Budget and Scheduling

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Budget and Scheduling
Factors Influencing the Quality of Estimates
Acquired experience is the best guide in
predicting costs.
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Common Factors to ConsiderProject Structure and
Organization
Which project structure is chosen to manage the
project will influence time and cost estimates.

• The advantages of a dedicated project team is the
  speed gained from concentrated focus and
  localized project decisions.
• Projects operating in a matrix environment may
  reduce costs by efficiently sharing personnel
  across projects, but may take longer to complete
  since attention is divided and coordination
  demands are higher.

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Common Factors to ConsiderThe Planning Horizon
Early stages of the planning process generate
multiple hypotheticals and questions, but as the
process is refined and project implementation
draws near, nearly all issues should be resolved.

• Estimates of current events are close to 100
  percent accurate but are reduced for more distant
  events.
• Accuracy of time and cost estimates should
  improve as you move from the conceptual to the
  point where individual work packages are defined.

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Common Factors to ConsiderProject Duration
Time to implement new technology has a habit of
expanding in an increasing, nonlinear fashion.

• Poorly written scope specifications for new
  technology result in errors in estimating times
  and costs.
• Long-duration projects increase the uncertainty
  in estimates.

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Common Factors to ConsiderPeople
Accuracy depends on the skills of the people
making the estimates

• A close match of people skills to the task will
  influence productivity and learning time.
• Team members who have worked together before will
  influence the time it takes to form an effective
  team.
• Increasing new people to a project increases time
  spent communicating.

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Common Factors to ConsiderPadding Estimates
Most of us are inclined to add a little padding
to increase the probability of success and reduce
the risk of being over budget.

• If everyone at all levels of a project adds a
  little padding to reduce risk, the project
  duration and cost are seriously overstated.
• In a competitive environment cost padding is
  counterproductive to gaining project acceptance.
• However
• As a project manager, it is prudent to calculate
  an overall safety margin of 10 to account for
  unexpected variations in project execution.

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Common Factors to ConsiderOrganizational Culture
Organizational culture can significantly
influence project estimates.

• In some organizations padding estimates is
  tolerated and even privately encouraged.
• Other organizations place a premium on accuracy
  and strongly discourage estimating gamesmanship.

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Common Factors to ConsiderOther Factors
Non-project factors can impact time and cost
estimates.

• Equipment downtime
• Local and national holidays
• Vacations and sick leave
• Legal work limits
• Municipal and utility delays
• Contractual interruptions

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Estimating Project Time an Cost
Detailed Estimates for the WBS Work
Packages Probably the most reliable method for
estimating time and cost is to use the WBS and to
ask the people responsible for the work package
to make the estimates. Estimate accuracy
improves with more detailed planning. The extent
of this improvement varies by type of
project. As the project progresses through its
life cycle and more information is available, the
reliability of the estimates should improve.
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Detailed PlanningThe Arguments

• Arguments for
• Detailed estimates result in better low-cost
  efficient methods that can be utilized down the
  road.
• We were burned once. We need a detailed estimate
  of every task by the people responsible.
• Arguments against
• Rough order of magnitude is good enough. Detailed
  estimates wastes time and money.
• The project is internal. We dont need to worry
  about cost.
• The uncertainty is so great, spending time and
  money on estimates is a waste.

The more you know the more you can anticipate.
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Cost estimates are not a budget
Time-Phased Budgeting
For most sizable projects, money is dispensed as
the project is implemented. A time-phased budget
determines when the money must be available.
Three elements must be known in order to
establish a realistic budget

• Project duration
• Completion of a work breakdown structure
• Identification of individual work packages

Work packages usually consist of

• Direct costs labor, materials, equipment, etc.
• Project overhead costs Salaries, space, storage,
  etc.
• General and administrative overhead
  costsAdvertising, accounting, and senior
  management

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Estimating Guidelines
Poor estimates are a major contributor to
projects that have failed.

1. Identify who is responsibleThe individual
   responsible for a work package should generate
   the estimate for that work package.
2. Use several people to estimateFind other people
   with similar experiences to generate comparative
   estimates.
3. Define your normal conditionsConsider the
   prevalent work culture, availability of
   resources, seasonal considerations, etc.
4. Be consistent with time unitsAll task time units
   need to be the same.

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Estimating Guidelines(continued)

1. Treat each project independent of other
   projectsAlthough experience is a major
   influence, pay attention to the potential
   differences present in individual projects.
2. Account for interaction costsIdentify task
   dependencies and the time and coordination
   required for a smooth project execution.
3. Add a risk assessmentIdentify the degree of risk
   so that stakeholders can consider alternative
   process decisions.

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Common Culprits of Project Difficulty

• Conditions turn out to be not so
  normal.Availability of resources are often the
  first to go when conditions change. Having to
  bring in outside contractors/help introduces
  uncertainty.
• Things just go wrong on the project.Design
  flaws, accidents, theft, personality conflicts,
  etc.
• Abrupt change in project scope or plans.Unstable
  project scopes are a major source of cost
  overruns. The farther into a project, the more
  costly the change.
• Inaccurate assumptions Avoid making assumptions
  regarding cost and scheduling. Document your
  assumptions during the planning phase.
• Once work gets behind, it tends to stay
  behind.If times represent average time, we
  should expect that 50 percent will be less than
  the estimate and 50 percent will exceed the
  estimate.

Quality time and cost estimates are the bedrock
of project control. Past experience is the best
starting point for these estimates.
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Elements of a Budget

• TimePlays an important role in determining the
  need for funds availability.
• Direct CostsDetermines the costs for the nuts
  and bolts of a specific project.
• Indirect CostsDetermined by the business
  environment, working conditions, etc.

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Defining Direct and Indirect Costs
Direct Costs Those costs (labor, material,
equipment, etc.) that can be consistently related
to work performed on a particular project. Direct
costs are best contrasted with indirect costs
that cannot be identified to a specific
project. Examples Labor, equipment, materials,
etc. Indirect Costs Expenses that have been
incurred by the operation in general, but which
cannot be identified and charged directly to a
specific project without an inordinate amount of
tracking and accounting. Often referred to as
overhead. Examples Electricity, water, sewer,
bookkeeping, etc.
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Direct Costs
Count Position Hours Hourly Rate Amount
1 Vice-President of Instruction 12 48 576.00
1 Director of Assessment 49 39 1,911.00
1 Project Manager 202 32 6,464.00
1 DB Administrator 180 32 5,760.00
1 Programmer 358 27 9,666.00
10 Department Chairs 19 340 6,460.00
Total 820 30,837.00
Indirect Costs
Category Amount
Administration and clerical salaries and fringe _at_ 21/hr Total hours 812 17,052
General office supplies 1,980
Computer supplies and general-purpose software 1,200
Postage and delivery charges 200
Telephone charges 150
Printing production and photocopying 150
Total Indirect Costs Total Indirect Costs 20,732
Per hour indirect costs Per hour indirect costs 25.53
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Example Time-Phased Budget

• Time-Phased Budget Establishes the specific
  allocation of resources, time and cost throughout
  the duration of the project.

Potter - WBS and Budget.xls
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Questions??Comments??