22 March 2013 MBA G523 PROJECT MANAGEMENT

Transcription

1 22 March 2013 MBA G523 PROJECT MANAGEMENT

2 ESTIMATING PROJECT TIMES AND COSTS Some of the Whys : Estimates are needed to Support good decisions Schedule work Determine how long the project should take and its cost Develop cash flow needs Determine how well the project is progressing

3 FACTORS INFLUENCING QUALITY OF ESTIMATES Planning horizon: accuracy less for more distant phases of project Duration of project: uncertainty in estimates greater for longer duration projects People: skills of people making estimates, new people added into team due to staff turnover, people working together for first time in a project

4 FACTORS INFLUENCING QUALITY OF ESTIMATES Project structure: functional organization, dedicated project team, matrix Padding estimates: 30 minutes with 50/50 chance getting to airport on time, superfast driving in 20 minutes, to receive company president 50 minutes. Organization culture: estimation not worth the trouble, detailed estimation essential Non-project factors: equipment downtime, national holidays, vacations, etc.

5 ESTIMATING GUIDELINES FOR TIMES, COSTS, RESOURCES Responsibility: estimates by persons most familiar with task, buy-in with plan implementers ensured Use several people to estimate: consensus, realistic estimate, extremes avoided Normal conditions: 8 hour day, two-shift work day, 3 programmers for coding or two road graders for construction (normal level of resources)

6 ESTIMATING GUIDELINES FOR TIMES, COSTS, RESOURCES Time units: consistency across all tasks estimated, calendar days, workdays, workweeks, person days, single shift, hours, minutes (for medical contexts minutes more relevant) Independence: each task to be estimated individually, avoid estimation by high level managers who might aggregate multiple tasks into a single estimate, avoid simultaneous multiple task estimation

7 ESTIMATING GUIDELINES FOR TIMES, COSTS, RESOURCES Contingencies: avoid building allowances for contingencies into work package estimates most top management will include a separate contingency fund to handle unforeseen events Add risk assessment to estimate helps avoid surprises to stakeholders: optimistic and pessimistic task time

8 TOP-DOWN VERSUS BOTTOM-UP Condition Top-down estimate Bottom-up estimate Strategic decision making Cost and time important High uncertainty Internal small project Fixed-price contract Customer wants details Unstable scope X X X X X X X

9 AERIAL TRAM IN PORTLAND. OREGON Original estimate: USD 15 million Real budget: USD million Guesstimate: actual design not costed out

10 TOP-DOWN APPROACHES Consensus method Made by senior or middle managers For greater rigor: Delphi Method Experts called upon to estimate Experts tied to project being estimated One expert s feedback given to all Anonymity of experts Progressive convergence over multiple rounds At beginning of project Only an initial estimate May be off the mark

11 RATIO METHODS 2700 square USD 160 per square feet = USD 432, 000 by experience 100 days to complete

12 APPORTION METHODS Bank loan for house construction: payment to contractor Foundation: 3% Framing: 25% Electric/plumbing/heating: 15%.

13 APPORTION METHODS. Total project: USD 500,000 Design (20%): USD 100,000 D-1: USD 50,000 D-2: USD 50,000 Program (30%): USD 150,000 P-1: USD 100,00 P-2: USD 25,000 P-3: USD 25,000 Testing (40%): USD 200,000 (T-1, T-2, T-3) Document (5%): USD (Doc-1, Doc-2) Produce CD (5%): USD (CD-1)

14 FUNCTION POINT METHODS FOR SOFTWARE AND SYSTEM PROJECTS Element Complexity Weighting Low Average High Total # of inputs x 2 + x 3 + x 4 + = # of outputs x 3 + x 6 + x 9 + = # of inquiries x 2 + x 4 + x 6 + = # of files x 5 + x 8 + x 12 + = # of interfaces x 5 + x 10 + x 15 + = Total

15 LEARNING CURVES Output qty doubles labor hours reduced by constant rate First 100 units: 100 ours Second 100 units: 60 hours Next 200 units: 36 hours

16 CASE STUDY 4.1 (PAGE ) Manchester United Soccer Club

17 BOTTOM-UP APPROACHES Template: Historical data for similar projects: adjust for differences Parametric procedures applied for specific tasks MS Office Conversion Project: 36 workstations to be converted One person = 3 workstations/day 3 persons and 36 workstations (36/3)/3 = 4 days Wallpapering allowance in house remodeling USD 5 per square yard of wallpaper, USD 2 per yard to install, total cost = USD 7 Measure length, width, height of room area of walls known and multiply by USD 7 for total cost

18 DETAILED ESTIMATES FOR WBS WORK PACKAGES

19 A HYBRID: PHASE ESTIMATING

20 COMPARISON Top-down Estimate Bottom-up Estimate Intended Use Preparation Cost Feasibility/conceptual phase Rough time/cost estimate Fund Requirements Resource Capacity Planning 1/10 to 3/10 of a percent of total project cost Budgeting Scheduling Resource Requirements Fund Timing 3/10 of a percent to 1 % of total project cost Accuracy -20% to 60% -10% to 30% Method Consensus Ratio Apportion, FP, Learning Curves Template Parametric WBS Packages

21 LEVEL OF DETAIL For top mgt For middle mgt For first line mgrs WBS provides this flexibility 40 day task: better to break it down to multiple 5-10 day tasks, quicker corrective action and better for project control

22 TYPES OF COSTS Direct: Labor, Materials, Equipment Project (Direct) Overhead Costs: Proj Mgr Salary, temporary rental space for proj team General and Administrative (G&A) Overhead Costs: advertising, accounting, senior mgt salary (across products and projects)

23 CONTRACT BID SUMMARY COSTS Direct Costs USD Direct Overhead USD G&A Overhead (20%) USD Total Costs USD Profit (20%) USD Total Bid USD

24 PERSPECTIVES OF COSTS Committed Cost Proj Mgr months before Finance Mgr plans cash outflows Actual Cost: when budgeted cost will occur Scheduled budget: budgeted cost is charged (earned)

25 REFINING ESTIMATES Multiplying factors: why this need after so much effort in estimation Interaction costs are hidden in estimates: dependence between tasks, implementers clarification questions to design engineers, coordination meeting briefings Normal conditions do not apply: normal condition of 4 bull dozers but only 3 available Things go wrong in projects: design flaws show up later, extreme weather conditions, accidents Changes in project scope and plans: needed to hold customer from competition

26 CREATING A DATABASE FOR ESTIMATING

27 CASE STUDY 5.1 Page Sharp Printing, AG Written Answers Due 5 April 2013 Discussion on 5 April 2013