BSS052-6 Project & Operations

Management
THEME -5.2: Project Planning: Work
Breakdown Structure, Gantt Chart and
Project Budget

Dr. Nasrullah Khilji

&
Emmanuel U. Unuafe
 Overview

 Interface Coordination through Integration

Management
 Estimating Project Budgets
 Improving the Process of Cost Estimation
 Scheduling: Gantt Chart
 Learning Outcomes

 Become familiar with the integration of cost estimation into project

management processes and procedures
 Understand the importance of the central role and importance of
managing costs throughout a project lifecycle
 Put in practice critical planning, scheduling and control procedures in your
projects
 Estimate costs and deal with cost escalations and reductions
 Apply the key aspects of managing a project budget effectively
 The Key to Overall Project Success:
Good Project Integration Management
Project managers must coordinate all of the other
knowledge areas throughout a project’s life cycle
Many new project managers have trouble looking at
the “big picture” and want to focus on too many
details (See opening case for a real example)
Project integration management is not the same thing
as software integration

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Information Technology Project Management, Fifth Edition, Copyright 2007
 Project Integration Management Processes
Develop the project charter: working with
stakeholders to create the document that formally
authorizes a project—the charter
Develop the preliminary project scope statement:
working with stakeholders, especially users of the
project’s products, services, or results, to develop the
high-level scope requirements and create a
preliminary project scope statement
Develop the project management plan: coordinating
all planning efforts to create a consistent, coherent
document—the project management plan

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Information Technology Project Management, Fifth Edition, Copyright 2007
 Project Integration Management Processes
Direct and manage project execution: carrying out
the project management plan by performing the
activities included in it
Monitor and control the project work: overseeing
project work to meet the performance objectives of
the project
Perform integrated change control: coordinating
changes that affect the project’s deliverables and
organizational process assets
Close the project: finalizing all project activities to
formally close the project

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Information Technology Project Management, Fifth Edition, Copyright 2007
Project Integration Management Summary

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Information Technology Project Management, Fifth Edition, Copyright 2007
 Project Integration Management Processes

The project managers takes responsibility for

– Coordinating all the people, plans and work
required to complete a project
– Focusing on the big picture and steering the project
team toward successful completion
– Making the final decisions when there are conflicts
among project goals or people involved
– Communicating key project information to top
management

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Information Technology Project Management, Fifth Edition, Copyright 2007
 Project Integration Management Processes
Good project integration management is critical
to providing stakeholder satisfaction
– Interface management – identifying and managing the
points of interaction between various elements of the
project
 The number of interfaces can increase exponentially as
the number of people involved in the project increases
 Therefore, the PM must establish and maintain good
communication and relationships with all stakeholders,
customers the project team, top management , other PMs
and opponents of the project.
– This was one of Nick Carson’s mistakes – he did not find
out what top management expected of him as PM and
did not see the big picture

Schwalbe, K. (2007) Information Technology Project Management, Fifth Edition. Austria: Course Technology
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Cengage Learning (Chapter Four)
 Example: Airbus A380 What Went Wrong?
 The Airbus A380 megajet project was two years behind schedule in Oct. 2006,
causing Airbus’ parent company to face an expected loss of $6.1 billion over
the next four years. (See http://www.widebodyaircraft.nl/a380.htm)
 The project suffered from severe integration management problems, or
“integration disintegration”
– Pre-assembled bundles containing hundreds of miles of cabin wiring were
delivered from a German factory to the assembly line in France
– Workers discovered that the bundles didn't fit properly into the plane.
Assembly slowed to a near-standstill, as workers tried to pull the bundles apart
and re-thread them through the fuselage. Now Airbus will have to go back to
the drawing board and redesign the wiring system.”*
– The problem was caused by factories in Toulouse and Hamburg using different versions
of a design software program which made it difficult for the two machines to
communicate with each other. Top management should have made it a priority to have
all sites use the same version of the software.

*Matlack, Carol. “First, Blame the Software,” BusinessWeek Online (October 5, 2006).
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Recall Figure 2-5. Level of Process
Group Activity Over Time
The most time and money are usually
spent on executing processes
 The Project Control Process
 Control
 The process of comparing actual performance against plan to
identify deviations, evaluate courses of action, and take
appropriate corrective action.
 Project Control Steps
1. Setting a baseline plan.
2. Measuring progress and performance.
3. Comparing plan against actual.
4. Taking action.
 Tools
 Tracking and baseline Gantt charts
 Control charts
 What is a baseline?

 It makes the plan difficult to change

 It is rather like writing the plan (schedule and cost) on the
backside of Moses’ tablets
 Its an anchor point for measuring performance against plan
 Planned cost
 Planned schedule
 Planned scope
Example: Baseline and Tracking Gantt
Charts
Fixed Costs:
Variable Costs:
 Honoraria
 Alternatives - $1,100
 Theatre shop fees
 Printing $3,500
 Costumes
 Set designer $80 per day
 Radio & Television
 Student newspaper advertising $40
advertisements
$8,000
$14,000

Budget $28,000
Total costs $ 22,000
Unspent money $6,000
Example: Project Schedule Control
Chart
 Project Estimation

 For project management to effectively plan and control a project,

accurate estimating is essential.
 The quality and accuracy of the estimate should be seen as the best
approximation based on: -
- Time available
- Information available
- Techniques employed
- Expertise and experience of the estimator.
 The quality and accuracy of the estimate can be continually improved
as the project is executed and more detailed and accuracy information
becomes available.
 Project Estimation

Estimating Terminology
 In industry and commerce it is common to label the estimate
according to its level of detail and accuracy.
 The following estimating terms; concept, feasibility, definitive
and costing, relate quite closely to the project life-cycle phases.
 This classification depends on the quality of information
available and the amount of effort put into compiling the
estimate.
 Three types of estimates according to their purpose, scope of
work, detail and level of accuracy.
 Project Estimation

 Conceptual Estimate
 Also called order of magnitude, budget figure, ball-park figure.
 The conceptual estimate addresses the needs of management who
are presented with a number of possible projects.
 They need an initial filter to select those projects that warrant further
investigation.
 This would occur in the concept and initiation phase.
 Conceptual estimate will be based on a limited scope of work using
scale factors to give a low level of accuracy +/- 25%.
 Project Estimation

Feasibility Study
 Preliminary estimate or comparative estimate.
 It is essential at the outset to determine the needs and expectations of all
the stakeholders.
 Although the feasibility study is characterised by information gathering,
processing and reporting, the accuracy of the estimate may still be
somewhat limited at about +/-10%.
 Project Estimation

Definitive Estimates
 Also called detailed estimate, project control estimate, quotation or
tender.
 When the decision has been made to proceed to the next phase, the
design and development phase, or planning phase, this will initiate
another mini project to provide detailed designs and plans to build and
manage the project.
 The definitive estimate will be based on considerable amount of data
incorporating a developed scope of work, detailed WBS, detailed
drawing, specification, vendor quotations (that are legally binding) and
site surveys to give an improved accuracy of +/- 5%.
 Project Estimation: Accuracy of
Estimate
The level of accuracy is presented as a continuum from conceptual estimate at
25% to closeout report at 0%.
 As the graph moves from estimating to costing so the data moves from
historical to actual information, and the level of accuracy increases, but so
does the time to produce the estimate and the associated cost to produce
the estimate.
 The relationship between a higher level of accuracy and increasing cost of
producing it.
 Although it is not the project manager’s function to set the company’s profit
margin, the project managers does need to know what the profit margin is,
as this will influence the accuracy of the estimate and subsequent level of
control.
 Project Estimation
Estimating Costing
(Historical Data) (Actual info)

Accuracy of Estimate
25% 10% 5% 0%

Concept phase Design phase Implement phase Commission phase

Conceptual Estimate

Feasibility Study

Definite Estimate
Closeout Report
 Project Estimation: Costing
 If estimating is defined as a quick method for pricing a project based on
incomplete data, then costing may be defined as a detailed price based on
a complete bill of materials (BOM) and parts list.
 Costing requires the following items to be complete:
 Design and calculations
 Scope of work, bill of materials (BOM) and parts list
 Detailed planning
 Firm prices from subcontractors and suppliers, man-hours and
labour costs.
 Almost every aspect of the project must be quantified, and with this high
level of information and effort, accurate quotations of +/-1 can be
achieved.
 Exercise 1

• Creating an estimate for your project

– Identify cost areas from PBS
– Where will you obtain detailed information?
– How will you verify accuracy?

– 10 Minutes
 Product Breakdown Structure
H.M.S PINAFORE
1.0.0

Budget Publicity Venue Production Costumes Music Programme

1.1.0 1.2.0 1.3.0 1.4.0 1.5.0 1.6.0 1.7.0

Hire publicity Hire place for Collect

Prepare budget Hire set designer Order costumes Hire orchestra biographies
director audition
1.1.1 1.4.1 1.5.1 1.6.1 1.7.1
1.2.1 1.3.1

Advertising to Auditions to hire Hire production Enter info into

Approve budget Alter costumes Get Music
hire crew & cast cast crew computer
1.1.2 1.5.2 1.6.2
1.2.2 1.3.2 1.4.2 1.7.2

Hire publicity Train production

Rehearsal Music rehearsal Printing
crew crew
1.3.3 1.6.3 1.7.3
1.2.3 1.4.3

Design & Build

Advertising plan
set
1.2.4
1.4.4

Media
advertising
1.2.5
 Project Estimation/Budget

Project Costs
• A project estimate can be subdivided into a number of different
costs, consider the following:
- Direct costs
- Indirect costs
- Time related costs
- Labour costs
- Materials and equipment costs
- Transport costs
- Preliminary and general (P&G) costs
- Project Office Costs
- Project Team Costs
 Project Estimation

Direct Costs
 Direct costs are those costs that can be specifically identified
with an activity or project.
 The current trend is to assign as much as possible, if not all costs
to direct costs, direct cost can be budgeted, monitored and
controlled far more effectively than indirect costs.
 The distinctive nature of direct costs is that the total expense can
be charged to an activity or project.
 Project Estimation

Direct costs are:

 Direct management cost refer to the project office running
costs. Salaries for the project manager, project engineer,
planner, accountant, secretary and QA.
 Direct labour costs refer to the people working on an activity,
e.g. boilermakers, welders, fitter, computer programmers, etc.
 Direct materials costs are for the materials, consumables,
components which are used for completing an activity and an
allowance for scrap and wastage.
 Direct equipment costs refer to machinery, plant and tools.
 Project Estimation

Indirect Costs
 Indirect costs, also called overheads, are those costs that cannot
be directly booked to an activity or project, but are required to
keep the company operational.
 Indirect management costs refer to:
- senior managers,
- the estimating department,
- sales and marketing, accounts,
- IT,
- general office staff,
- secretarial, administration and personal department.
 Project Estimation
Indirect Costs
 Indirect labour costs refer to
- the reception,
- maintenance,
- security and cleaners.

 Basically, it includes all employees who are required to keep

the company functioning.

 Indirect materials include:

- stationary,
- cleaning materials and
- maintenance parts.
 Project Estimation
Indirect Costs
 Indirect equipment includes
- computers,
- photocopiers.

 Indirect expenses include:

- training, insurance,
- depreciation,
- rent and rates.

 Indirect costs are usually financed by an overhead recovery

charge added to the earned man-hour rate and if not properly
managed will eat away at The company profits.
 Quick Estimating Categories for events
(Allen, 2000)
Accommodation Gifts Photography Special effects
Protection
Audiovisual Insurance/risk Place cards Staffing
assessment
Communication Websites and Power charges Staging
costs Social Media
Customs Invitations Print material Taxes and service
charges
Decoration Lighting Promotional Transportation
material
Entertainment Labour charges Rehearsal costs Translation
Event Menus Security Venue rentals
management fee
Floral Miscellaneous Shipping and
arrangements handling
Food and Music Speakers
Beverage
 Name of the Task Duration Predecessors
1 Budget Approval 1 day -
2 Hire Publicity Director 14 days 1
3 Hire Set Designer 14 days 1
4 Hire Place For Auditions 7 days 2
5 Advertising To Hire Crew and Cast 7 days 4
6 Hire Production & Publicity Crew 28 days 5
7 Set Designed and Built 42 days 3,6
8 Train Production Crew 12 days 3,6
9 Auditions To Hire Cast 2 days 5
10 Cast Rehearsal 84 days 9
11 Hire Orchestra 7 days 1
12 Music 7 days 11
13 Photograph Cast And Crew & Collect Biographies 35 days 6, 9,11
14 Enter Information Into Computer 1 day 13
15 Printing 5 days 14
16 Develop an Advertising Plan 7 days 6
17 Advertising Media 21 days 16
18 Orchestra rehearsal 4 days 12
19 Order Costumes 7 days 9
20 Costume Parade And Alterations 5 days 7,19
21 Dress Rehearsal 1 day 8,10,18,20
22 Performance 10 days 15,17,21
Gantt Chart
 Current project time – 126 days x
Time available – 107 days √

Shorten the project by

at least 19 days

Unspent budget $6,000

Project Management Team: 4 members
Questioning the activity logic Activity 4 – Hire
place for auditions

and

Activity 5 – Advertise
to hire crew and cast

Can
go simultaneously
Questioning the activity duration Activity 10: Cast rehearsal
is shortened by
1 week

Based on the rehearsal

days of the week

84 days
becomes
73 days
 Activity 2: Hire publicity director
Duration Uncertainty
o m p (o+4m+p)/6 t [(p-o)/6]2 Variance (σ2)
10 days 12 days 14 days (10+4x12+14)/6 12 [(14-10)/6]2 0.81

for reference

Activity 13: Photograph & biographies for the programme

Duration Uncertainty
o m p (o+4m+p)/6 t [(p-o)/6]2 Variance (σ2)
28 days 32 days 35 days (28+4x32+35)/6 32 [(35-28)/6]2 1.08
 Activity 2:
Hire publicity Director
is shortened by
2 days
Pros:
 Performance can be staged 11 days instead of 10 days
 More spectators
 Increase revenue by maximum $9,360

Cons:
× Insufficient time to find a capable publicity director
× Difficult to monitor all the activities on the 2 critical paths
× Some volunteers under pressure may quit
 Time Time Cost Cost Crash cost Critical
Activity Normal Crash Normal Crash /day path?

Printing 5 days 2 days $3,500 $4,250 $375 NO

Order 7 days 2 days $6,500 $6,700 $100 NO
Costumes
Design and
build set 42 days 7 days $3,360 $5,600 $320 YES
 Activity 7:
Set designed and built
is shortened by
7 days @ $2,240
and
Activity 10:
Cast Rehearsal
is shortened by
another week
Pros:
 Performance can be staged 13 days instead of 10 days
 More spectators
 Increase revenue by maximum $ 28,080
 Additional 3 days for all the activities on the critical path

Cons:
× Cost increases by $2,240
× 10 weeks for rehearsal may affect the performance quality
× Volunteers will be under high pressure and may quit
Go for option 2
 Hire an extra master builder
 Reduce the rehearsal time by 2 weeks, but add an additional half
an hour per day
 Use the Vroom’s Expectancy Theory of Motivation to get the
volunteers commitment.
 Provide small monetary rewards for volunteers after performance
is over, allocated from revenue.
 No formal organisation chart or line of authority, control and
reporting were more challenging - open communication is critical
throughout the pre-production, production and post-production
stages of the show.
 Lesson recap
 The first step in successfully managing project costs is to have a project
budget that realistically reflects the costs for executing the project.
 We have learnt that estimates of times and costs are fundamental to project
success
 To be sensitive to the factors and number of factors that influence estimates
 To understand various types of costs
 We now understood the relationship between costs and schedules / the need
for time based estimates
 We have understood the relationship between time and money
 The implications of time constrained projects
 We have also understood the costs and total implications of crashing in
terms of risk, quality, costs, etc.
 As well as the concept of optimum duration / optimum cost projects
 We have also understood the process for crashing a project