PM/U2 Topic 7 Scheduling, Project Cost Estimate and Budgets

In project management, a schedule is a listing of a project’s milestones, activities, and deliverables, usually with intended start and finish dates. Those items are often estimated by other information included in the project schedule of resource allocation, budget, task duration, and linkages of dependencies and scheduled events. A schedule is commonly used in the project planning and project portfolio management parts of project management. Elements on a schedule may be closely related to the work breakdown structure (WBS) terminal elements, the Statement of work, or a Contract Data Requirements List.

Methods of Scheduling

Before a project schedule can be created, the schedule maker should have a work breakdown structure (WBS), an effort estimate for each task, and a resource list with availability for each resource. If these components for the schedule are not available, they can be created with a consensus-driven estimation method like Wideband Delphi. The reason for this is that a schedule itself is an estimate: each date in the schedule is estimated, and if those dates do not have the buy-in of the people who are going to do the work, the schedule will be inaccurate.

To develop a project schedule, the following needs to be completed:

  • Project scope
  • Sequence of activities
  • Tasks grouped into 5 project phases (conception, definition & planning, launch, performance, close)
  • Task dependencies map
  • Critical path analysis
  • Project milestones

In order for a project schedule to be healthy, the following criteria must be met:

  • The schedule must be constantly (weekly works best) updated.
  • The EAC (Estimation at Completion) value must be equal to the baseline value.
  • The remaining effort must be appropriately distributed among team members (taking vacations into consideration).

The schedule structure may closely follow and include citations to the index of work breakdown structure or deliverables, using decomposition or templates to describe the activities needed to produce the deliverables defined in the WBS.

A schedule may be assessed for the quality of the schedule development and the quality of the schedule management.

Cost Estimation and Project Budgeting

A well-researched and planned cost estimation and budget is necessary for the successful completion of any project. Project managers need to thoroughly scope the project in order to secure sufficient funding. Scoping involves estimating labor hours, materials, supplies and other miscellaneous expenses. Cost estimations and budgets are a work in progress and should contain room for change.

What Cost Estimates Include?

A good cost estimate is unbiased. It should not be made by someone who would over- or under-state the numbers. The cost estimate should clearly define the purpose of the project, what it will accomplish, what assumptions are made, how long the estimate is valid, and how much the project will cost. It should show all interested parties everything relevant, without holding back information. The estimate should be flexible, adaptable and provide a range of the costs involved.

Budgeting

Budgeting is the process of creating a plan to spend your money. This spending plan is called a budget. Creating this spending plan allows you to determine in advance whether you will have enough money to do the things you need to do or would like to do.

Why is Budgeting so Important?

Since budgeting allows you to create a spending plan for your money, it ensures that you will always have enough money for the things you need and the things that are important to you. Following a budget or spending plan will also keep you out of debt or help you work your way out of debt if you are currently in debt.

Project Management Software

An effective and simple way to estimate costs and prepare a project budget is to use project management software. Most software has features that identify the types, quantities, and phasing of different types of labor. It also has capabilities for estimating the costs for individual project pieces and adding them together to reach a project total. The pieces can differ in size and number from a few large phases of a project with known costs to hundreds or thousands of small tasks.

Accuracy

Management needs to assess the accuracy of cost estimates and budgets. Unanticipated expenses can result in the project being abandoned. Cost estimates that are overstated also have negative consequences. If they are too liberal, they can kill an otherwise viable project by making it look unaffordable. Good cost estimating requires access to a historical cost database. For example, in the software industry, there should be a cost database that contains information regarding cost per line of code, software sizing algorithms and costs for functional descriptions and tasks.

Considerations

Not scoping the project thoroughly enough, misunderstanding technical difficulties, and making changes are the most common reasons projects do not adhere to cost estimates and budgets. Cost estimates can never be too detailed. Every change should be documented thoroughly. Management should consider how changes affect other phases of the project. A simple, yet effective tool is to use a spreadsheet to prepare the cost estimate, and keep all of the important data visible in cells, instead of hidden in formulas.

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