San Diego State University Budget Estimation Process Paper class is project manegment can u answer i uploaded the chapters to answer SCM 515 Study Guide fo

San Diego State University Budget Estimation Process Paper class is project manegment can u answer i uploaded the chapters to answer SCM 515 Study Guide for the Final
Terms and concepts you should know:
Ch 7
the budget estimation process:
does it measure of a project’s progress or value to the organization?
scalling various cost elements based on historical data?
How did the Mars Pathfinder and Sojourner Rover project achieve cost reductions?
Is budgeting a way to allocate scarce resources?
Uncertainty in budgeting
Top-down vs bottom-up budgeting
Contingency reserves
Why have professional cost estimators?
Certainty in projects
Learning curves, learning rates
RFPs
Monte Carlo simulation
Risk management
Ch 8
What tool influences the management of projects most?
GANTT charts
PERT charts
Org charts
Schedules
Tasks, activities, events, paths, networks, AON, AOA
Variance, standard deviation
Milestones
PERT, CPM
Pessimistic, optimistic and most likely times
Parkinson’s Law
What defines the critical path?
Gamma & normal distributions
Iterative scheduling
Ambiguities in projects
Relation between time for completion and costs of a project
MSP, Crystal Ball, Excel and projects
Ch 9
Resources for projects
Expediting a project
Crashing
Critical resources
Fast-tracking and change orders, productivity, costs, time
Over-determined systems
Resource loading, resource leveling
Disruptive work situations
Constrained resources
Reasons for lack of scarce resources
Heuristics, priority rules
Scheduling and allocating resources for multiple projects
Measures of effectiveness of PM scheduling: schedule slippage, resource utilization, in-process inventory
Goldratt’s Critical Chain & constrained resource scheduling
Overly optimistic PMs
Independent activities, parallel activities & resources
Ch 10
Project management systems
Project monitoring systems & up-front planning
Most important thing to manage on a project
Measuring project performance
Reporting systems & detail
Common problems in project reports
Project reports and WBS
Routine, exception and special analyses
Percent completion estimation
Resource flow variance, cost variance, SPI
Burnup charts
Ch 11
PM’s primary function
What is involved in the control of physical assets
Does project control involve ethical considerations?
Is growth and development of people part of HR stewardship?
Three types of project control processes: cybernetic, go/no-go, and post-control
Know something about each of these control processes (eg, which is most common?)
Proactive aspects of project control
Human response to steering controls
Phase-gated approach to control
Discovery-driven form of control
Post-controls
Costs of control systems
Properties of effective control systems
SPI, critical ratio (CR), CPI, and earned value
Benchmarking
Reasons for scope creep
How to respond to client’s requests to increase the scope or functionality of a project
Ch 12
Ancillary goals of projects
Problems with unstated project goals
Why a company initiates projects
Project evaluation vs planned progress and performance
Elements in the evaluation of a project
Project audits and financial audits and their scope
Limits on the depth of investigation and level of detail in a audit
Post-project audits
Steps in a project audit
How to select an audit team
Where should the information needed for a project audit come from?
Project auditor/evaluator (a/e) team responsibilities
How to measure audit data: what is easy, what is hard
Ch 13 Project Closure
Fundamental ways to close out a project: Extinction, addition, integration, and starvation
Causes, circumstances and characteristics for each
Is closure easy or complicated?
Two critical success factors for projects
Cases of early termination
Uncertainty associated with projects
What should be in the project final report? Why write one?
Phases in benefits realization
Pitfalls to implementation and adoption of a system by users implies the PO should plan in advance for
implementation
Does anybody really use this stuff? Results of a survey (see Afterword)
Chapter 7
Copyright 2018 John Wiley & Sons, Inc.
Budgeting and Risk
Management
Budgeting (Slide 1 of 2)
• Budgeting is the allocation of scarce resources to
the various endeavors of an organization
• A budget is a plan for the costs of project resources
• A budget implies constraints
• Thus, it implies that managers will not get
everything they want or need
7-2
Budgeting (Slide 2 of 2)
• The budget for an activity also implies management
support for that activity
• Higher the budget, relative to cost, higher the
managerial support
• The budget is also a monitoring & control mechanism
• Many organizations have controls in place that prohibit
exceeding the budget
• Comparisons are against the budget
7-3
Estimating Project Budgets
• Like any forecast, this includes some uncertainty
• There is uncertainty regarding usage and price
• Especially true for material and labor
• The more standardized the project and
components, the lower the uncertainty
• The more experienced the cost estimator, the lower
the uncertainty
• Can use previous, similar projects as guides
7-4
Rules of Thumb
• Some estimates are prepared by rules of thumb
• Construction cost by square feet
• Printing cost by number of pages
• Lawn care cost by square feet of lawn
• These rules of thumb may be adjusted for special
conditions
• However, this is still easier than starting the
estimate from scratch
7-5
Budgeting Concepts
• Tradition
• Life cycle costing
• Actual costs and earned value analysis
• Tracing expenses to specific tasks
7-6
Estimating Budgets is Difficult (slide 1 of 2)
•
•
•
There may not be as much historical data or
none at all
Even with similar projects, there may be
significant differences
Many people have input to the budget
7-7
Estimating Budgets is Difficult
•
•
•
•
(Slide 2 of 2)
Multiple people have some control over the
budget
There is more “flexibility” regarding the
estimates of inputs (material and labor)
The accounting system may not be set up to
track project data
Usage of labor and material is very lumpy over
time
7-8
Types of Budgeting
•
•
•
Top-down
Bottom-up
Negotiated
7-9
Top-Down Budgeting
• Top managers estimate/decide on the overall
budget for the project
• These trickle down through the organization where
the estimates are broken down into greater detail
at each lower level
• Sometimes viewed as zero-sum game
• The process continues to the bottom level
7-10
Advantages
• Overall project budgets can be set/controlled very
accurately
• A few elements may have significant error
• Management has more control over budgets
• Small tasks need not be identified individually
7-11
Disadvantages
• More difficult to get buy in
• Leads to low level competition for larger shares of
budget
7-12
Bottom-Up Budgeting
• Project is broken down into work packages
• Low level managers price out each work package
• Overhead and profits are added to develop the
budget
7-13
Reserve Analysis
• Contingency reserve
• Management reserve
7-14
Advantages
• Greater buy in by low level managers
• More likely to catch unusual expenses
7-15
Disadvantages
• People tend to overstate their budget requirements
• Management tends to cut the budget
7-16
Work Element Costing
• Labor rates include overhead and personal time
• Direct costs usually do not include overhead
• General and administrative (G&A) charge
7-17
Estimation Examples
• Assume a work element is estimated to require 25
hours of labor by a technician.
• The specific technician is paid $17.50/hr.
• Overhead charges to the project are 84 percent of
direct labor charges
25 hr × $17.50 × 1.84 = $805.00
• Assume 12% personal time
1.12 × 25 hr × $17.50 × 1.84 = $901.60
7-18
An Iterative Budgeting Process–
Negotiation-in-Action
• Most projects use some combination of top-down
and bottom-up budgeting
• Both are prepared and compared
• Any differences are negotiated
7-19
Opposing Views of Superior and
Subordinate
7-20
Category Budgeting Versus
Program/Activity Budgeting
• Organizations are used to budgeting (and collecting
data) by activity
• These activities correspond to “line items” in the
budget
• Examples include phone, utilities, direct labor,…
• Projects need to accumulate data and control
expenses differently
• This resulted in program budgeting
7-21
Typical Monthly Budget
7-22
Project Budget by Task & Month
7-23
Improving The Process of Cost
Estimation
• Inputs from a lot of areas are required to estimate a
project
• May have a professional cost estimator to do the
job
• Their primary job is to reduce uncertainty
• Project manager will work closely with cost
estimator when planning a project
• We are primarily interested in estimating direct
costs
• Indirect costs are not a major concern
7-24
Problems
• Even with careful planning, estimates are wrong
• Most firms add 5-10 percent for contingencies
7-25
Not Always About The Profit
• To develop knowledge of a technology
• To get the organization’s “foot in the door”
• To obtain the parts or service portion of the work
• To be in a good position for a follow-on contract
• To improve a competitive position
• To broaden a product line or a line of business
7-26
Project Bids and RFPs
• The project proposal is essentially a project bid
• Putting together a project proposal requires a
detailed analysis of the project
• Project proposals can take weeks or months to
complete
• A more detailed analysis may result in not bidding
on the project
7-27
Questions To Consider
• Which projects should be bid on?
• How should the proposal-preparation process be
organized and staffed?
• How much should be spent on preparing proposals
for bids?
• How should the bid prices be set? What is the
bidding strategy? Is it ethical?
7-28
Project Proposal Contents
• Cover letter
• Executive summary
• The technical approach
• The implementation plan
• The plan for logistic support and administration
• Past experience
7-29
Learning Curves
• Human performance usually improves when a task
is repeated
• This happens by a fixed percent each time the
production doubles
• Percentage is called the learning rate
7-30
Learning Curves
7-31
Learning Curve Calculations
Tn = T1n
Tn
T1
n
r
r
log (rate)
r=
log 2
= Time for nth unit
= Time for first unit
= Number of units
= log decimal
rate/log 2
N
Total time = T1  n
r
n =1
7-32
A Special Case of Learning –
Technological Shock
• New systems may promise efficiency, but it may
take time to realize
7-33
Other Factors
• Escalation
• Waste
• Bad Luck
7-34
Project Risk Management
• Considerable more interest in risk management now
• The human factor is probably the major element
• Consider risk attitude or tolerance
• Tailor risk communication to the audience
7-35
Subprocesses of Risk
Management
1.
2.
3.
4.
5.
6.
7.
Risk management planning
Risk identification
Qualitative risk analysis
Quantitative risk analysis
Risk response planning
Risk monitoring and control
The risk management register
7-36
Risk Management Planning
• Need to know the risk involved before selecting a
project
• Risk management plan must be carried out before
the project can be formally selected
• At first, focus is on externalities
• Track and estimate project survival
• Project risks take shape during planning
• Often handled by project office
7-37
Risk Management Planning
• Types of risks
1. Preventable
2. Strategy
3. External
7-38
Risk Identification
• Risk is dependent on technology and
environmental factors
• Delphi method is useful for identifying project risks
• Other methods include brainstorming, nominal
group techniques, checklists, attribute listing, and
EWS.
• May also use cause-effect diagrams, flow charts,
influence charts, SWOT analysis
7-39
Qualitative Risk Analysis
• Purpose is to prioritize risks
• A sense of the impact is also needed
• Each objective should be scaled and weighted
• Construct a risk matrix
• Same approach can be used for opportunities
7-40
Risk Matrix
Figure 7.6 Risk Matrix
7-41
International Project Risk Categories
• Cultural
• Political
• Regional
• Virtual
7-42
Quantitative Risk Analysis
• More precise than qualitative
• Typically more accurate
• Three techniques:
1.
2.
3.
Failure Mode and Effect Analysis
Decision Tree Analysis
Simulation
7-43
Risk Response Planning
Threats
• Avoid
• Transfer
• Mitigate
• Accept
Opportunities
• Exploit
• Share
• Enhance
• Accept
7-44
Risk Monitoring and Control
• Monitoring covered in detail in Chapter 10
• Control covered in Chapter 11
7-45
The Risk Register
• Environments that may impact projects
• Assumptions made
• Risks identified
• List of categories and key words
• Estimates on risk, states of project’s environment,
or on project assumptions
• Minutes
• Actual outcomes
7-46
Quantitative Risk Assessment
7-47
Failure Mode and Effect Analysis
1.
2.
3.
4.
5.
List ways a project can fail
Evaluate severity
Estimate likelihood
Estimate the inability to detect
Find the risk priority number (RPN) (RPN = S  L
 D)
6. Consider ways to reduce the S, L, and D for each
cause of failure
7-48
Decision Tree Analysis
Figure 7.7
7-49
General Simulation Analysis
• Simulation combined with sensitivity analysis is
useful for evaluating projects
• Would support project if NPV is positive and is the
best use of funds
• Should avoid full-cost philosophy
• Some overheads are not affected by changes
• Analysis gives a picture in terms of costs and times
that will be affected
• Project is then reviewed using simulation
7-50
Monte Carlo Simulation
• Can handle both threats and opportunities and
sequential events
7-51
Sensitivity Analysis
• Also referred to as “What-if” analysis
• Can be used for quantitative and qualitative models
• Process includes going back into the model to
change one parameter and see impact on final
result
• Weakness: In reality, a single change in
environment doesn’t happen
• There is also “scenario sensitivity analysis”
7-52
Dealing With Project Disasters
• What to do if a loss is catastrophic?
• Even if the probability is low
• Buy insurance
• What if insurance isn’t available?
• Four approaches for project disaster planning
•
•
•
•
Risk analysis
Contingency planning
Developing logic charts
Tabletop Exercises
7-53
Copyright
Copyright © 2018 John Wiley & Sons, Inc.
All rights reserved. Reproduction or translation of this work beyond that permitted
in Section 117 of the 1976 United States Act without the express written
permission of the copyright owner is unlawful. Request for further information
should be addressed to the Permissions Department, John Wiley & Sons, Inc. The
purchaser may make back-up copies for his/her own use only and not for
distribution or resale. The Publisher assumes no responsibility for errors,
omissions, or damages, caused by the use of these programs or from the use of
the information contained herein.
7-54
Chapter 8
Scheduling
Copyright 2018 John Wiley & Sons, Inc.
Useful Abbreviations
• CPM – Critical Path Method
• PERT – Program Evaluation and Review Technique
8-2
Background (Slide 1 of 2)
• Schedule is the conversion of a project action plan
into an operating timetable
• Basis for monitoring a project
• One of the major project management tools
• Work changes daily, so a detailed plan is essential
• Not all project activities need to be scheduled at the
same level of detail
8-3
Background (Slide 2 of 2)
• Most of the scheduling is at the WBS level, not the
work package level
• Only the most critical work packages may be shown
on the schedule
• Most of the scheduling is based on network
drawings
8-4
Network Scheduling Advantage (Slide 1 of 2)
• Consistent framework
• Shows interdependences
• Shows when resources are needed
• Ensures proper communication
• Determines expected completion date
• Identifies critical activities
8-5
Network Scheduling Advantage (Slide 2 of 2)
• Shows which of the activities can be delayed
• Determines start dates
• Shows which task must be coordinated
• Shows which task can be run parallel
• Relieves some conflict
• Allows probabilistic estimates
8-6
Network Scheduling Techniques:
PERT (ADM) and CPM (PDM)
• PERT was developed for the Polaris
missile/submarine project in 1958
• CPM developed by DuPont during the same time
• Initially, CPM and PERT were two different
approaches
• CPM used deterministic time estimates and allowed
project crunching
• PERT used probabilistic time estimates
• Microsoft Project (and others) have blended CPM
and PERT into one approach
8-7
Terminology (Slide 1 of 3)
• Activity – A specific task or set of tasks that are
required by the project, use up resources, and take
time to complete
• Event – The result of completing one or more
activities
• Network – The combination of all activities and
events that define a project
• Drawn left-to-right
• Connections represent predecessors
8-8
Terminology (Slide 2 of 3)
• Path – A series of connected activities
• Critical – An activity, event, or path which, if delayed,
will delay the completion of the project
• Critical Path – The path through the project where, if
any activity is delayed, the project is delayed
• There is always a critical path
• There can be more than one critical path
8-9
Terminology (Slide 3 of 3)
• Sequential Activities – One activity must be
completed before the next one can begin
• Parallel Activities – The activities can take place at
the same time
• Immediate Predecessor – That activity that must be
completed just before a particular activity can begin
8-10
Sequential Activities
8-11
AON and AOA Format
8-12
Constructing the Network
• Begin with START activity
• Add activities without precedences as nodes
• There will always be one
• May be more
• Add activities that have those activities as
precedences
• Continue
8-13
Sample of Network Construction
8-14
Sample of Network Construction
8-15
Gantt (Bar) Charts
• Developed by Henry L. Gantt
• Shows planned and actual progress
• Easy-to-read method to know the current status
8-16
Advantages and Disadvantage
• Advantages
• Easily understood
• Provide a picture of the current state of a project
• Disadvantage
• Difficult to follow complex projects
8-17
Microsoft Project Gantt Chart
8-18
Microsoft Project AON Network
8-19
An Important Aside on Estimating
Activity Times
• It is vital to good project management to be
meticulously honest in estimating the time required
to complete each of the various tasks included in the
project
• No false deadlines
• Evaluate alternative ways of completing work.
8-20
Solving the Network
8-21
The AON Network From The Previous Table
8-22
Calculating Activity Times
• Use three time estimates:
•
•
•
Optimistic
Pessimistic
Most likely
8-23
Calculating Activity Times
(
a + 4m + b )
TE =
6
 (b − a ) 
 =

 6 
2
2
= 
2
8-24
The Results
8-25
Parkinson’s Law
• Work expands to fill the allotted time
8-26
Critical Path and Time (Slide 1 of 2)
8-27
Critical Path and Time (Slide 2 of 2)
8-28
Slack (aka, Float)
• LS – ES or LF – EF
8-29
Slack Values
8-30
Precedence Diagramming Restrictions
• Finish to start
• Start to start
• Finish to finish
• Start to finish
8-31
Precedence Diagramming Conventions
8-32
Microsoft Project
8-33
Gantt Chart
8-34
AON Network
8-35
Microsoft Project Calendar
8-36
Uncertainty of Project Completion Time
• Assume activities are statistically independent
• Vari…
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