Scheduling and Budgeting

1. Scheduling and Budgeting Week 6 IBS 540

2. Scheduling • A schedule is the conversion of a project action plan into an operating timetable • It serves as the basis for monitoring and controlling project activity • Taken together with the plan and budget, it is probably the major tool for the management of projects

3. Scheduling • In a project environment, the scheduling function is more important than it would be in an ongoing operation • Projects lack the continuity of day-to-day operations and often present much more complex problems of coordination

4. Scheduling • The basic approach of all scheduling techniques is to form a network of activity and event relationships • This network should graphically portray the sequential relations between the tasks in a project • Tasks that must precede or follow other tasks are then clearly identified, in time as well as function

5. Scheduling • Such networks are a powerful tool for planning and controlling a project and have the following benefits: • It is a consistent framework for planning, scheduling, monitoring, and controlling the project • It illustrates the interdependence of all tasks, work packages, and work elements • It denotes the times when specific individuals must be available for work on a given task

6. Scheduling • Network benefits (cont.): • It aids in ensuring that the proper communications take place between departments and functions • It determines an expected project completion date • It identifies so-called critical activities that, if delayed, will delay the project completion time • It identifies activities with slack that can be delayed for specific periods without penalty

7. Scheduling • Network benefits (cont.): • It determines the dates on which tasks may be started - or must be started if the project is to stay on schedule • It illustrates which tasks must be coordinated to avoid resource timing conflicts • It illustrates which tasks may run, or must be run, in parallel to achieve the predetermined project completion date • It relieves some interpersonal conflict by clearly showing task dependencies

8. Network Techniques: PERT and CPM • With the exception of Gantt charts, the most common approach to scheduling is the use of network techniques such as CPM a.k.a PERT • The critical path method (CPM) was invented by project managers in the early 1950's. • The US Navy adapted and improved it to manage the Polaris missile project in the late 1950's. Naming the technique PERT (Program Evaluation and Review Technique) the Defense, Aerospace, and other industries adopted the tool as the major project tool to this day.

9. Network Techniques: PERT and CPM • PERT lists the specific activities that make up a project, their duration and the activities that must be completed before a specific activity can start.

10. Activity This PERT chart shows the relationship between each activity, no activity can begin before its precedent activities are completed. The precedents are the activities that the arrows come from. The time (in days) for each activity is noted in its box (for example Patient Teaching has an expected time of T=2 days). These relationships create pathways through the process. Summing the times along each pathway gives the pathways length or duration. The longest pathway is the critical pathway, the critical pathway is the longest pathway in the process. The process cannot end before the critical pathway ends. In the diagram the critical pathway consists of the bold faced boxes.

11. Terminology • 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 define the project and the activity precedence relationships

12. Terminology • Path - The series of connected activities (or intermediate events) between any two events in a network

13. What is Critical Path (CPM)? • Critical Path - the path of longest duration as determined on a project network diagram. The critical path determines the total duration of the project. If a task on the critical path is delayed, the final completion of the project will likely be delayed. • The critical path is "critical" because tasks that follow a critical task cannot be started until all of the previous tasks on the critical path are completed.. The critical tasks will have starting and finishing times that are fixed relative to the start of the project. • Tasks not on the critical path will usually have some flexibility relative to when they can start and finish. This flexibility is called "float", or sometimes "slack". Float is the difference between the time available for performing a task and time required to complete a task.

14. Terminology • An activity can be in any of these conditions: • It may have a successor(s) but no predecessor(s) - starts a network • It may have a predecessor(s) but no successor(s) - ends a network • It may have both predecessor(s) and successor(s) - in the middle of a network

15. Scheduling

16. Scheduling

17. Scheduling

18. Drawing Networks

19. Scheduling

20. Scheduling

21. Student Exercise: Tasks for Preparing Dinner • A, Wash and cut salad vegetables (15 minutes) • B, Toss the salad (2 minutes) • C, Set the table (8 minutes) • D, Start the rice cooking (2 minutes) • E, Cook rice (25 minutes) • F, Place the rice in a serving dish (1 minute) • G, Mix casserole ingredients (10 minutes) • H, Bake the casserole (25 minutes) • I, Bring the food to the table (2 minutes) • J, Call the family for dinner (1 minute)

22. Gantt Charts • Shows timing of tasks • Shows sequence of tasks • The Gantt chart shows planned and actual progress for a number of tasks displayed against a horizontal time scale • It can be helpful in expediting, sequencing, and reallocating resources among tasks

24. GANTT Example

25. Gantt Charts • There are several advantages to the use of Gantt charts: • Even though they may contain a great deal of information, they are easily understood • While they may require frequent updating, they are easy to maintain • Gantt charts provide a clear picture of the current state of a project • They are easy to construct

26. Summary • Scheduling is particularly important to projects because of the complex coordination problems • The network approach to scheduling offers a number of specific advantages of special value for projects • Critical project tasks typically constitute fewer than 10 percent of all the project tasks

27. Summary • Networks are usually constructed from left to right, indicating activity precedence and event times as the network is constructed • Gantt charts are closely related to network diagrams, but are more easily understood and provide a clearer picture of the current state of the project

28. Budgeting and Cost Estimation • The budget serves as a standard for comparison • It is a baseline from which to measure the difference between the actual and planned use of resources • Budgeting procedures must associate resource use with the achievement of organizational goals or the planning/control process becomes useless • The budget is simply the project plan in another form

29. Estimating Project Budgets • In order to develop a budget, we must: • Forecast what resources the project will require • Determine the required quantity of each • Decide when they will be needed • Understand how much they will cost - including the effects of potential price inflation • There are two fundamentally different strategies for data gathering: • Top-down • Bottom-up

30. Top-Down Budgeting • This strategy is based on collecting the judgment and experiences of top and middle managers • These cost estimates are then given to lower level managers, who are expected to continue the breakdown into budget estimates • This process continues to the lowest level

31. Top-Down Budgeting • Advantages: • Aggregate budgets can often be developed quite accurately • Budgets are stable as a percent of total allocation • The statistical distribution is also stable, making for high predictability • Small yet costly tasks do not need to be individually identified • The experience and judgment of the executive accounts for small but important tasks to be factored into the overall estimate

32. Bottom-Up Budgeting • In this method, elemental tasks, their schedules, and their individual budgets are constructed following the WBS or project action plan • The people doing the work are consulted regarding times and budgets for the tasks to ensure the best level of accuracy • Initially, estimates are made in terms of resources, such as labor hours and materials • Bottom-up budgets should be and usually are, more accurate in the detailed tasks, but it is critical that all elements be included

33. Bottom-Up Budgeting • Advantages: • Individuals closer to the work are apt to have a more accurate idea of resource requirements • The direct involvement of low-level managers in budget preparation increases the likelihood that they will accept the result with a minimum of aversion • Involvement is a good managerial training technique, giving junior managers valuable experience

34. Budgeting • Top-down budgeting is very common • True bottom-up budgets are rare • Senior managers see the bottom-up process as risky • They tend not to be particularly trusting of ambitious subordinates who they fear may overstate resource requirements • They are reluctant to hand over control to subordinates whose experience and motives are questionable

35. Work Element Costing • The actual process of building a budget - either top-down or bottom-up - tends to be a straightforward but tedious process • Each work element in the action plan or WBS is evaluated for its resource requirements, and then the cost • Direct costs for resources and machinery are charged directly to the project. Labor is usually subject to overhead charges. Material resources and machinery may or may not be subject to overhead.

36. Budgeting Process • Usually the initial step toward reducing the difference between the superior’s and the subordinate’s estimates is made by the superior • The superior agrees to be “educated” by the subordinate in the realities of the job • This is a time consuming process, especially when the project manager is negotiating with several subordinates

37. Project Budget by Task and Month Monthly Budget (£) Task I J Estimate 1 2 3 4 5 6 7 8 A 1 2 7000 5600 1400 B 2 3 9000 3857 5143 C 2 4 10000 3750 5000 1250 D 2 5 6000 3600 2400 E 3 7 12000 4800 4800 2400 F 4 7 3000 3000 G 5 6 9000 2571 5143 1286 H 6 7 5000 3750 1250 I 7 8 8000 2667 5333 J 8 9 60006000 75000 5600 12607 15114 14192 9836 6317 5333 6000

38. Improving the Process of Cost Estimation • There are two fundamentally different ways to manage the risks associated with the chance events that occur on every project: • The most common is to make an allowance for contingencies - usually 5 or 10 percent

39. Learning Curves • Studies have shown that human performance usually improves when a task is repeated • In general, performance improves by a fixed percent each time production doubles • More specifically, each time the output doubles, the worker hours per unit decrease to a fixed percentage of their previous value • That percentage is called the learning rate • The project manager should take the learning curve into account for any task where labor is significant

40. Budgeting and Cost Estimation

41. Other Factors • Anywhere from about three-fifths to five-sixths of projects fail to meet their time, cost, and/or specification objectives • There are several common causes: • Arbitrary and impossible goals • Scope creep • Wildly optimistic estimates in order to influence the project selection process • Changes in resource prices • Failure to include an allowance for waste and spoilage • Bad luck