Fundamentals of Project Management: Part 1b

1. Fundamentals of Project Management: Part 1b APEGGA Annual Conference April 24 & 25, 2003 Dr. George F. Jergeas PEng. University of Calgary

2. Day 1a Introduction 5-Step PM Planning and definition Day 1b Estimating cost and time Video Organize project team Selecting PM and team Effective teams Day 2 c Project procurement Bidding process Building & sustaining project team Contract administration Day 2 d Schedule control Cost control Project Close-out Claims and disputes Schedule

3. 5-Step Project ManagementPLANNING IMPLEMENTATION CONTROL ORGANIZE DEFINE PLAN CLOSE Identify project activities State the Problem Determine Personnel Needs Define Management Style Obtain Client Acceptance Install Deliverables and Commissioning Document the Project Issue Final Report Conduct Post- Implementation Audit Identify Project Goal Estimate time and cost Recruit Project Manger Establish Control Tools List the Objectives Prepare Status Reports Review Project Schedule, cost, team report Issue Change Orders Recruit Project Team Quality and Communication management Determine Preliminary Resources Organize Project Team Bidding Identify Risks and stakeholders Success criteria Assign Work Packages Write Project Proposal Decision Project charter WBS Recruit Criteria Variance Reports Final Report Project network Define Work packages Status Reports Audit Reports Project proposal Assign Work Packages

4. Project Charter Project Name - PM Conference Project Manager: Problem/Opportunity Membership in PM Association has declined in the past four years and attendance at conference has declined in past three years. The viability and financial stability of the organization depends on maintaining membership and successful annual conference. Goal Reverse the downward trend in membership and annual conference attendance Objectives 1. Develop the Program 2. Set the Conference Site and Date 3. Design and Implement the Marketing Plan Success Criteria 1. At least 50 of previous years conferences attendees will attend 2. At least 150 of 450 members will attend 3. At least 1.5% of the non-members receiving conference brochure will attend 4. At least 5% of the non-member attendees will join PM Assumptions and Risks 1. Interest in PM can be renewed through the annual conference 2. A quality professional program will attract members and non-members 3. Key speaker(s) fail to show up or submit written paper. Stakeholders Attendees, Speakers, Hotel, PM Association, Organizing team

5. Risk Quantification Technique: High, Medium, Low (HML) • H HH • M Impact • L L M H Probability

6. Stakeholder Analysis STAKEHOLDER Objective Potential Impact How They Operate Where they gain Support How to Manage them and plan for mitigation Fundamentals of Project Management Tool Kit

7. Hierarchical Representation CONFERENCE PLANNING PROGRAM SITE MARKETING THEME MATERIALS SPEAKERS DATE PLACE LISTS BROCHURE REGISTER OBTAIN MATERIALS PREPARE KITS DESIGN BROCHURE MAIL BROCHURE

8. Estimating Time and Cost • Once the WBS is completed then time and cost estimates for each activity can be started. • With experience this becomes an easier task.

9. Time Management KA2 • Purpose: Create a realistic schedule with the team • Identify the activities (tasks) • Use the WBS and scope statement • Develop activity lists and revise the WBS • Sequence activities • Consider dependencies

10. Time Management • Estimate durations (time) • Top down, bottom up estimates, Monte Carlo simulations • Estimating formulae (PERT estimates) • Expert opinion • Consider resource capabilities • Look at similar projects • Develop the schedule (Gantt chart) • Document assumptions and decisions • Use project management scheduling software e.g. MS Project

11. Estimating formulae • PERT Estimate (weighted average) • [Pessimistic + (4 x Likely) + Optimistic]/6 • Pessimistic time to get to work = 30 min • Optimistic time to get to work = 10 min • Likely time to get to work = 15 minutes • PERT Estimate = 30 + (4x15) + 10/6 • 100/6=16.6 = 17 min • Quick and dirty formula • [Worst + best + most likely]/3 • 55/3=18.3 min

12. Estimating Activity Time • Optimistic Completion Time - is the time the activity will take if everything goes right • Pessimistic Completion Time - is the time the activity will take if everything that can go wrong does go wrong but the project is still completed • Most Likely Completion Time - is the time required under normal circumstances. It can also be the completion time that has occurred most frequently in similar circumstances

13. Estimating Activity Time • Time to complete a task is uncertain: • Skill levels and knowledge of the individuals • equipment variations • Material availability • Unexpected events • Illness • Employee turnover and accidents

14. Estimating Activity Time • We know unexpected events and occurrences will happen but are unable to predict the likelihood with any confidence • We must however account for the possibility of the occurrence of these events

15. Estimated times for conference planning ACTIVITY TIME IN WEEKS (O) (M) (P) (E) • A Set conference date 1.0 2.0 3.0 2.0 • B Establish theme & program 2.0 5.0 8.0 5.0 • C Select conference site 4.0 5.0 6.0 5.0 • D Obtain mailing labels 4.0 6.0 8.0 6.0 • E Develop brochure 3.0 10.0 11.0 9.0

16. Estimated Times for Conference Planning ACTIVITY TIME IN WEEKS (O) (M) (P) (E) • F Obtain mailing labels 3.0 4.5 9.0 5.0 • G Mail brochure 1.0 2.0 3.0 2.0 • H Obtain speaker materials 3.0 3.5 7.0 4.0 • I Receive registrations 4.0 6.0 8.0 6.0 • J Confirm arrangements 0.5 1.0 1.5 1.0 • K Prepare conference kits 1.0 2.0 3.0 2.0

17. Scheduling Activities • Bar chart and RACI • Produce a Logical Network • Critical Path Method • Arrow Diagrams • Precedence Diagrams • Identify Critical Activities • Locate the Critical Path • Floats

18. Bar Charts/Gantt Chart • Most projects, however complex, start by being depicted on a bar chart. The principles are very simple: • Prepare list of project activities • Estimate the time and resources needed • Represent each activity by a bar • Decide logical sequence • Plot activities on a chart with horizontal time scale showing start and end

19. Project Schedule - Sample Project: ____________________ Project Manager: ____________________ Date: _____________ Sample

20. RACI Charts • Responsible - Accountable - Consulted - Informed • Identify the roles of participants in each element of a project • Effective communications road map • 4 to 8 weeks look ahead

21. RACI Charts • Update weekly to: • Reset expectations • Ensure right people involved in detailed planning • Ensure everyone knows what needs to be done by whom

22. Task Responsible Accountable Consulted Informed 1 2 RACI Chart

23. RACI Charts (F. T. Hartman, 2000) 2.4.5 Major Element Amelia Drover Fred 2-5 Deliverable:_____________________ Manager:___________________ Project:_________ DATES A C G C F M J W B D M H F W L S W E Budget Actual Budget Actual W/Hrs. W/Hrs. Cost Cost ACTION Activity Another activity Build something R A A C I I - I C 120 400 - R C I A A I A - 50 50 R - A C I I - C - 345 1,500 - R C I A A I A - 127 - R A A C I I - I C 90 9,000 R - A C I I - C - 55 1,700 Another Item Yet another Design a bit Design more Sneeze Gesundheit - A R I C C A I I 455 875 R C A A I C I - - 200 7,785 - R I I C - - - - 65 - Another thing Wait for item More stuff Finish A C R - C I C - - 20 100,000 - I C A A R I A I 655 - R A - I C I A A A 80 - A I C I I A A A R 12 100

24. CPM: Critical Path Method • Graphic network based scheduling technique • Arrow Diagrams • Precedence Diagrams • Use activities created by the WBS process • Analysis of timing and sequencing logic • Aids in identifying complex interrelationship of activities

25. CPM: Critical Path Method • Allows for easy revision of schedule and simulation and evaluation of the impact of changes • Also used as a control tool during execution of the project

26. Producing a Logical Network • The sequencing identifies activities that must be completed before another activity can start and which activities can occur simultaneously. Different methods: 1. “Low-tech” approach: use post-it labels • Each label has one activity written on it • Through iterative process the labels can be arranged and rearranged

27. Producing a Logical Network 2. Ask yourself the following: • Which activities must be completed before this activity starts? • Which activity cannot start until this activity is completed? • Which activities have no logical relationship with this activity and therefore take place at the same time (concurrent activities)?

28. Producing a Logical Network 3. Identify immediate predecessor activities, which are activities that must be completed before another activity can begin

29. Activity Sequencing: Training Example ACTIVITY IMMED. TIME(WEEKS) PREDECESSOR (E) A Set conference date - 2.0 B Establish theme/program - 5.0 C Select conference site A 5.0 D Obtain speakers B 6.0 E Develop brochure C,D 9.0 F Obtain mailing labels C,D 5.0 G Mail brochure E,F 2.0 H Obtain speaker materials D 4.0 I Receive registrations G 6.0 J Confirm all arrangements H,I 1.0 K Prepare conference kits J 2.0

30. Activity Sequencing: Training Example a c e g i start j k end f b d h

31. Activity Sequencing: Training Example 0 2 7 11 20 59 20 22 22 28 26 28 29 29 31 2 a 2 c e 4 6 6 11 11 20 g i Start 11 16 20 22 22 28 j1 k2 End f5 0 5 5 11 11 15 28 29 29 31 b5 d6 h4 15 20 0 5 5 11 24 28

32. Critical Path • The longest path is the Critical Path • Critical path is where there is zero slack time • If an activity takes longer than estimated on the critical path then the project will be delayed • The critical path can change if there is a delay that make an alternative path longer

33. Float (Slack) • Slack or float time is amount of delay that could be tolerated in the start or completion time without causing a delay in completion of the project • Total float or calculations to determine how long each activity could be delayed without delaying the project • Total float = LF - ES - duration

34. Should be able to: • Develop a complete project plan: • WBS listing all activities • Project organization and communication • Project schedule using Post-it notes and bar charts • RACI Chart(s)

35. Video • The Power of scheduling

36. Plan the Project: Basics of Cost Estimating

37. 5-Step Project ManagementPLANNING IMPLEMENTATION CONTROL ORGANIZE DEFINE PLAN CLOSE Identify project activities State the Problem Determine Personnel Needs Define Management Style Obtain Client Acceptance Install Deliverables and Commissioning Document the Project Issue Final Report Conduct Post- Implementation Audit Identify Project Goal Estimate time and cost Recruit Project Manger Establish Control Tools List the Objectives Prepare Status Reports Review Project Schedule, cost, team report Issue Change Orders Recruit Project Team Quality and Communication management Determine Preliminary Resources Organize Project Team Bidding Identify Risks and stakeholders Success criteria Assign Work Packages Write Project Proposal Decision Project charter WBS Recruit Criteria Variance Reports Final Report Project network Define Work packages Status Reports Audit Reports Project proposal Assign Work Packages

38. Introduction • Cost estimates: • Key to successfully conceived, managed and completed projects • An approximation procedure • Mistakes can be very costly!

39. What is a Cost Estimate? • AACEI Definition • “A compilation of all the costs of the elements of a project or effort included within an agreed upon scope” • To the contractor • “To forecast cost required to complete a project in accordance with the contract, plans and specifications” • To the owner cost includes: • Administering the contract • Contractor's charges, consultants and suppliers fees • Price of land, financing and operating costs

40. What Constitutes a Good Estimate? • A clear, sound basis • An agreed upon realistic execution plan • Good estimating methods and data base • Good experienced estimator

41. Order - of - Magnitude Estimates • A quick method of determining an approximate probable cost of a project due to the following specific situations: • Time constraints • High cost of a detailed estimate

42. Order - of - Magnitude Estimates • Prepared without detailed engineering data • Square feet of floor area • Cubic feet of volume • Plant capacity for input and output • Km of road surface type • Use: In feasibility studies of a project and screening several types of alternatives or proposals • Accuracy: +/- 30%

43. Definitive Estimates • Prepared from very defined engineering data • Requires as a minimum: • Plans and elevations • Piping and instrument diagrams • Single line electrical diagrams • Equipment data sheets and quotations • Architectural and structural details • Soil data and sketches of major foundations • A complete set of specifications • Accuracy: +/- 5%

44. Components of a Cost Estimate • Direct Cost • Labour: actual amount paid to field personnel • Materials: essential to constructing and operating a facility including equipment installed permanently • Equipment: used to perform a contract • Subcontracts

45. Components of a Cost Estimate • Indirect Costs • Overhead • Home office overhead • Site overhead • Taxes • Risks • Contingency • Profit • Escalation

46. Profit • Is the amount of money included by the contractor in its price as compensation for risk, effort and endeavor in undertaking a project. • It is the money left after a contractor has met all costs (both indirect and direct). • Profit amount included is very subjective and depends on: • Size of project • Extent of risk involved • Need for work • Extent of competition

47. Contingency • An amount added to cover any additional costs that may occur. • To determine the amount of contingencies desirable, an estimator should rely on: • Personal judgment, or • Through statistical analysis of past project costs

48. Training Example: Estimated Conference Planning Budget CONFERENCE PLANNING $243,325 Site $170,425 Program $41,100 Marketing $31,800 Theme $600 Materials $13,300 Speakers $27,200 Date $1,000 Location $169,425 Lists $2,000 Brochure $29,800 Registration 3 conf calls with pgm comm Travel/expenses for 16 speakers @ $500 per speaker 3 site visits @ $800/visit food @$50 per person/day for 3 days for 1100 meeting rooms @ $225/day/room for 3 days for 3 rooms Deposit 25,000 labels @ $80/1000 Obtain Speaker Materials $800 Prepare Conference Notebook $12,500 Design Brochure $12,800 Mail Brochure $17,000 Layout: 16 pages @ $50/page Printing: 30,000 copies @ $0.40/copy 25,000 pieces @ $0.68/piece 1100 binders @ $5/binder photocopy materials 350,000 pages @ $0.02/page Edit/format @ $50/speaker

49. Writing a Project Proposal

50. 5-Step Project ManagementPLANNING IMPLEMENTATION CONTROL ORGANIZE DEFINE PLAN CLOSE Identify project activities State the Problem Determine Personnel Needs Define Management Style Obtain Client Acceptance Install Deliverables and Commissioning Document the Project Issue Final Report Conduct Post- Implementation Audit Identify Project Goal Estimate time and cost Recruit Project Manger Establish Control Tools List the Objectives Prepare Status Reports Review Project Schedule, cost, team report Issue Change Orders Recruit Project Team Quality and Communication management Determine Preliminary Resources Organize Project Team Bidding Identify Risks and stakeholders Success criteria Assign Work Packages Write Project Proposal Decision Project charter WBS Recruit Criteria Variance Reports Final Report Project network Define Work packages Status Reports Audit Reports Project proposal Assign Work Packages