Unit IV Scholarly Activity (For hifsa shaukat Only) Managing Complex Project

MBA 6951, Managing Complex Projects 1

Course Learning Outcomes for Unit IV Upon completion of this unit, students should be able to:

1. Determine the necessary elements of a resource requirements plan. 2. Outline the cost of activities in relation to the project budget. 3. Determine the earned value of work performed.

Reading Assignment Chapter 6: Resource Utilization Chapter 7: Determining Costs, Budget, and Earned Value

Unit Lesson Estimating the Cost There are several types of budgeting. Many organizations use a combination of the strategies, depending on where they are in the life cycle of a project. Analogous estimating (or top-down) is used when few details are known about a project. It is often used in the early stages of a project and based on previous projects of a similar nature. For example, if a builder is building homes in a subdivision that average $200,000 for a four-bedroom home, and $175,000 for a three- bedroom home, an analogous estimate for a typical buyer of a four-bedroom home would be $200,000. It is usually less accurate, but it is cheaper to produce analogous estimates. It is most reliable when previous projects are very similar and the preparers have expertise in building estimates. Bottom-up estimating is used when most of the details are known about a project. It is often used in the later stages of a project. Typically, estimators, or the people who are doing the work, look at each activity and estimate the cost of that activity. The costs are aggregated into an overall budget. For example, when that same builder walks through a model home with a potential buyer and the buyer selects all of the fixtures, lighting, floor coverings, and so on and identifies all of the requested options, he or she can build a much more accurate budget. In most cases, this budget is much higher. That $200,000 could easily grow into a $240,000 budget. Bottom-up estimating is usually more reliable, but it costs more to produce because these estimates take longer to create. Fixed costs are costs that remain constant regardless of the duration of a project or scale of business activity. For example, a purchase of a crane or computer system is the same cost regardless of the duration of the project. Variable costs are costs that vary with time or resource changes. For example, hourly labor costs are dependent on the number of hours.

UNIT IV STUDY GUIDE

Planning, Performing, and Controlling the Project—Part 3

MBA 6951, Managing Complex Projects 2

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Resolving Resource Conflicts A project manager (PM) can address resource conflicts in a variety of ways, but the first step is to realize there is a conflict. If the project team builds a schedule using a scheduling tool like Microsoft Project, the PM can run an overallocated resource report. Once the overallocation is identified, there are several key strategies to address them: (1) resource leveling, (2) adding or modifying resources, and (3) changing the project. Most methods for addressing resource conflicts cost the project something, either more money, less functionality, or an extension in the scheduled completion. So why bother? In some cases, you have no choice—it is operational necessity. For instance, if your company has two bulldozers and you need four on a particular week, you will have to address that resource conflict to complete both projects. On other projects, resource conflicts take the form of people being overallocated. Sometimes, a team lead will say “that is what nights and weekends are for," but many people would strongly disagree. If people are overworked, something will suffer—the quality of the product will decrease, and defects and re-work will increase. Ultimately, it will result in personnel turnover. It costs a project time and money when people are replaced. If you make people miserable enough, they will leave either by quitting, getting sick, transferring, or just not working up to their capacity. Addressing resource conflicts improves morale, which increases quality, reduces defects, reduces re-work, decreases team turnover, and increases team commitment Resource Leveling The first method—resource leveling—is the easiest to do if you are using an automated scheduling tool like Microsoft Project. You can also use the tool to try various what-ifs. For example, try plugging in new resources, and see if their addition will change your scheduled completion time. If they are not working on a task on the critical path, their work will not even affect the project's scheduled completion. This method helps smooth out the peaks and valleys in your schedule without increasing your overall budget. If you choose level only within available slack as an option when you level the resources, leveling the resources will not extend your project's schedule either. However, if there is not enough slack in your schedule, it will not correct all of your allocation problems, in which case you will have to use another method to relieve the problem. In summary, the benefits of resource leveling are:

1. Minimizes period-by-period variations by shifting tasks within their slack 2. Utilizes resources more efficiently 3. Resources do not have days with no work scheduled and other days with too much work 4. Does not increase budget 5. Does not have to change scheduled completion

Adding or Modifying Resources Adding people to a project must be approached carefully. Additional people are easier to absorb into projects that are well-documented. Adding personnel to well-defined tasks is straightforward when the plan is clear. Throwing people at projects that are in trouble, behind, and already managed poorly often results in an even bigger problem. Adding resources increases the budget and rarely doubles the work completed. This is because additional people must be trained, which ties up their time and the time of a team member who is training them and adds to the communication channels.

MBA 6951, Managing Complex Projects 3

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Modifying resources can take several forms: Assign a person with greater expertise or more experience to perform or help with the activity, and increase productivity through improved methods or technology. Changing the Project Changing the project from its original baseline can take two forms: The project stakeholders may have to make a tough decision and change the originally committed project scope, or they may decide to extend the project schedule. Changing the scope often happens. You may have seen project teams implement a phased approach where some of the original scope is shifted to a Phase 2 or a Phase 3. Sometimes the only viable solution for a project manager is to negotiate with your stakeholders for additional time. This solution is often the last resort for project managers because this decision may change the budget if you have to pay contractors and keep employees on your project and off other projects, and it always results in missing your original completion date. When Schedules and Budgets Collide Now that you have a schedule and a budget, it is likely that a stakeholder will want a more aggressive due date. In “real life,” in some types of projects, there are standard crash costs that project managers can use to determine how a project's budget would be affected by crashing an activity or activities. Your textbook calls this strategy “time-cost trade-off.” For example, in a construction project on a hill, the builder can use a standard cement trunk where the workers will have to transport the cement via wheelbarrow from the truck to the site, or the builder can use a pump truck. In this example, the normal time would be three days with a total normal cost of $300 ($100 per day). The crash time would be one day, and the total crash cost would be $600. Using the network below and the additional information provided, find (a) the crash cost per day per activity, (b) which activities should be crashed to meet a project deadline of 10 days at minimum cost, and (c) the new cost.

Activity Crash Time Normal Time Crash Cost Normal Cost

A four days seven days $800 $500

B two days three days $350 $200

C four days six days $900 $500

D one day three days $500 $200

E one day two days $550 $300

The first step in this type of problem is to calculate the crash cost per day:

crash cost = (crash cost - normal cost) / (normal time - crash time) Activity crash cost per day: A 800-500/(7-4) = 300/3 = $100 B 350-200/(3-2) = 150/1 = $150 C 900-500/(6-4) = 400/2 = $200 D 500-200/(3-1) = 300/2 = $150 E 550-300/(2-1) = 250/1 = $250

MBA 6951, Managing Complex Projects 4

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For Part B, you need to find all of the paths and their durations. These networks are usually smaller than the ones for the AIB questions, and they will be drawn for you. Remember to use the normal times to calculate durations. Path duration: A-B-E 12 Days C-D-E 11 Days By looking at the durations of each path, you learn that both will need to be shortened in order to make the new scheduled completion of 10 days. In the calculation for Part A, the denominators are in red because that is the maximum number of days those activities can be crashed. In other words, A can be crashed up to three days, while E can only be crashed for one day. To find the minimum crash cost, start substituting numbers until you get down to the desired scheduled completion. The rules for crashing are (1) look at activities, which are on more than one path (more bang for your buck!) and (2) look at the activities with the cheapest crash cost. In this case, your cheapest solution is to crash A for two days at a cost of 2 x 100 = $200 and to crash D for one day at a cost of 1 x $150, for a total of $350. This entire paragraph is the solution to Part B of this question. For Part C, the new cost is simply the normal cost for each activity, along with the additional $350 premium, or 500 + 200 + 500 + 200 + 300 + 350 = $2,050.

1. Explain the basic elements of a resource requirements plan. Delineate each element, and describe its importance within the sphere of project management.

2. Explain the purpose of resource leveling within a project. Using the simplified project proposal you developed in Unit II, discuss how you would use resource leveling within that fictional project to acquire the necessary resources for project completion.

3. Describe the importance of determining the actual cost in relation to a project’s cumulative budgeted cost. Consider a project that has a significant lapse in tracked costs; what could happen to the project?

4. Imagine that you are a manager of a major project involving the construction and maintenance of a windmill farm in the Midwest. Explain to a protégé why it is so important to track actual costs in comparison with budgeted costs and how this could affect the project’s reputation.

5. Imagine that you are the instructional designer of a large aerospace firm that needs training for a new simulation. Over the course of 12 weeks you need to develop roughly 15 hours of training that address all critical areas of the simulation. The budget for the project is $24,000. After 8 weeks of work, you realize that the project is only 40% complete and has consumed $12,000. Calculate the earned value of work performed on this project, and discuss the importance of tracking earned value throughout a project.

6. Describe the importance of cost estimation within a project and, subsequently, the management of cash flow. Using the concepts within the text, describe what could happen if cost estimation is not performed properly during a project.