The Project Schedule and Budget Chapter 7 7
The Project Schedule and Budget Chapter 7 7 -1 Copyright 2012 John Wiley & Sons, Inc.
Learning Objectives Describe the Project Management Body of Knowledge (PMBOK®) area called project cost management. Develop a Gantt chart. Develop a project network diagram using the activity on the node (AON) technique. Identify a project’s critical path and explain why it must be controlled and managed. Develop a PERT diagram. Describe the concept of precedence diagramming and identify finish-to-start, start-to-start, finish-to-finish, and start-to-finish activity relationships 7 -2
The Importance of Project Cost Management IT projects have a poor track record for meeting budget goals A 2011 Harvard Business Review study reported an average cost overrun of 27 percent. The most important finding was the discovery of a large number of gigantic overages or “black swans”
Examples of how not to mange costs The U. S. government (e. g. IRS) The United Kingdom’s National Health Service IT § http: //www. bbc. co. uk/news/uk-15014288 § http: //www. bbc. co. uk/news/uk-politics-24130684 § http: //www. hsj. co. uk/news/technology/rising-cost-of-nhs-itfiasco/5063357. article#. Ulb. D 8 NKsh 8 E 4
Project Cost Management Processes Process Group Planning Monitoring and Controlling Cost Management Process Major Output CP 1: Planning Cost Mgmt Cost Management Plan CP 2: Estimating Costs Activity Cost Estimates CP 3: Determining the Budget Cost Performance Baseline MC 1: Controlling Costs Work Perf. Measurements Budget Forecasts 5
What is Cost and Project Cost Management? 6
Project Cost Management Processes Scope Baseline Schedule Baseline Estimate bases Determine Budget Estimate Costs Activity Cost Estimates Project Funding Req. Control Costs Cost Baseline
PMBOK® Project Cost Management Estimate Costs § Focuses on the processes to estimate the monetary resources needed to complete the project work or activities. Determine Budget § Aggregating the individual cost for each of the project activities or work package components to determine the cost baseline or overall project budget. Control Costs § Updating the project’s status while monitoring the project’s budget and managing any changes to the baseline plan. 7 -8
The Project Planning Framework 7 -9
Budget and Schedule Development 7 -10
Developing the Project Schedule Project Management Tools 7 -11
Gantt Chart for Planning 7 -12
Gantt Chart Reporting: Project’s Progress 7 -13
Project Network Diagram: Activity Analysis for AON Activity Description Estimated Duration (Days) Predecessor A Evaluate current technology platform 2 None B Define user requirements 5 A C Design Web page layouts 4 B D Set-up Server 3 B E Estimate Web traffic 1 B F Test Web pages and links 4 C, D G Move web pages to production environment 3 D, E H Write announcement of intranet for corp. newsletter 2 F, G I Train users 5 G J Write report to management 1 H, I 7 -14
Activity on the Node (AON) Network Diagram 7 -15
Possible Activity Paths Possible Paths Path Total Path 1 Path 2 Path 3 Path 4 Path 5 7 -16
Critical Path 7 -17
PERT 7 -18
Activity Analysis for PERT Activity Predecessor Optimistic Estimates (Days) Most Likely Estimates (Days) Pessimistic Estimates (Days) A None 1 2 4 B A 3 5 8 C B 2 4 5 D B 2 3 6 E B 1 1 1 F C, D 2 4 6 G D, E 2 3 4 H F, G 1 2 5 I G 4 5 9 J H, I . 5 1 3 Expected Duration 7 -19
Activity Analysis for PERT 7 -20
Possible PERT Activity Paths Possible Paths Path 1 Path 2 Path 3 Path 4 Path 5 Path Total
Precedence Diagramming Method - PDM Based on 4 fundamental relationships 7 -22
Lead and Lag times Lead is starting the next task before the first task is complete Lag (or negative lead) is the adding of a buffer of time before the next task begins 7 -23
Critical Path Analysis (with slack time) 7 -24
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