Project Management. Project Management Fundamentals: Estimation and Project Control. Sergio Cavaliere. IBM Global Business Services
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1 Project Management Sergio Cavaliere IBM Global Business Services
2 Agenda Estimating Basic Definitions Estimating Approaches an Techniques Project Estimating Project Control Overview Schedule and Cost Control Earned Value Management Exercises Estimation and Project Control
3 Estimating General Objective Verify common concepts Know best practices Select the Estimating Approach Make a Project Estimation
4 Estimating Definitions - 1 Estimating: evaluating the resources (labor, equipment, facilities) needed to complete project activities Plan: An organized set of decisions about how to carry out future activities and requires input from the estimate (including shedule and resource availability) Cost: the value of the estimate allocated as a budget available to deliver the plan (difference between cost and budget are called unresolved costs) Cost Estimating: evaluating the cost of the resources needed to complete project activities Cost Budgeting: allocating the costs estimated to individual project components to make them measurable and manageable Price: The amount quote to the client What is an estimate? An assessment of the likely quantitative result Usually applied to project cost factors and schedule Should include some indication of accuracy (e.g. +- percent) Usually used with a modifier (e.g. preliminary, conceptual, feasibility)
5 Estimating Definitions - 2 Software Creates project estimate Template Requires Estimating input and calibration Historical Data o defined algorithms Costs money Black box Overcomes black box tool Usually spread sheet Mechanism for undertaking estimation Many identified Tool variants e.g. Monte Carlo for variance e.g. Top-Down for estimating Use 2 or more Part of an estimate strategy
6 Estimating Definitions - 3 Items to consider Utilization factor: amount of time a FTE (Full Time Equivalent) can be used for the length of the project Hours available/year: (Exam (52 w X 5 d X 8 h) Duration parameters: Working Time: Activity duration based on number of hours a workday or a workweek Effort Hours: Hours required to complete a task Elapsed Time: Calendar Duration including weekends, holidays and breaks Productivity: rate at which work is produced Availability: resource present and ready to work Contiguous duration: work time that is not interrupted Interruptible duration: work time that may be interrupted Level of Effort: computed uniform rate of activity Some formulas Cost = Effort Hours Productivity X Unit Cost Effort / Productivity Resource duration = Availability
7 Estimating Types of Estimates Estimates per Phase: Pre-bid Offering Estimates per target Raw Development Technical What an estimate has to include? Labor Equipment Software Real estate Supplies
8 Estimating Quality of Estimate Correct Estimate prevents from causing troubled projects Types of Estimating Problems Absence of historical data Incorrect project / goal definition No accurate validation of the estimate Estimation is a process which requires governance Process Elements (lifecycle model, Data and metrics, Best Practices) Governance (Reviews, Action Plan, Roles)
9 Estimating Pricing Process Effort Estimating is a step of a process Factor Adjustments 5 Additional Factors 4 Price Project Consider Additional factors Additional Factors 3 Create Resource Plan Project Schedule Metric Size Measures Create Effort Estimate 1 Effort Estimate 2 Create Project Schedule Release Strategy
10 Estimating Estimation Life Cycle Model Start Client Request Decision to go on Indicative Estimate Request for detailed Proposal Proposed Estimate Deision made to close Decision not to continue Agreement made Closed Estimate Project End Committed Estimate
11 Estimating Committed Stage Committed Stage Estimation Process Project manager 3.1 Confirm work plans from Estimates 3.2 Gather actuals for the period 3.3 Integrate Change Orders Project Start 3.4 Estimation Checkpoint Review Plan Requires Changes? Type of Change? Estimating SME 3.5 Gather Actuals for Esrimation Factors Project Close 3.6 Review Estimation factors
12 Estimating Best Practices of Estimate 1. Quantify things 2. Use more than one approach 3. Use historical data and metrics 4. Same metrics for project measurements and estimate 5. Use recommended estimating tools 6. Analyze your input and output data 7. Estimates should be done by experts 8. Document the assumptions 9. Verify estimate with other people 10. The later you will make an estimate the more accurate it will be
13 Estimating Quantify things Quantify things needed to obtain a project size Estimation Parameters : Function points, Lines of Code, Use Cases Using in a Parametric Model Artifacts: modules, interfaces, screens, reports, implementation classes, data entities, etc. Driven by technique and project type. Many tools require the choice of a project pattern Using number and range of artifacts Using estimating factors
14 Estimating Use more than one approach Use more than one estimating approach Methods and Techniques might include: 1. One ore more top-down approach 2. A bottom up estimate (task by task or work product based) 3. Experts involvement (Delphi) The selected approach may involve the use of tools and/or spreadsheets: Validate when. All estimates agree Otherwise analyse assumptions By iterating, estimates from different methods start to converge The different approaches converge
15 Estimating Approaches Deadline Driven 1. Compute Estimate starting from the WBS 2. Add Resources and dependencies and generate the schedule 3. Add estimate for non included activities using historical data or expert support Analogy (use data of similar project types) 1. Identify projects similar to the one to be estimated 2. Note the effort, cost and schedule of the identified projects 3. Adjust effort, cost and schedule by assessing size, complexity and other factors Parametric (is most commonly supported by tools) 1. Confirm the size of the project using chosen parameters 2. Assess productivity related to the parameters and generate effort 3. Add any additional effort not included 4. Convert effort into schedule and determine cost
16 Estimating Approaches - 2 Artifacts and Work Distribution (uses the number and range of artifacts and info about how iyhe effort is distributed across the project phases) 1. Choose the artifacts and classify them by complexity 2. Count the artifacts 3. Calculate the build effort for each artifact according to its complexity, using hystorical data and expert support 4. Sum the build efforts 5. Asses the effort for non build activites, using the work distribution 6. Convert effort into schedule and determine cost Plan Driven (the most accurate) 1. Use historical data and expert knowledge to get ALL activities to be done 2. Determine the effort and allocate resources for each activity 3. Convert effort into schedule and determine cost 4. Add effort for resource leveling, non-productive hours, level of effort and so-on to get the total effort
17 Estimating Selecting the Estimation Approach (Indicative and Proposal Stage) No Yes No Yes, always No Yes if tool has rilevant Yes Yes Yes Use Only to give a go/no go decision on doability Not a primary method unless adequately calibrated Often a primary method in Indicative State, sometimes in Proposal If primary requires accurate historical data, otherwise can be used in validation approaches Yes No Yes No Should be the approach of choice when possible
18 Estimating Use historical data Use actual historical data and metrics Use harvested metrics from similar projects Make sure that the project has similar work pattern and size Analyse both successful and troubled similar projects Many tools have hystorical data db as basis for Estimate calculation
19 Estimating Example - a Parametric database Type Productivity Fpts FP/SM Project Name Pj no PM Type Project FP count (predicted) Project 1 1 John Smith ND C/S ,89 Project 2 2 John Smith ND web ,16 Project 3 3 John Smith ND C/S ,13 Project 4 4 John Smith Enh C/S ,52 Project 5 5 John Smith ND web ,74 Project 6 6 John Smith Enh web ,82 Project 7 7 John Smith ND C/S 92 12,84 Project 8 8 John Smith ND C/S ,49 Project 9 9 John Smith Enh web ,1 Project John Smith Enh C/S ,81 Project John Smith ND web ,2 Project John Smith ND C/S ,14 Project John Smith ND web ,35 Project John Smith ND web ,03 Project John Smith Enh C/S 96 36,24 Project John Smith Enh C/S ,47 Project John Smith Enh web ,32 Platform Average of all Web developments Variance (Standard deviation) Actual 23,59 5,11 Parametric Estimating From Parametric DB -> Web Portal Base Productivity = 21,09 (SD 5,15) My project size = 250 Expected Effort = 250/21,1 = 11,8 Staff Months Variance will be defined with Delphi or Monte Carlo techniques
20 Estimating Use same metrics Use same metrics for project measurements and estimate Match metrics to the estimating technique being used 1. Track at task level a plan with estimates at task level and use results as direct input for collection of metrics 2. A plan based on estimates of FP or Artifacts can be tracked against delivery of these artifacts The metrics match avoids: a. Allocation of gathered data downwards or to other variables b. Possible interpretive errors caused by such allocation It is always difficult to track at task level a project that was estimated al project level
21 Estimating Example - b Use the same metrics for estimating and tracking Test Scripts Completed Plan Actual Weeks
22 Estimating Use tools Use recommended estimating tools 1. Use one of several available tools (e.g. SLIM or those based on COCOMO II) 2. Avoid build an estimating worksheet to apply estimating techniques/approaches 3. Tools are usually based on harvested metrics and can provide excellent estimate validation 4. Choose the tool that fits your need: see what types of project it has been designed for 5. If possible choose tools where you can feed back actuals to remake and perfect estimating forecasts
23 Estimating Analyze data Analyze your input and output data Input Data: experience level of team, complexity of solution, work pattern, productivity, size, interfaces, client Inputs have all a degree of variance so as well the outputs 1. Verify provenance and accuracy of each input to better assess the confidence level (ball park estimate or based on reliable process as for ex. Function Point Analyis -) 2. Consider if the input data is appropriate to your project: Same Problem Domain Similar technical solution Similar project type (work pattern) Same project scope
24 Estimating Statistics must be verified for validity Top down vs Bottom-up approach: use of a large set of small numbers results in a global variance reduction -> Bottom-up approach is preferred When using Top-down approach we must be sure the numbers are based on a great variety of experience with similar projects/tasks to reduce the risk to be off how many projects? how many contributors?
25 Estimating Example - c Statistics must be verified for validity - Example
26 Estimating Variances Variance is always included in estimates Input data are affected by variance Output estimates are to be delivered with variance Nominal values and a range Specific techniques are used to compute variance: Delphi technique MonteCarlo technique
27 Estimating Variance Techniques There a number of commonly used techniques for assessing estimating variance: Wideband Delphi technique consensus in meeting PERT technique simple calculations Monte Carlo technique graphical output Using an estimating tool that generates variance Analyzing historical data records to determine variance (Gut feel NOT RELIABLE!)
28 Estimating Delphi Technique Subject Matter Experts are engaged Each SME gives 3 estimates: Low (1%) Nominal (50%) High (99%) Evaluations are shared and compared Final Estimates are generated
29 Estimating Delphi Technique: the process flow Delphi Flow Historical Data xxxx xxxx. xxxx.. Assumptions xxxx Interim xxxx. Estimate High xxxx.. Nom. Low.. Assumptions xxxx Interim xxxx. Estimate High xxxx.. Nom. Low.. Assumptions xxxx Estimate xxxx. High xxxx.. Nom. Low.. Initial Meeting Estimation Session Assess Results Present Results Agree Present Final Estimate No agreement
30 Estimating PERT Technique distribution assumed for optimistic, most likely and pessimistic guesses: Nominal = 1*Optimistic + 4*Most Likely + 1*Pessimistic Standard Deviation = (Optimistic pessimistic) / 6 PERT Estimate = ,3 (ab. 68% certainty -> 1 SD of Nominal)
31 Estimating Monte Carlo Technique Executes simulations on the basis of nominal values and theirs variances Supported by tools (adds-in in Excel, MS Project) Indicates Cumulative Frequencies by Nominal values Output in graph or table form
32 Estimating Understanding output data Overestimated Errror in Estimate to complete Requirements Design Code and Test Deployment Underestimated Higher Variance in early phases, reducing variance as the projects goes on to its completion
33 Estimating Other Best Practices Estimates carried out by experienced people Always assumptions must be documented Estimates need reviewing, updating and auditing, so an estimate report must be produced which specifies Method Used, Results, Assumptions Typical assumptions: Staff experience Productivity Size (artifacts and FP) Artifacts complexity Number of external interfaces Accuracy
34 Estimating Hidden Assumptions (typically obvious but to be considered) Data conversion / load / migration Training environment setup Printing location Historical Data Administrative tasks Auditing Analysing assumptions helps in identifying risks
35 Estimating Preparing a Project Estimate Roles Independent Estimating SME (evaluator) Project Manager (estimate total project size, effort, schedule& cost) Estimating Practitioner Estimating Independent Practitioner Independent Estimating SME (approver) Items to document Purpose of the Estimate Approaches used Project Content and scope Assumptions Baseline Values Active Participants Confidence Level Contingency
36 Estimating Preparing a Project Estimate - 2 Technical Estimate Size Estimate Effort Estimate Schedule Estimate Assumptions Resources allocated Project Estimate Additional roles, phases and activities A full schedule for all activities Overall effort Cost to complete Baseline Estimate Consolidate Estimate Components Document rationales and assumptions
37 Estimating Estimate Review (Indicative and Proposal Stage) Address main problems in determining the Estimate Insufficient historical information or validation Price not matching estimate Incorrect Project Definition No reassessment Verify Estimate Rules of thumb for quick validation Full check list for detailed assessment Risk Mitigation Plan in place which considers sources of variance This quote is from - "Steve McConnell", How to Defend an Unpopular Schedule, IEEE Software, Vol. 13, No. 3, May 1996
38 Project Control General Objective Verify common concepts Identify areas of Control Know Schedule and Cost Control parameters Know Earned Value Management
39 Project Control - Overview Scope Schedule Budget Customer Contract Risks Project Control Suppliers Change Management Quality Issue Management Problem Management
40 Project Control - Stages of Control Establish standards through plans and procedures Collect actual performance Information Compare actual and planned performance Take corrective action
41 Project Control - Compare Actual vs Planned Compare Actual vs Planned using Metrics Resource Utilization Number of Risk events passed or completed Number of changes over time Earned Value Defect Tasks start/finish (planned vs actual) Milestones Technical control point Deliverables
42 Estimating follow on Estimating in Delivery (Committed Stage) Estimating in delivery is strictly connected to controlling Scope and Size Schedule Cost Assumptions Risk Plan Performing Team Performing Differences between old and new Estimate generate new baselines Gaps are to be identified GAP Cost Budget Pert estimating approach used Low, Expected and High values. Standard deviation and Variance Variance = SD²
43 Estimating follow on Estimating in Delivery - 2 Reducing Variance means reducing Risks Overestimated Errror in Estimate to complete Requirements Design v v v v Code and Test Deployment but Underestimated NOTE: Estimate at Completion can increase even if Variance reduces Effort Estimate to Complete Date of Checkpoint Estimate to Complete Maximum Estimate to Complete Nominal Estimate to Complete Minimum Current Estimate at Completion Baseline Estimate Variance Mar Apr May Jun Jul ,00 69,44 38,03 51,36 44,44
44 Schedule and Cost Control - 1 Considering the Earned Value Allows objective assessment of variance Allows common understanding of the amount of work actually done Is incorporated in major project management SW packages Allows point-in-time analysis Allows forecast of future performance Can be determined at different levels (work element, summary, project)
45 Schedule and Cost Control - 2 Earned Value Definitions Budgeted Cost of Work Scheduled (BCWS): planned expenditure of each work package scheduled to be accomplished as of the status reporting date on the baseline schedule Actual Cost of Work Performed (ACWP): actual expenditure of each work package as of the status reporting date Budgeted Cost of Work Performed (BCWP): percentage complete of each work package as of the status reporting date multiplied by the baselined budget of that work package (EV) Budget at completion (BAC): the sum of all the baselined budgtes allocated to the project work packages
46 Schedule and Cost Control - 3 Earned Value Variance Analysis Cost Variance (CV): The difference between what was accomplished and what was spent to accomplish it CV = BCWP ACWP Negative CV denotes overexpenditure of budget for work done Positive CV denotes underexpenditure of budget for work done Schedule Variance (SV): The difference between what was accomplished and what was planned or scheduled to be accomplished SV = BCWP BCWS Negative CV denotes budget needed to catch up on work scheduled Positive CV denotes budget used for work accomplished earlier than planned
47 Schedule and Cost Control - 4 Earned Value Performance Index Analysis Cost Performance Index (CPI = BCWP/ACWP): Denotes past performance on the money spent as of the status reporting date Schedule Performance Index (SPI = BCWP/BCWS) Denotes past performance on the money spent as of the status reporting date Percentage complete vs. Percentage spent: Percentage complete (BCWP/BAC) Percentage spent (ACWP/BAC)
48 Schedule and Cost Control - 5 Forecasting Project Performance How much will it take to finish = estimate to complete (ETC): Alternatives ETC = Sum of new estimates of unfinished work (may be very accurate but also very time consuming) ETC = Sum of budgets of unfinished work ETC = BAC/CPI ACWP Show how much it will cost when done (EAC) EAC = ETC + ACWP
49 Schedule and Cost Control - 6 Forecasting Project Performance Efficiency level required to finish within budget = To-Complete- Performance-Index (TCPI) : TCPI = (BAC-BCWP) / (BAC ACWP) Denotes the performance required for the remaining work in order to get the project back on track (with no change) Is not and indicator of required overtime If the project is on schedule and on budget TCPI = 1 IF TCPI > 1, efficiency required might be unachievable Determine feasible TCPI and recalculate EAC
50 Earned value management implies reestimating discrete work units $ ETC EAC BAC VAC AC = actual costs SV = schedule variance CV = cost variance ETC = estimate to complete EAC = estimate at completion VAC = variance at completion BAC = budget at completion CV SV Budget (BCWS or PV) Actual (ACWP or AC) CV = EV AC SV = EV - PV Work performed (BCWP or EV) T=t Time
51 Plan for Earned Value Management: where we are Factor Adjustments 5 Additional Factors 4 Price Project Consider Additional factors Additional Factors 3 Create Resource Plan Project Schedule Metric Size Measures Create Effort Estimate 1 Effort Estimate 2 Create Project Schedule Release Strategy
52 Plan for Earned Value Management First find something that you can count and is a meaningful measure of product scope Define the units of work that are suitable for the project: this is represented by the WBS tailored for the solution Define organizational breakdown structure (OBS): teams, sub-contractors & control accounts, Define the Responsibility Assignment Matrix (RAM) Define the schedule or WHEN it is to be done! Spread total project effort amongst all Control Accounts Define the budget as the last step before project start, or by using an EVM acronym: Planned Value (PV) or Budgeted Cost for Work Scheduled (BCWS). Allocate the project budget to units of work (effort, costs, etc.) at the control account level.
53 Earned Value Management in delivery Factor Adjustments 5 Additional Factors 4 Price Project Consider Additional factors Additional Factors Project Schedule 3 Create Resource Plan Project Launch Tracking Progress and Reestimate Metric Size Measures Create Effort Estimate 1 Effort Estimate 2 Create Project Schedule Release Strategy Project Close
54 Tracking Progress with Earned Value - Build Indicators Planned value (PV) = of budgeted costs for each control account Actual cost (AC) = of timesheets + other costs Measure progress: 0/100 - work packages planned to start and complete 50/50-50% earned at start, 50% upon completion percent complete - Monthly estimate of % of work completed (subjective basis) units complete - Places a given value for each unit completed interim/weighted milestones - work packages subdivided into milestones each having a weight associated with it level of effort - value earned with the passage of time Calculate earned value (progress units x rates defined when estimating) Calculate cost variance CV = EV AC and schedule variance SV = EV PV Calculate estimate to complete (ETC): estimated cost (effort + expenses) needed to complete ETC implies adjustments to initial estimate based on actual productivity Calculate estimate at completion (EAC): EAC = AC + ETC
55 Schedule Control Adjusting the schedule to meet objectives: Change the relationships among tasks so that the critical path is shorter (fast-tracking) Do tasks in parallel not in sequence Change approach to work to create a different set of interrelated tasks with a shorter critical path (note: this may change the WBS) Change finish-start relationships to finish-finish ones Change a date constraint so that a task on the critical path can start or end sooner Crash the network to decrease the project total duration after alternatives and use of resources
56 Sample Problems - 1
57 Sample Problems - 2
58 Sample Problems - 3
59 Sample Problems - 4
60 Sample Problems Solutions - 1
61 Sample Problems Solutions - 2
62 Sample Problems Solutions - 3
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