problems - 3


Sample Problems - 4


Sample Problems – Solutions - 1

project management presentation - univaq · project management fundamentals: ... (difference...

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