2.1.1. Introduction to Project Time and Cost Management
A project team is likely to deal with some or all of the following in the course of a typical project:
However, project managers continually face balancing the triple constraint: project scope, time, and cost, when planning any project. Project quality depends on the balance between these three constraints. High quality projects deliver required results within scope, on time, and within budget.
Scope, time and cost plans are all part of the project management plan; the formal, approved document used to guide both project execution and project control. (To view a sample Project Management Plan, see Appendix).
Project scope management is made up of a number of processes that define and control what work is included in the project. These definitions are taken from the PMBOK® Guide. Scope Management processes includes the following:
Project scope may refer to a product or a service. Work breakdown structures (WBS) are one of the most important tools in project management and are issued in the project planning phase. The WBS presents a definition of the project scope in the form of work packages.
If the initial requirements of a project change as it progresses, this represents a change in the scope of the project. Similarly, if there are any changes to the project work regardless of how small or large, or whether they were specifically requested or not, these also represent a change in project scope.
Scope changes can make a project larger or smaller. They can also affect the timeline and cost of the project. These changes in scope are commonly referred to as scope creep. In a nutshell, scope creep is the change or growth of project scope.
Scope creep occurs most frequently during the later stages of a project, such as programming and testing, rather than during the earlier stages, such as design. This is a result of the project team gaining more knowledge of any early problems and developing solutions to them.
Collecting requirements is essential to the success of the project. According to the International Institute of Business Analysis Business Analysis Body of Knowledge, v1.6, a requirement is “a condition or capability needed by a stakeholder to solve a problem or achieve an objective”. Requirements are the building blocks for development of the WBS, schedules, test cases, and ultimate customer expectations. Requirements should be elicited, validated, specified, and verified.
The project manager must understand that characteristics of a good requirement are:
Planning is a project manager’s major responsibility. If project planning is performed correctly, then it is conceivable that the project manager will work him/herself out of a job because the project can run itself. However in reality, this is highly unlikely. Few projects are completed without some conflict or trade-off for the project manager to resolve.
The stable elements of planning in any project are cost and time. Project time management includes those processes needed to accomplish timely completion of a project. The Project Time Management processes and their associated tools and techniques are documented in a schedule management plan. The Schedule Management Plan is contained in, or is a subsidiary plan of, the project management plan.
Project time management processes include the following: These definitions are taken from the PMBOK® Guide. Project time management processes include the following:
On some projects, particularly smaller ones, the processes of activity sequencing, activity duration estimating, and schedule development are so tightly linked that they are viewed as a single process that can be performed by an individual over a relatively short period of time.
All well-managed projects, including large government projects, adhere to the time management processes of activity definition, activity sequencing, activity resource estimating, activity duration estimating, schedule development, and schedule control.
This planning effort sets out the format and establishes criteria for the development and control of the project schedule.
The main task of the planning effort is to define the project scope. This is achieved using a work breakdown structure (WBS), which is a deliverable-oriented hierarchy of decomposed project components that organizes and defines the total scope of the project.
The project time management planning function produces a developed project schedule and schedule management plan that is contained in, or is a subsidiary plan of, the project management plan.
This schedule management plan may be formal or informal, highly detailed or broadly framed, depending on the needs of the project.
Project cost management includes the processes involved in planning, controlling, and managing costs so that a project can be completed within the approved budget. It can be broken down into the following three processes:
Project cost management is mainly concerned with the cost of the resources, labor, and equipment required to complete project activities. It should also consider the effect of project decisions on the cost of using the product. For example, limiting the number of design reviews can reduce the cost of the project at the expense of an increase in the customer’s operating costs.
In many application areas, the work of predicting and analyzing the prospective financial performance of the project’s product is done outside the project.
In other application areas, such as capital facilities projects, project cost management also includes this work.
When these predictions and analyses are included, project cost management encompasses additional processes and numerous general management techniques, such as return on investment, discounted cash flow, earned value and investment payback analysis.
Project cost management should consider the information needs of the project stakeholders. Different stakeholders measure project costs in different ways and at different times. For example, the cost of an acquired item can be measured when the actual cost is incurred, or the actual cost can be recorded for project accounting purposes.
Representative bodies in large governments generally assign funds to programs rather than individual projects. Each project must be funded by one or more of these programs.
It is generally possible that a single project can contribute to the goals of more than one program. This is particularly common in transportation infrastructure projects. A road-widening project could be combined with pavement rehabilitation or seismic retrofitting, for example, even though each individual piece of work would be budgeted as a separate program. A program is a group of related on-going projects that are managed in a coordinated way.
Similar situations are common wherever new facilities are budgeted separately from rehabilitation. It generally makes sense to have a new contractor perform both the new work and the rehabilitation at a particular location, as this minimizes the overhead cost and the disruption to the occupants of the facility.
The backbone of any good schedule or budget is a well-rounded work breakdown structure that includes all work packages to fulfill the scope of the project requirements. A well-rounded work breakdown structure has the following characteristics:
Effective time and cost management is necessary to create a well-rounded WBS, which in turn is necessary for successful completion of the project. As each time and cost management process is completed, the WBS is updated and refined.
The main processes of time management are
The main processes of cost management are
2.1.2. Project Deliverable
The Work Breakdown Structure (WBS) is a deliverable-oriented hierarchy of decomposed project components that organizes and defines the total scope of the project.
It is a representation of the detailed project scope statement that specifies the work to be carried out in the project. The elements of the WBS assist stakeholders in viewing the end product of the project. The work at the lowest-level WBS component is estimated, scheduled, and tracked.
A deliverable is any measurable, tangible, verifiable outcome, result, or item that must be produced to complete a project or part of the project.
Deliverables are linked to milestones in that a milestone is any significant event in the project, usually completion of a major deliverable.
A work package is a deliverable at the lowest level of the WBS, and can be used to help evaluate accomplishments. Work packages should be natural subdivisions of effort, planned according to the way the work will be done. However, when work packages are relatively short, little or no assessment of work-in-progress is required and the evaluation of status is possible mainly on the basis of work package completions.
The longer the work packages, the more difficult and subjective the work-in-process assessment becomes, unless the packages are subdivided by objective indicators such as discrete milestones with pre-assigned budget values or completion percentages.
To get a correct balance for defining a work package, the 80-hour rule of thumb can be used. It identifies work packages where the duration of activities when possible be between 8 and 80 hours. Anything that exceeds this is not a single activity and should be further decomposed when possible.
Defining Deliverables through Decomposition
Decomposition involves subdividing the major project deliverables or sub deliverables into smaller, more manageable components until the deliverables are defined in sufficient detail to support development of project activities (planning, executing, controlling, and closing).
Decomposition involves the following major steps in identifying a deliverable:
Identifying the Deliverable’s Components
The components of the deliverable need to be described in terms of tangible, verifiable results in order to allow performance measurement.
As with the major components, each deliverable’s components need to be defined in terms of how the work of the project will be organized and accomplished.
Tangible, verifiable results can include services, as well as products. For example, status reporting could be described as weekly status reports.
In summary, project deliverables must be defined in sufficient detail to support development of project activities. By decomposing major project deliverables into components and naming them, it is possible to create a series of activities that can be estimated, scheduled, and tracked. These activities are known as work packages, and are the lowest level component of a WBS.
2.1.3. Work Breakdown Structure (WBS)
A WBS is a deliverable-oriented grouping of project components that organizes and defines the total scope of the project. Any work not in the WBS is outside the scope of the project.
It is used to develop or confirm a common understanding of project scope. Each descending level within the WBS shows an increasingly detailed description of the project deliverables.
A WBS is normally presented in the form of a chart. The WBS should not, however, be confused with the method of presentation. Simply drawing an unstructured activity list in chart form does not make it a WBS.
Each item in the WBS is usually assigned a unique identifier, which is used to provide a structure for a hierarchical summation of costs and resources. The items at the lowest level of the WBS may be referred to as work packages, particularly in organizations that follow earned value management practices. These packages can be decomposed further, if necessary, into activities. The activities can then be sequenced and estimated to create the project schedule.
Work component descriptions are often collected in a WBS dictionary.
A WBS dictionary will typically include