Project Management Module 2

By Dr Dennis Mark Laxton

The Design Phase (continued)

The Work Breakdown Structure (WBS)

In order to complete major tasks, they should be broken down into clearly
defined, manageable areas of work. The work breakdown structure (WBS) is one
of the most important initial steps in defining and planning a project. Not only
does it assist with setting the boundaries for the project, but it also underlines
the key elements to be included, so that nothing is omitted, and assists with task
allocation.

The purpose of the work breakdown structure (WBS) is to sub-divide the scope
of work into manageable work packages which can be estimated, planned and
assigned to a responsible person or department for completion. The WBS, which
can be a one page document, is the foundation of the project plan, is critical in
defining the scope of the project and is used as the basis for managing the
project.

Designing a work breakdown structure

• Decomposition is the process of sub-dividing major project deliverables

into smaller, more manageable components until the deliverables are
defined in sufficient detail for future project activities. The major elements
should always be defined in terms of how the project will actually be
managed;
• Within each area of work identify the deliverables or outputs, the team
member accountable for delivery of each output and the means of
achieving the outputs;
 • Identify all the resources required for each output: human resources,
materials, machines, means or processes, money and time; and
• Identify all the people who will be involved in some way (RACI is a good
way of remembering): who is responsible (who does it), who is
accountable, who needs to be consulted and who needs to be informed.

Scope definition output

A work breakdown structure is a deliverable-oriented grouping of project

elements that organises and defines the total scope of the project. Work not in
the WBS is outside the scope of the project. The WBS is often used to develop or
confirm a common understanding of the project scope. Each level represents an
increasingly detailed description of the project elements. Each item in the WBS is
generally assigned a unique identifier; these identifiers are collectively known as
the code of accounts. The items at the lowest level of the WBS are known as
work packages.
A detailed example of a WBS by phase

An Intranet WBS Organised by Phase

A detailed example of a WBS by product

An Intranet WBS Organised by Product

Guidelines for the structuring of a WBS

• Start with the project as a whole unit e.g. arrange a party;

• Sub-divide the project into major categories e.g. people, venue and
refreshments;
• Divide each major category into its component parts;
• Identify an outcome for each part;
• For each part, identify the tasks to be done e.g. the part called guests
would include the tasks: compile guest list, send invitations and record
responses;
• For each part, identify the resources required (human resources,
materials, machines, money, means and time);
• Allocate responsibility for the various parts of the project to your team
members; and
• Continue to break the project down until the entire scope in terms of
outputs, processes, responsibilities, activities and resources has been
documented. Everyone should be clear about what they must do, how
they must do it, what they should achieve and how their achievements
will be measured.

The advantages of doing a proper work breakdown include:

• Better control of work definition;

• Work packages can be delegated;
• Work can be defined at appropriate levels for estimation and control of
current stages of the project; and
• Risk can be contained within the work breakdown structure.
Creating A WBS / OBS Fit

Once the organisational breakdown structure (OBS) has been established and
the work breakdown structure (WBS) designed, a responsibility matrix must be
created to ensure that responsibility for the phases of the project is well defined
and documented.

There should be sufficient supporting detail. Information frequently supplied as

supporting detail includes: organisational impact – what alternatives are
precluded by organising in this manner, job descriptions – written outlines of the
skills, responsibilities, knowledge, authority, physical environment and other
characteristics involved in performing a given job, and training needs – if staff
skills required for the project need to be developed as part of the project.
 Responsibility Matrix
Activity Project Project Business Project
Team Manager Owner Stakeholders
Members
Project change P P P P
identification
(change request
form)
Screen request to P P
determine if it is
reasonable &
determine effort
required to evaluate
impact on project
Conduct informal P A
interview with client
to determine
whether further
handling of the
request is warranted
Record change and A P
monitor status on
change control log
If approved for The person the project change is assigned to will be
investigation by accountable. This person may be from any of these areas
client, prepare and may seek participants from any of these areas.
cost/schedule
impact assessment
& communicate
impact to client
Project change A A S A
solution
approved/rejected
Modify project A P
baseline and work
papers as required
Do required work A P A A
Project change The person the project change implementation is assigned
resolution to will be accountable. This person may be form any of
implemented these areas or may be from outside the project team.
P = Perform, A = Assist, S = Signoff
Determining the Project Milestones

Projects must be managed by objectives. Motivation, productivity and

communication are all boosted if definite progress can be seen. To achieve each
objective, milestones must be set. A milestone is a significant event relating to
the completion of a certain part of the project. This usually requires some type of
sign-off and is often accompanied by a payment. A project should have a series
of milestones indicating a series of tasks to be completed. Milestones occur at
the end of a stage, not at the end of each activity.

At each milestone there is:

• A formal progress report;
• A finished document; or
• A finished product/service.

By identifying major achievement points within your project life cycle you can set
goals that are easily understood. Stakeholders in the project have defined
expectations and the project team members have defined delivery points. The
milestone plan should be clear to everyone involved and preferably not more
than a page long.

Both the objectives and milestones should conform to the SMART formula. They
must be: specific, measurable, attainable, realistic and time bound. There should
be an overall objective for the project and an objective for each milestone.

Establishing Project Measures

To measure the outputs of a project we must establish if the objectives of the

project have been met and the milestones achieved, according to the defined
and agreed upon charter and scope of work.
A good measurement system should provide information that is actionable; the
system should include both effectiveness and efficiency indicators, including
measures of positive accomplishments. The system should measure only what it
is intended to measure e.g. the value of a report could be measured in terms of
its contents and the timeliness with which it was submitted rather than the actual
amount of time spent working on it. The system should only measure what a
particular group or individual has full control over e.g. a sales person cannot be
fully accountable for sales of an item that is out of stock because of a production
problem. Measures should be objective and discrete (not dependent on one
another) e.g. a sales person may generate good sales and so be rated favourably
in terms of customer service, which may not necessarily be valid; customer
service should be measured independently.

Measurements should be put into place for each milestone in a project plan, as
well as for the project as a whole, to ensure that progress reports and rewards
or corrective action take place timeously. Measurement information should be
readily available in standard reports or measuring instruments. Although
measurement systems are used to control projects they should also enhance
awareness of progress and improvement.

The system should identify:

• What will be measured;
• Who will do the measuring;
• How the measurement will take place;
• Where the measurement information will be recorded and reported; and
• When and how often the measurement information will be communicated.
Activity
Identify two measures for each milestone in your project.
Activity
Do a work breakdown for your project.

Name of the project:

Identify the major categories that your project will consist of:

Identify the specifications for the whole project and for each category:

Identify activities to be carried out within each category:

Estimate the length of time each activity will take:

Estimate the cost of each item at the first level of the WBS:
Activity
Reflect on the process you have just undertaken.
What are your insights about performing a WBS in
terms of workplace efficiency and effectiveness?
Define your Communication Strategy

During the course of a project you will have to communicate extensively

with your team members, the sponsor, customers, stakeholders and
suppliers. To do this effectively you should identify each individual or group
with which you will be required to communicate, what you will need to
communicate with them about, and when and how you will communicate
with them. For example:

Who What When How

Sponsor Project progress, By the 1st of Monthly report
Resource each month
utilisation
Team (whole Get feedback, Third Monday of Team meeting
group) Report progress each month
Administrative Project news Quarterly Company
staff newsletter
Activity Write a broad communication strategy for your
own project.

Who What When How

Setting, Monitoring and Managing Project Parameters

After working through this section you should be able to:

Ÿ Plan, monitor and manage the time dimension;

Ÿ Plan, monitor and manage the cost dimension; and

Ÿ Plan, monitor and manage the quality dimension.

The project manager’s job is to complete the project on time, within budget
and to quality expectations. This can be achieved if all members of the
project team have clearly defined roles and responsibilities, together with
working plans that prescribe how they should meet their project objectives.
If there is no plan, there can be no control. The three important areas
requiring control: time, cost and quality, determine the success or failure of
a project. Control can be defined as:

Comparing where you are to where you are supposed to be, and
then taking action to correct any discrepancy.
 Project Parameters

PROJECT
PROJECT PARAMETERS
PARAMETERS

PROJECT
PARAMETERS

QUALITY COST TIME

Specifications Budget Schedule

Planning, Monitoring and Managing the Time Dimension

Time can be considered a soft constraint on most projects. Being late

reduces the benefit, but few projects will fail if they are not completed in
time. There are exceptions. For example in Project Giotto there was a very
small time window for an exploratory space craft to rendezvous with Haley’s
comet and if the opportunity had been missed there would not have been
another for 75 years. Another example is the opening of a shopping mall:
once the opening function has been arranged and the traders have
advertised the opening date they would lose sales and credibility if the
opening did not take place on time. However, on most projects timely
completion is a benefit that must be balanced against the cost of achieving
it.

The three most important aspects of planning and managing time are the
development of schedules, the management of those schedules and the
evaluation process, which is particularly important if improvements are to
be made.
Developing project schedules

• Determine the duration, sequence and dependencies of tasks from

the scope definition;

• Use time management techniques and tools to determine the

schedule, resource allocation and financial requirements; and

• Communicate with stakeholders to establish agreement on the

schedule and use it as the basis for planning, implementation and
progress review.

Managing project schedules

• Develop mechanisms to monitor, control, record and report project

progress in relation to the agreed schedule;

• Continuously monitor project progress against the schedule and

identify variances;

• Adjust the schedule, with agreement as necessary, to ensure that

changes in scope or objectives, and constraints related to time and
resource availability are accommodated; and

• Respond to schedule changes and manage them to achieve project

objectives.

Analysing time management outcomes

• Analyse project outcomes and report on the effectiveness of the

schedule and time management processes; and

• Incorporate lessons learned into future projects.

Communicating project schedules

There are three ways of communicating project schedules:

 • Activity listings with dates;

• Bar charts (or Gantt charts); or

• Network diagrams (or PERT diagrams).

Remember: Schedules are only effective in controlling project duration if:

• Measures are set – the planned dates set the measure, it is important to
measure against the fixed baseline established in the planning phase of
the project; do not adjust the schedule at every project meeting;
• Progress is recorded regularly – report actual start and finish dates versus
planned start and finish dates;
• Variance is calculated – in the form of delays to completion of critical work
or as the remaining float for activities to be completed; and
• Remedial action is taken – following an assessment of the impact of the
delays and any proposals for addressing them.

Network Diagrams

Network diagrams are frequently used to communicate project schedules. When

activities are in series they are carried out one after the other. When a network
is first developed this would probably be the most common type of relationship
used. When activities are in parallel they may be carried out at the same time,
hence there is a more effective use of time.

Activity float, also known as slack, is a measure of the flexibility of an activity,

indicating how many working days the activity can be delayed or extended by
before the completion date of the project or any target finish dates are affected.
Float is calculated by either of the two equations:
Float = Late Start - Early Start (preferred method); or
Float = Late Finish - Early Finish.
Free float is a measure of the amount of float the activity can use up without
affecting the early start of any other activity. When calculations show that an
activity must start before the preceding activities are finished, this is indicated as
negative float, an unworkable situation which occurs when an activity falls
behind planned progress. The value of the negative float indicates by how much
the duration of an activity must be shortened.

The example that follows, for the construction of a network diagram (PERT
chart) and the related Gantt chart, is based on a landscaping project for a park.
Assign activity or task durations and draw up a logic table

Activity times can be estimated by the programme evaluation and review

technique (PERT) originally set up by the US Navy development team with
Lockheed and the management consultancy Booz Allen Hamilton Inc as an
integrated planning and control system to manage their Polaris submarine
project. The PERT technique applies a statistical treatment to a possible range of
activity time durations. A three time probabilistic model was developed, using
pessimistic, optimistic and most likely time durations. The three times are used
to estimate the time required for an activity. The time required is calculated by
applying the following formula:

Te = (To + 4 Tm + Tp) / 6
where:
Tm = most likely time
To = optimistic time (shortest)
Tp = pessimistic time (longest)
Te = estimated time

A logic table is constructed reflecting the time required for each activity. The
logic table shows a list of activities and the logical order in which they are linked.
This may also be referred to as indicating the constraints between the activities.
This table forms the basis for a network diagram depicting the sequence of
activities. The logic table below indicates a list of activities, with their
predecessor(s) and successor(s).
 ACTIVITY ESTIMATED PREDECESSOR SUCCESSOR
TIME ACTIVITY ACTIVITY
A 2 Days - B,C,D
(Design the
landscape)
B 3 Days A E
(Prepare back of
park)
C 4 Days A E
(Prepare front of
park)
D 2 Days A F
(Order plants)
E 2 Days B,C G
(Add compost to
land)
F 3 Days D G
(Prepare the plants)
G 3 Days E,F -
(Plant)
Construct the network diagram and calculate the critical path

• Draw a network diagram activity box as shown below for each activity;
• Assign durations to all activities;
• Give the project a start date; and
• Link the tasks.

EARLY START EARLY FINISH

Early finish =
early start +
duration - 1
FLOAT ACTIVITY DURATION
Float = late start – NUMBER
early start (DESCRIPTION)
LATE START LATE FINISH
Late start = late
finish – duration +
1

The forward pass calculates the early start and the early finish dates to
determine project duration - at junctions take the higher early finish value.
Calculations for the above network diagram (early start and finish dates)

At this junction, take the higher

3 early finish value, i.e. 6
5
B 3 Days
7
8
1 E 2 Days
3
2
6
A 2 Days
C 4 Days 9
11
G 3 Days

3 5
4 7
D 2 Days F 3 Days
 Activity Early Start Early Finish
early finish = early
start + duration - 1
A Starts at beginning of day 1 1+2-1 = 2
B Starts after end of day 2, i.e. Day 3 3+3-1 = 5
C Starts after end of day 2, i.e. Day 3 3+4-1 = 6
D Starts after end of day 2, i.e. Day 3 3+2-1 = 4
E Can only start after day 6 i.e. Day 7 7+2-1 = 8
F Starts after end of day 4, i.e. Day 5 5+3-1 = 7
G Can only start after day 8, i.e. Day 9 9+3-1 = 11

The backward pass calculates late finish and late start dates to determine the
critical path through the network and the float – at junctions take the lowest late
start value. After calculating the backward pass, the float per activity can be
calculated using the formula: float = late start – early start. The float is shown
centre left in each activity box. The highest individual float on any activity in a
network is the total spare time available for the complete network. The individual
float amounts cannot be added up for each path in the network diagram. The
critical path or the path with least float in this example is A-C-E-G as indicated. If
any one of these tasks is delayed the project end date will be delayed.
 3
5 Critical
1 B Path
3Days 7
8
1 2 0 E
0 A 2Days 3 2Days
1 6
2 0 C 9 11
4Days 0 G 3Days
9 11

Use lowest
late start at 3 5
junction 4 7
1 D 1 F
2Days 3Days
Calculations for the above network diagram (late finish and start dates)
Start at activity G and let early finish = late finish

Activity Late Start Late Finish

late start = late finish - duration +1
G 11-3+1 = Day 9 Let EF=LF
Must finish at end of
Day 11
F 8-3+1 = Day 6 Must finish at end of
Day 8 if G must start
on day 9
E 8-2+1 = Day 7 Must finish at end of
Day 8 if G must start
on day 9
D 5-2+1 = Day 4 Must finish at end of
Day 5 if F must start
on Day 6
C 6-4+1 = Day 3 Must finish at end of
Day 6 if E must start
on Day 7
B 6-3+1 = Day 4 Must finish at end of
Day 6 if E must start
on Day 7
A 2-2+1 = Day 1 Must finish at the
end of Day 2 if C
must start on Day 3
(lowest late start of
B,C or D)
The Gantt charts (bar charts) for the above network diagram follow.
The early start Gantt chart

Working Day (Working

from 8am to 5pm) M Tu W Th F M Tu W Th F M
Activity \ Day number 1 2 3 4 5 6 7 8 9 10 11
A
B
C
D
E
F
G

The late start Gantt chart

Working Day (Working

from 8am to 5pm) M Tu W Th F M Tu W Th F M
Activity \ Day number 1 2 3 4 5 6 7 8 9 10 11
A
B
C
D
E
F
G

NOTE: The red activities are the critical path activities. From the Gantt chart it is
easy to see how they follow on from each other to create the critical path. Any
delays on this path will cause the project end date to be extended. The activities
with float are pushed to the right in the late start Gantt chart but the critical
activities do not move at all as they have no float. Also, note that weekends are
non-project work days in the above example. Once the early start / early finish
and late start / late finish Gantt charts are drawn up, the resource and cost
allocations can commence.
Remember - a Gantt chart shows:

• The minimum total time needed to complete a project;

• Proper sequencing of events and activities; and

• Which steps can be underway at the same time.

Actual progress can be charted to show actual beginning and end times
versus estimated beginning and end times.

Resource Management

A resource is any commodity that is required to complete an activity or task. In

an ideal situation the resource requirements equal the resources available.
Unfortunately in project management this seldom happens so some form of
compromise is essential. When a resource is overloaded there are three basic
solutions available to address the problem:
• Activities with float may be delayed;
• Resources may be rescheduled if necessary; or
• If the end date of the project is fixed, resources may be increased.

Resource estimating

The resource estimate is linked directly to the scope of work and the bill of
materials. The scope of work may be expressed as so many tons of steel
erected, or so many square-metres of wall to be painted. The ‘man’ hours per
unit expressed in the scope must be determined and trade-off analysis between
the resource requirement and the activity duration must be performed.
e.g. The work requirement is to erect 12 tons of timber and the estimator knows
from past experience that the work can be done in 150 ‘man’ hours per ton; if 10
hour shifts are worked, the equation is:

(12 tons X 150 ‘man’ hours/ton)

(10 hours/day) = 180 ‘man’ days

The resource / duration trade-off would be as follows:

RESOURCE DURATION ‘MAN’

(workers) (days) DAYS
10 18 180
11 16.4 180
12 15 180
13 13,8 180
14 12.9 180

Resource forecasting

The next step is to forecast the total resource requirements. This is done by
compiling all the resource estimates and presenting them in a structured
resource table as follows:

ACTIVITY RESOURCE QUANTITY RESOURCE LEAD

NUMBER TYPE PER DAY DURATION TIME
010 WELDER 5 4 DAYS O

• The resource information is allocated to an activity number;

• The resource type field is used to distinguish the different types of
resource;
• The quantity per day field indicates the quantity of a resource required
per day;
 • The duration field indicates how many days the resource will be required
for that activity; and
• Lead time is the difference in time between the scheduled start date for
the activity and the availability date for the resource.

If there is more than one resource needed for an activity. Use a separate line for
each resource.

ACTIVITY RESOURCE QUANTITY RESOURCE LEAD

NUMBER TYPE PER DAY DURATION TIME
010 ENGINEER 3 6 DAYS O
010 FITTER 4 10 DAYS 0
Resource levelling

An unlevelled Gantt chart and histogram are illustrated below. In this example
the resource “Dennis” works an 8 hour day but has 8 hours of work, 16 hours of
work and 24 hours of work scheduled for three separate tasks on three
successive days. Clearly Dennis cannot do all this work without working
overtime. The resource histogram for Dennis is shown below the Gantt chart.

ec '97 28 Dec '97 4 Jan '98

ID Task Name Duration W T F S S M T W T F S S M T W T F S S
1 RESOURCE LEVELLING 3d

2 TASK 1 1d DENNIS
3 TASK 2 2d DENNIS
4 TASK 3 3d DENNIS
5

Dec 28, '97 Jan 4, '98

F S S M T W T F S S M T W T
300%

250%

200%

150%

100%

50%

% Work Allocated: 300 200 100

Dennis Overallocated: Allocated:

Full resource levelling is done as follows:

The Gantt chart for the resource “Dennis” (normal hours per day = 8) with full
resource levelling is shown below. With full resource levelling the tasks are
delayed to match the resource availability. Note: the three tasks are not linked in
this example.

ec '97 28 Dec '97 4 Jan '98

ID Task Name Duration W T F S S M T W T F S S M T W T F S S
1 LEVELLED PROJECT 6d
2 TASK 1 1d DENNIS
3 TASK 2 2d DENNIS
4 TASK 3 3d DENNIS

The levelled resource histogram below shows that the problem has been
resolved by pushing the activities out and extending the duration of the project
from three to six days.

28 Dec '97 4 Jan '98 1

M T W T F S S M T W T F S S M T
100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

100 100 100 100 100 100

DENNIS Overallocated: Allocated:

Cost Estimation and Budgeting

The output of the resource planning process is a description of what types of

resources are required and in what quantities for each element of the work
breakdown structure.

Cost estimation involves developing an approximation (estimate) of the costs of

the resources needed to complete project activities. Care should be taken to
distinguish cost estimation from pricing for projects. Cost estimation involves
assessing how much it will cost the performing organisation to provide the
product or service required. Pricing is a business decision – how much the
performing organisation will charge for the product or service.

The work breakdown structure and the resource requirements are required as
inputs for cost estimation. The individual or group preparing the estimates must
know the unit rate (e.g. bulk material cost per cubic metre) for each resource in
order to calculate project costs. If actual rates are not known, the rates may
have to be estimated. Information on the cost of many categories of resources is
often available from historical sources. One or more of the organisations involved
in the project may have maintained records of previous projects that are detailed
enough to aid in developing cost estimates. In some application areas, individual
team members may have maintained such records. The individual members of
the project team may remember previous estimates or actual costs. While such
recollections may be useful, they are generally far less reliable than documented
results. Historical information may also be available from commercial cost
estimation databases.

Activity duration estimates will affect cost estimates on any project where the
project budget includes an allowance for the cost of financing (interest rates).
A chart of accounts describes the coding structure used by the performing
organisation to report financial information in its general ledger. Project cost
estimates must be assigned to the correct accounting category.

Example of Accounting Codes

Department Code
Corporate Bank 210
Loan Products 340
Internal Audit 710
Cash Management 560

Tools and techniques for cost estimation

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. It is a form of expert
judgement and is generally less costly than other techniques, but is also
generally less accurate. The upward effect of inflation can be established using a
commercially available cost price index (CPI) and inflation indices. One of the
problems with the method is that different commodities tend to escalate at
different rates, this can be addressed by sub-dividing the project into its
component costs by CPI category, see the figure below. It is most reliable when
the previous projects are similar in fact and not just in appearance and when
those preparing the estimate have the necessary expertise.

Sample Analogous Estimating Template

YEAR 2000 2001 2002
Base Cost Inflation Rate New Price Inflation Rate New Price
Labour R500 000 10% R550 000 8% R594 000
Material R400 000 15% R460 000 5% R483 000
TOTAL R900,000 - R1 010 000 - R1 077 000

Parametric Modelling – Involves using project characteristics (parameters) in a

mathematical model to predict project costs. The models can be simple or
complex (one software package uses 13 separate adjustment factors). These
models are most likely to be accurate when the historical data used to develop
the model was accurate, the parameters used in the model are quantifiable and
the model is scalable. See the figure below.

Sample Parametric Model

Management Fee 5% of Contract price
Quality Assurance 1% of Contract price
Pipe work 20% of Generator price
Consumables 10% of Material price
Profit 20% of Construction price

Bottom up estimating – Involves estimating the cost of individual work items,

then summarising or rolling up the individual estimates to get a project total. See
the figure below.

Sample Bottom up Estimating Template

TASK DESCRIPTION LABOUR MATERIAL PLANT TRANSPORT TOTAL
HIRE
Mark out
100 R1 000 R500 R1 500
foundations
200 Dig foundations R5 000 R500 R1 000 R500 R7 000
300 Lay foundations R3 000 R10 000 R3 000 R2 000 R18 000
TOTAL ESTIMATE R26 500

Computer software such as MS Project ® is readily available to assist in cost

estimation. Expert opinion is recommended in estimating pessimistic (P),
optimistic (O) and most likely (ML) costs for the determination of the target cost
estimate.

Target Cost Estimate = (P + 4ML + O) / 6

Cost estimation outputs

A cost estimate is a quantitative assessment of the likely cost of the resources
required to complete a project. Estimates may be presented in summary or in
detail. Costs must be estimated for all resources that will be charged to the
project. This includes labour, materials, supplies and special categories such as
inflation allowance or cost reserve.

Supporting detail should include:

• A description of the scope of work;
• Documentation on the basis for the estimate i.e. how it was developed;
• Documentation of any assumptions made; and
• A cost management plan which describes how cost variances will be
managed (e.g. different responses to major problems or minor ones). It
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 work
items in order to establish a cost baseline for measuring project performance.
Cost estimations and budgeting are based on the work breakdown structure.
Costs can be assigned to each element of the project, just as quality standards
must be assigned to each element.

Typical cost components include labour (contract / temporary / consultants

included), overheads, materials, supplies (e.g. stationery, reference
sources), equipment purchase or rental (e.g. computers, scaffolding,
vehicles), administrative costs (support services, secretarial, purchasing)
and profit if applicable. Labour will always be a significant component, so
accurate time estimation is required before this can be budgeted. Refer to
the WBS and schedule for input.

Combine similar items into categories of costs for the budget proposal to
the sponsor, stakeholders and higher project authorities and agree with
the relevant parties on the costs, the maximum flexibility in the budget
and on ways to handle discrepancies between budgeted cost and actual
costs. A key issue here is scope creep where specifications are changed
without formal approval when the project team has new ideas or
stakeholders or customers have new requirements.

Obtain agreement from resource providers or suppliers that they will

incorporate agreed cost estimates into their budgets, and obtain cost
codes where relevant. Ensure that the budget is phased correctly
throughout the project life cycle.

Cost budgeting inputs include:

• Cost estimates;
• The work breakdown structure; and
 • The project schedule which includes the planned start and expected
finish dates for the project elements to which costs will be allocated.

The output from cost budgeting is a time phased budget that will be used to
measure and monitor cost performance on the project. The following might be
useful headings for your budget:
• Labour: Wages and salaries for project staff;
• Overheads: Taxes and fringe benefits;
• Materials: All items used on the project;
• Supplies: Tools, stationery, etc.
• Equipment: Rental or purchase price of machinery, etc.
• General and Admin: Cost of management and support services for the
duration of the project; and
• Profit: Successful completion (% of cost).

Activity
Refer to the work breakdown structure and allocate an
estimated cost to each item.
 Activity

Draw a Gantt chart for your own project by

following these steps:

¬ List the steps required to complete the project

(from your work breakdown) and estimate the
time required for each step.

¬ On a grid list the steps down the left side and time intervals along
the bottom;

¬ Draw a horizontal bar for each step, from the planned start date
to the planned end date; and

¬ Overlap the parallel steps that can be done at the same time.

¬ Estimate the resource requirements for each activity.

¬ Allocate a cost per activity per day.

¬ Allocate a contingency allowance where you feel the risk is higher.

Planning, Monitoring and Managing the Quality Dimension

If a project is not managed properly, it is almost impossible to achieve a quality

product. The project manager must understand how to measure time and cost –
hours or days, Rands and cents, but must also have a clear idea of what is
meant by quality in a project.

The word quality is often used to mean expensive, luxury or conforming to an

extremely high specification. Adopting this view of quality could result in the
pursuit of an impossibly expensive standard that is neither what the customer
wants, nor what is necessary for the project. Good quality does not have to
mean high prices; it simply means supplying the customer with what they want,
to the standard and specification they require, with a predictable degree of
reliability and uniformity, and at a price that suits their needs.

As an example of a quality specification - for a corporate dinner function the

customer might require:

• A venue in the Durban city centre accommodating 50 people, seated at

round tables of 5 per table;

• At least 5 toilets in each rest room;

• Parking adequate for 50 vehicles;

• At least two accredited security guards available from 5.00pm to

12.00pm; and

• A map showing directions to the venue from Durban International Airport.

Achieving quality on projects

The process currently adopted by many organisations is total quality

management (TQM). Total quality management means harnessing everyone’s
effort to achieve zero defect at the lowest cost.

Quality management includes five elements:

• Quality of the Product: This is the ultimate goal. This means meeting the
customer’s purpose;
• Quality of the Management Process: Another necessary condition for
achieving a quality product; the management process should assure the
quality of the product throughout each stage of the project;
• Quality Assurance: These are steps taken in advance to increase the
likelihood of obtaining a quality product and to prevent defects;
• Quality Control: These are steps taken to measure the quality of both the
product and the management processes, and to eliminate any variance
from the desired standard; and
• Attitude of Mind: The commitment of everyone in the project team to
achieving quality must start at the top, it cannot be delegated.

Effective quality management requires:

• A project review programme to evaluate project team performance;

• The application of new techniques of participative project

management especially in community projects; and

• The identification of critical success factors in new project situations.

Quality management tools

The principle tools used in defining, planning and managing quality are:
 § The work breakdown structure; and

§ The project specifications.

The work breakdown structure has already been useful in defining the
scope of the project and in managing costs and it will be used again in
managing quality. Quality standards are specified for each of the specific
items and tasks identified in the work breakdown structure. While it is good
to aim for high standards, remember that the specifications will be used as
measures of success for the various stages of the project and if
unnecessarily stringent may be difficult to meet or may add significantly to
the cost and time requirements of the project.
 Activity

For your project, select five outcomes or outputs

and write them down. Identify at least three
quality standards that each must meet in order to
be acceptable to the customer.

Outcome or Output Quality standard