PAN African e-Network Project

MFC
Project planning : Appraisal and Control
Semester - 3
Session 4

Dr Loveleen Gaur
Roles of Project Manager
1.Diplomat:
Maintain better relationship between project and
environment
Ensure political support
Tackle new threats, if any
Have high level of sensitivity
Good negotiating skill
2.Chief Executive:
Responsible for all action of project personnel
Make things happen by active intervention
Make changes if necessary
Coordinate the team
Controlling and allocating resources
3. Leader
Authority and influence
Define ethics, norms and values of the
team
Motivating capacity
Drive- be a leader
Team spirit- team work
 Resource Allocation and
Leveling
One of the major issues in scheduling is resource
allocation. Resources include funds, labor, machine,
time, etc. The problem of resource allocation has two
aspects: finding the peak level requirements and trying
to arrange the resources so that the project is completed
on time, and adjusting the activities within the available
slacks so that the additional resources to be brought in
are keeping cost within limits.

The first issue is known as resource loading and

second as resource leveling.
 As can be seen from the above table the initial requirement is high, followed
by severe fluctuations. After the time block 20-25, it is not required at all.
The project manager, therefore, has to ensure that the peak requirement of
15 cranes is available with him by the time the project is scheduled to start.
If he has 15 cranes, he can be sure that the works do not get stuck due to
non availability of cranes. It should be noted that we are talking about
resources such as machinery and equipment and not about consumables.
 Project review and control

Control is taking corrective actions to bring

the actual performance up to the level of
scheduled performance.

Evaluation is a judgment about the quality

and effectiveness of the project.
 COST ESTIMATION
Cost estimating involves developing an approximation
(estimate) of the costs of the resources needed to
complete project activities. In approximating cost, the
estimator considers the causes of variation of the final
estimate for purposes of better managing the project.
 When a project is performed under contract, care should be taken to
distinguish cost estimating from pricing.

Cost estimating involves developing an assessment of the likely

quantitative resulthow much will it cost the performing
organization to provide the product or service involved?

Pricing is a business decisionhow much will the performing

organization charge for the product or servicethat uses the cost
estimate as but one consideration of many. Cost estimating includes
identifying and considering various costing alternatives.
 Inputs to Cost Estimating
Work breakdown structure. It is used to organize the cost
estimates and to ensure that all identified work has been
estimated.
Resource requirements.
Resource rates. The individual or group preparing the
estimates must know the unit rates (e.g.,staff cost per
hour, bulk material cost per cubic yard) for each
resource to calculate project costs. If actual rates are not
known, the rates themselves may have to be estimated.
.
 Activity duration estimates. Activity
duration estimates will affect cost
estimates on any project where the project
budget includes an allowance for the cost
of financing (i.e., interest charges).
Estimating publications. Commercially
available data on cost estimating
 Historical information. Information on the cost of many categories of
resources is often available from one or more of the following
sources:
Project filesone or more of the organizations involved in the
project may maintain records of previous project results that are
detailed enough to aid in developing cost estimates. In some
application areas, individual team members may maintain such
records.
Commercial cost-estimating databaseshistorical information is
often available commercially.
Project team knowledgethe individual members of the project
team may remember previous actuals or estimates. While such
recollections may be useful, they are generally far less reliable than
documented results.
 Chart of accounts. A chart of accounts describes the coding
structure used by the performing organization to report financial
information in its general ledger. Project cost estimates must be
assigned to the correct accounting category.
Risks. The project team considers information on risks when
producing cost estimates, since risks (either threats or opportunities)
can have a significant impact on cost. The project team considers
the extent to which the effect of risk is included in the cost estimates
for each activity.
 Tools and Techniques for Cost
Estimating
Analogous estimating. Analogous estimating, also called
top-down estimating, means using the actual cost of a
previous, similar project as the basis for estimating the
cost of the current project.
It is frequently used to estimate total project costs when
there is a limited amount of detailed information about
the project (e.g., in the early phases). Analogous
estimating is a form of expert judgment.
 Parametric modeling. Parametric modeling
involves using project characteristics
(parameters) in a mathematical model to predict
project costs. Models may be simple (residential
home construction will cost a certain amount per
square foot of living space) or complex (one
model of software development costs uses
thirteen separate adjustment factors, each of
which has five to seven points on it).
Both the cost and accuracy of parametric
models vary widely.
 Bottom-up estimating. This technique involves estimating
the cost of individual activities or work packages, then
summarizing or rolling up the individual estimates to get
a project total.
The cost and accuracy of bottom-up estimating is driven
by the size and complexity of the individual activity or
work package: smaller activities increase both cost and
accuracy of the estimating process. The project
management team must weigh the additional accuracy
against the additional cost.
 Computerized tools. Computerized tools, such as project
management software spreadsheets and
simulation/statistical tools, are widely used to assist with
cost estimating. Such products can simplify the use of
the tools described earlier and thereby facilitate rapid
consideration of many costing alternatives.
Other cost estimating methods. For example, vendor bid
analysis.
 Outputs from Cost Estimating
Cost estimates. Cost estimates are quantitative assessments of the
likely costs of the resources required to complete project activities.
Cost estimates are generally expressed in units of currency (dollars,
euros, yen, etc.) to facilitate comparisons both within and across
projects. In some cases, the estimator may use units of measure to
estimate cost, such as staff hours or staff days, along with their cost
estimates to facilitate appropriate management control. Cost
estimating generally includes considering appropriate risk response
planning, such as contingency plans.
 Supporting detail. Supporting detail for the cost estimates should include:
_ A description of the scope of work estimated. This is often provided by a
reference to the WBS.
_ Documentation of the basis for the estimate; i.e., how it was developed.
_ Documentation of any assumptions made.
_ An indication of the range of possible results; for example, $10,000
$1,000 to indicate that
the item is expected to cost between $9,000 and $11,000.
The amount and type of additional details vary by application area.
Retaining even rough notes
may prove valuable by providing a better understanding of how the estimate
was developed.
 Cost management plan. The cost management plan
describes how cost variances will be managed (e.g.,
different responses to major problems than to minor
ones). A cost management plan may be formal or
informal, highly detailed or broadly framed, based on the
needs of the project stakeholders.
 COST BUDGETING
Cost budgeting involves allocating the
overall cost estimates to individual
activities or work packages to establish a
cost baseline for measuring project
performance.
Reality may dictate that estimates are
done after budgetary approval is provided,
but estimates should be done prior to
budget request wherever possible.
 Inputs to Cost Budgeting
Cost estimates.
Work breakdown structure. The WBS
identifies the project elements to which
costs will be allocated.
 Project schedule. The project schedule includes planned
start and expected finish dates for the project
components to which costs will be allocated. This
information is needed to assign costs to the time period
when the cost will be incurred.
Risk management plan. The risk management plan often
includes cost contingency, which can be determined on
the basis of the expected accuracy of the estimate.
 Tools and Techniques for Cost Budgeting
Cost budgeting tools and techniques.
Outputs from Cost Budgeting
Cost baseline. The cost baseline is a time-phased budget that will
be used to measure and monitor cost performance on the project. It
is developed by summing estimated costs by period and is usually
displayed in the form of an S-curve.
Many projects, especially larger ones, may have multiple cost
baselines to measure different aspects of cost performance. For
example, a spending plan or cash-flow forecast is a cost baseline for
measuring disbursements.
 COST CONTROL

Cost control is concerned with a)

influencing the factors that create changes
to the cost baseline to ensure that
changes are agreed upon, b) determining
that the cost baseline has changed, and c)
managing the actual changes when and
as they occur.
Cost control includes:
_Monitoring cost performance to detect and understand
variances from plan.
_ Ensuring that all appropriate changes are recorded
accurately in the cost baseline.
_ Preventing incorrect, inappropriate, or unauthorized
changes from being included in the cost
baseline.
_ Informing appropriate stakeholders of authorized
changes.
_ Acting to bring expected costs within acceptable limits.
 Cost control includes searching out the whys of both
positive and negative variances. It must be thoroughly
integrated with the other control processes (scope
change control, schedule control, quality control, and
others). For example, inappropriate responses to cost
variances can cause quality or schedule problems, or
produce an unacceptable level of risk later in the project.
 Inputs to Cost Control

Cost baseline:
Performance reports: Performance reports provide information on
project scope and cost performance, such as which budgets have
been met and which have not. Performance reports may also alert
the project team to issues that may cause problems in the future.
Change request: Change requests may occur in many formsoral
or written, direct or indirect, externally or internally initiated, and
legally mandated or optional. Changes may require increasing the
budget or may allow decreasing it.
 Tools and Techniques for Cost
Control
Cost change control system: A cost change control system defines
the procedures by which the cost baseline may be changed. It
includes the paperwork, tracking systems, and approval levels
necessary for authorizing changes. The cost change control system
should be integrated with the integrated change control system.
Performance measurement: Performance measurement techniques,
help to assess the magnitude of any variations that do occur.
Earned Value Management (EVM), is especially useful for cost
control. An important part of cost control is to determine what is
causing the variance and to decide if the variance requires
corrective actio
 Earned value management (EVM:) All EVM Control Account Plans (CAPs)
must continuously measure project performance by relating three
independent variables:
1) The Planned Value, the physical work scheduled to be performed,
including the estimated value of this work (previously called the Budgeted
Costs for Work Scheduled [BCWS]), as compared against the
2) The Earned Value, physical work actually accomplished, including the
estimated value of this work (previously called the Budgeted Costs for Work
Performed [BCWP])
3) Actual Costs incurred to accomplish the Earned Value.
The relationship of 2) Earned Value less 1) Planned Value constitutes the
Schedule Variance (SV). The relationship of 2) Earned Value less 3) Actual
Costs constitutes the Cost Variance (CV) for the project.
 Additional planning:. Few projects run exactly
according to plan. Prospective changes may
require new or revised cost estimates or analysis
of alternative approaches.
Computerized tools: Computerized tools, such
as project management software and
spreadsheets, are often used to track planned
costs versus actual costs, and to forecast the
effects of cost changes.
 Outputs from Cost Control
Revised cost estimates. Revised cost estimates are modifications to
the cost information used to manage the project. Appropriate
stakeholders must be notified as needed. Revised cost estimates
may or may not require adjustments to other aspects of the project
plan.
Budget updates. Budget updates are a special category of revised
cost estimates. Budget updates are changes to an approved cost
baseline. These numbers are generally revised only in response to
scope changes. In some cases, cost variances may be so severe
that rebaselining is needed to provide a realistic measure of
performance.
 Corrective action: Corrective action is anything
done to bring expected future project
performance in line with the project plan.
Estimate at completion: An Estimate at
Completion (EAC) is a forecast of most likely
total project costs based on project performance
and risk quantification. The most common
forecasting techniques are some variation of:
 EAC = Actuals to date plus a new estimate for all remaining work.
This approach is most often used when past performance shows
that the original estimating assumptions were fundamentally flawed,
or that they are no longer relevant to a change in conditions.

Formula: EAC = AC + ETC.

_ EAC = Actuals to date plus remaining budget (BAC EV). This
approach is most often used when current variances are seen as
atypical and the project management team expectations are that
similar variances will not occur in the future.
Formula: EAC = AC + BAC EV.
 Time Control
The first step in establishing a project is to estimate how
long each activity will take, from the time it is started until
the time it is finished. This duration estimate for each
activity is the time for the work to be done plus
associated waiting time. Its a good practice to have the
person who will be responsible for performing a
particular activity make the duration estimate for that
activity.
 An activity duration estimate must be based on the
quantity of resources expected to be used on the activity.
The estimate should be aggressive, yet realistic.
Throughout the performance of the project some
activities will take longer than their estimated duration,
others will be done in less time than their estimated
duration, and a few may conform to duration estimates
exactly. Over the life of a project that involves many
activities, such delays and accelerations will tend to
cancel out one another.
 The key to effective project control is to measure
actual progress and compare it to planned
progress on a timely and regular basis and to
take necessary corrective action immediately.
The project control process involves regularly
gathering data on project performance,
comparing with the planned performance. This
process must occur regularly throughout the
project.
Approaches to schedule control:

Schedule control includes four steps

1. analyzing the schedule determine which areas
may be need corrective action.
2. Deciding what specific corrective actions should
be taken.
3. Revising the plan to incorporate the chosen
corrective actions.
4. Recalculating the schedule to evaluate the
efforts of the planned corrective actions.
 Performance Evaluation
The ultimate use of all the information obtained during the
monitoring stage is to control the progress of the ongoing activities.
Control is to check whether the actual performance is up to the mark
or not and to take corrective action if necessary. Objective
measurement of performance is,therefore, the foundation for the
success of a control system. If performance measurement used is
defective, the project controller will be misled by the information he
receives into either taking an unsuitable action or not taking any
action at all.
There are several techniques used to measure the progress of a
project. The Earned Value (EV) technique and the Cost/Schedule
Control System Criteria (C/SCSC) technique are very popular.
Earned Value Technique
A good technique for measuring the progress of a
project should enable its user to measure the
progress in terms of time, cost and performance.
The earned value technique contains variances for
measuring the progress in all the three. Earned
value is the total budgeted cost of the project
multiplied by the percent of work completed thus far. By
comparing the actual cost incurred so far with the budgeted
cost, it can be found out whether the project is on the right
track.
Spending Variance = Actual Cost Earned value of works
completed
Schedule Variance = Earned value of the works completed
Earned value of the works that should have been
completed by now
Total Variance = Actual cost of works completed Earned
value of the works that should have been completed by
now.
Cost/Schedule Control System Criteria (C/SCSC)
Three parameters are considered in this technique for
calculating the variances:
(a) Budgeted cost of the work that should have been
completed by now, according to the schedule, or budgeted
cost of work scheduled (BCWS),
(b) Budgeted cost of work performed (BCWP)
(c) The cost actually incurred for the works completed, or
actual cost of work performed (ACWP)
 Cost Variance= BCWP - ACWP
Schedule Variance = BCWP BCWS
The interpretation of these two variances is the
same as we have seen in earned value
technique.
The progress of the project compared to the time
spent and costs incurred can also be gauged
using the following indices:
Cost performance index = BCWP/ACWP
A value of less than one means a cost overrun
 Schedule performance index = BCWP/BCWS
Value of less than one means a time over run.
Estimated cost performance index = BCTW/
(ACWP+ACC)
Where BCTW = Budgeted cost for total work
ACC = Additional cost for completion
 Differences between the amounts of work
performed arise due to various factors: changes
in the work elements previously designed to
accomplish a task, changes in the methods
followed to carry out elements, changes in the
tasks to be accomplished, etc. All these factors
also give rise to cost variances.
 Other factors such as prices of the inputs
change in the mix of the inputs and changes in
the accounting method also cause cost variance.
When such changes occur, the work plans and
budgets should be adjusted accordingly.
Otherwise control of the time and cost by
comparison of the actual with the plans becomes
impossible.
 Project Control System

Control is said to be consist of two elements:

one, ensuring that the resources of organization
are not misused and are well maintained and
two regulations of the activities of the project.
There are three major resources that the project
manager needs to control- physical resources
like plant and equipment, land and building, etc.
, the human resources and the financial
resources.
 Control of physical resources needs technical skill of
project manager. Maintenance of assets has to be
carried out at regular intervals. Too frequent
maintenance results in heavy maintenance cost and too
less leads to break down. A trade off has to be made
between frequency of maintenance.
Control of human resources is highly difficult as any
number of appraisal criteria is not sufficient for
maintaining the human resources well.
 There are various techniques for control of
financial resources as accounting and auditing
system is oriented towards it. Techniques for
control of the current assets, budgets and capital
investment screening technique are in
widespread use. These techniques are applied
through a series of analyses and audits
conducted by the controller.
 Types of control system
There are three types of control systems in
used:
cybernetic control system,
go/no-go control systems and
post-control system.
 Cybernetic Control
The information input required for a cybernetic control are- the
characteristic features of the output that need to be controlled have
to be specified, standards must be set for each characteristics,
sensors to be measure the characteristics to be desired level of
accuracy should be developed. Measurements made by the sensor
should then be interpreted into a signal that indicates the quality of
output.
 Mechanism for communicating the difference between
the quality of the output and the standard to the decision
maker should be determined. The action to be taken to
counteract each and every possible deviation from the
standard should be available with the decision maker.
Concept of cybernetic control is applied frequently for
tracking the system and notifying the project manager
automatically about the state of things.
 Go/No-go System
Go/No-go systems are used to see if specific preconditions laid down have
been met or not. These types of controls are very popular as almost any
aspect of a project is amenable to the application of this type of control. But
proper judgment should be exercised while using these controls. Certain
characteristics of the output may be required to be within clearly laid down
range of values.
The project budget and schedule are the two documents that assist greatly
in exercising control. They contain various milestones, the budget allocation
for achievement of each milestone and the time when it should be achieved.
Control can be exercised on the smallest possible task, based on the
information of these two.
 Post-Control System
It is comparable to post-mortem of a project. The
performance in the execution of the project is
reviewed critically. The objective is to identify
what went wrong and to study how to avoid such
mishaps in future projects. The orientation of
post-control is towards future, in contrast to the
cybernetic and go/no-go control system.
 The document has following sections:
Project Objectives: A brief description of the objectives of
the project is given. The objectives are obtained from the
project proposals. Actual performance of the project
depends on many uncontrollable events assumptions
regarding those events should be disclosed in this
section.
Deviation Report: It contains a comprehensive report on
performance of the project as compared to schedules
and budgets. Each and every deviation used to highlight
there.
 Report on Project Results: This section contains
explanation for all deviations. Major concern in this
section is on how rather what, as how any deviation had
happened let it be positive or negative not what deviation
had happened.
Recommendation for Improvement: This is the final
section of report and it contains the recommendations on
the pitfalls to be avoided, improvements to be brought
about in the systems, additional skills and equipment to
be required, etc.
 Features of Good Control
System
In addition to these, the control system should possess the following
characteristics:
Simplicity: The control system, should be easy to operate and maintain
Cost-effective: The cost of control should not be more than the benefits from
it
Flexibility: The control system should be flexible enough to extend it to other
areas or to react to unforeseen changes in the levels of system
performance
Timeliness: It should be capable of bringing problems to the notice of the
project manager when there is still sometime for coercive action.
Effectiveness: The actions initiated through the control system should be
seen to bring about the desired changes in performance to the desired
extent.
Managerial Perspectives in Control
The feeling that they are subject to a control influences the behavior of
people substantially. The response of people to control system can be
classified into three:
(i). active participation and attempt to achieve the goals, using the
control
(ii). Passive participation, to avoid being reprimanded by the superiors
(iii). Non-compliance with the orders- either by acting in a manner
contrary to what has been told or by just not carrying out the
instructions.
 Questions (Project
Implementation)
1. Traditional form of organization is suitable to
(a) The projects which are characterized by non-
routine work
(b) The projects which call for the coordination of
different functional areas
(c) The projects which contain a continuous flow of
repetitive work
(d) The projects which are dynamic in nature
(e) None of the above
2. Which of the following statement/s is/are true?
(a). By line-staff form of organization an efficient utilization of resources
can be achieved
(b). The functional form of organization is not suitable to achieve
effective utilization of resources.
(c). Matrix form of organization is not conducive to achieve effective
realization of project objectives.
(d). Divisional form of organization is suitable for effective utilization of
resources.
(e). Line-staff form of organization is suitable for an effective realization
of project objectives.
3. Which of the following is not an advantage of traditional
form of organization for the management of projects?
(a). Budgeting and control are easy
(b). It facilitates better technical control
(c). It is easy to integrate the functions of all concerned
departments towards the fulfillment of the project objectives
(d). The lines of communication are well established
(e). It is easy to estimate the staff requirement for each
department.
4. Which of the following is/are true?
(a). The concept of crashing an activity is given both in
PERT and CPM models
(b). Both PERT and CPM techniques involve drawing
networks showing relationships between various activities
(c). PERT is more deterministic, while CPM is probabilistic
(d). Floats and slacks are used in both PERT and CPM
(e). Both (b) and (d) above
5. The involvement of top management in project staffing
(a). Is necessary to make the importance it is giving known
to all
(b). Is not necessary because it is purely the task of project
manager
(c). Is necessary because the project manager may
entertain vested interests
(d). May be necessary when things appear to be going
wrong
(e). Both (a) and (d) above
 Questions

1. Variance analysis approach is

(a). A traditional approach
(b). Incapable of looking forward i.e., it cannot
predict what may happen in future
(c). Not useful for calculating the value of work
done
(d). A tool which merely indicates what amount of
resources were expended compared to
the budgeted resources
(e). All of the above
2. A critical review of the execution of the
project after its completion is called
a. Cybernetic control
b. Go/No-go control
c. Post-control
d. Exception control
e. None of the above.
3. Which of the following statements is true regarding
project control?
a. Cybernetic control is like steering an automobile.
b. Third order cybernetic control systems invariably contain
a human element.
c. The informational inputs required for cybernetic control
are quite complex.
d. The second order cybernetic controls use a single
standard all the time.
e. Both (a) and (b) above.
4. Which of the following statements is false?
a. The control system should be easy to operate and
maintain.
b. The cost of control should not be overriding criteria while
designing the control system for a project.
c. The control system should not be rigid to react to
unforeseen changes.
d. The control system should be capable of indicating the
problem areas when there is still time for corrective action.
5. Which of the following aspects related to
a project cannot be monitored by
comparison of works with the schedules?
a. Cost of the project
b. Morale of the employee
c. Completion time of the project
d. Attitude of the client
e. Both (b) and (d) above.
6. Which of the following statement/s is/are true
regarding performance analysis?
a. BCWS consists of budgets for work packages
actually completed.
b. ACC stands for actual cost of completion.
c. ACWP stands for actual cost of work planned.
d. BCTW comprises of total budgeted cost for the
entire project.
e. All of the above
Please forward your query

To: lgaur@amity.edu