International Project Management prof.dr MILOŠ D. MILOVANČEVIĆ
Project time management Project cost management
Time in project management process Time is a valuable resource. It is also the scarcest. Time has the least amount of flexibility - it passes no matter what happens on a project. Once time passes, it is never again to be get back. A project manager must be skillful in managing her time and the time of the team. Project managers often cite delivering projects on time as one of their biggest challenges. Schedule issues are the main reason for conflicts on projects, especially during the second half of projects. The easiest way to manage time effective is scheduling
Project time management is the project management function that: establishes and maintains appropriate allocation of time by planning, estimating, scheduling, and schedules control of the overall conduct of the project through the successive stages of its life cycle (initiation, definition, execution, and finishing).
Project time management is essentia to Finish a project to a deadline Avoid going round in circles Avoid a lot of rework, and Avoid a lot of frustrated people (to say nothing of a frustrated customer!)
The six phases of the project time management processes are: Activity Definition a part of the planning process group that identifies the specific schedule activities which are performed to produce the deliverables. Activity Sequencing details interdependencies and dependencies among the schedule activities. Activity Resource Estimating calculates the type and amount of resources required for each scheduled activity. Activity Duration Estimating calculates the duration of time that will be needed to complete a scheduled activity. Schedule Development involves reviewing the activity sequences, duration, and resource requirements to create the Project Schedule. Schedule Control manages changes to the project
The basis for creating a project schedule is derived from four project time management processes Activity definition further defining the scope Activity sequencing further defining the time Activity resource and activity duration
Activity definition Activity definition involves identifying and documenting the specific activities that must be performed in order to produce the deliverables and sub-deliverables identified in the work breakdown structure. An activity list is a tabulation of activities to be included on a project schedule that includes: The activity name An activity identifier or number A brief description of the activity Activity attributes provide more information such as predecessors, successors, logical relationships, resource requirements, constraints, imposed dates, and assumptions related to the activity
Milestone A milestone is a significant event that normally has no duration Not every deliverable or output created for a project is a milestone It often takes several activities and a lot of work to complete a milestone They re useful tools for setting schedule goals and monitoring progress Examples include obtaining customer sign-off on key documents or completion of specific products such as software modules or the installation of new
Activity Sequencing After defining project activities, the next step is activity sequencing Involves reviewing the activity list and attributes, project scope statement, milestone list and approved change requests to determine the relationships between activities A dependency or relationship is the sequencing of project activities or tasks You must determine dependencies in order to use critical path analysis
Three Types of Dependencies Mandatory dependencies: inherent in the nature of the work being performed on a project, sometimes referred to as hard logic Discretionary dependencies: defined by the project team; sometimes referred to as soft logic and should be used with care since they may limit later scheduling options Don t start detailed design work until users sign off on all the analysis good practice but can delay project External dependencies: involve relationships between project and non-
Tools and Techniques for Activity Sequencing Network diagrams Arrow diagramming method (ADM) Precedence diagramming method (PDM) Conditional diagramming methods
Network diagram 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
Arrow Diagramming Method (ADM) Also called activity-on-arrow (AOA) network diagrams Activities are represented by arrows Nodes or circles are the starting and ending points of activities Can only show finish-to-start dependencies Can omit activities that have no dependencies
Sample ADM network diagraming
Precedence Diagramming Method (PDM) More popular than ADM method and used by project management software Activities are represented by boxes Arrows show relationships between activities Better at showing different types of dependencies
Task Dependency Types
Sample PDM Network Diagram
Conditional diagramming method Diagramming techniques such as: GERT (Graphical Evaluation and Review Technique) and System Dynamics models Introduce nonsequential activities such as loops (e.g., a test that must be repeated several times) or conditional branches (e.g., a design update that is only needed if the inspection detects errors).
Activity Duration Estimating Duration includes the actual amount of time worked on an activity plus 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 What are the inputs for the activity duration estimations?
Activity Duration Estimating The activity list, resource information, identified risks and historical information are among the inputs, the Project Manager can use in estimating the duration of tasks and the entire project. The basis of the estimates as well as updates to the activity list must be documented.
Three-Point Estimates Instead of providing activity estimates as a discrete number, such as four weeks, it s often helpful to create a three-point estimate An estimate that includes an optimistic, most likely, and pessimistic estimate, such as three weeks for the optimistic, four weeks for the most likely, and five weeks for the pessimistic estimate Three-point estimates are needed for PERT and Monte Carlo simulations
- Uses Schedule results Development of the other time management processes to determine the start and end date 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
Gantt Charts Gantt charts are a project planning tool that can be used to represent the timing of tasks required to complete a project. Gantt charts are simple to understand and easy to construct; they are used by most project managers for all but the most complex projects. In a Gantt chart, each task takes up one row. Dates run along the top in increments of days, weeks or months, depending on the total length of the project. The expected time for each task is represented by a horizontal bar whose left end marks the expected beginning of the task and whose right end marks the expected completion date.
Gantt chart
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 Any delay of an activity on the critical path directly impacts the planned project completion date (i.e. there is no float on the critical path). Slack or float is the amount of time an activity may be delayed without delaying a succeeding activity or the project finish date. A project can have several, parallel, near critical paths. An additional parallel path through the network with the
Calculating the Critical Path First 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
Determining the Critical Path for Project X
CPM results allow managers to prioritize activities for the effective management of project completion. By using CPM managers are able to shorten the planned critical path of a project by pruning critical path activities, by "fast tracking" (i.e., performing more activities in parallel), and/or by "crashing the critical path" (i.e., shortening the durations of critical path activities by adding resources).
PERT is a network analysis technique used to estimate project duration when there is a high degree of uncertainty about the individual activity duration estimates PERT uses probabilistic time estimates Duration estimates based on using optimistic, most likely, and pessimistic estimates of activity durations, or a three-point estimate PERT attempts to address the risk associated with duration estimates by developing schedules that are more realistic Program Evaluation and Review Technique (PERT)
PERT Formula and Example PERT weighted average = optimistic time + 4X most likely time + pessimistic time Example: PERT weighted average = 6 8 workdays + 4 X 10 workdays + 24 workdays = 12 days 6 where optimistic time= 8 days, most likely time = 10 days, and pessimistic time = 24 days Therefore, you d use 12 days on the network diagram instead of 10 when using PERT for the above example
PERT Duration Calculation
Schedule control The aim of the schedule control process is to: Determine the current status of the project schedule Influence the factors that create schedule changes Determine that the project schedule has changed Manage the changes as they occur. Main tools: progress reporting, schedule change
Schedule control The schedule management plan and the schedule change control system insure that changes are beneficial to the project and that the changes are communicated to the appropriate stakeholders. Documenting the corrective actions taken and the lessons learned is important in case there are questions regarding actions taken at a later date, or there is discontinuity of staff on the project.
In 1906, Italian economist Vilfredo Pareto created a mathematical formula to describe the unequal distribution of wealth in his country, observing that twenty percent of the people owned eighty percent of the wealth. The observation of the "vital few and trivial many were develped into the principle that 20 percent of something always are responsible for 80 percent of the results - principle known as Pareto's Principle or the 80/20 Rule. The 80/20 Rule means that in anything a few (20 percent) are vital and many(80 percent) are trivial. In Pareto's case it meant 20 percent of the people owned 80 percent of the wealth. Project Managers know that 20% of the work (the first 10 % and the last 10%) consume 80 % of your time and Pareto's Principle - The 80-20 Rule
Project Cost Management
Project cost management includes the processes required to ensure that the project is completed within the approved budget. Project cost management is primarily concerned with the cost of the resources needed to complete project activities. Project cost management should consider the information needs of the project stakeholders different stakeholders may measure project costs in different ways and at different times.
Cost is a resource sacrificed in order to achieve a specific objective Costs are usually measured in monetary units PCM is the process group to ensure the project is completed within the approved budget. The major output is the cost management plan There are 4 processes in Project Cost Management
Project Cost Management Processes: Resource planning (planning phase) determining what resources and quantities of them should be used Cost estimating (planning phase) developing an estimate of the costs and resources needed to complete a project Cost budgeting (planning phase) allocating the overall cost estimate to individual work items to establish a baseline for measuring performance
Basic Principles of Cost Management Profits are revenues minus expenses Life cycle costing is estimating the cost of a project over its entire life Cash flow analysis is determining the estimated annual inflows and outflows for a project Benefits and costs can be tangible or intangible, direct or indirect Sunk cost (a cost that is not recoverable) should not be a criteria in project selection
It must be closely coordinated with the next process in the PCM- cost estimating Some questions to consider: How difficult will it be to do specific tasks on the project? Is there anything unique in this project s scope statement that will affect resources? What is the organization s history in doing similar Resource Planning Resource planning involves determining what physical resources (people, equipment, materials) and what quantities of each should be used to perform project activities.
Inputs to Resource Planning WBS Historical information identifies required resourced used in similar work on previous project. Scope statement contains the project justification and the project objectives. Resource pool description identifies available project resources. Organizational policies may impact some of the project management decision. These are constraints, such as staffing, rentals, and purchasing supplies and equipment. Activities duration estimates the best estimates of the time that it will take to perform the work
Tools & techniques Expert judgment access the inputs to the process by subjectmatter expert, group, or individual, including consultants, professional or technical associations, industrial advisory groups Project management software help to organize resource pools, define resource availabilities and their rates, and define resource calendars.
Outputs from Resource Planning Resources requirement describes the types (e.g. skills levels) and quanity of resources required by each element of the WBS. These resources will be obtained either through acquisition or procurement.
Cost Estimating Cost estimating involves developing an approximation of all the costs of the resources needed to complete project activities. Cost estimating (how much will it cost the performing organization to provide the product or service involved) VS Pricing (how much will the performing organization charge for the product or service) There are several types of cost estimates and tools and techniques to help create them
Inputs to Cost Estimating WBS Project management plan Resource requirement (Outputs from Resource Planning) Resource rates (unit rates for each resource that are used to calculate project costs). Activities duration estimates (output of the Activity Duration Estimating) Commercial databases Historical information (the cost of many categories of resources is available from the following sources: a) project file; b) commercial cost-estimating databases; c) project team knowledge)
Tools & techniques Analogous estimating known as top-down A form of expert judgment because it uses actual costs from previous, similar projects to estimate current costs Although it is less costly than other estimates, it is the least accurate It is frequently used to estimate total project costs when a limited amount of detailed information is available. Parametric modeling uses project characteristics as the parameters is a mathematical model to predict project costs Models may be simple or complex (e.g. simulations using statistics or function point analysis to estimate software development durations)
Tools & techniques (2) Bottom up estimating estimating the cost of individual activities or work packages and then adding the individual estimates to arrive at a project total Defining smaller activities or work packages increases both the cost and accuracy of the estimate. Computerized tools Project management software, spreadsheets, simulation tools, and statistical packages can help estimate costs.
Outputs from Cost Estimating Cost estimates Quantitative assessments of the likely costs of the resources required to complete project activities. Cost estimates types include preliminary estimate budget estimate analogy estimates definitive and control estimates Supporting details include description of the scope of work estimated, reference to WBS, the basis of the estimate, assumptions, and the range of possible results. Cost management plan describe how cost variances will be managed. It is part of the project plan.
Cost Budgeting It is the process of allocating cost estimates to individual work activities Cost budget involves allocating the project cost estimate to individual work items and providing a cost baseline The project budget is the planned cost of each activity at the lowest level, which is then rolled into a project total.
Inputs to Cost Budgeting Cost estimates output from cost estimates process WBS output from scope definition process Project schedule includes planned start and expected finish dates for the activities or work packages in order to allocate costs. Risk management plan -A part of the project plan that contains procedures to manage risk throughout the project. Cost management plan
Outputs from Cost Budgeting Cost baseline A time-phased budget that will be used to measure, monitor and control cost performance on the project It is developed by summing estimated costs by period and is usually displayed in the form of an S- curve Larger projects may have multiple cost baselines to measure different aspects of cost performance. Project funding requirements (derived from the cost baseline)
Cost Control Project cost control include monitoring cost performance ensuring that only appropriate project changes are included in a revised cost baseline informing project stakeholders of authorized changes to the project that will affect costs During this process, project manager try to determine what factors impact costs, how these factors can be influenced, whether these changes are beneficial to the project or product. Earned value management (EVM) is an important tool for cost control
Inputs to Cost Control Cost baseline includes a time-phased budget used to measure and monitor cost performance on the project The cost baseline is usually shown as cost-by-period and can be charted in the form of an S-curve. Performance reports provide information on cost performance, such as which budgets have been met and which have not. Change requests take many forms: oral or written, direct or indirect, external or internally initiated, and legally mandated or optional. Cost management plan
Tools & techniques Cost change control system defines the procedures by which the cost baseline may be changed It includes the paperwork, tracking systems, and approval levels necessary for authorizing changes. Performance measurement techniques help to assess the magnitude or any variation that do occur. Earned value analysis is especially useful for cost control Additional planning prospective changes may require new or revised cost estimates or analysis of alternative approaches. Other general computerized tools project management software or spreadsheets that track planned versus actual costs or that forecast the effects of cost changes.
Earned Value Management (EVM) EVM is a project performance measurement technique that integrates scope, time, and cost data Given a baseline (original plan plus approved changes), you can determine how well the project is meeting its goals You must enter actual information periodically to use EVM
Earned Value Management Terms The planned value (PV), formerly called the budgeted cost of work scheduled (BCWS), also called the budget, is that portion of the approved total cost estimate planned to be spent on an activity during a given period Actual cost (AC), formerly called actual cost of work performed (ACWP), is the total of direct and indirect costs incurred in accomplishing work on an activity during a given period The earned value (EV), formerly called the budgeted cost of work performed (BCWP), is the percentage of work actually completed multiplied by the planned value Cost variance (CV) equals earned value (EV) minus actual
Outputs from Cost Control Revised cost estimates update of the project cost estimates. Budget updates changes to an approval cost baseline. The numbers are generally revised only in response to scope changes. Cost variance (EV-AC) may be so severe that rebaselining is needed in order to provide a realistic measure of performance. Corrective action anything done to bring expected future project performance into line with the project plan.
Outputs from Cost Control (2) Estimate at completion (EAC) A forecast of total project costs based on project performance. The most common variations are actual cost to date plus the remaining project budget modified by a performance factor actual costs to date plus a new estimate for all remaining works actual cost to date plus the remaining budget. Project closeout processes and procedures for closing or canceling the project. Lessons learned
Literature: Project Management Institute, A guide to the project management body of knowledge (PMBOK), 2004 Schwalbe K. Information Technology Project Management, Thompson, 2008