Key Aspects for Project Managers: Cost and Time Assessment

As soon as the project's scope is reasonably defined – the next two key aspects of the project that the Project Manager must focus on are an assessment of Cost and Time.  

Larger projects may have a specialist consultant to assist with the development and management of the Project Budget and Project Schedule but on smaller projects, this is rarely the case. And even on larger projects, the PM will need to develop an early appraisal of time and cost before they can access specialist advice.

 

Project Deliverables, Work Breakdown Structure and Milestone Program

A project manager needs to know how to develop a milestone program and a project budget from the first principles this assist immensely in getting an early grasp on a projects scale and mapping out early requirements. This skill also assists the project manager in the future when they get to review and assess timelines and budget generated by others.

 

Budgeting and scheduling from the first principles are both informed by the process of decomposition – the breaking down of a project, applying a traditional waterfall methodology, so that each project deliverable is identified and broken down into lower levels of activity in outline format. This reduces the project into its component deliverables and activities and into a table format known as work breakdown structures or WBS.

 

The WBS is then quantified (each activity valued against time and cost). If the activity being down even further. Once assessed each individual value can be aggregated to build an overall appraisal of time and cost. In the absence of any other historical data this process will be the most accurate way a project manager has to create a project manager has to create as project schedule and a project budget. Thid detailed breakdown is the best way for a project manager to really get to know the project. I will also assist the project manager identify resourcing needs and isolate elements of risk.

 

 

Bottom-up Estimating

Bottom-up estimating is a method that involves estimating the individual cost and likely time taken for each activity or deliverable identified in the WBS and then assembling all these estimates into an aggregated estimate of time and cost for the entire project.

In the early stages of a project such estimation may provide only a rough order of cost but as the project progresses and is better understood – greater accuracy can be expected. It may also be that the WBS makes it possible for the Project Manager to apply prior knowledge or experience to valuing certain activities. This will likely add to the accuracy of the estimate.

While cost estimating is a relatively linear process with all the costs aggregating into an overall final estimate it is not the same for estimating the project timeline. This is because some activities can and may overlap – Therefore the Project Manager needs to be able to identify parallel activities and moderate the project time to accommodate overlaps and to allow for periods of waiting that may be inherent between activities.

 

Example of a WBS that includes Time & $$$ estimates

 

 

The Pros and Cons of Bottom-up Estimating

PROS

·         Bottom-up estimates can be very accurate especially when the project team responsible for their particular component gets to put a time and cost value against it.

·         Estimation errors tend to balance out across the components of a project. If the time or cost of one work package has been underestimated, this will likely be offset by an overestimation of another work package. 

·         Bottom-up estimating can be enhanced by other statistical/historical inputs where available.

·         This method can also be used to assess time and cost impacts of proposed changes.

 

CONS

·         The aggregated project estimate may fail to identify project-specific additional or overhead costs – this is especially true on larger more complex projects – eg. where a tower crane may be an added whole of project cost.

·         Bottom-up estimation requires a lot more effort to develop and can be seen as tedious and more onerous than a simple $ per m2 estimate.

·         It’s impossible to apply without a proper WBS.

·         Estimation errors will likely lead to both inaccurate time and cost estimates. 

·         Bottom-up estimates are still at risk to the bias or inexperience of the estimators. The only document what they know or are familiar with.

The Project Management Plan is the lead document in a project director’s suite of controls. 

As a minimum, it should answer the basic four questions. 

• What is the work to be performed
• Why is it being sponsored
• Who is involved and what are their responsibilities
• When is the work to be done

A well-developed Project Plan will address all 10 PMBOK Knowledge Areas.

Early effort by the Project Manager to develop a WBS to analyse the project’s deliverables in detail will directly address three of these 10 knowledge areas – Time , Cost and Resources. The WBS will provide also useful intelligence to inform the project’s risk profile and procurement requirements.