ESTIMATING PROJECT COST AND

TIME
Barasa Bernard
 Project Progress

5–2
 Estimating Projects
• Estimating
– The process of forecasting or approximating the time
and cost of completing project deliverables.
– The task of balancing expectations of stakeholders and
need for control while the project is implemented.
• Types of Estimates
– Top-down (macro) estimates: analogy, group
consensus, or mathematical relationships
– Bottom-up (micro) estimates: estimates of elements
of the work breakdown structure

5–3
 Why Estimating Time and Cost Are Important

• To support good decisions.

• To schedule work.
• To determine how long the project should take and 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 the
project baseline.

EXHIBIT 5.1
5–4
 Top-Down versus Bottom-Up
Estimating
• Top-Down Estimates
– Are usually are derived from someone who uses
experience and/or information to determine the
project duration and total cost.
– Are made by top managers who have little knowledge
of the processes used to complete the project.
• Bottom-Up Approach
– Can serve as a check on cost elements in the WBS
by rolling up the work packages and associated cost
accounts to major deliverables at the work package
level.

5–5
 Estimating Projects: Preferred
Approach
• Make rough top-down estimates.
• Develop the WBS/OBS.
• Make bottom-up estimates.
• Develop schedules and budgets.
• Reconcile differences between top-down
and bottom-up estimates

5–6
 Top-Down Approaches for Estimating
Project Times and Costs
• Consensus methods
• Ratio methods
• Apportion method Project Estimate
Times
• Function point methods for Costs

software and system

projects
• Learning curves

5–7
 Apportion Method of Allocating Project Costs Using
the Work Breakdown Structure

FIGURE 5.1
5–8
Project Scheduling

Barasa Bernard
A project is a collection of tasks that must be
completed in minimum time or at minimal cost.

• Objectives of Project Scheduling

– Completing the project as early as possible by
determining the earliest start and finish of each
activity.
– Calculating the likelihood a project will be
completed within a certain time period.
– Finding the minimum cost schedule needed to
complete the project by a certain date.

5–10
 • Objectives of Project Scheduling
– Investigating the results of possible delays in
activity’s completion time.
– Progress control.
– Smoothing out resource allocation over the
duration of the project

5–11
 Project Scheduling: PERT/CPM
• Project Scheduling with Known Activity Times
• Project Scheduling with Uncertain Activity Times
• Considering Time-Cost Trade-Offs
 PERT/CPM
• PERT
– Program Evaluation and Review Technique
– Developed by U.S. Navy for Polaris missile project
– Developed to handle uncertain activity times
• CPM
– Critical Path Method
– Developed by Du Pont & Remington Rand
– Developed for industrial projects for which activity
times generally were known
• Today’s project management software
packages have combined the best features of
both approaches.
 PERT/CPM
• PERT and CPM have been used to plan,
schedule, and control a wide variety of
projects:
– R&D of new products and processes
– Construction of buildings and highways
– Maintenance of large and complex equipment
– Design and installation of new systems
 PERT/CPM
• PERT/CPM is used to plan the scheduling of
individual activities that make up a project.
• Projects may have as many as several
thousand activities.
• A complicating factor in carrying out the
activities is that some activities depend on the
completion of other activities before they can
be started.
 PERT/CPM
• Project managers rely on PERT/CPM to help
them answer questions such as:
– What is the total time to complete the project?
– What are the scheduled start and finish dates for
each specific activity?
– Which activities are critical and must be
completed exactly as scheduled to keep the
project on schedule?
– How long can noncritical activities be delayed
before they cause an increase in the project
completion time?
 Project Network
• A project network can be constructed to
model the precedence of the activities.
• The nodes of the network represent the
activities.
• The arcs of the network reflect the
precedence relationships of the activities.
• A critical path for the network is a path
consisting of activities with zero slack.
 Example: Frank’s Fine Floats
Frank’s Fine Floats is in the business of building
elaborate parade floats. Frank and his crew have a new
float to build and want to use PERT/CPM to help them
manage the project .
The table on the next slide shows the activities that
comprise the project. Each activity’s estimated
completion time (in days) and immediate predecessors
are listed as well.
Frank wants to know the total time to complete
the project, which activities are critical, and the earliest
and latest start and finish dates for each activity.
 Example: Frank’s Fine Floats
Immediate Completion
Activity Description Predecessors Time (days)
A Initial Paperwork --- 3
B Build Body A 3
C Build Frame A 2
D Finish Body B 3
E Finish Frame C 7
F Final Paperwork B,C 3
G Mount Body to Frame D,E 6
H Install Skirt on Frame C 2
 Example: Frank’s Fine Floats
• Project Network B D
3 3 G
F 6

A 3
Start Finish
3 E
7
C H
2 2
 Earliest Start and Finish Times
• Step 1: Make a forward pass through the
network as follows: For each activity i
beginning at the Start node, compute:
– Earliest Start Time = the maximum of the earliest
finish times of all activities immediately preceding
activity i. (This is 0 for an activity with no
predecessors.)
– Earliest Finish Time = (Earliest Start Time) + (Time
to complete activity i ).
The project completion time is the maximum
of the Earliest Finish Times at the Finish node.
 Example: Frank’s Fine Floats
• Earliest Start and Finish Times
B 3 6 D 6 9
3 3 G 12 18
F 6 9 6

A 0 3 3
Start Finish
3 E 5 12

3 5 7
C H 5 7
2 2
 Latest Start and Finish Times
• Step 2: Make a backwards pass through the
network as follows: Move sequentially
backwards from the Finish node to the Start
node. At a given node, j, consider all activities
ending at node j. For each of these activities,
i, compute:
– Latest Finish Time = the minimum of the latest
start times beginning at node j. (For node N, this is
the project completion time.)
– Latest Start Time = (Latest Finish Time) - (Time to
complete activity i ).
 Example: Frank’s Fine Floats
• Latest Start and Finish Times
B 3 6 D 6 9
3 6 9 3 9 12 G 12 18
F 6 9 6 12 18

A 0 3 3 15 18
Start Finish
3 0 3 E 5 12
7 5 12
C 3 5 H 5 7
2 3 5 2 16 18
 Determining the Critical Path
• Step 3: Calculate the slack time for each activity
by:
Slack = (Latest Start) - (Earliest Start), or
= (Latest Finish) - (Earliest Finish).
 Example: Frank’s Fine Floats
• Activity Slack Time
Activity ES EF LS LF Slack
A 0 3 0 3 0 (crit.)
B 3 6 6 9 3
C 3 5 3 5 0 (crit.)
D 6 9 9 12 3
E 5 12 5 12 0 (crit.)
F 6 9 15 18 9
G 12 18 12 18 0 (crit.)
H 5 7 16 18 11
 Example: Frank’s Fine Floats
• Determining the Critical Path
– A critical path is a path of activities, from the Start
node to the Finish node, with 0 slack times.
– Critical Path: A–C–E–G

– The project completion time equals the maximum

of the activities’ earliest finish times.
– Project Completion Time: 18 days
 Example: Frank’s Fine Floats
• Critical Path B 3 6 D 6 9
3 6 9 3 9 12 G 12 18
F 6 9 6 12 18

A 0 3 3 15 18
Start Finish
3 0 3 E 5 12
7 5 12
C 3 5 H 5 7
2 3 5 2 16 18
 Uncertain Activity Times
• In the three-time estimate approach, the time to
complete an activity is assumed to follow a Beta
distribution.
• An activity’s mean completion time is:
t = (a + 4m + b)/6
• An activity’s completion time variance is:
2 = ((b-a)/6)2
– a = the optimistic completion time estimate
– b = the pessimistic completion time estimate
– m = the most likely completion time estimate
 Uncertain Activity Times
• In the three-time estimate approach, the
critical path is determined as if the mean
times for the activities were fixed times.
• The overall project completion time is
assumed to have a normal distribution with
mean equal to the sum of the means along
the critical path and variance equal to the sum
of the variances along the critical path.
 PERT/Cost
• PERT/Cost is a technique for monitoring costs during a
project.
• Work packages (groups of related activities) with
estimated budgets and completion times are
evaluated.
• A cost status report may be calculated by determining
the cost overrun or underrun for each work package.
• Cost overrun or underrun is calculated by subtracting
the budgeted cost from the actual cost of the work
package.
• For work in progress, overrun or underrun may be
determined by subtracting the prorated budget cost
from the actual cost to date.
 PERT/Cost
• The overall project cost overrun or underrun
at a particular time during a project is
determined by summing the individual cost
overruns and underruns to date of the work
packages.
Monitoring and Evaluation

Barasa Bernard
 What is Program Monitoring, Evaluation?

Monitoring is the Evaluation is the use of

social research methods
routine process of
to systematically
data collection and investigate a
measurement of achievement of a
progress toward program’s results
program objectives.
 Monitoring and Evaluation
• M&E builds greater transparency and
accountability in use of project resources

• Information generated through M&E provide

project staff with a clearer basis for decision-
making

• Future project planning and development is

improved when guided by lessons learned
from project experience
5–35
 Relationship Between M&E
• M & E are two different management tools that
are closely related, interactive and mutually
supportive
• Through routine tracking of project progress,
monitoring can provide quantitative and
qualitative data useful for designing and
implementing project evaluation exercises
• Through the results of periodic evaluations,
monitoring tools and strategies can be refined
and further developed

5–36
 Comparison Between M&E
Item Monitoring Evaluation
Frequency Regular, ongoing Episodic
Main action Keeping track/oversight Assessment
Basic purpose Improving efficiency Improve effectiveness, impact,
Adjusting work plan future programming
Focus Inputs/outputs, process Effectiveness, relevance,
outcomes, work plans efficiency, impact, sustainability

Information Routine systems, field visits, Same plus

sources stakeholder meetings, output Surveys (pre-post project)
reports, rapid assessments Special studies
Undertaken by Project/program managers External evaluators
Community workers Community (beneficiaries)
Supervisors Project/program managers
Community (beneficiaries) Supervisors
Funders Funders
Other Stakeholders
5–37 Adapted from UNICEF, A UNICEF Guide for Monitoring and Evaluation: Making a Difference? New York, 1991,
p.3
 Monitoring
• Monitoring also implies analysis and use of
the data (Qualitative and quantitative)
• Generally, the level that records information
should be able to use it
• Designing data collection systems with this
principle in mind helps improve chances that
the data will be collected carefully and put to
use.

5–38
 Monitoring process
1. What should be monitored?
– Keep information requirements to a bare minimum
– Collect info that will be most helpful to those who will
use it
2. How?
– Select methods to track indicators/report on progress
• Observations, interviews, routine reporting, sentinel
sites
• Both formal/informal and quantitative/qualitative
methods
• Decide how information will be recorded
systematically and reported clearly
• Consider the time and skills of those who will collect
the data
• Pretest new monitoring instruments
5–39
 Monitoring process
3. Who should be involved when?
– Clearly identifying who will collect information on
indicators, when (frequency) and who will receive it
– The monitoring plan should also identify who will be
involved in reviewing progress and providing feedback

4. What resources are needed and available?

– The human and financial cost of gathering, reporting and
reviewing data should be identified
– Needed funding and time should be set aside for this
work

5–40
 Monitoring process
5. Consultation and Training
– Discuss the monitoring program with a representative
group from each level before it is put into effect
– Provide training to those who will be using the
monitoring systems

6. Prepare a workplan
– for each year
– listing the main activities to be carried out, their output,
timing and parties involved

5–41
 Monitoring process
5. Consultation and Training
– Discuss the monitoring program with a representative
group from each level before it is put into effect
– Provide training to those who will be using the
monitoring systems

6. Prepare a workplan
– for each year
– listing the main activities to be carried out, their output,
timing and parties involved

5–42
 Monitoring immediate results of project
activities
Means of
Component Monitoring Frequency Responsible
Target projected result Collection
Output eg Indicator (WHEN) Agency/Person (WHO)
(HOW)

Training

Planning and
Management

Advocacy

5–43
Project termination

Barasa Bernard
 Project Termination
• A project can be said to be terminated when work
on the substance of the project has ceased or
slowed to the point that further progress is no
longer possible
• There are four fundamentally different ways to
close out a project: extinction, addition,
integration, and starvation
– Project Extinction
• project activity suddenly stops
• either successfully completed or high expectation for failure
– Termination-By-Addition
• becomes a new formal part of organization
– Termination-By-Integration
5–45
• becomes standard part of operating systems
 Project termination factors
1. Low Probability
– Technical Objectives
– Commercial Viability
– ROI Achieved
2. No Solution
– Engineering Design
– Lasting Process
3. Intellectual Property Issues

5–46
 Project termination: When?
• Some questions to ask when considering
termination:
– Has the project been obviated by technical advances?
– Is the output of the project still cost-effective?
– Is it time to integrate or add the project as a part of
regular operations?
– Are there better alternative uses for the funds, time and
personnel devoted to the project?
– Has a change in the environment altered the need for
the project’s output?

5–47
 End

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