Planning – Scheduling

& Budgeting
Lecture 6
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Project Schedule
The Project Schedule is a description (often a picture/gantt) of the
sequence of activities and tasks that must be undertaken to produce
the project outputs.
 3

Project Schedule
The schedule provides a day to day control mechanism for Project
Managers, a detailed work plan for team members and feeds into the
reporting framework feeding up to higher level control. ​
​
Scheduling involves specifying:​
The tasks - you need to do in order to produce your products​
When you will do it – the duration required for the tasks and their
relationship with each other​
Who will do it – the resources required to undertake the tasks.​
​
The schedule should detail tasks, timeframes and resources.​
​
 4

Scheduling Activities

Task Definition

Task Sequencing

Task Resource Estimating

Task Duration Estimating

Schedule Development

Schedule Control
 5

Creating a Project Schedule

To be able to create a project schedule you will need to:

Identify the tasks required to produce quality

outputs

Assign a duration to each of the tasks and work out

the task type

Understand how each of the tasks are inter-related

or dependent on one another.

Assign Resources to complete those tasks

 6

Understanding Tasks
 Tasks are defined as the activities required to undertake and complete your
project.

 The planning of tasks is critical as they form the steps that make up your project.
If you omit one of these tasks it won't be scheduled, possibly invalidating your
whole project.

 Determining the tasks is usually best done in combination with other project
members. It can take the form of brainstorming to work out the steps needed to
complete the project.

 Once the ideas have been jotted down they can be refined until everyone is
satisfied that the necessary tasks and their order has been correctly worked out.

 Utilise your WBS, identify the tasks required to complete each deliverable.
 7

Identifying Task Dependencies

 The next step is to develop the activity sequence & identify linked
tasks
 The linking of tasks creates task dependencies.
 Ask yourself:

− What precedes this task?

− What tasks follow this task?

− What tasks can take place concurrently with or in parallel to

this one?
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Task Dependencies

When you first identify tasks they are not linked in any way.
In the real world tasks are inter-dependent, and most tasks in
your project will relate to one another in some way.
Example:
Make A Birthday Cake

Mix Ingredients Make Icing Deliver Cake

Bake Cake Decorate Cake Create Bill for Customer

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Establish Task Relationships

Arrange the tasks in a logical sequence.

Take into account both physical (mandatory) dependencies and
logical (discretionary) dependencies.
Ask: What must be done before this activity can start? What
cannot start until this activity is completed?

Mix Ingredients Bake Cake Decorate Cake Deliver Cake

Make Icing

Create Bill for Customer

9
 10

Types of Relationships

Task relationships are characterised by one of the following types:

Finish to Start (FS) – One task must finish before a dependent task can start.
Example:
Mix Ingredients Bake Cake

Start to Start (SS) One task must start before a dependent task can start
Mix Ingredients

Create Bill for

Customer
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Types of Relationships

Task relationships are characterised by one of the following

types:
Finish to Finish (FF) One task must finish before a dependent
task can finish Deliver Cake

Create Bill for Customer

Start to Finish (SF) A task must start prior to its dependent task
being completed
Heating Oven

Mixing
Ingredients
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Types of Relationships

Lag vs Lead
 Lag: a deliberate gap or pause between tasks e.g.
One hour lag: Time to Cool

Bake Cake Decorate Cake

 Lead: starting a task before its predecessor is complete

Bake Cake Decorate Cake

Make Icing
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Summary Tasks

 Summary tasks are general headings that then have subordinate

tasks. The subordinate tasks are indented to the right (or demoted)
and provide a further level of detail for that part of the project.
 Summary tasks can be entered when the tasks are first entered into
the project, or at a subsequent stage.
 Summary tasks not only summarise data but also allow you to hide
unnecessary detail. For example, you can collapse a project so that
the detail tasks below the summary tasks are no longer visible.
 This is an excellent way of seeing a bird's eye view of your project.
 14

Resource Estimating

• Estimate the type and quantity of resources

 15

Duration Estimating

• Estimate how long it will take to complete the activities

• All activities should have the same time unit.
• List all assumptions and factors
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Duration Estimating
 17

Estimations

Cost estimates are a ‘guess’ but they should be best guesses. You have
information to help make them as close to reality as possible.
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PERT Estimating
o + 4e + p
Estimate =
6
Example: Attendees at Christmas party
o = optimistic or best case
e = 150 attendees
e = expected or likely case
p = 25 (last year party was boring, no food or drinks
p = pessimistic or worst case provided free, venue too far away, hungover from other
Christmas parties,)
o = 230 (food and drink provided free, last year was great,
great venue, social club is very active)

Estimate =
230 + 600 + 25
4(150)
855 + 25
6
Estimate = 143 attendees
 19

Schedule Development

What you need to know:

• Schedules of people that will be working on the project

• Vacation times

• Other projects that team members are involved in

• Schedules for materials and resources

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Schedule Development

14th Feb 21st Feb 28th Feb

Effort
Hours Start Finish Predecessors Who M T W T F M T W Th F M T W Th
1 Send invites 19
18th
1.1 Decide who to invite 7 21st Feb March HS
1.1.1 Get previous list 2 HS
1.1.2 Go through with team 2 Team
1.1.3 Agree who's on and off 1 Team
1.1.4 Complete invite list 2 1.1.1, 1.1.3 HS
1.2 Get addresses 7 4th April 8th April HS
1.2.1 Check addresses already on file 1 1.1.4 HS
1.2.2 Identify gaps 2 JR
1.2.3 Find new addresses 4 HS
1.3 Invites designed 5 RA
 21

Milestone Development

• A milestone is a reference point that marks a major event in a project

and is used to monitor the project's progress.

• Milestone planning will help you focus on results

• Completing milestones is a good point to do reporting to your
stakeholders
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Milestones

 Must be SMART

 Not too many, not too few

 Regularly spaced

 Have dates attached

 The Critical Path
 The critical path is that combination of tasks that sets the duration of the project.
It:
− Is the longest path though the project
− Comprises tasks which have no slack or waiting time
− Is therefore, the shortest time in which the project can be done.
 Delay on tasks in the critical path will delay project

Critical Path
Task B
7 days
Task A Task E
2 days 2 days
Task C Task D
2 days 3 days
 Reducing the Critical Path
 Eliminate tasks on the Critical Path
 Convert serial paths to parallel when possible
 Overlap sequential tasks
 Shorten the duration on critical path tasks
 Shorten:
− early tasks
− longest tasks
− easiest tasks
− tasks that cost the least to speed up

09-24
 Crashing

The process of accelerating a project

Principal methods for crashing

 Improving existing resources’ productivity
 Changing work methods
 Compromise quality and/or reduce project scope
 Institute fast-tracking
 Work overtime
 Increasing the quantity of resources

10-25
 Project Activities: Budget v Crashed Costs
Activity Normal Crashed Difference
Duration Cost Duration Cost Days Cost
A 5 days 1,000 3 days 1,500 -2 +500
B 7 days 700 6 days 1,000 -1 +300
C 3 days 2,500 2 days 4,000 -1 +1,500
D 5 days 1,500 5 days 1,500 0 0
E 9 days 3,750 6 days 9,000 -3 +5,250
F 4 days 1,600 3 days 2,500 -1 +900
G 6 days 2,400 4 days 3,000 -2 +600
H 8 days 9,000 5 days 15,000 -3 +6,000
Totals: $22,450 34 $37,500 -13 $15,050

10-26
Copyright © 2013 Pearson Education Table 10.1
 Managerial Considerations
 Determine fixed and variable costs for each activity
 The crash point is the fully expedited activity
 Optimize time-cost tradeoffs
 Shorten activities on the critical path
 Cease crashing when either one of the following occurs:
− the target completion time is reached
− the crashing cost exceeds the penalty cost

10-27
 28

Project Contingency

Project Schedule Contingency is an indicator of the level of confidence in

the accuracy of task estimates and is dependent on many factors including:

− the planning level i.e. High Level or Detailed

− number and level of assumptions
− level of delivery risk
− level of confidence in any vendor estimates
− an advance view of available skills
 29

Project Schedule: Example of Baseline

The grey bars depict the planned baseline, the blue/red bars show ‘actual’ and
schedule work. Note the ‘slippage’
 30

Activity - Project Scheduling

31

Cost Management
 Why do we need a budget?
 To provide an estimate of size (a ‘straw man’)
 To provide context to sponsors and stakeholders and manage expectations
 To obtain funds to invest in the deliverables
 To be able to rank competing projects
− Assess cost versus benefit
− To choose the best investment
− This is the economist’s concept of ‘opportunity cost’
 So that there are no surprises
 The budget validates the schedule, and vice versa, as you account for time and
resource-cost
 To provide a ‘baseline’ for monitoring and communicating progress

Monday, June 15, 2020

 8-
33

Creating a project budget

The project budget is a plan that identifies the allocated resources, the
project’s goals and the timeline. Typically it involves one of three
approaches:
 Top-Down budgeting uses the opinions and experiences of top
management regarding estimated project costs as a start point and
passes these down the hierarchy adding more information as it goes
until costs are reflected at a task-by-task basis.
 Bottom-Up budgeting begins with the Work Breakdown Structure and
aggregates costs at the deliverable level and then at the whole-of-
project level.
 Activity-based costing assigns costs first to activities and then to the
project’s use of resources
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34

It’s a project ∴ there’s uncertainty

Uncertainties exist in projects because:
 Project scope is subject to change; external events, environmental
changes, risks which become issues, changes to organisation priorities
etc.
 Murphy’s Law is always hovering
 Cost estimation must anticipate interaction costs; e.g. the assumptions
made about how new products and services will flow through the
development phase prove to be wrong
 Normal conditions are rarely encountered but most costings are based
on ‘normal’ working conditions because it is too difficult to cost
‘abnormality’
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35

Contingency funding
Project contingency is the allocation of extra funds to cover uncertainties and
improve the chance of finishing on time; Task Contingency at a work package
level, Managerial Contingency at a whole-of-project level and Insurance e.g.
for construction projects. It offers three benefits:
1. Recognises the future contains unknowns
2. Adds provision for company plans for an increase in project cost
3. Applies contingency fund as an early warning signal to potential
overdrawn budget
 8-
36

Cost Estimation options

Cost estimation is a ‘fit for purpose’ activity. Whether for a top-down,
bottom-up or activity-based budget, one or more of the following can be used
at different times in the planning phase: %
3 0
 Ballpark estimates (order of magnitude) are used when information or ±
time is scarce.
1 5%
 Comparative estimates assume historical data can be used to estimate ±
similar projects
 Feasibility estimates are based on real numbers following preliminary 10%
design (e.g. using RFI feedback) ±
 Definitive estimates are created after most of the detailed design has
been done (e.g. based on the RFP outcome) 5%
±
 Basic rules for estimating

 Resources may not be 100% productive

 Personnel working on multiple projects lose time switching from one
project to another
 Natural optimism usually under-estimates work
 Person responsible for creating the output should also be responsible
for estimating work
 Communicate assumptions, exclusions, and constraints back to the
stakeholders responsible for creating the products and the estimates
 Build provision for problem solving, meetings, and unexpected events

Monday, June 15, 2020

Apportioning indirect costs
 One way of accounting for indirect costs is to “recover” them by
apportioning them against a real quantity:
− Allocated against labour hours
− Or the number of staff on the project
− Or office-space used

 Personnel / un-productive staff time can also be apportioned by

applying a productivity factor
− wage-rate * hours * 1.12

Monday, June 15, 2020

 8-
39

Problems with Cost Estimation

 Low initial estimates

 Unexpected technical difficulties
 Lack of definition
 Specification changes
 External factors
 The Budget Process

 Refine cost estimates to as accurate as possible

 Incorporate contract information when known
 Apply aspects of your risk register to calculate a contingency reserve
 Use the project schedule baseline to derive a phased budget (cashflow)
 Roll the costs up into accounting control accounts
− By work package, so that you can report actual against budget by time-
period and by completion percentage (earned value)
 Save your budget as the cost baseline

Monday, June 15, 2020

 Principles of an effective budget regime
 Iterative process – just like all planning
 Covers the total lifecycle of the project
 Time-phased
 Comprehensive – account for ALL costs
 Include a buffer – contingency and management reserves
 Document assumptions

Reference
Horine, G.M. (2005). Absolute beginner’s guide to project management. Indianapolis, IN: Que Publishing.

Monday, June 15, 2020

Funding Requirements

Once you have a budget and have used the baseline schedule to create
a phased budget (a cashflow plan):
 You need to ensure that you have access to sufficient funds at the
right time to keep the project financially afloat (liaise with sponsor)
 As project manager you must ensure that you can meet your
financial commitments
 Continual re-forecasting and performance measurement help you
to control costs

Monday, June 15, 2020

 Controlling cost

 Compare Actual vs Budget baseline

− Total spent:
• For the project
• For each task
• For each resource
• By time (cash flow)
− % spent compared with expected % spent
 Summary
 Understand the various types of common project costs
 Recognise differences between various forms of project costs.
 Apply common forms of cost estimation for project work, including
ballpark estimates and definitive estimates.
 Discern the various reasons why project cost estimation is often done
poorly.
 Apply both top-down and bottom-up budgeting procedures for cost
management.
 Understand the uses of activity-based budgeting and time-phased
budgets for cost estimation and control.
 Recognise the appropriateness of applying contingency funds for cost
estimation.
 45

Budget by Resources
Budget By Resources
INCOME
Attendence Fees 2000
TOTAL INCOME 2000

EXPENSES
Labour
Speaker 1 1000
Speaker 2 1000
Caterers
Waiters 180
Chef 180
Kitchen Hands 360
Total Labour Cost 2720

Resources
Food 200

Facilities
Venue Hire 500

Disbursements
Photocopying 50
Accomodation and Meals 250
Total Disbursements 300

TOTAL EXPENSES 3720

Net profit (loss) -1720

2000

Assumptions
One handout per person
Venue hire includes cleaning and setup
 46

Cash Flow
Mar Apr May
Opening Balance 0 -200 -970

INCOME
Attendence Fees 2000

Total Income 0 2000 0

EXPENSES
Labour
Speaker 1 1000
Speaker 2 1000
Caterers
Waiters 180
Chef 180
Kitchen Hands 360

Resources
Food 200

Facilities
Venue Hire 500

Disbursements
Photocopying 50
Accomodation and Meals 250

Total Expenses 200 2770 750

Income less Expenses -200 -770 -750
Closing Balance -200 -970 -1720
 47

Cost/Benefit Analysis
Cost/Benefit Analysis

Costs Benefits
Labour Costs 2720 Attendence Fees 2,000
Resources 200
Facilities 500
Disbursements 300

Total Costs 3,720 Total Benefits 2,000

Return on Investment: -46%

Other qualitative benefits:

None.
 48

Building the Detailed Schedule in MS Project

& Developing the Project Budget