Session 3 - Project Schedule and Cost Planning

Project Management I
ADM 6260-E00
Sara Hajmohammad, PhD, PMP

Winter 2020
Session 3
Project Planning
Schedule (Cont’d) and Cost
From Project Management Absolute Beginner's Guide, 4/e by Gregory M. Horine (0789756757) Copyright
© 2017 Pearson Education, Inc. All rights reserved 2
Planning: Project
Schedule Management
Develop Schedule (cont’d)
• What should you do to create a finalized schedule?

– Schedule Network Analysis
• Critical Path Method
• Schedule Compression
• Resource Optimization
Resource Optimization
Finding ways to adjust the use of resources.

• Resource–Limited Scheduling: develops the shortest
schedule when the number of available resources is
fixed and cannot be exceeded. It lengthens the
schedule and increases cost in order to deal with a
limited amount of resources, resource availability,
and other resource constraints.
Resource Optimization (cont’d)
• Resource Leveling:
– Resolves over-allocation of resources by delaying a
task until the assigned resource is available to
work on it. Produces a resource-limited schedule.
– Results in more stable number of resources used
during the project.
– In resource levelling, you check if all resources are
loaded around 100%. If someone is above 100%,
then you will have to either extend the schedule
or move some tasks to other resources.
Resource Optimization (cont’d)
• Resource Smoothing:
– Constraint on the total duration of the project.
– Resources are leveled only within the limits of the
float of their activities, so the completion dates
are not delayed.
– Only activities on noncritical paths are shifted.
Resource Smoothing Example: Consider the below time-constrained project (i.e., project
duration fixed and resources flexible). Assume that a maximum of 3 programmers can
work each week throughout the project duration. Is there a resource over-allocation? If
so, even out the resource allocation so that the resource constraint is met.
A, Drtn=10 B, Drtn=5
Start E, Drtn=15 Finish
C, Drtn=10 D, Drtn=12
Task Resource Constraints

A 1P 1st week 2P 2nd week
B 2P
C 1P 1st week 2P 2nd week
D 1P
E 1P
ES=0, LS=7 ES=10, LS=17
Day=0 ES=22, LS=22 Day=37
ES=0, LS=0 ES=10, LS=10
Weeks
Task
1 2 3 4 5 6 7 8
A 1P 2P
B 2P
C 1P 2P
D 1P 1P 2/5=0.4P
E 3/5=0.6P 1P 1P 2/5=0.4P
Total 2P 4P 3P 1P 1P 1P 1P 0.4P
Draw the network with ES and LS on it. Load the resource table for each week
based on ES.
ES=0, LS=7 ES=10, LS=17
Day=0 ES=22, LS=22 Day=37
ES=0, LS=0 ES=10, LS=10
Weeks
Task
1 2 3 4 5 6 7 8
A 1P 2P
B 2P
C 1P 2P
D 1P 1P 2/5=0.4P
E 3/5=0.6P 1P 1P 2/5=0.4P
Total 1P 3P 3P 3P 1P 1P 1P 0.4P
Smooth the schedule: Activities should be shifted depending on their floats.
Resource Smoothing Example
A network with the following activity durations and
manpower requirement is given. Analyze the project
from point of view of resource constraints (11 people)
and take the necessary steps for resource smoothing.
Activity A B C D E F J G H K I
Duration 2 3 4 2 4 3 6 6 5 4 4
No. of men 4 3 3 5 3 4 3 6 2 2 9
B, Drtn=3 D, Drtn=2 J, Drtn=6
Start A, Drtn=2 E, Drtn=4 G, Drtn=6 K, Drtn=4 Finish
C, Drtn=4
F, Drtn=3 H, Drtn=5 I, Drtn=4
Resource Smoothing Example
A network with the following activity durations and
manpower requirement is given. Analyze the project
from point of view of resource constraints (11 people)
and take the necessary steps for resource smoothing.
Activity A B C D E F J G H K I
Duration 2 3 4 2 4 3 6 6 5 4 4
No. of men 4 3 3 5 3 4 3 6 2 2 9
B, Drtn=3 D, Drtn=2 J, Drtn=6
ES=2, LS=5 ES=5, LS=8 ES=7, LS=10
Start A, Drtn=2 E, Drtn=4 G, Drtn=6 K, Drtn=4 Finish
0 ES=0, LS=0 ES=6, LS=6 ES=10, LS=10 ES=16, LS=16 20
C, Drtn=4
ES=2, LS=2
F, Drtn=3 H, Drtn=5 I, Drtn=4
ES=6, LS=8 ES=9, LS=11 ES=14, LS=16
Resource Smoothing Example (cont’d)
Resource Allocation Table (per Day)
Activity 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
A
B
C
D
E
F
J
G
H
K
I
Total
Activity 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
A 4 4
B 3 3 3
C 3 3 3 3
D 5 5
E 3 3 3 3
F 4 4 4
J 3 3 3 3 3 3
G 6 6 6 6 6 6
H 2 2 2 2 2
K 2 2 2 2
I 9 9 9 9
Total 4 4 6 6 6 8 12 10 10 8 11 11 11 8 15 15 11 11 2 2
The Load Histogram.
No. of Resources
16
14
12
10
8
6
4
2
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Activity 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
A 4 4
B 3 3 3
C 3 3 3 3
D 5 5
E 3 3 3 3
F (4th step) 4 4 4
J (3rd step) 3 3 3 3 3 3
G 6 6 6 6 6 6
H (2nd step) 2 2 2 2 2
K 2 2 2 2
I (1st step) 9 9 9 9
Total 4 4 6 6 6 8 8 7 7 7 9 11 11 11 11 11 11 11 11 11
Planning: Project Cost
Management
Monitoring &
Initiating Planning Executing Closing
Controlling
Integration
Scope Scope
Schedule Schedule
Cost Cost
Quality
Resources
Communications
Risk
Procurement
Stakeholders
Project
Planning
Process
Group
PMBOK, 6th Edition (2017)
Budget
• Budget is a plan for allocating organizational

resources to the project activities.
• It’s basically the WBS, expressed in monetary terms.
Warning!
Different views of costs within an organization

• PM recognizes a cost when a commitment is made to
pay for resources or services.
• Accountant recognizes a cost (expense) when an
invoice is received, not when it is paid!
• Controller recognizes a cost when the check for the
invoice is mailed (managing organization’s cash flow).
Cost Management Process
Plan Cost Management
Estimate Costs
Determine Budget
Plan Cost Management
• The process of defining how the project costs will be

estimated, budgeted, managed, monitored, and
controlled throughout the project.
Plan Cost
Managemen
t
Estimate
Costs
Determine
Budget
Estimate Costs
• Direct Costs: directly associated with project work-
labor, material, training, computers, project
manager’s time, expenses for physical office spaces
used directly for project, costs of quality efforts, costs
of risk efforts, etc.
• Indirect Costs: overhead costs or costs incurred for
the benefit of more than one project, taxes, janitorial
services, etc. Plan Cost
Managemen
t
Estimate
Costs
Determine
Budget
Example
• A certain task is expected to require 16 hours of

labor at $10 per hour and the required materials cost
$235. The organization charges overhead for the use
of utilities, indirect labor, etc. at a rate of 50% of
direct labor.
– Cost= $235 + [(16hr x $10/hr) x 1.5]=$475
• Sometimes the PM adds the overhead charges to the
budget at the end.
Estimate Costs (cont’d)
• Top-Down Budgeting
– Collective judgement of senior / middle
management based on similar past projects.
– Estimate the costs of major tasks, next lower level
of managers split it up among the tasks under
their control
• Bottom-Up Estimating
– Creating detailed estimates for each activity in
Schedule/work package in WBS and then roll up.
– By people responsible for executing them
Advantages and Disadvantages
Advantages Disadvantages
Top-Down 1- Fairly accurate overall budget 1- Substantial error in activity cost
Budgeting cost estimations
2- The good chance that some 2- Not suitable for progress
small but important tasks was monitoring and performance
overlooked does not usually measurement
cause a serious budgetary 3- Requires considerable experience
problem. to do
3- Fast and cheap 4- Conflict over gaining biggest piece
of the budget
Bottom-Up 1- Accurate in details 1- Time consuming

Estimating 2- Acceptance of the budget by 2- Costly
team members and higher 3- Team members are likely to pad
commitment 4- Chance of overlooking some
3- Provides basis for monitoring small but costly tasks
and performance measurement
Accuracy of Estimates
• Rough Order of Magnitude (ROM) Estimates

– Used during project initiation
– -25% to +75% from actual
• Budget Estimate
– During project planning
• Definitive Estimate
– During project
Determine Budget
Contingency reserves: cost
impacts of the risks identified
during planning.
Management reserves:
Additional funds set aside to
cover unforeseen risks.
PM has authority to manage
and control the cost baseline.
Plan Cost
Managemen
t
Estimate
Costs
Determine
Budget
Determine Budget (cont’d)
• Roll up your estimates into control accounts (Cost

Aggregation)
• Come up with your Reserves
• Build a Cost Baseline
• Use expert judgement to see if the budget is Realistic
• Make sure you haven’t blown your limits and that
you have money when it is needed
Typical Monthly Budget for a Real Estate Project
(Partial)
Project Budget by Task and Month
Improving Estimates and Forecasts
• List of Resource Requirements (From Estimate

Activity Resources Process)
– People – managers, technical and non-technical
– Money
– Materials – facilities, equipment, tools, space
– Special services
• Learning Curves
Learning Curves
• Humans learn when they repeat a task
• It has been found that unit performance improves by

a fixed percent each time total production doubles
• Each time the output doubles, the worker hours per

unit decrease by a fixed percentage of their previous
value
– This percentage is called the learning rate [70%
(for mental tasks)-95% (for mechanical tasks)]
Learning Curves (cont’d)
Tn  T1n r
where
Tn = the time required to complete the nth unit
T1 = the time required to complete the first unit
r = log(learning rate)/log(2)

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Project Management I

Sara Hajmohammad, PhD, PMP

• What should you do to create a finalized schedule?

Finding ways to adjust the use of resources.

Task Resource Constraints

Smooth the schedule: Activities should be shifted depending on their floats.

B, Drtn=3 D, Drtn=2 J, Drtn=6

Start A, Drtn=2 E, Drtn=4 G, Drtn=6 K, Drtn=4 Finish

PMBOK, 6th Edition (2017)

• Budget is a plan for allocating organizational

Different views of costs within an organization

Plan Cost Management

• The process of defining how the project costs will be

• A certain task is expected to require 16 hours of

Bottom-Up 1- Accurate in details 1- Time consuming

• Rough Order of Magnitude (ROM) Estimates

• Roll up your estimates into control accounts (Cost

• List of Resource Requirements (From Estimate

• Humans learn when they repeat a task

• It has been found that unit performance improves by

• Each time the output doubles, the worker hours per

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