1. Estimating, scheduling and budgeting
Chapter 9
Estimating, scheduling and budgeting

2. Learning objectives After reading this chapter, you should be able to:
explain the importance of project scheduling and budgeting
describe the main techniques used in estimating the duration and cost of activities
construct and analyse project networks
draw Gantt charts and comment on their value for project control
use simple techniques to help optimise a schedule
explain the differences between top-down, bottom-up and iterative budgeting
construct a cost breakdown structure from a knowledge of the work breakdown structure and organisation breakdown structure
construct a time-phased project budget from a knowledge of the project schedule, cost estimates and the cost breakdown structure
draw S-curves to graphically illustrate project cash flows

3. The project schedule
About sequencing project activities and milestones into a sensible and logical order to aid project execution and control

4. Estimating activity durations
There are three ways to estimate activity durations:
Use historical data
Time the activity
Use a probabilistic method

5. Weighted average technique
Based on three estimates of the duration of an activity, often arrived at by expert judgment:
Most optimistic (a) – the minimum time this activity would take to complete if everything went exactly as expected without any difficulties or problems whatsoever.
Most likely (m) – the most likely duration assuming normal conditions.
Most pessimistic (b) – the expected duration if major difficulties are encountered.

7. Defining activity dependencies and creating a project network
Sequencing activities in parallel or in a series

8. The network diagram
A network diagram not only shows the relationships between activities but can be used to reveal which activities are time-critical, and so warrant greater management attention

9. Activity boxes Each activity has seven attributes:
The activity code and name (middle row)
The estimated duration of the activity (top row, middle)
Earliest start and finish times (top row, left and right respectively)
Latest start and finish times (bottom row, left and right respectively)
Float or slack (bottom row, middle)

11. Activity relationships
There are four basic relationships that can be expressed between two activities (A and B):
Finish-to-start
Start-to-start
Finish-to-finish
Start-to-finish

13. Creating a network
The most challenging aspect of creating a network is getting the relationships between the activities defined correctly
To begin, write out the activities on cards of Post-it notes and start arranging them to reflect the logical relationships
Or, if you have planned similar projects before, you may have historical records that contain information about the activities you will need to perform and how they should relate to each other

14. A network is a special chart to show the relationships between project activities.

15. The logical relationships in a project can also be expressed in the form of a dependency table.

16. Analysing the network to determine the critical path
The critical path is defined as the path through the network having the longest duration
The critical path defines the expected duration of a project
If a critical activity overruns, the project will also overrun (unless special action is taken)

17. Activity floats
Activities that are not critical are said to have float (or slack)
Float = LFT – EFT or
Float = LST – EST
Critical activities have zero float

18. Importance of network analysis
Knowing which activities lie on the critical path is important for the project manager and other stakeholders
These are the activities that are most likely to cause a delay to the project schedule
Identifying the critical path helps the project manager concentrate his or her time on areas of the project that are most likely to cause delays
The critical path is also used to help plan and schedule resources for the project

19. Gantt charts Another way of representing scheduling information
Intuitively easier to interpret than networks
Note that:
activities are arranged from top to bottom
time is plotted to scale from left to right
activity bars begin at their earliest start time
critical activities are highlighted

21. Milestones
Special events in the life of a project to which you want to draw added attention to
Events rather than activities, so they take up no time
Normally represented on Gantt charts as a diamond and in network diagrams as elements with zero duration

22. Methods available for shortening the duration of a project:
Project crashing
Network re-evaluation
Fast tracking
Rescoping
Increased procurement
Lean thinking

23. Project budgeting
Used by managers to fix in advance the resources that a project will use
Budgets represent the planned cost of a project at inception
Is all about allocating resources to a project
How much money (or other resources, e.g. labour)
How much detail
The progress status of a project cannot be determined without reference to both schedule and budget

24. The building blocks of a budget
Expenditures
Revenues
Cash flow
A time-phased plan

25. Approaches to budgeting
Top-down budgeting
Bottom-up budgeting
Iterative budgeting
Risk and management reserve

26. Tools and techniques for cost estimating
Analogous estimating (or top-down estimating)
Parametric estimating
Definitive estimating (or bottom-up estimating)

27. Cost budgeting
Relating cost estimates to schedule and producing time-phased cost and cash flow projections
Payment milestones can be used to produce projections of cash flow
The WBS and OBS can be combined to form a cost breakdown structure (CBS)
The CBS forms the basis of the cost reporting structure for the project
The building blocks for the CBS are called ‘control accounts’

28. The cost breakdown structure (CBS)

29. S-curves
Show cumulative project cost against time

30. Cash flow projections
With the creation of project S-curves, cash flow analysis can be performed and the feasibility of the budget tested
If the resulting cash flow is not acceptable, it is possible to modify the schedule
For example: by delaying or bringing forward activities that have float