1. The Project Schedule and Budget
Chapter 7
Copyright 2012
John Wiley & Sons, Inc.

2. Learning Objectives
Describe the Project Management Body of Knowledge (PMBOK®) area called project cost management. Develop a Gantt chart. Develop a project network diagram using the activity on the node (AON) technique. Identify a project’s critical path and explain why it must be controlled and managed. Develop a PERT diagram. Describe the concept of precedence diagramming and identify finish-to-start, start-to-start, finish-to-finish, and start-to-finish activity relationships

3. The Importance of Project Cost Management
IT projects have a poor track record for meeting budget goals A 2011 Harvard Business Review study reported an average cost overrun of 27 percent. The most important finding was the discovery of a large number of gigantic overages or “black swans”

4. Examples of how not to mange costs
The U.S. government (e.g. IRS)
The United Kingdom’s National Health Service IT

5. Project Cost Management Processes
Process Group
Cost Management Process
Major
Output
Planning
CP1: Planning Cost Mgmt
Cost Management Plan
CP2: Estimating Costs
Activity Cost Estimates
CP3: Determining the Budget
Cost Performance Baseline
Monitoring and Controlling
MC1: Controlling Costs
Work Perf. Measurements
Budget Forecasts

6. What is Cost and Project Cost Management?

7. Project Cost Management Processes
Scope Baseline
Schedule Baseline
Estimate bases
Project Funding Req.
Determine Budget
Control Costs
Estimate Costs
Activity Cost Estimates
Cost Baseline

8. PMBOK® Project Cost Management
Estimate Costs
Focuses on the processes to estimate the monetary resources needed to complete the project work or activities.
Determine Budget
Aggregating the individual cost for each of the project activities or work package components to determine the cost baseline or overall project budget.
Control Costs
Updating the project’s status while monitoring the project’s budget and managing any changes to the baseline plan.

9. The Project Planning Framework

10. Budget and Schedule Development

11. Developing the Project Schedule
Project Management Tools

12. Gantt Chart for Planning

13. Gantt Chart Reporting: Project’s Progress

14. Project Network Diagram: Activity Analysis for AON
Description
Estimated Duration (Days)
Predecessor A
Evaluate current technology platform 2
None B
Define user requirements 5 C
Design Web page layouts 4 D
Set-up Server 3 E
Estimate Web traffic 1 F
Test Web pages and links
C,D G
Move web pages to production environment
D,E H
Write announcement of intranet for corp. newsletter
F,G I
Train users J
Write report to management
H,I

15. Activity on the Node (AON) Network Diagram

16. Possible Activity Paths
Possible Paths
Path
Total
Path 1
Path 2
Path 3
Path 4
Path 5

17. Critical Path

18. PERT

19. Activity Analysis for PERT
Predecessor
Optimistic Estimates (Days)
Most Likely Estimates (Days)
Pessimistic Estimates (Days)
Expected Duration A
None 1 2 4 B 3 5 8 C D 6 E F
C,D G
D,E H
F,G I 9 J
H,I .5

20. Activity Analysis for PERT

21. Possible PERT Activity Paths
Possible Paths
Path
Total
Path 1
Path 2
Path 3
Path 4
Path 5

22. Precedence Diagramming Method - PDM
Based on 4 fundamental relationships

23. Lead and Lag times
Lead is starting the next task before the first task is complete Lag (or negative lead) is the adding of a buffer of time before the next task begins

24. Critical Path Analysis (with slack time)