IEN Exam #2 – Flashcards
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What is crashing a project?
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The process of accelerating or expediting a project to reach an earlier completion date
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Why choose an earlier completion date? (4)
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1. The initial schedule may be too optimistic 2. Market needs change 3. Project slipped behind schedule 4. Contractual obligations
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How to accelerate activities (3)
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1. Improve the productivity of existing project resources 2. Changing the working method employed for the activity - alter technology or types of resources 3. Increasing quantity of personnel, plant, equipment
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Time vs. Cost slope ($ per t)
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(Crash Cost - Normal Cost)/(Normal Time - Crash Time)
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Why are cost estimates needed? (5)
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1. Support good decisions 2. Determining project cost 3. Is the project worth doing? 4. Poor estimates = failed projects 5. Cash flow needs
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Who should be making estimates?
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Person(s) most familiar with task at the work package level - experts
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Why is it good to have multiple sources of a cost estimate?
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Better chance of being reasonable and realistic when several people with relevant experience are used Discussion of differences can eliminate estimate errors
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What can be considered 'Normal Conditions'
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Ex. working 8 hours a day, working 2 shifts, using 3 programmers Includes establishment of time units for projects
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How should contingencies be considered?
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Estimates should *NOT* include contingencies Assume normal or average conditions always
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Why add risk assessments to estimates
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Stakeholders can consider alternative methods and alter process decisions
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What are top-down estimates?
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Cost estimates derived from using experience and/or information to determine project duration and total cost Sometimes made by top managers with very little knowledge of the processes
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What are bottom-up estimates?
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Cost estimates that are pushed down to the work package level - estimates come from the people closest to the work
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What is the Preferred Approach? (Process)
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Make rough top-down estimate Develop Work Breakdown Structure Make bottom-up estimates Develop schedule and budget Reconcile differences between top-down and bottom-up estimates
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Top-Down Approaches (4)
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Consensus Methods Ratio Methods Apportion Methods Learning Curves Methods
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Consensus Methods
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Pooled experience of senior management to estimate project duration/cost - best guess
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Delphi Method
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Developed by RAND Corp. in 1969 for tech forecasting Group decision process by panel of experts about likelihood of events
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Ratio Methods
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(aka parametric methods) Use of ratios to estimate Ex. Contractors using number of square feet to estimate
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Apportion Methods
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Extension to ratio methods, costs are apportioned as a percentage of the total cost
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Learning Curves Methods
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When projects repeat same tasks/groups of tasks, and performance improves with repetition
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Bottom-Up Approaches (3)
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Template Methods Parametric Procedures Applied to Specific Tasks Range Estimating Method
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Template Methods
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Estimates from past projects can be used as starting point if project is similar, and adjust to reflect the differences
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Parametric Procedures Applied to Specific Tasks
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Application of parametric methods at work package level
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Range Estimating Methods
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Calls for Low, Average, and High estimates when work packages have significant uncertainty
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Types of Costs
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Direct costs - Labor, Material, Equipment Direct Overhead - Salaries, Space Rental, % applied to materials and labor Gen. and Admin. Overhead - Advertising, Accounting, senior management, % of total direct cost
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Costs
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Labor Materials Subcontractors Equipment/Facilities Travel
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Problems with cost estimation (6)
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1. Low initial estimates 2. Unexpected technical difficulties 3. Lack of definition 4. Scope creep 5. Inflation/economic factors 6. Interaction costs
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Pitfalls of Estimating
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Misinterpretation of statement of work Omissions Overly optimistic schedule Inaccurate WBS Failure to account for risks No account for inflation
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Why Monitor and Control people? (3)
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1. Control holds people accountable 2. Prevents small problems from developing into large problems 3. Helps to maintain focus
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What does a project monitoring system involve?
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What data to collect How, when, and who will collect the data Analysis of the data Reporting current progress
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What data is collected?
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Actual activity duration Resource usage and rates Actual costs (All are compared against planned times, resources, and budgets)
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4 steps in the project control process
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1. Setting a baseline plan 2. Measuring progress and performance 3. Comparing plan against actual 4. Taking action
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Setting a baseline plan
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Derived from the cost and duration information found in the WBS Derived from the time-sequence data from the network
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Measuring progress and performance
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Quantitative measures - time and budgets Qualitative measures - meeting customer technical specs and product functions
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Comparing plan against actual
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Measure deviations from plan Frequent status reports should allow for early detection of variations
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Taking action
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For significant deviations, corrective action needed
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Earned Value Management (EVM)
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Pioneered by Dept. of Def. in the 1960s Considers joint impact of time, cost, and performance
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Planned value PV
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A cost estimate of the budgeted resources scheduled across project's life cycle Also called BCWS(cheduled)
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Earned value EV
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The real budgeted cost, or "value" of the work that has actually been performed to date % complete x original budget Also called BCWP(erformed)
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Actual Cost AC
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The cumulative total costs incurred in accomplishing the various project work packages Also called ACWP(erformed)
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Cost Variance CV
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Difference between the Earned Value and the Actual Costs CV = EV - AC A negative value indicates a cost overrun condition
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Schedule Variance SV
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Difference between the Earned Value and Planned Value SV = EV - PV A negative value indicates a behind schedule condition *always use values with a V in them
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Schedule Performance Index
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EV/PV Gives the efficiency in operating the project 1/SPI x time unit length of project = time to completion
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Cost Performance Index
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EV/AC Gives the efficiency with which the work has been accomplished 1/CPI x original budget = cumulative cost to completion
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What is project risk?
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Any possible event that can negatively affect the viability of a project
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What is risk management?
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Identifying, analyzing, and responding to risk factors throughout the life of a project
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Types of risk management
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Proactive management Reactive management
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Definition of risk (function)
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Risk of an event = f(Likelihood, Impact) Likelihood is the probability of occurrence Impact is the amount at stake
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Systematic Risk Management Process (I-IV)
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I. Risk Identification II. Analysis of probability and consequences III. Risk mitigation strategies IV. Control and documentation
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Financial Risk
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Financial exposure a firm opens itself to when developing a project Ex. a large up-front capital investment required
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Technical Risk
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When new projects contain unique technical elements or unproven tech Ex. trying a new material for the first time
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Commercial Risk
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For projects that have been developed for a definite commercial intent such as profitability, a constant unknown is degree of success
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Execution Risk
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The specific unknowns related to the execution of the plan Ex. Weather, earthquake, poorly trained staff
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Contractual/Legal Risk
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Strict terms and conditions are drawn up in advance, companies try to limit their exposure to litigation and liability
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Risk Impact Matrix
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Consequences vs. Likelihood boxes High and Low options, produce combinations
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Customer's Knowledge vs. Contract Type
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As the customer's experience level decreases, and the contract becomes more complex, there is a positive relationship on a graph for Future Risk
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Risk Mitigation Strategies
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Accept Risk - Do nothing when risk is low Minimize Risk - Intervening for damage control Share Risk - Risk allocated proportionally among multiple members Transfer Risk - Client handles overruns (ex. fixed price contracts)
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Contingency reserves
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Provision for unforeseen elements of a cost within the defined scope Ex. construction projects setting aside 10-15% of a project for contingency
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A risk profile
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A list of questions that address traditional areas of uncertainty on a project
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Questions in a risk profile
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Are the tech. requirements stable? (Technical Requirements) How reliable are the cost estimates? (Budget) Are quality considerations built into the design? (Quality) Are there any ambiguities in the contractor task definitions? (Contractor)
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General types of risks
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Business risks Insurable risk - Direct property damage - Indirect consequential loss - Legal liability - Personnel
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Types of risk (PMI Method)
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External - unpredictable External - predictable Internal - Non-technical Internal - Technical Legal
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Purpose of project closeout
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Formalizing acceptance of the project or phase and bringing it to an orderly end
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Closeout objectives
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Meet contractual obligations Transition project to next phase Analyze overall performance Close project office Pursue follow-up
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Contract closeout
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Completion and settlement of the contract
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Administrative closure
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Generating, gathering, and disseminating information to formalize project completion
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Project closeout organizational structure
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Project closeout - Project organization: evaluate performance - Financial: conduct audits and prepare final report - Contracting: notify and pay suppliers - Site: close facilities and return equipment
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Types of project closure
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Normal Premature Perpetual Failed Project Changed Priority
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Normal closure
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most common, a completed project
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Premature closure
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Completed early with some parts of the project having been eliminated Ex. first to market with unfinished product
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Perpetual closure
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Projects that never seem to end. Constant add-ons, indicative of poorly conceived scope
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Failed Project closure
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Projects fail b/c of circumstances beyond control of team
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Changed Priority Project Closure
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Organizations' priorities often change and strategy shifts direction
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How to implement closure activities (7)
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1. Delivery acceptance 2. Shutting down resources 3. Reassigning team members 4. Closing accounts and paid bills 5. Client sign-off 6. Post implementation audit 7. Final report
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What goes into the final report? (5)
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Executive Summary Review and Analysis Recommendations Lessons Learned Appendix
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Why document the project?
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Reference for future changes Historical record Training resource Input for performance evaluation and further training
