Project Cost

Hi team, today I would like to look into project cost, not much is likely to happen in a project if there is insufficient funds to maintain the project, or if it is beyond the financial expectation of your customer. It is expected when scoping the project; indicative project cost is included, normally delivered in your Statement of Work or Project Charter. This will allow your customer to budget appropriately for the project. Remember that your project must work within the confines of the budget, so tracking your resources is paramount.

Once you have scoped the project, and hence you are aware of the projects deliverables then a price to perform this work can be calculated and negotiated with the customer. I find, once the cost of a project is placed in front of the customer, then this is the time to work on your negotiation skills. That is the customer normally has a figure in their mind which differs greatly from your own. One way to convince your customer is to highlight the tasks associated with your project including the days/hours your resources will be working, so they can visualise the actual effort involved.. Once the cost of the project is agreed to, and the Statement of Work has been signed off, then it is up to the project manager to track the resources and the finances to ensure there is no cost “Blow Out”.

Project cost is made up of many different components, covering the following, the cost benefit analysis, normally located in the Statement of Work, cost constraints, cost controls within matrix structures and within project driven structures. As project managers we are constantly asked for our cost estimates when pricing a project, remember to always add contingency when estimating a projects cost, within my projects 20% is added to the overall amount to cover for any issues.

In order to develop a budget, resource forecasting is required of each quantity, and how much they will cost, this also includes the effects of potential price inflation. Not all projects can be delivered within 6 months; some projects can cover a period of 18 months, such as Data Centre builds, so price inflation must be factored into your costs. Projects covering a lengthy time period, introduce another issue, plans and schedules set at the beginning of a project life may need to be altered by the availability of alternate or new materials, resources that are at a different rate from when the project commenced.

One aspect of cost estimation and budgeting that is often overlooked has to do with actual use of resources as opposed to how your organisations finance department assumes how your resources are being used.  Remember finance departments take a linear view of the world. This may not affect the projects budget, but it will affect the projects cash flow, which must be avoided to maintain continuity. Every expenditure must be identified with specific project milestone, remember these identifiers are needed for the project manager to exercise budgetary control.

Project s rarely run significantly under budget, but it is up to your controls to ensure that the project does not run considerably over budget. It will be a hard sell to your customer if it does, with cost mechanisms in place, tracking project cost is not a complex task, but is mandatory to ensure issues of this nature are avoided, or at least brought to your customers notice before it is too late.

Time Management in Projects

I find one of the most important factors in a project is the scheduling or planning of time, the negotiation of time and the time added to a project for contingencies, that is those factors which have not been specifically planned for but happen, which are beyond our control. Is the customer expected to pay for the unforeseen, you will find most expect a certain level of add time “or fat” as we say in the industry, but it has to be reasonable, so the negotiation of this aspect is very tricky. The customer specifies a timeframe or drop dead date for project completion. This then inversely impacts cost versus time, as the time it takes to complete a project can be reduced, if all is going well, but the cost increases as a result.

 

Time is a very interesting resource, as it is not part of inventory. It is consumed whether it is used or not. Our objective as Project Managers is to effectively use the future time allocated to a project to ensure maximum productivity.  In respect to future time, an intangible resource, that is time which has not occurred yet in the project but can be traded

within the project. Once a project has begun, it is the prime resource available to us, to keep the project on track, to schedule or get it back into or allow us to negotiate for more of it if it has been lost.

 

A good Project Manager will be able to notice when time will be lost, via reporting from their resources, as road blocks should be identified during team meetings and maintained in risk and issues register mentioned in a previous posting, once identified and then addressed with the customer then the negotiation of time can occur, how it affects the project currently, or the overall project completion timeframe, what cost it has for the customer and the cost to you as the resources will have to be kept  for a longer period, hence costing the project more. 

 

Avoiding Time Management issues of this nature is addressed during the project scheduling phase, where you outline the necessary activities to deliver a project, and you have covered with your internal resources their concerns, potential risks to the project, and the time for resolution. Discussed with the customer the potential “Road Blocks” and the length of time it may take to resolve, essentially planting the seed before it occurs, so if it does become reality then it does not become a surprise.  Ensure you communicate with the customer frequently on the project progress, covering any delays to the delivery of milestones, set the expectation, the earlier the better.

 

Time Management in projects, an important factor to cover, because once it is gone, there is no way to retrieve it. Ensure your project schedule covers for those unforseen contingencies, if an issue arises then communicate it early, negotiate with your team and the customer on the time required to resolve, evaluate how it affects your current milestone or delivery, is it on the critical path, can it be negotiated in this phase and made up in another, your skills here are paramount, a good project manager will work out the best solution.

Project Scope

One of the more challenging in planning a project is the delivery of a solid project scope.  This is the statement that defines the boundaries of the project. It should state what will be done during the project, and cover items which will not be included. Each of the steps is outlined as part of stage 1 in Delivering a Project, which can be reviewed on this website. Scope is often referred to as a Statement of Work, essentially a document of understanding between the two parties involved, you and your customer. This document is the foundation for all work to follow. It is critical that the scope is correct, and should be socialised with all parties involved, to ensure an understanding of the projects deliverables.

 

Beginning a project on the right foot is paramount, and so is staying on track. It is no secret that scope can change during the course of a project, commonly referred to as “scope creep”, normally we don’t know how or when this will happen, but don’t be surprised if it does. Detecting that change and deciding how to accommodate it in the project plan are major challenges for all project managers. An area a project could run into trouble is normally at the very beginning, at times it could be difficult to understand or decipher what is being asked of us and the project by the customer. An essential skill a project manager should have is “Good Listening Skills”

 

Good listening skills are important for two reasons; it enables us to define exactly what the request is and what kind of response is appropriate. At this time I would ask my customer to email me with exact details of their request, a record of what is being asked from them, this is outside of the Statement of Work, and a good reference point once the Statement of Work is written.   It ensures that you as the project manager who is responsible for the project have an understanding of the customers’ requirements before quality time is spent on the writing the document. Essentially what you are delivering with the Statement of Work is a condition of satisfaction.

 

The Statement of Work should cover the following essential elements, such as project deliverables, the proposed solution, and each team’s roles and responsibly must be clearly covered, what are the high level projects milestones, during large scale projects, milestones are used for progressive payments. The project dependencies must be outlined, high level risks and their associated mitigation, the assumptions of the parties involved, this would also include the involvement of any third parties. Does the project have any exclusion, the cost of the project; establish how the work is to be accepted, and the overall project acceptance criteria. How will you know if the project is successfully completed if you have not established this guideline? It is also important to include any Bill of Materials at this time, a high level design and establish the budget internally, ensure you have sufficient funds to run the project.

 

This has been a broad overview of project scope covering some of the core features required, you have documented the project through the Statement of Work and received signoff from the customer to proceed. Once this has occurred you are in a position to commence developing the detailed project plan. 

Project Quality

Hi team, today I would like to cover how is project quality measured. Quality is a parameter which normally equates to the successful delivery of a project, within budget and to scope which are just some of the accepted criteria. There are two types of quality which make up almost every project. One is the product quality, which refers to the quality of the deliverable from the project, this being the traditional tools of quality control, such as performance, cost and time. The second relates to the actual project management process itself that is the governance behind managing a project and the tools available to us for successful delivery.  

 

The reference to the identified quality requirements consist of the following, conformity, usability, efficiency, maintainability, response time, flexibility, portability, security, audit-ability and the actual impact to the job itself. Each of these quality attributes has a criteria subset. For example, conformity is a measure of completeness and traceability. It is clear that some of these attributes are potentially incompatible, as security could degrade response time and usability could degrade efficiency.

 

The focus is on how well the project management process works and how it can be improved. Remember we are always looking at ways to better deliver projects, whether it is through the use of standard processes or customer feedback, actually any mechanism available to us to build our success rate. Continuous quality improvement and process quality management are areas we should always look into, as they are the tools used to measure quality process. 

  

A good project manager should attempt to gain a consensus on what quality attributes are required for the project deliverables before planning the project and negotiate a formal quality agreement. Simply put, different quality attributes have different impact on the project estimates. While some attributes such as maintainability and flexibility have relatively low impact, that is, a requirement to make a system maintainable would not add a significant cost to the project – others have a major impact, efficiency, usability, and portability require significant effort to achieve. It is essential that the project manager and team clearly understand the requisite quality requirements before they finalise the project estimates.

 

A sound quality management program with processes in place that monitor the work in a project would be a good investment. Not only does it contribute to the customer satisfaction, it helps you and your organisation use resources more effectively and efficiently by reducing waste and rework. This is one area that should not be compromised. The payoff is a higher probability of successfully completing the project and satisfying the customer.

The Accidental Project Manager

When did you know you wanted to be a Project Manager, I can’t say that I gave it much thought during my childhood years, actually I don’t think I gave it much thought when I started working. I didn’t study IT when I attended Uni, and only really stumbled into IT when I was employed to do another role for an international Oil and Gas Exploration company. I noticed the only IT guy in the company did very little, or it was perscieved by me for what he got paid, that is really well for not doing much of anything, I wanted a piece of that action. So I asked the relevant questions, enrolled in night college and got myself a diploma in Data Processing, programming that sort of thing. It seems like a life time ago now…actually come to think of it, it’s ancient history. The next few years was spent plodding about in Helpdesk roles, operations and general support, for those of you old enough, you might recall the “Tape Jockey”, well that was me.

 

Then it happened, after working years on a Roster basis, night shift was the worst, I landed a role as a Network Analyst, I deserved it though, I worked hard and pleased as many people as I could with good service, so I started cutting my teeth on 2^nd and 3^rd level support, diagnosing problems setting up Networks (Novel at the time) performing maintenance routines and again offering good customer (internal staff members, are still our customers) great service. Open communication, that was my mantra, which still works for me today, keep everyone, customer and management in the loop, and tell them straight what is going on, and I found they normally give you latitude to do your own thing, and time to resolve the issue, it was great I was in my element. Before all this happened I didn’t know I was cut out for this sort of stuff, but it came naturally.

 

Working for a large multinational fizzy drink manufacturer, there was plenty of scope to grow, and I would recommend to any “young player” out there, find yourself a home in a large organisation, move around, use them as much as they will use you, and learn, and learn and learn as much as you can about the way of the corporate world, stuff that just can’t be taught in a text book. There it was my first Project Management role, I didn’t know it at the time..it was Accidental in a way. Called into a meeting by my manager at the time, and I was asked…well more demanded that I should work on a project which was going to revolutionise the way orders where going to be placed by the sales staff, 24 hour turnaround, gone was the old paper and pen system, to be replaced by a fully automated state or the art system.

 

It was great and exhausting, responsible for the build and support of each laptop, for a Sales force of over 150 people, and the knowledge transfer that went with it, travelling to the remote parts of the state for weeks at a time, teaching the “ins and outs” of the system, how to enter data and transfer it to the mainframe. How picking slips would be generated and the order placed onto a pallet and then onto the back of a truck and out the door to the customer. There were plenty of the “old guard” who weren’t interested, which was expected..but its’ how you handle them and the situation which stands you out from the rest.

 

Take the time, never dismiss, everybody has a story to tell and communicate with those who are in trouble as with those who are not, get to know your customer, both internal and external and you will find out more than you expected. Once you have this skill, project delivery shouldn’t be a chore, anyone can drone through the process of delivering a project, kicking and screaming along the way, but it takes a special person to communicate, to open up and have people open up to them, and together you deliver a project, maybe sometimes just by accident.

 

Enjoy the ride.