IT Project Management: Chapter 4 Resource Plan and Cost Estimation

8/18/2019 IT Project Management: Chapter 4 Resource Plan and Cost Estimation

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IT PROJECT MANAGEMENT Dr. Zeeshan Bhatti

MPhil (IT)

Chapter 4

BY: DR. ZEESHAN BHATTI 1Institute of Information and Communication TechnologyUniversity of Sindh, Jamshoro

Resource Plan and Cost Estimation


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ShareLessonsLearned

EvaluateSuccess

ConductClose-OutMeeting

Roadmap to Project Management Success

FormProject

Team

Statementof WorkPurpose

Project Background

Project Deliverables

WorkBreakdownStructure

ResponsibilityMatrix

R A

A

S S

R

Network Gantt ResourcePlan

UpdatePlan

ResolveIssues

ManageChange

TrackProgress

PerformTasks

Budget

TIME

LEADERSHIP

COMMUNICATION

P R O J E C T

N O T

E B OOK

M E E

T I N G S

R E P O

R T S

L E S S

O N S L E A R N E D

PLAN

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ResourcePlan

BY: DR. ZEESHAN BHATTI 2


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ASSIGNING RESOURCES

A schedule is not complete until all the resources necessary to complete

the project have been committed or assigned.



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NON-LABOR RESOURCES

Lab time

Facilities

Prototype parts/systems

Equipment

Materials


ShareLessonsLearned

EvaluateSuccess



FormProjectTeam


Project Background




R A

A

SS

R


UpdatePlan

ResolveIssues

ManageChange

TrackProgress

PerformTasks

Budget

TIME

LEADERSHIP

COMMUNICATION

P R

O J E C T

N O T

E B OOK

M E E

T I N

G S

R E P O R

T S

L E S S O N S

L E A R N E D

PLAN

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ResourcePlan


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8– 5

WHERE WE ARE NOW

BY: DR. ZEESHAN BHATTI


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8– 6

THE RESOURCE PROBLEMResources and Priorities Project network times are not a schedule

until resources have been assigned.

The implicit assumption is that resources will be available in the required amounts when needed.

Adding new projects requires making realistic judgments of resource availability and project durations.

Cost estimates are not a budgetuntil they have been time-phased.



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THE RESOURCE PROBLEM (CONT’D)

Resource Smoothing (or Leveling)

Involves attempting to even out varying demandson resources by using slack (delaying noncritical activities) to manage resource

utilization when resources are adequate over the life of the project.

Resource-Constrained Scheduling

The duration of a project may be increased by delaying the late start of some of itsactivities if resources are not adequate to meet peak demands.



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TYPES OF PROJECT CONSTRAINTSTechnical or Logic Constraints Constraints related to the networked sequencein which project activities must occur.

Physical Constraints Activities that cannot occur in parallel or are affected by contractual or

environmental conditions.

Resource Constraints The absence, shortage, or unique interrelationship and interactioncharacteristics of resources that require a particular sequencing of projectactivities

Kinds of Resource Constraints People, materials, equipment



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8– 9

CONSTRAINT EXAMPLES

FIGURE 8.2



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8– 10

CLASSIFICATION OF A SCHEDULING

PROBLEMClassification of Problem Using a priority matrix will help determine if

the project is time or resource constrained.

Time-Constrained Project Must be completed by an imposed date.

Time is fixed, resources are flexible: additional resources are required to ensure project meets schedule.

Resource-Constrained Project Is one in which the level of resources available cannot be exceeded.

Resources are fixed, time is flexible: inadequate resourceswill delay the project.



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RESOURCE ALLOCATION METHODSLimiting Assumptions

Splitting activities is not allowed — once an activity is start, it is carried to completion.

Level of resources used for an activity cannot be changed.

Risk Assumptions

Activities with the most slack pose the least risk.

Reduction of flexibility does not increase risk. The nature of an activity (easy, complex) doesn’t increase risk.



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RESOURCE ALLOCATION METHODS (CONT’D)Time-Constrained Projects

Must be completed by an imposed date.

Require use of leveling techniques that focuson balancing or smoothing resource demands.

Use positive slack (delaying noncritical activities) to manage resource utilization over theduration

of the project.

Peak resource demands are reduced.

Resources over the life of the project are reduced.

Fluctuation in resource demand is minimized.



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RESOURCE ALLOCATION METHODS (CONT’D)Resource Demand Leveling Techniques

for Time-Constrained Projects Advantages

Peak resource demands are reduced.

Resources over the life of the project are reduced.

Fluctuation in resource demand is minimized.

Disadvantages

Loss of flexibility that occurs from reducing slack.

Increases in the criticality of all activities.



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8– 14

RESOURCE ALLOCATION METHODS (CONT’D)Resource-Constrained Projects

Resources are limited in quantity or availability.

Activities are scheduled using heuristics(rules-of-thumb) that focus on:

1. Minimum slack

2. Smallest (least) duration

3. Lowest activity identification number

The parallel method is used to apply heuristics

An iterative process starting at the first time periodof the project and scheduling period-by-period the start of any activities using the three priority rules.



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ShareLessonsLearned

EvaluateSuccess



FormProject

Team


Project Background




R A

A

SS

R


UpdatePlan

ResolveIssues

ManageChange

TrackProgress

PerformTasks

LEADERSHIP

COMMUNICATION

Budget

TIME

P R O J E C T

N O T

E B OOK

M E E

T I N G S

R E P O R T S

L E S S

O N S L E A R N E D

PLAN

I M P L E

M E N

T

C L

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Budget

TIME

BY: D R. ZEE SHA N BHATT I 15


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COST BUDGETING

Cost Budgeting involves allocating overall costestimates to individual work items in order to

establish a cost baseline for measuring projectperformance. Using cost estimates, the WBS, theproject schedule, and cost estimating tools, theproject team develops a time-phased budget.This budget will be used to measure and monitor

cost performance on the project.”

Source: PMI



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WHY ESTIMATING TIME AND COST ARE IMPORTANT

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EXHIBIT 5.1

•

To support good decisions.• To schedule work.

• To determine how long the project should takeand its cost.

• To determine whether the project is worth doing.

• To develop cash flow needs.

• To determine how well the project is progressing.

• To develop time-phased budgets and establish theproject baseline.



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FACTORS INFLUENCING THE QUALITY OF

ESTIMATES

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Quality of

Estimates

Project

Duration

People

Project Structure

and Organization

Padding

Estimates

Organization

Culture

Other

(Nonproject)

Factors

Planning Horizon



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ESTIMATING GUIDELINES FOR TIMES,COSTS, AND RESOURCES

1. Have people familiar with the tasks make the estimate.

2. Use several people to make estimates.

3. Base estimates on normal conditions, efficient methods, and anormal level of resources.

4. Use consistent time units in estimating task times.

5. Treat each task as independent, don’t aggregate.

6. Don’t make allowances for contingencies.

7. Adding a risk assessment helps avoid surprisesto stakeholders.

5– 21BY: DR. ZEESHAN BHATTI


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TOP-DOWN VERSUS BOTTOM-UP ESTIMATING

Top-Down Estimates

Are usually are derived from someone who uses experience and/or information todetermine the project duration and total cost.

Are made by top managers who have little knowledge of the processes used tocomplete the project.

Bottom-Up Approach

Can serve as a check on cost elements in the WBSby rolling up the work packages and associated cost accounts to major deliverables

at the work package level.



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TOP-DOWN VERSUS BOTTOM-UP

ESTIMATING

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TABLE 5.1

Conditions for Preferring Top-Down or Bottom-up Time andCost Estimates

Condit ion Macro Estimates Micro Estimates

Strategic decision making X

Cost and time important X

High uncertainty X

Internal, small project X

Fixed-price contract X

Customer wants details XUnstable scope X



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ESTIMATING PROJECTS: PREFERRED

APPROACHMake rough top-down estimates.Develop the WBS/OBS.

Make bottom-up estimates.

Develop schedules and budgets.Reconcile differences between top-downand bottom-up estimates



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TOP-DOWN APPROACHES FOR ESTIMATINGPROJECT TIMES AND COSTS

Consensus methods

Ratio methods

Apportion method

Function point methods for software and systemprojects

Learning curves

5– 25

Project Estimate

Times

Costs



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APPORTION METHOD OF ALLOCATING PROJECT COSTS USING THEWORK BREAKDOWN STRUCTURE

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FIGURE 5.1



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SIMPLIFIED BASIC FUNCTION POINT COUNT PROCESSFOR A PROSPECTIVE PROJECT OR DELIVERABLE

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TABLE 5.2



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EXAMPLE: FUNCTION POINT COUNT METHOD

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TABLE 5.3



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BOTTOM-UP APPROACHES FOR ESTIMATINGPROJECT TIMES AND COSTS

Template methods

Parametric procedures applied to specifictasks

Range estimates forthe WBS work packages

Phase estimating: A hybrid



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SUPPORT COST ESTIMATE WORKSHEET

5– 30

FIGURE 5.2



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PHASE ESTIMATING OVER PRODUCT LIFE CYCLE

5– 31

FIGURE 5.3



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TOP-DOWN AND BOTTOM-UP ESTIMATES

5– 32

FIGURE 5.4



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LEVEL OF DETAIL

Level of detail is different for

different levels of management.

Level of detail in the WBS varieswith the complexity of the project.

Excessive detail is costly.

Fosters a focus on departmental outcomes

Creates unproductive paperwork

Insufficient detail is costly.

Lack of focus on goals

Wasted effort on nonessential activities



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CONTRACT BID SUMMARY COSTS

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FIGURE 5.5

Direct costs $80,000

Direct overhead $20,000

Total direct costs $100,000

G&A overhead (20%) $20,000Total costs $120,000

Profit (20%) $24,000

Total bid $144,000



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THREE VIEWS OF COST

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FIGURE 5.6



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REFINING ESTIMATES

Reasons for Adjusting Estimates

Interaction costs are hidden in estimates.

Normal conditions do not apply.

Things go wrong on projects.

Changes in project scope and plans.

Adjusting Estimates

Time and cost estimates of specific activities are adjusted as the risks, resources, and

situation particulars become more clearly defined.



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CREATING A DATABASE FOR ESTIMATING

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FIGURE 5.7



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KEY TERMS

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Apportionment methods

Bottom-up estimates

Contingency funds

Delphi method

Direct costs

Function points

Learning curves

Overhead costs

Padding estimates

Phase estimating

Range estimating

Ratio methods

Template method

Time and cost databases



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WBS FIGURE

5– 40

TABLE 5.4




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ShareLessonsLearned

EvaluateSuccess



FormProjectTeam


Project Background




R A

A

SS

R


UpdatePlan

ResolveIssues

ManageChange

TrackProgress

PerformTasks

Budget

TIME

LEADERSHIP

COMMUNICATION

P R O J E C

T N O T

E B OOK

M E E

T I N

G S

R E P O R T S

L E S S O

N S L E A R N E D

PLAN

I M P L E

M E N

T

C L O S E

- O U T




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ShareLessonsLearned

EvaluateSuccess



FormProjectTeam

Statementof Work


Purpose

Project Background



R A

A

SS

R

Network Gantt BudgetResourcePlan

UpdatePlan

ResolveIssues

ManageChange

TrackProgress

PerformTasks

LEADERSHIP

COMMUNICATION

TIME

P R O J E C

T N O T

E B OOK

M E E

T I N

G S

R E P O R T S

L E S S O

N S L E A R N E D

PLAN

I M P L E

M E N

T

C L O S E

- O U T



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REFERRED NOTESA Short Course in ProjectManagement, by Nayda G.Santiago


REFERRED BOOK


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THANKYOU

Q & A

For Course Slides and Handouts

Blog:http://zeeshanacademy.blogspot.com/

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IT Project Management: Chapter 4 Resource Plan and Cost Estimation

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