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PJM5900 Week 7 Presentation

1. PJM5900 Week 7 Presentation

1.1 Project Time and Cost Management

Slide Text:

Project Time and Cost Management

Week 7 Lesson:

This lesson on cost and time management topics, focusing on how to develop a project schedule and a project budget.

1.2 Introduction

Transcript:

Hi. In this lesson, we're going to be taking a look at project time management and project cost management. Now, these are two separate project knowledge areas. But we're going to be combining them together, because they integrate together so nicely because much of the information in one is complimentary to the other. And oftentimes, we do much of this work simultaneously or in a very coordinated way at the minimum. So I think it's important that we understand each of these in relation to the other so that we get the most benefit of seeing how these two different knowledge areas come together in the actual planning and execution of a project. We're going to be giving primary attention to what it takes to produce a final project schedule in a completed project budget, which then is used to guide the work of the project and also to track performance of the project, as we look to compare actual performance with planned performance, once the project gets under way.

1.3 Knowledge Areas

Image Description: A circle labeled “Project Integration Management” is surrounded by smaller circles titled “Scope”, “Time”, “Cost”, “Quality”, “HR”, “Communications”, “Risk”, “Procurement”, and “Stakeholder”. Clickable Interactions:

1.Scope - Project Scope Management is focused on those processes that help to identify and manage the project’s scope of work.

2.Time - Project Time Management is concerned with creating estimate durations and a realistic project schedule that can be monitored and updated throughout the project.

3.Cost - Project Cost Management includes processes for creating cost estimates for materials and labor, creating a budget, and then monitoring costs throughout the project.

4.Quality - Project Quality Management includes identifying the quality standards that should be used, and then monitoring the work of the project and the deliverables produced to ensure the quality standards are met.

5.Human Resources - Project Human Resource Management focuses on ensuring that you have the right people with the right skills for the right jobs.

6.Communications - Project Communication Management includes processes for ensuring that those involved in the project have the right information at the right time to support the work of the project.

7.Risk - Project Risk Management includes identifying risks, analyzing risks, and then monitoring and managing risks while executing the project.

8.Procurement - Project Procurement Management contains processes to ensure that resources are procured in an appropriate and timely manner.

9.Stakeholder - Project Stakeholder Management contains processes for identifying, analyzing and engaging stakeholders throughout the life of the project.

10.Project Integration Management - Project Integration Management contains those processes necessary for combining the processes and practices from all the other knowledge areas to ensure that no key components are missing or not fully considered.

1.4 Overview of Lesson

Image Description:

A series of 6 arrows is displayed, each pointing to the next. In order from first to last, they are labeled “Define Activities”, “Sequence Activities”, “Develop Estimates”, “ Develop Schedule”, “Determine Budget”, “Control Costs-Schedule”.

Slide Text:

INPUTS

 Project Charter

 Work Breakdown Structure & Dictionary

 Requirements

OUTPUTS

 Project Schedule

 Project Budget

 Cost & Schedule

 Control Plan

Transcript:

I want to begin by giving a high level overview of how we create a project scheduling budget-- what this process looks like. We begin first with a set of foundational documents that we use. The project charter, the work breakdown structure, and work breakdown structure dictionary if we have one, and any other requirements, documents, or documents that would contain plans and specifications about the work of the project. And we use those as, if you will, the baseline document that we will use to develop the project schedule and budget. Once we have those documents on hand, we begin by looking at the work breakdown structure and defining the activities. We talked in a previous lesson about the distinction between a deliverable and an activity. So we want to make sure that if we've not done it yet, that we defined what those activities are. What are those actions needed to produce the deliverables? We then move to sequencing those activities. We put them in the order in which they need to be done for us to complete the work of the project. Once we've done that, it's time to develop some estimates. We need to develop a time estimate for each activity. We need to develop a resource estimate for each activity. And along with this, if we've not done it, we could develop a more detailed cost estimate for each activity at this point as well. Once we have those estimates on hand and the activities have been sequenced, we're ready to develop our schedule. To put it into a calendar and see when the work will be done by whom. From there, we're able to determine our budget for each of the components of the work that we're going to be doing. And then finally, we want to put together a plan for controlling the cost and the schedule of the project. So those are the steps that we go through to create a project schedule and budget so the output, if you will, is a completed project schedule, a completed project budget, and a cost and schedule control plan that we can then use throughout the monitoring and controlling phase of the project. Now in the remainder of this lesson, we're going to walk through these six activities for creating a project schedule and budget in more detail so that you better understand the process for creating a project schedule and budget.

1.5 Defining Activities

Image Description:

Slide Text:

1.0 Construction Project

1.1 House Foundation

1.1.1 - Grade site

1.1.2 - Dig footing

1.1.3 - Pour slab

1.2 Exterior Construction

1.2.1 - Frame house

1.2.2 - Build roof

1.2.3 - Install siding

1.3 Interior Construction

1.3.1 - Rough-in Electrical

1.3.2 - Install insulation

Transcript:

We begin by defining the activities. That's the first step. Now, here we have a sample work breakdown structure, a very small one to illustrate how we do this. The highest level is 1.0, Construction Project. And then we've got three deliverables below that. 1.1 is the House Foundation, 1.2 is Exterior Construction, and 1.3 is Interior Construction. You'll remember that these follow the adjective/noun format. So exterior is an adjective. Construction is the noun, so adjective/noun, and the same for the others, as you can see. Deliverables are what we are producing. It's the end result of the activities that we undertake. So let's add some activities. Let's define some activities associated with these deliverables. And here you can see the activities have been added to this example. Under 1.1 House Foundation, we have 1.1.1 Grade the Site, 1.1.2 Dig Footing, 1.1.3 Pour Slab. Now, typically, we follow an action verb/adjective/noun format. I've shortened these just for the sake of example. But for us to build the house's foundation, we first need to grade the site. Then we dig the footing. And then we pour the concrete slab, that on which the home will be constructed. And that's our foundation. So those are the activities that produce the deliverables. So what we have to do is go through each of the deliverables in our work breakdown structure and define what the activities are for producing those deliverables. And you can see the other examples that I've inserted here for exterior construction and interior construction. The question is, what work has to be done, what activities have to be undertaken for us to produce the deliverables of the project? And that's what we're adding at this point. Those are the activities that we are defining at this stage of the process.

1.6 Sequencing Activities

Image Description:

Slide Text:

 Goal: most efficient ordering of tasks to accomplish the scope of the project

 Apply hard logic

 Apply soft logic

Transcript: Now that we have defined our activities, we want to begin sequencing those activities in the order in which they must be done to accomplish the work of the project. Now, the primary goal at this stage is to try to sequence the activities in as efficient a manner as possible, as I said, to accomplish the scope of the project so that we waste the least amount of time and sources in completing that work. Now, to do this we need to apply what's called hard logic and soft logic, so let's begin with hard logic. Hard logic is, if you will, the way which certain tasks must be done necessarily. So for instance, if I'm building a house, I must build the foundation before I can build the walls,

and I must build the walls before I can build the roof, and so on and so forth. So this is the order in which the work must be done in order for us to deliver the scope of work of the project. So begin sequencing those activities using this sort of hard logic. This must be done before that is done-- the sort of necessary predecessors, if you will. Then we go back through, and we apply what's called soft logic. And this is what is our preference for what we would do first, or second, or third, or so on, and so forth, because oftentimes we have a degree or a certain amount of preference that we can apply in building a schedule. So let me give you an example of that from the construction industry. Once we finish up the exterior of the home and the home is under roof, if you will, then we move to the interior, and there's a lot of different things that can begin happening then. We can do rough in plumbing, rough in electrical, rough in HVAC. And depending on the project, it doesn't really matter which one of those is done first. It's simply a preference. Now, my preference was that we do the HVAC first, the plumbing second, and the electrical third. So that's the preference-- the way that I followed in scheduling in most instances. But in other situations, I might have done that a bit differently depending on certain constraints or certain desires. So we have the hard logic. This must be done before that. The walls must be built before the roof is put on. And then we've got soft logic, and this is where we apply our preference based on our experiences and what we think is going to create that most efficient schedule for the project. So we want to go through and apply both the hard logic and the soft logic when we're sequencing these activities so that we, again, create the most efficient schedule that we can, or sequencing of activities that we can, for producing our project schedule for accomplishing the work.

1.7 Task Sequencing

Image Description:

Transcript:

When performing our initial task sequencing, we want to apply both hard logic and soft logic. But what I want to do is briefly illustrate the difference between those two items. So what we have here is an activity list of a few activities for building a house. We choose an architect. We design the house. We choose the builder. We build the house, and then we move in. So five very simple steps. And so, if we start with applying hard logic, and we start with basically sequencing these activities for what should come before and after the other. So here we have choose architect. Then we design the house. Then we choose our builder. We build the house, and then we move in. And that's a process that can often be followed. But it's not required that we follow that. Now, there are certain things. We have to have a builder before we can build the house. And we must have an architect before we can design the house. But there's nothing that would stop us from choosing the builder after designing the house. There's nothing that forces this sequence in the realities of building a house. And so this is an opportunity for us to apply soft logic. And it's a way for us to, when we're sequencing our tasks, to look for ways for, if you will, compacting our schedule so that we have the most efficient use of time and resources. So in this instance-- and I'm using a piece of software, Visio here, just so I can easily illustrate this-- we could put choosing the builder at the same time as choosing the architect. And we have to have the builder before we can build the house. So our schedule could actually look like this. While we're choosing the architect, we could be choosing the builder and then move to designing the house. And then once we have the house designed, and we have the builder selected, then we're ready to build the house. So instead of having everything in sequence, one after the other, we can have some parallel activities. And when you're doing the initial sequencing of tasks, I recommend that you start with putting everything in the order that initially makes sense to you but then coming back and rethinking it so that we can, hopefully, compact the schedule so that now it'll take less time to complete the project, because our schedule has been compacted. And you can see here that we've got everything linked up with its predecessor and successor moving towards that final move-in goal of this little example that we have here.

1.8 Creating a Network Diagram

Image Description:

Transcript:

I want us to take a quick look at creating a network diagram. This is an important skill that it's important that you understand how to do. Now oftentimes, you're going to be using software that will do this for you, but it's important that you understand how it's done so that you can effectively analyze a project schedule and a network diagram. And so what we have here is just a list of 10 tasks. And we have the predecessors and the duration. And so really what we're focusing on for this example is just the task and the predecessor. So you can see that Task 1 has no predecessor. Task 2 has no predecessor. Task 3 has a predecessor of Task 2. And so on and so forth. And so we take this information and we use it to create the network diagram, which I've already done here. So you can see that 4 has a predecessor of 1. 6 has a predecessor of 4 and 3. And if we go back and look at our list, we see that 6 has a predecessor of 3 and 4. And so we use this to create a network diagram. And there's a couple things that I want to say about the limitations of what we have before us. First, this doesn't tell us how

long the project's going to take. All it does is show us the relationship of the various activities to the other activities. Also this is a closed network diagram. And what I mean by that is that although there are multiple possible beginning points, based on this, we could begin Task 1, 2, or 7 simultaneously, potentially, if we had enough resources. But there's nothing that stops us from the beginning of executing the project of us starting those activities because there's no predecessors to them. So we can have multiple beginning points, but you'll notice that we have one final termination point. So this is what's called a closed network diagram. Everything is within the network and closed off at the ending. Now if for instance that link were not to be there between 5 and 8, and 5 was as it were dangling here, we would not have a closed network diagram because what this network diagram communicates is that no task depends upon Task 5 being done. Once we get to Task 5, there's nothing that feeds into. And that oftentimes-- and I would dare say always-- is not the case because typically, at the end, a task 10 would be something like user acceptance or final close out or lessons learned. And for us to complete that, 5, in fact, would have to be done. And so we need to ensure that we have a closed network diagram because if in your schedule you do not, then it raises questions as to whether or not you've completed scheduling your project, and it shows that you don't understand how all the activities in your project schedule relate one to the other. And so it's important that you create this closed network diagram as we've illustrated here. So hopefully this has been helpful. It's a very simple process of going through and simply setting out the different tasks and then linking them up based on the predecessors and ensuring then that we've got a closed network diagram. Oftentimes, whenever we do a first pass, we don't create a closed network diagram so we need to review it and then go back and make adjustments to ensure that we have a closed network diagram.

1.9 Developing Estimates

Image Description:

Slide Text:

1. Gather necessary documents

2. Choose estimating method(s)

3. Assign responsibilities

4. Create Estimates

Transcript:

We now move to developing estimates. Now, we're going to talk just about estimating here, but what we're talking about can be applied to either creating time estimates or cost estimates. The same process and the same tools are available to you. So all that we're going to be saying about estimating in this context applies to both time estimates and cost estimates. So as we begin the estimating process there's a few things that we want to do as we

prepare. We want to begin by gathering necessary documents. These are the documents that will support us in preparing both time and cost estimates. This would be things such as the work breakdown structure or activities list, any plans and specifications, our project charter potentially, and our work breakdown structure dictionary if we have one available. So any documents that we have or have prepared before hand that may inform this process we want to have at hand ready for reference. So once we've gathered those documents then we need to choose an estimating method or methods. Oftentimes a project may use one or more methods for creating estimates, and we're going to look at some specific estimating method types in a later slide. Once we've chosen the methods that we're going to use we want to assign responsibilities. On larger projects that are much more complex we may have subject matter experts, are subcontractors, or members of the sub team to create estimates for a specific area. Or it may be primarily the project manager doing a lot of it if it's a smaller scale project. So you just need to determine who's going to be creating what estimates, and when those estimates are going to be due. And then finally we simply go about the work of creating estimates. For many things, things that we've done in the past, it may be fairly quickly. We may have a good idea of how long some different time frames will take or what the costs may be. But for the more complex pieces it can take time to develop the estimate, so you want to plan for that in your scheduling, realizing that it may take longer than just a day or two to knock out some estimates. Sometimes this can take much longer, depending on the complexity and the scope of the project.

1.10 Estimating Methods

Image Description:

Slide Text:

Four broad categories of estimating methods are available to project managers

for creating both time and cost estimates.

Transcript:

In this lesson, we've taken a look at two of the parts of the triple constraint-- cost and time. The third one being scope, of course. These are really two of the foundational bases on which our project is built. Oftentimes, the schedule people confuse with the actual project plan. Now, as you've gone through this course, you'll realize that the project plan is much more than the schedule. But the schedule typically is one of the more visible parts of the project plan. And the budget is that all-important piece that many project managers are measured on in a very important way. So it's important that we grab a firm grasp of the project schedule and the project budget for project planning and execution purposes. So I want you to make sure that you take the time necessary to maybe even go back and review some of the lectures in this presentation, to make sure that you feel like you have a firm grasp of this area before moving on, because again it is such a critical piece and integrates with so many other areas of the project plan.

Transcript of: Tales from the Trenches When I was a project manager in the construction industry, often times I would get a client who would ask-- maybe it was a client that the company was having initial conversations with about a construction project-- and one of the questions that they would oftentimes ask is, what is your price per square foot? And what they're asking is, is essentially for your parametric estimating model. They wanted to know how you were going to prepare the estimate. And they wanted to use this as an indicator to find out whether or not you were competitively priced for maybe a project that they were considering. And I hated getting this question. The reason is because the number that I would get would vary greatly depending upon the type of home that a client was asking to be built. For instance, if someone were asking for a starter home, something that has very base building features and components inside of it, then the number that I would give would be very different than if it were someone who was asking for a very custom home with a number of custom features. Or if I were building in, if you will, a level grass fill in a subdivision, as opposed to on a side of a

mountain that's not really uncommon in the part of North Carolina that I worked in, then the cost per square foot could vary quite a bit depending upon the type of project and the type of features. So I use that to illustrate that these types of ratios can get us in trouble if we don't use them appropriately because these numbers are built on a model that is established on certain baseline parameters. And so if we're comparing sort of our historical project with a project that's not similar but very different, then we can produce estimates that are incredibly inaccurate. And so whenever someone asks you for some type of a ratio, and as is the case with parametric estimates, be careful to ensure that they're going to be comparing it against the sort of baseline that you have in mind in providing that number. Otherwise, you're going to be creating estimates that are problematic and inaccurate, which is going to create problems for you down the road depending upon whether or not that estimate is updated based on the type of project that you're engaging with.

1.11 Creating the Estimate

Image Description:

Slide Text:

 Create estimating schedule

 Collect and review estimates

 Aggregate estimates

 Approve estimates

 Create draft baseline

Transcript:

When the time comes to create the estimate, there's a few steps that we should go through as, if you will, a best practice, a basic best practice. Now, there are other things that you may do based on the industry or the project type that you're working in, but you want to have these steps in some fashion as part of that process. First, you want to create an estimating schedule. You want to identify when you want to have the various estimates created by. Now, if this is a known project, that may be something that takes place fairly quickly. But often in very complex projects, these types of estimates can take some time to put together. And so you need to create a schedule for when you're going to be creating the different parts of the estimate. And then that brings us to the next point is you want to collect and review those estimates, so bringing back those together, reviewing them, looking at the supporting documentation. And then aggregating those estimates together so that you have a total estimate of both cost and time frame for the work of the project. And then next you would approve those estimates. Now, after you aggregate those estimates, you may find that you're over-budget, that you're over-schedule, the project is estimated to take longer than expected. And that may make you go back and adjust some of the factors of the project, the scope or different variables, so that it becomes in line with what it needs to be. But once you get estimates that are ready to be approved, those need to be formally approved and documented. And that is part of creating that draft baseline, both for the cost and for the schedule of the project. And that baseline would then need to be reviewed and a final baseline approved so that your actuals could be tracked against your plan as you're executing the work of the project.

1.12 Develop Schedule

Image Description:

Slide Text:

 Sequenced activities

 Apply time & resource estimates

 Apply to working calender

Transcript:

Once we have developed the estimates that we're going to be using for our project, we're ready to develop the schedule. Now let's think about what we have. We have sequenced activities, so we know what order the work should be done in. We also have our estimates for time, cost, and the resources for each of the activities. So now we want to apply those time and resource estimates to the activities so that we know how long each activity takes, and we know who's going to be responsible for accomplishing the work of that activity. Third, we want to apply a working calendar-- or, rather, we want to apply this to our working calendar; meaning that whenever we apply

this in the context of the calendar, we want to know what date people are available for, what dates they're not available for, days that the office is open versus days that the office isn't open. So, for instance, if your office typically closes down the week of Christmas, then you want to make sure that that's not available as a time frame that you're going to be scheduling work in your schedule. So now that you've done that, you basically have a schedule for the work that you're going to be doing as part of this project. Oftentimes, or typically most of the time, we're going to be using a tool-- some type of a scheduling tool such as MS Project-- that will calculate the schedule for us. And we're going to be introducing that tool later on in this course. What I've got before you on the screen, though, is an example of something called a Gantt chart. And you can see how this lays out the work for the activities of the project, as well as who's assigned to be working on that project by virtue of the initials. And the percentage there is the percentage of time that they're allocated to work on that project. And then you can also see the arrows connecting different activities showing you the sequence of the activities. And this is just a small snapshot of a much larger schedule. But this gives you an idea, because if you look along the top of this graphic, you can see a date-- days as well as dates-- showing you the days on which these activities would be completed. So this gives you an idea of what we're after-- what the final product should look like. We're looking for our activities sequenced, with resources assigned, and in the context of a working calendar that shows us when the work will be completed and when it should all be finished.

1.13 Develop Schedule

Image Descriptions:

Image 1 - A series of 6 arrows is displayed, each pointing to the next. In order from first to last, they are labeled “Define Activities”, “Sequence Activities”, “Develop Estimates”, “ Develop Schedule”, “Determine Budget”, “Control Costs-Schedule”. “Develop Schedule” is highlighted.

Image 2 - A chart is displayed with columns titled “Task Name”, “Duration”, “Start”, and “Finish”.

Transcript:

This is another example of a project schedule in MS Project, just to give you, again, an idea of what this looks like whenever we create it in a scheduling tool such as MS Project. You can see the deliverable levels is bolded, such as Project Initiation, Project Charter, Stakeholder Registration, Kick-off Meeting, and so on and so forth. And you can see that the activities are in red, or most of them are in red, such as Create Project Statement, Develop Business Case, Develop Budget, and Resource Planning. You can see how the estimates have been given for the duration of each of the activities, and then those activities have been scheduled based on the inputs to MS Project. So in the previous slide, we looked at an example of a schedule in a Gantt chart. And this is the data, if you will, that produces that Gantt chart whenever we enter it into MS Project. This provides that information, and it shows us the schedule in a table format much similar to Excel. But this gives you an idea of how we go through and we create a schedule and what it looks like whenever we're finished.

1.14 Critical Path

Image Description:

An image of a critical path is displayed with the caption “Network Diagram” beneath it.

Slide Text:

 The longest path of continuous activities

 The path through the network diagram with no slack

 The path that if an activity on the path is delayed, the overall project will be delayed by an equal amount

 Can change as the project progresses Transcript: An important concept when talking about scheduling is the critical path. This is the most common scheduling technique that's used in project management, the critical path technique. It's the technique that I've been alluding to in the past couple slides without actually calling it that. But the critical path method, as I said being the most common used method, is one that it's important that you're familiar with. So let's try to define this method and then give you an example so that you can understand it. One way to define the critical path is the longest path of continuous activities in the network diagram. So whenever we look at our network diagram and we try to trace through it, it's the path that takes the longest time to get through. Another way to look at it is the path through the network diagram with no slack. Now,

that is a new concept maybe for you, the idea of slack. And it's something that, again, we'll illustrate in the next slide with a presentation of how to identify the critical path in a very practical way. But it's another way that we can define the critical path, and it essentially means the same thing as the first definition of the longest path of continuous activities. A third way to define the critical path is that it is the path that, if any activity on it is delayed, then the overall project's going to be delayed by an equal amount. So if an activity's on the critical path and it takes three days to complete, and it's delayed and now takes five days to complete, an addition of two days, then the entire project will be delayed by two days. So all these three things mean the exact same thing. And I know that if it's a new concept that it's difficult to visualize this in this sort of way. So again, in the next slide I've created a presentation that walks you through how to identify the critical path in a network diagram, and I believe it'll help you understand these things in a very tangible way. But one of the most important things to recognize about the critical path is that it can change as the project progresses. As certain activities take a shorter duration of time or other activities take a longer duration of time, that critical path can change, and it's something that we have to monitor throughout the life of the project. So now let's take a look at an example network diagram where I go through and show you how to identify and calculate the critical path of a project. Now, before you watch this, I just want to say that most of the time, pretty much all the time, there is software that will do this for you, such as MS Project and other scheduling software. But the way in which they do it can be slightly different. And so what I'm doing is showing you the way to do it so that you can understand how to critically assess the critical path whenever you're using a scheduling tool of some kind.

1.15 Identifying the Critical Path

Transcript:

In this brief video, I'm going to illustrate how to identify the critical path in your network diagram. Now, you're going to be using software that will most likely do this for you when managing projects. But oftentimes, the software will calculate the critical path differently, or multiple ways. And oftentimes, what it will identify as the critical path may not, in fact, be the critical path. And we often run into this with MS Project, that only identifies a partial critical path. And so, I want to show you how the critical path should be identified, so that you can analyze the network diagram to ensure that you understand what, in fact, the critical path in your schedule is. So, one definition of the critical path is the longest path, the continuous task, through your network diagram. It's also true of that path-- that longest path of continuous task-- that each of the tasks along that path will have slack of zero. And so, what I've got in front of you is the same network diagram that we looked at a few slides ago, but in Excel, and set up so that I can easily illustrate how to identify the critical path by doing what's called the forward pass and the back pass. And we begin here with the legend. And, sort of, what all this means in this little grid around Task 1. We need some information to be able to calculate and identify the critical path. We need to know the earliest start date. So, this is the earliest date that the task can begin. The earliest date that the task can finish. The latest day that the task can start so that it does not delay the work of the project. And the latest date that it can finish so that it won't impact the work of the schedule. And here DT, you can see, is duration. And SL is slack. And so, with the forward pass, we begin. And why it's called the forward pass is we're going to move from the left to the right, and complete the top half of each of the data

points associated with each task. So, the earliest date that Task 1 can begin, because it has no predecessor, is 0. There's a duration of 4 days. And so, the earliest that it can finish is 4 days. We see that Task 1 is the predecessor to Task 4. So, we carry for the early finish date and make it the early start date for Task 4. So, it can begin on Day 4. We add the 2 to it. And the early finish is 6. And we want to stop here. And the reason we want to stop is because Task 6 has two predecessors-- Task 4 and Task 3. And so, we need to identify the early finish for Task 3 before we do the calculation for Task 6. And I'll show you why that's the case here in a moment. So, let's go back and do Task 2. We start with 0 again as the early start date for Task 2 because it has no predecessor. We add to that the duration time of 3 and get an early finish of 3. We carry that 3 forward for Task 3 because Task 2 is the predecessor. We add the duration of 4 days. And we come up with an early finish of 7. So, here's why it's important that we've waited-- because now the question is what's the earliest that Task 6 can begin, because we know that for Task 6 to be able to begin, Task 4 and Task 3 must be completed. And so, we know that we can't carry the 6 forward when Task 4 ends, because Task 3 will not yet be completed, because it completes on day 7. So, in the forward pass, we carry forward the highest number. So, in that case, it's going to be 7. We add to that the 3 for Task 6. And that gives us a early finish of Day 10. Now, we can go back down and do Task 5. Here we'll carry forward the 7 as well, because Task 3 is the predecessor for Task 5. We add to that the 5. And that's going to give us 12. Now, I want to go down and go ahead and do Task 7. There's no predecessor. And so, 0 is the early start. And we add to that the 6 duration, and get an early finish of 6. And so, now we're ready to scroll over and work on the final half. Now, I'm going to go ahead and begin here with Task 8. Remember here that the early finish is 6. And for Task 8, you can see that Task 7 back here and Task 5 are predecessors. So remember, we carry forward the highest early finish. So, in this case, it's not going to be the 6 associated with Task 7. But it's going to be the 12 associated with Task 5. So, we put in that 12. And we'll go ahead and scroll over to where you can see more, the final points of the network diagram. So, we take the 12, we add the 3 duration. And that makes it 15. And again, we're going to have to wait to carry forward the early start day here, because we need to complete Task 9 so that we can carry forward the largest, the highest number for the early start date. So, here we carry forward the 10. We add the 6 to it, duration, and that gives us 16. So, here we carry forward the 16 because it's the highest number. We add to that the 5, and we get 21. So, now we're halfway done with identifying the critical path. We've done the forward pass. Now it's time to do the backwards pass. So, we begin that starting at the task to the furthest to the right of our network diagram. And we will just work our way backwards as we worked our way forward. So, we carry down the 21, that's your starting point. And then what you do is you subtract the duration from the late finish. So, it's late finish minus duration equals late start. And that is going to be 16. So, it's the same.

And then we can calculate the slack-- the 21 minus 21, late finish minus early finish, is 0. So, we have 0 slack. That tells us that this task is on the critical path. And in this instance, we will carry back the late start to both of the preceding tasks. So, 16 will be carried back to Task 9. And we do 16 minus 6 equals 10. Again, we subtract late finish minus early finish. That gives us a slack of 0. Here we carry back the late start and make it the late finish. That 16, we subtract the 3 duration for Task 8. That gives us 13. And now we subtract late finish minus early finish, and that gives us a slack of 1. Because this has a slack of 1, we know that this activity is not on the critical path, because activities on the critical path have a slack of 0. So, now we will scroll back a bit here. We're going to carry back the 10 from Task 9 to Task 6. We will subtract the 3. That will give us 7. Again, late finish minus earliest finish is 0. Here we can carry back the 13 from Task 8 to Task 5. We will subtract the 5. And we will get 8. And here again, we have a slack of 1. All right. We will continue to move back through to the left. Now, here we will carry back the 7. Remember we carry back the highest number. So, 7 minus 2 is going to give us 5. And so, here we have a slack of 1. Here we're going to carry back the 7. Subtract the 4. That's going to give us 3. And we're going to get a slack of 0. Here we're going to carry back the 5. Subtract the 4. We will get a 1. A slack of 1, 5 minus 4. Here we carry back the 3. Subtract the 3 and get a late start of 0. So, we know that our slack is 0. And then here, we need to carry back the 13. So, 13 minus 6 is 7. And so, the 13 minus 6-- here we have a slack of 7. So, now we can identify the critical path. Task 2 is on the critical path. And we know that because the slack is 0. So, I'm just going to highlight that in red, just so that it will stand out. Task 3 is on the critical path. Task 6 is on the critical path. Task 9 is on the critical path. And Task 10 is on the critical path. So, what does slack tell us? [? Task ?] tells us the amount of time that a task can be delayed before delaying it anymore will impact the endpoint of the project. So, here, for instance, we can delay Task 7 for up to 7 days without delaying the end date, our projected completion date. If we delay this for 8 days, then it will extend the project in duration 1 more day. So, it's important that you're able to understand how critical path is calculated, what it means for the project, so that you can analyze network diagrams and understand what, in fact, the critical path means, and how to use it to manage your project effectively.

1.16 Determine Budget

Image Description:

A chart is displayed with the following columns: “WBS Code” “Deliverable” and “Budgeted Amount.”

Slide Text:

 Deliverables oriented

 Linked to Work Breakdown Structure

 Provides a total budgeted amount

 Used to compare actual vs. budgeted performance

 Variance analysis and earned value metrics

Transcript:

Now we're going to look at setting a project budget. We placed it in this lesson after developing the schedule. Although it does not necessarily have to be done at this point. It could have actually been done after you've completed your cost estimates. I've put it here, though, because it's important oftentimes to understand the link between the schedule and the budget. For instance, if you were working in a small company where they are cash constrained, then it's important that they understand when you're going to need this money to spend for the work of the project. So linking the budget to the schedule in a time-scaled way can be a very helpful tool for managing cash flows.

I've put together here an example of a very simple straightforward project budget for this little construction project we've been looking at in this lesson. And I want you to notice just a few things about this sample budget that we put together. First, notice that it's deliverables oriented. We have, if you will, summarized the budgeted amount at the deliverables level. Oftentimes, especially when presenting the information for presentation or in summary form, you want to present it in this format as the totals relate to the different deliverables in your work breakdown structure rather than showing the costs associated with each estimated activity. Also notice that we have linked this budget to the work breakdown structure. This is important for cost control purposes. Oftentimes, these deliverables or the work breakdown structure codes are tied to cost accounts in your company's accounting system. So that whenever an amount is extended, whenever you're purchasing something or paying a vendor or something of that nature. Whenever it's a link back to the work breakdown structure code, it's automatically linked then to the control code that is in your company's accounting system. So this keeps that connection nicely. Also notice that provide a total budgeted amount. This seems rather obvious when you see it. You'd be surprised at the number of times that I see budgets that contain all the line items but does not include a total. So we want to include a total as well. And another important reason that we want to have something like this is because it allows us to compare actual performance to budget performance. There's a number of tools that you're going to be exploring whenever you study this later on in some detail later in the program. But comparing the performance or the actual performance to the budget performance is an important way for project managers to measure their performance. A couple of tools that are fairly common is variance analysis and earned value where there's a number of earned value metrics that we can use to not simply understand past performance, but to also forecast future performance. So putting together a budget such as the one that's illustrated here in a simple way is an important way for us to document the cost of the project so that we can perform a performance evaluation. And it's also an important way that we can link the budget to the work breakdown structure to our accounting system, and also to present this to sponsors and stakeholders as needed.

1.17 Cost & Schedule Controls

Image Description:

A chart depicting a 4 month schedule is shown, with evaluation points animating onto the chart at the end of each of the first three months.

Slide Text:

Set cost & schedule baseline Select performance evaluation tool(s) Follow change control policy Set specific evaluation points Expect variances Ensure responses appropriate to variances Transcript: Finally, we want to look at controlling the cost and schedule. This is something that takes place mainly during the controlling and monitoring phase of the project. And the goal is for us to understand how well we're performing and line up what we plan. So how does our planned performance compare with our actual performance Well, for this to take place, we need to begin by setting a cost and schedule baseline. And this is essentially a snapshot of the budget and the schedule that we developed and approved. If you will, we try to freeze that in time so that we can later compare actual performance with planned performance, or with our baseline.

Once we've got that baseline set, we need to know what kind of performance evaluation tools we're going to be using. There's a number of tools available for project managers to use. The most common is simply a variance analysis, and that's where we compare what we said we were going to do, plan performance with what we actually did-- the actual performance. And we look at the variances that exist, and we spend more than we anticipated-- did we take longer than we anticipated. There are other more advanced tools that we can use such as earned value, and this is a tool that allows us to not simply understand past performance, but also to forecast future performance. And that's a tool that you'll be learning something about in one of your later courses on scheduling and budgeting. We also want to make sure that we understand what the change control policies are and that we follow those policies. Oftentimes, whenever we look at performance, we may need to make adjustments to the project schedule or the budget. And so we want to make sure that we follow those change control policies that we established early in the project to ensure there we track those well and appropriately. We also want to make sure that we set specific evaluation points. It's important that we set out from the outset that we're going to evaluate the performance of this project at these specific points. These could be related to milestones within the project or specific dates. Maybe every two weeks. Whatever the case may be, you want to make sure that there are those specific evaluation points that's going to let you get an understanding of how well you're performing. And you don't want to set these too late in the project, because otherwise you may be going well over budget or over schedule and not realize it so that you can make those adjustments as needed. It's important to say in all this that you do expect some variances. It's rare that we execute a project that's executed according to the plan we specifically set out in terms of cost and schedule. So we want to expect that there's going to be variances. But we want to ensure that our responses are appropriate to the variances. It's rare that I ever did a project that wasn't 3% to 5% off in some way, either to the positive or to the negative side. So if we see some variances in our project, that doesn't mean that we have to automatically call an emergency meeting and start all this work to make sure that things are recovered a certain way. Rather, we want to ensure that our response is appropriate to the variance. It doesn't mean that we ignore variances, but it means that we take a measured look at variances and make certain that our responses are appropriate to them given the context of our project.

1.18 Closing Remarks

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