Project Schedule & Cost

Management
 Lesson Outlines
 Project Time Management

 Project Time Management Processes

 Techniques used for Time Management Processes

◦ Network Diagrams
◦ Gant Chart
◦ Critical Path Analysis (CPA)
◦ Program Evaluation and Review Technique (PERT)
 Project Cost Management
◦ Importance of Project Cost Management
◦ Resource Planning
◦ Cost Estimating
◦ Cost Budgeting
◦ Cost Control May 22, 2024 2
Seble E.
 Lesson Learning Objectives

After this lesson, you will be able to:

 Understand the importance of project schedule
& Cost management;
 Discuss the major processes of project schedule
& cost management ;
 Differentiate basic tools & techniques for
schedule & cost management;
 Explain basic project schedule & cost
management concepts ;
 Describe the process of planning schedule &
cost management ;
 Describe how project management software can
assist in project time & cost management

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 Project Time Management

ProjectTime Management includes

the processes to manage the timely
completions of a project.
It is primarily concerned with
developing a realistic project
schedule and controlling changes to
the schedule.
◦ Timely completion of project(s)

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 Project Time Management
Processes
Figure 1. Major Processes of Schedule Management

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 Defining Activities
 Identifying the specific activities that must be performed to

produce the various project deliverables

 An activity or task is an element of work normally found

on the work breakdown structure (WBS) that has an

expected duration, a cost, and resource requirements

 Activity definition involves developing a more detailed WBS

and supporting explanations to understand all the work to
be done so you can develop realistic cost and duration
estimates
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 Activity Lists and Attributes

 An activity list is a tabulation of activities to be included on

a project schedule that includes (activity name, identifier &
brief description)

 Activity attributes provide more information such as

predecessors, successors, logical relationships, resource
requirements, constraints, imposed dates, and assumptions
related to the activity.

 A milestone is a significant event or point in the project

◦ Identify whether a milestone is mandatory or optional

◦ They’re useful tools for setting schedule goals and monitoring

progress

◦ Examples include obtaining customer sign-off on key documents or

completion of specific products

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 Sequencing Activities
 Identifying and documenting the relationships between
project activities.

 All activities will be sequenced as per the dependencies.

 Involves reviewing activities and determining
dependencies
 A dependency or relationship is the sequencing of
project activities or tasks
 Determining these relationships or dependencies
among activities is crucial for developing and managing
a project schedule.
 You must determine dependencies in order to use
critical path analysis
◦ Example: does a certain activity have to be finished before
another can start? Can the project team do several activities
in parallel? Can some overlap?
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 Network Diagrams

 Network diagrams are the preferred technique

for showing activity sequencing

A network diagram is a schematic display of the

logical relationships among, or sequencing of,
project activities

 Thenetwork diagram represents activities that

must be done to complete the project

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 Arrow Diagramming Method (ADM)

 Thetwo main methods used for creating

Network diagrams are arrow diagramming
method and the precedence diagramming
method.

ADM
 Also called Activity – on - Arrow (AOA) network
diagrams
 Activities are represented by arrows
 Nodes or circles are the starting and ending
points of activities
 Only Finish-to-Start dependencies can be
shown

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 Figure 2. Network Diagram for Project X – AOA/ADM

 Where:
◦ The letters A through J represent activities with dependencies that
are required to complete the project
◦ The arrows represent the activity sequencing or relationships
between tasks

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 Process for Creating AOA Diagrams

1. Find all of the activities that start at node 1. Draw

their finish nodes and draw arrows between node 1
and those finish nodes. Put the activity letter or
name and duration estimate on the associated
arrow
2. Continuing drawing the network diagram, working
from left to right.
3. Continue drawing the project network diagram until
all activities are included on the diagram that have
dependencies
4. As a rule of thumb, all arrowheads should face
toward the right, and no arrows should cross on an
AOA network diagram

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 Precedence Diagramming Method (PDM)
 Activities are represented by boxes
 Arrows show relationships/dependencies between activities
 More popular than ADM method & used by project management
software
 Better at showing different types of dependencies, including four types:
◦ Finish to Start - a successor (second task) cannot begin until its predecessor
(first task) is complete
 The most common
 E.g. Install new IT s/m (T1: Install IT Equipment; T2:. train staff)
◦ Start to Start - a successor activity cannot begin before its predecessor has started
 Less common
 E.g. Construction (T1: Assemble scaffolding; T2: Paint exterior)
◦ Finish to finish - a successor activity can only finish after its predecessor has been
completed.
 e.g. SYSTEM IMPLEMENTATION
 T1: Connect system to interfaces and devices
 T2: Install and configure software
◦ Start to Finish - The predecessor activity can only complete once the successor task
has started.
 Not common
 E.g. MIGRATING TO NEW IT SYSTEM
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 Figure 3. Task Dependency Types

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 Figure 4. Sample PDM Network Diagram

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 Estimating Activity Resources
 It is the process of estimating how many resources a
project team should use to perform project activities
 Before estimating activity durations, you must have a
good idea of the quantity and type of resources that
will be assigned to each activity; resources are
people, equipment, and materials
 Consider important issues in estimating resources
◦ How difficult will it be to do specific activities on this project?
◦ What is the organization’s history in doing similar activities?
◦ Are the required resources available?
 A resource breakdown structure is a hierarchical
structure that identifies the project’s resources by
category and type

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 Estimating Activity Duration
 It involves estimating the number of work periods that
are needed to complete individual activities

Three-Point Estimates
 Instead of providing activity estimates as a discrete
number, such as four weeks, it’s often helpful to create
a three-point estimate
 Optimistic time
◦ It is based on a best-case scenario
◦ It is an estimate of the minimum time required for an
activity if exceptionally good luck is experienced
 The most likely time
◦ It is based on a most likely or expected scenario.
◦ It is the longer duration for the activity
 The pessimistic time
◦ It is based on a worst-case scenario.
◦ It is the longest duration for the activity
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 Developing the Schedule
 Involves analyzing activity sequences, activity
resource estimates, and activity duration
estimates to create the project schedule
 Uses results of the other time management
processes to determine the start and end date of
the project
 Ultimate goal is to create a realistic project
schedule that provides a basis for monitoring
project progress for the time dimension of the
project
 Important tools and techniques include Gantt
charts, Critical Path Analysis, and critical
chain scheduling, and PERT analysis

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 Gantt Charts
 Gantt charts provide a standard format for
displaying project schedule information by
listing project activities and their
corresponding start and finish dates in a
calendar format
 You can depict milestones on Gant Charts
using diamond symbol.
 Milestones emphasize important events or
accomplishments on projects
 Milestones should be SMART
◦ Specific
◦ Measurable
◦ Assignable
◦ Realistic
◦ Time-framed May 22, 2024 19
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 Figure 5: Gantt Chart for Software Launch Project

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 Critical Path Method (CPM)

 CPM is a network diagramming technique used

to predict total project duration
 A critical path for a project is the series of
activities that determines the earliest time by
which the project can be completed
◦ The main objective is to calculate & communicate the
shortest possible completion time for a project.
 The critical path is the longest path through the
network diagram and has the least amount of
slack or float
 Slack or float is the amount of time an activity
may be delayed without delaying a succeeding
activity or the project finish date
 CPM doesn’t consider uncertainty of time (unlike
PERT)
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  Example 1: Assume the following activities
and the time estimates required to finish
each activity of a project. Find the critical
path.
Activity Immediate Predecessor Estimated Time
A ---- 2
B A 4

C A 5

D B 4

E C 7

F D, E 6

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 Example 2. Determining the Critical Path for
Project X

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 Exercise
Activity Immediate Estimated Time (Weeks)
Predecessor
Consider this activity
A ---- 4
table on the left:
B ---- 7
1. Draw the network
C ---- 3
diagram
D A 6
2. Identify the critical
E B 4
path
3. What is the
F B 7

G C 6 minimum project
H E 10 completion time?
I D 3

J F, G 4

K H, I 2

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 Program Evaluation and Review
Technique (PERT)

 PERT is a network analysis technique used to

estimate project duration when there is a high
degree of uncertainty about the individual
activity duration estimates

 PERT uses probabilistic time estimates

◦ Duration estimates based on using optimistic, most
likely, and pessimistic estimates of activity durations,
or a three-point estimate

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 PERT Formula and Example
• To use PERT, you calculate a weighted average for the
duration estimate of each project activity using the
following formula
 PERT weighted average =
optimistic time + 4 * most likely time + pessimistic time
6
 Example:
◦ Design an input screen Act. 10 days
PERT weighted average =
8 workdays + 4 * 10 workdays + 24 workdays = 12 days 6
where optimistic time= 8 days
most likely time = 10 days, and
pessimistic time = 24 days

Therefore, you’d use 12 days on the network diagram instead of 10 when

using PERT for the above example

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  Exercise:Find PERT weighted average for
each activity of the project and draw
network diagram

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 Controlling the Schedule
 It involves controlling and managing changes to the project
schedule

 Goals are to know the status of the schedule, influence

factors that cause schedule changes, determine that the
schedule has changed, and manage changes when they
occur

 Tools and techniques include

◦ Progress reports
◦ A schedule change control system
◦ Project management software, including schedule
comparison charts like the tracking Gantt chart
◦ Variance analysis, such as analyzing float or slack
◦ Performance management, such as earned value
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 Reality Checks on Scheduling

 First review the draft schedule or estimated

completion date in the project charter
 Prepare a more detailed schedule with the
project team
 Make sure the schedule is realistic and
followed
 Alert top management well in advance if there
are schedule problems

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 Project Cost Management

Importance of Project Cost Management

 ITprojects have a poor track record in meeting

budget goals

 Most software projects face cost overrun

problems.
◦ It is the additional percentage or currency amount by
which actual costs exceed estimates.

 So,the main goal of project cost management is

to complete a project within an approved
budget.
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 What is Cost and Project Cost
Management?
Why do we need to deal about cost
management?
 Many IT professionals often react to cost overrun information.
◦ the original cost estimates for IT projects are low or
based on unclear project requirements so naturally
there will be cost overruns
◦ Not emphasizing the importance of realistic project cost
estimates
◦ many IT professionals think that preparing cost
estimates is a job for accountants
◦ Another perceived reason for cost overruns is that
many IT projects involve new technology or business
processes.
 Any new technology or business process is untested and
has inherent risks.

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 What is Cost and Project Cost
Management?

 Cost is a resource sacrificed or foregone to

achieve a specific objective or something given
up in exchange
◦ Measured in monetary units like dollars

 Project cost management includes the

processes required to ensure that a project is
completed within an approved budget

 Project managers must make sure their

projects are well defined, have accurate
schedule and cost estimates, and have a
realistic budget
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 Project Cost Management
Processes
Figure 6. Cost Management Main Processes

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 Planning Cost Management

 Startwith plan to manage your budget

 Planning how the costs will be managed
throughout the life of the project

 Itinvolves determining the policies, procedures,

and documentation that will be used for
planning, executing, and controlling project
cost.

 Describes how the project cost will be

◦ Planned
◦ Structured
◦ Controlled
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 Cost Management Plan
Examples of OPAs are:
• Previous Project Plans
• Software Tools
• Database & KB of Project
Information.
• Lessons Learned
• Historical Information, etc.
Seble E.
Examples of EEFs:
• Organizational processes, and
infrastructure
• Product/Quality/Government standards
• Market standards and conditions.
• Staffing guidelines
• Reviews and training records, etc.
35
May 22, 2024
 Estimating Costs

 Developing an approximation or estimation of the

costs of the resources needed to complete a project

 Project managers must take cost estimates seriously if

they want to complete projects within budget
constraints

 It’s important to know

◦ the types of cost estimates
 A rough order of magnitude (ROM) estimate
 A budgetary estimate
 A definitive estimate
◦ how to prepare cost estimates, &
◦ typical problems associated with IT cost estimates

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 Cost Estimates I – T – O

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 Cost Estimate - Inputs

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 Cost Estimation Tools and Techniques

 Basic tools and techniques for cost estimates:

◦ Analogous or top-down estimates: use the actual cost
of a previous, similar project as the basis for estimating
the cost of the current project
◦ Bottom-up estimates: involve estimating individual
work items or activities and summing them to get a
project total
◦ Parametric modeling uses project characteristics
(parameters) in a mathematical model to estimate
project costs
◦ Three-point estimates involve estimating the most
likely, optimistic, and pessimistic costs for items.

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 Sample Cost Estimate

Figure: Surveyor Pro Project Cost Estimate

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 Surveyor Pro Software Development Estimate

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 Determining the Budget

 Allocating the overall cost estimate to individual work

items to establish a baseline for measuring
performance (Cost Baseline)

 Cost budgeting is the process of aggregating the estimated

costs of individual activities/work packages to establish an
authorized cost baseline.
 It involves allocating the project cost estimate to
individual work items over time
 The WBS is a required input to the cost budgeting
process since it defines the work items
 The main goal of the cost budgeting process is to
produce a cost baseline for measuring project
performance and to determine project funding
requirements.
◦ A cost baseline is a time-phased budget that project managers
Seble E. use to measure and monitorMay
cost performance.
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 Determining the Budget
Baseline
◦ A starting point used for comparisons
◦ A fixed point used as a reference
◦ Scope Baseline
 Fixing the scope of the project
 Using the Scope Baseline to track the project
◦ Schedule Baseline
 Fixing the schedule of the project start and
end
◦ Cost Baseline
 Time phased spending plan of the project
budget. i.e.
 Budgetary allowed for a given period
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 Components of Triple Constraint Baselines

◦ Scope Baseline Components

 Scope Statement
 WBS Approved
 WBS Dictionary
◦ Schedule Baseline
 Approved Project Schedule
◦ Cost Baseline
 Approved Time phased spending plan

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 Determining the Budget …

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SPM
 Surveyor Pro Project Cost Baseline

(Schwalbe, 2018, pp. 305)

May 22, 2024 46
SPM
 Controlling Costs

 Refers to controlling changes to the project budget

 Project cost control includes
◦ Monitoring cost performance
◦ Reviewing changes
◦ Ensuring that only appropriate project changes are
included in a revised cost baseline
◦ Notifying project stakeholders of changes related to costs.
 Informing project stakeholders of authorized changes to the project
that will affect costs
 Many organizations around the globe have problems
with cost control
 Earned value management is an important method
used for measuring project performance.

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 Earned Value Management (EVM)

 EVM is a project performance measurement technique

that integrates scope, time, and cost data
 Given a baseline (original plan plus approved changes),
you can determine how well the project is meeting its
goals
 You must enter actual information periodically to use
EVM
 More and more organizations around the world are using
EVM to help control project costs
 Helps is to know
◦ The planned value
◦ Actual cost incurred for an activity/activities
◦ To estimate the funds required for the complete work of the
project at a given point in time.
◦ To estimate the funds required for the remaining work of the
project at a given point in time
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 EVM …
To obtain performance reports Schedule &
Cost
 EVM Reports
◦ Schedule Performance Reporting
 Activities completion per schedule
 Schedule Milestones, etc.
◦ Cost Performance Reporting
 Budget Spent
 Budget Remaining,
 Anticipated budget to complete the project,
etc.
 Reading Assignment
◦ Read more about how EVM is used to track the
performances of triple constraints of a project
(Scope, Time, & Cost) May 22, 2024 49
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 Project Portfolio Management

 Many organizations collect and control an

entire suite of projects or investments as
one set of interrelated activities in a
portfolio
 Five levels for project portfolio management
1. Put all your projects in one database
2. Prioritize the projects in your database
3. Divide your projects into two or three budgets
based on type of investment
4. Automate the repository
5. Apply modern portfolio theory, including risk-
return tools that map project risk on a curve

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 Benefits of Portfolio Management
Schlumberger saved $3 million in one
year by organizing 120 information
technology projects into a portfolio

Reduced redundant projects and

coordinated those with overlap

IT projects can be huge investments, so

it makes sense to view them as
portfolios and track their progress as a
whole

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 Using Software to Assist in Cost
Management
 Spreadsheets are a common tool for resource
planning, cost estimating, cost budgeting, and
cost control

 Many companies use more sophisticated and

centralized financial applications software for
cost information

 Projectmanagement software has many cost-

related features, especially enterprise PM
software

 Portfolio management software can help

reduce costs
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 Summary
 Project time & cost managements are often
cited as the main source of conflict on
projects, and most IT projects exceed time &
cost estimates
 The main processes involved in project time
management include defining activities,
sequencing activities, estimating activity
resources, estimating activity durations,
developing the schedule, and controlling the
schedule.
 Network diagram, Gant chart, CPM
 Project cost mgt. main processes include plan
cost mgt., estimate costs, determine the budget, &
control costs (EVM, & project Portfolio Mgt.)

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SPM
Thank You