The Project Schedule and Budget Chapter 7 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

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-it-fiasco/5063357.article#.UlbD8NKsh8E

Project Cost Management Processes Process Group Cost Management Process Major Output Planning CP1: Planning Cost Mgmt Cost Management Plan CP2: Estimating Costs Activity Cost Estimates CP3: Determining the Budget Cost Performance Baseline Monitoring and Controlling MC1: Controlling Costs Work Perf. Measurements Budget Forecasts

What is Cost and Project Cost Management?

Project Cost Management Processes Scope Baseline Schedule Baseline Estimate bases Project Funding Req. Determine Budget Control Costs Estimate Costs Activity Cost Estimates 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.

The Project Planning Framework

Budget and Schedule Development

Developing the Project Schedule Project Management Tools

Gantt Chart for Planning

Gantt Chart Reporting: Project’s Progress

Project Network Diagram: Activity Analysis for AON Description Estimated Duration (Days) Predecessor A Evaluate current technology platform 2 None B Define user requirements 5 C Design Web page layouts 4 D Set-up Server 3 E Estimate Web traffic 1 F Test Web pages and links C,D G Move web pages to production environment D,E H Write announcement of intranet for corp. newsletter F,G I Train users J Write report to management H,I

Activity on the Node (AON) Network Diagram

Possible Activity Paths Possible Paths Path Total Path 1 Path 2 Path 3 Path 4 Path 5

Critical Path

PERT

Activity Analysis for PERT Predecessor Optimistic Estimates (Days) Most Likely Estimates (Days) Pessimistic Estimates (Days) Expected Duration A None 1 2 4 B 3 5 8 C D 6 E F C,D G D,E H F,G I 9 J H,I .5

Activity Analysis for PERT

Possible PERT Activity Paths Possible Paths Path Total Path 1 Path 2 Path 3 Path 4 Path 5

Precedence Diagramming Method - PDM Based on 4 fundamental relationships

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

Critical Path Analysis (with slack time)