The Project Schedule and Budget
Chapter 7
7-1
Copyright 2012
John Wiley & Sons, Inc.
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-tostart, start-to-start, finish-to-finish, and start-to-finish activity
relationships
7-2
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”
Examples of how not to mange costs
The U.S. government (e.g. IRS)
The United Kingdom’s National Health Service IT
 http://www.bbc.co.uk/news/uk-15014288
 http://www.bbc.co.uk/news/uk-politics-24130684
 http://www.hsj.co.uk/news/technology/rising-cost-of-nhsit-fiasco/5063357.article#.UlbD8NKsh8E
4
Project Cost Management Processes
Process
Group
Planning
Monitoring
and
Controlling
Cost Management Process
Major
Output
CP1: Planning Cost Mgmt
Cost Management Plan
CP2: Estimating Costs
Activity Cost Estimates
CP3: Determining the Budget
Cost Performance Baseline
MC1: Controlling Costs
Work Perf. Measurements
Budget Forecasts
5
What is Cost and Project Cost Management?
6
Project Cost Management Processes
Scope
Baseline
Schedule
Baseline
Estimate
bases
Determine
Budget
Estimate Costs
Activity
Cost
Estimates
Project
Funding
Req.
Control Costs
Cost
Baseline
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.
7-8
The Project Planning Framework
7-9
Budget and Schedule Development
7-10
Developing the Project Schedule
Project Management Tools
7-11
Gantt Chart for Planning
7-12
Gantt Chart Reporting: Project’s Progress
7-13
Project Network Diagram:
Activity Analysis for AON
Activity
Description
Estimated
Duration (Days)
Predecessor
A
Evaluate current technology
platform
2
None
B
Define user requirements
5
A
C
Design Web page layouts
4
B
D
Set-up Server
3
B
E
Estimate Web traffic
1
B
F
Test Web pages and links
4
C,D
G
Move web pages to
production environment
3
D,E
H
Write announcement of
intranet for corp. newsletter
2
F,G
I
Train users
5
G
J
Write report to management
1
H,I
7-14
Activity on the Node (AON)
Network Diagram
7-15
Possible Activity Paths
Possible Paths
Path
Total
Path 1
Path 2
Path 3
Path 4
Path 5
7-16
Critical Path
7-17
PERT
7-18
Activity Analysis for PERT
Activity
Predecessor
Optimistic
Estimates
(Days)
Most Likely
Estimates
(Days)
Pessimistic
Estimates
(Days)
A
None
1
2
4
B
A
3
5
8
C
B
2
4
5
D
B
2
3
6
E
B
1
1
1
F
C,D
2
4
6
G
D,E
2
3
4
H
F,G
1
2
5
I
G
4
5
9
J
H,I
.5
1
3
Expected
Duration
7-19
Activity Analysis for PERT
7-20
Possible PERT Activity Paths
Possible Paths
Path 1
Path 2
Path 3
Path 4
Path 5
Path
Total
Precedence Diagramming Method - PDM
Based on 4 fundamental relationships
7-22
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
7-23
Critical Path Analysis (with slack time)
7-24