Unit 3 Schedule and Budget Knowledge Areas
Overview
In this unit, we will dive into two more of the “10 Project Management Knowledge Areas”, as listed in the Project Management Institutes Body of Knowledge (PMBOK). This unit will consider the Knowledge Areas of Schedule and Budget.
Every project initiative must have a balance of the Triple Constraints, the three aspects of project work that require every project manager’s attention to ensure they remain balanced. The Triple Constraints are: Time (schedule), cost (budget), and scope. This unit focuses on time and costs.
Time is managed within a project using a schedule. There are several ways to portray this list of tasks, but they offer common details: What the task is and when the task is to be completed. Charting these can offer visual correlation between each and every task. Some tasks are linear (one has to be completed before the next one), while others can occur in parallel (they can happen at the same time).
Costs are managed with a dynamic budget. A simple budget is usually built and left alone. While a dynamic budget is used throughout the project, tracking actual amounts accrued and comparing them to the budget estimates. If there are variances, then there are strategies to investigate and potentially resolve them.
Topics
This unit is divided into the following topics:
- Defining Project Activities and Formulating the Activity List
- Sequencing the List and Estimating Durations
- Cost Management Plan
- Building a Budget
- Budget Variance, Monitoring, and Controlling
Learning Outcomes
When you have completed this unit, you should be able to:
- Outline the actions that build a schedule
- Determine what qualifies as an activity to be included within a given project and to create a list of the applicable activities
- Sequence a project activity list in proper order; then estimate durations for each activity
- Develop the basics of a ‘dynamic’ budget (a *dynamic budget* is used throughout a project)
- Review a budget and integrate other data (columns in a spreadsheet) can be used to add strength to a project’s budget
- Assess the value of using formatting tools to improve a budget’s readability
Activity Checklist
Here is a checklist of learning activities you will benefit from in completing this unit. You may find it useful for planning your work.
Learning Activities
- Formulate the Activity List
- Sequencing and Estimating
- Build a Budget
- Calculating Variances
Assessment
- In this course you demonstrate your understanding of the course learning outcomes in different ways, including papers, projects, discussions and quizzes. Please see the Assessment section in Moodle for assignment details and due dates.
Planning Ahead
Before you examine the topics in this unit, take a moment to watch this video that has been provided by the instructor. This video will introduce each topic and help support your learning. You are encouraged to re-watch this video if you are struggling with any of the concepts you will be learning about in this section.
3.1 Defining Project Activities and Formulating the Activity List
Defining project activities and formulating the activity list are crucial tasks for a project manager in the planning phase of a project. These activities involve breaking down the project into smaller, manageable tasks and creating a detailed list of activities that need to be completed to achieve the project’s objectives. Here’s what these tasks entail:
1. Defining Project Activities:
Task Breakdown: Project managers need to break down the overall project into smaller, more manageable pieces or tasks. This process involves identifying the specific activities that need to be performed to accomplish the project goals.
Decomposition: The project manager decomposes the project scope into work packages, which are individual tasks or groups of tasks that can be assigned, executed, and monitored effectively.
Scope Clarification: Clearly defining project activities helps in clarifying the scope of work and ensures that all necessary tasks are identified and included in the project plan.
2. Formulating the Activity List:
Detailed Listing: Once the project activities are defined, the project manager formulates a comprehensive activity list. This list includes all the tasks that must be completed throughout the project lifecycle.
Dependencies: The activity list should also identify dependencies between tasks. Understanding the relationships between activities helps in scheduling and resource allocation. Some tasks may be dependent on the completion of others, and these dependencies need to be clearly outlined.
By defining project activities and formulating the activity list, the project manager creates a foundation for the project plan. This detailed breakdown enables better control, monitoring, and communication throughout the project’s execution. It helps in identifying potential risks, allocating resources effectively, and ensuring that the project progresses smoothly toward its goals.
Activity: Formulate an Activity List
Important Note:
For each of the learning activities in this section, you will be using a common scenario. This scenario, and each learning activity in this unit, will serve as part of the assignment you will be submitting at the end of this unit. Be sure to follow each of the steps carefully.
To begin this activity, read through the following scenario:
Your are tasked with hosting a book-signing at a local comic book store called Novelle’s. This store is known for selling some expensive collector items, including graphic novels (a comic book in book form).
One graphic novel author is available to come to the local bookstore, Novelle’s, and sign autographs as part of his national tour. He is also world famous for his cartoon work on children’s television programs. Plus, he has done animation work for several video games.
Your team’s project charter is to host a Book-Signing at Novelle’s on May 26th from 10AM to 2PM. Your budget is $20,000, but you’ll recoup that in ticket and book sales.
Consider these activities:
- Advertising
- Crowd control:
- Including safety ropes
- Ensure the author’s safety
- Travel Expenses:
- Hotel
- Meals
- Transportation
- Hotel
- Purchase enough books to be present to sell for the autographs:
- Pre-bought, delivered, and set up
- Pre-bought, delivered, and set up
- Enough staff is working to handle the additional sales:
- They should hire one or two more for the day
- They should hire one or two more for the day
- Enough cash registers exist at the time:
- There are not enough now
- There are not enough now
- Space is made available and set up for the author:
- Including revising the available lighting (the area is too dark)
- Including revising the available lighting (the area is too dark)
- Beverages and breaks are scheduled
- The author’s small dog (pet) has his own padded pillow on the signing table:
- This dog is also the star of the Graphic Novel
- This dog is also the star of the Graphic Novel
- And any other missing activities
After considering this scenario, your task is to brainstorm and formulate a list of tasks that need to be accomplished in order to ensure this project can be completed. As part of this determination of all required activities and tasks, be sure to identify any task that be performed while other are being performed (parallel tasks).
3.2 Sequencing the List and Estimating Durations
With the creation of an activities list, a Project Manager can move onto the next step in the process: ensuring the activities are in a logical order and assigning estimated durations.
Sequencing the list and estimating durations are crucial aspects of project management that contribute significantly to the success of a project. The sequencing of tasks involves determining the order in which project activities should be performed, creating a logical flow that ensures dependencies are considered. Proper sequencing helps in identifying critical paths, which are the sequence of activities that, if delayed, would directly impact the project timeline. By understanding the relationships between tasks, a project manager can optimize resource utilization, avoid bottlenecks, and enhance overall project efficiency.
Estimating durations is essential for developing an accurate project schedule. It involves predicting the time required to complete each activity, considering factors such as resource availability, skill levels, and potential risks. Accurate duration estimates facilitate effective resource planning, allowing project managers to allocate resources efficiently and avoid overcommitting or underutilizing team members. Furthermore, realistic duration estimates enable the identification of potential delays early in the project lifecycle, allowing for proactive management and mitigation strategies to be implemented. Both sequencing and estimating durations are integral to creating a well-structured and achievable project plan, providing a solid foundation for successful project execution and meeting stakeholder expectations.
Activity: Sequencing and Estimating
Using the list of activities you formulated in the previous activity, your task for this component is to sequence the activities in a manner that they can be completed in a logical, efficient manner. Once this is done, create a flowchart of the activities – be mindful of your parallel activities.
As you sequence your tasks, be sure to assign and estimated duration.
You can use MS Excel, paper, whiteboard, or other means to effectively communicate your flow chart.
3.3 Cost Management Plan
After formulating an activity list and assigning durations, a Project Manager must turn their focus to developing a cost management plan. A cost management plan is a key component of project management that outlines how project costs will be estimated, budgeted, managed, and controlled throughout the project lifecycle. It is a document that provides guidance on how financial resources will be allocated and utilized to ensure the successful completion of a project within its defined scope, schedule, and quality standards. Here are the key elements and the importance of a cost management plan for a project manager:
Cost Estimation: The plan outlines the methods and criteria for estimating project costs. This involves identifying and quantifying all the resources needed for the project, including labor, materials, equipment, and overhead.
Budgeting: A Cost Management Plan establishes the project budget, which serves as a baseline for monitoring and controlling costs. It provides a detailed breakdown of the allocated funds for each project phase or work package, helping to prevent cost overruns.
Resource Allocation: The plan specifies how financial resources will be allocated to different project activities. It helps in ensuring that the right amount of money is assigned to each task or phase based on its importance and requirements.
Monitoring and Control: The plan outlines procedures for monitoring and controlling project costs. Regular monitoring allows project managers to compare actual costs against the budget, identify variances, and take corrective actions if necessary to keep the project on track.
Risk Management: Cost Management Plans often include strategies for managing cost-related risks. By identifying potential cost risks early in the project, managers can develop contingency plans to address unforeseen events that may impact the budget.
Communication: The plan serves as a communication tool among project stakeholders. It helps stakeholders, including team members, sponsors, and clients, understand the financial aspects of the project, fostering transparency and accountability.
Decision Making: A well-developed Cost Management Plan provides project managers with the necessary information to make informed decisions regarding resource allocation, scope changes, and risk mitigation strategies.
Performance Measurement: The plan includes metrics and key performance indicators (KPIs) to assess the project’s financial performance. This allows project managers to evaluate the efficiency and effectiveness of cost management strategies.
A cost management plan is crucial for project managers because it provides a structured approach to estimating, budgeting, monitoring, and controlling project costs. It helps ensure that financial resources are used efficiently and that the project stays on course in terms of both budget and overall project objectives.
3.4 Budget Building
With a cost management plan in place, a Project Manager can begin creating a budget. Budget building in the realm of project management is the systematic process of estimating, planning, and allocating financial resources to various components of a project. It involves a comprehensive assessment of costs associated with project activities, encompassing elements such as labor, materials, equipment, overhead, and contingency funds. The primary objective is to develop a well-structured financial plan that guides the project team in executing tasks while staying within the approved budgetary constraints.
The initial phase of budget building involves estimation, where project managers assess the costs linked to each activity. This entails considering factors such as labor rates, material costs, equipment expenses, and any other relevant expenditures. Following estimation, project managers proceed to resource allocation, ensuring that the necessary human resources, equipment, and materials are assigned to each activity. This strategic allocation is instrumental in fostering an efficient progression of the project.
Contingency planning is another critical aspect of budget building. Projects inherently entail uncertainties and unforeseen events. Including contingency funds in the budget allows project managers to prepare for unexpected challenges or changes in project scope. This proactive approach ensures that the project can adapt to unforeseen circumstances without exceeding the approved budget.
Throughout the project lifecycle, project managers engage in continuous monitoring and control of the budget. This involves closely tracking actual expenditures against the budget, identifying any variations, and taking corrective actions as needed to maintain financial integrity. The ability to control costs is essential for project success, as it prevents financial overruns and aligns the project with the established financial constraints.
The importance of budget building to a project manager extends beyond cost control. It facilitates effective resource planning by ensuring that the right personnel, equipment, and materials are available as needed. The budget serves as a communication tool, fostering transparency and setting clear expectations with stakeholders, including clients, sponsors, and project team members. Furthermore, the inclusion of contingency funds enhances the project’s resilience in the face of uncertainties, contributing to robust risk management practices.
Ultimately, budgets act as benchmarks for evaluating project performance. By comparing actual costs to the budget, project managers can assess the financial health of the project and identify areas for improvement in future projects. In summary, budget building is a fundamental and multifaceted aspect of project management that empowers project managers to plan effectively, control costs, allocate resources efficiently, communicate with stakeholders, manage risks, and evaluate project performance.
Activity: Build a Budget
Again, using the list of activities you created in the previous learning activities, you will now create a budget based on these activities.
This is accomplished by considering each activity and estimating a cost for each. (Be sure to consider Parts, Labour, Labour Overhead, Paid Services, and the like. Perform a web search and consider sample project budgets you find from your research.)
3.5 Budget Variance, Monitoring, and Controlling
A critical consideration for any Project Manager when building a budget is factoring in variance and outlining how they plan on monitoring and controlling it. Each of these elements is highlighted below:
Budget Variance:
Budget variance is a crucial aspect of project management that assesses the difference between planned or budgeted costs and the actual expenses incurred during a project. It is calculated by subtracting the budgeted cost from the actual cost, providing insight into whether the project is over or under budget. Positive variances indicate cost savings, while negative variances signal cost overruns. For project managers, understanding and analyzing budget variances are essential for early detection of discrepancies, allowing them to implement corrective actions promptly. This proactive approach helps maintain financial control and keep the project on track.
Monitoring:
Monitoring involves the systematic observation and tracking of various project elements, including schedules, budgets, quality, risks, and team performance. Project managers employ tools such as project management software, key performance indicators (KPIs), and regular status meetings to gather information. Through continuous monitoring, project managers can identify emerging issues, assess progress, and gain a comprehensive understanding of project dynamics. This real-time awareness enables them to make informed decisions and adjustments, ensuring that the project aligns with its objectives and stays on course.
Controlling:
Controlling in project management is the process of taking corrective actions based on the insights gained from monitoring. When deviations from the project plan are identified, project managers implement necessary adjustments to bring the project back in line with its objectives. Controlling involves adapting the project plan to address issues such as scope changes, risks, and unforeseen challenges. This flexibility is crucial for responding to dynamic project environments and maintaining effective project management. Ultimately, controlling is instrumental in optimizing resources, mitigating risks, and ensuring that the project progresses toward successful completion.
Importance to a Project Manager
For project managers, budget variance analysis, monitoring, and controlling are essential tools for financial accountability, proactive decision-making, and resource optimization. By actively managing and controlling project elements, project managers can instill confidence in stakeholders, including team members, sponsors, and clients. The ability to demonstrate control over the project not only enhances stakeholder trust but also contributes to overall project success. Effectively managing budget variances, continuously monitoring project dynamics, and implementing timely controls are key components in delivering projects on time, within budget, and with the desired level of quality.
Activity: Calculating Variances
Finally, using the same information from the previous learning activities, your task in this activity is to ensure that you have there are columns for “Actual Amounts” and “Variances” within your budget. This will allow a Project Manager to determine if each line item is over, under, or “at” budget using this formula: Budgeted minus Actual = Variance.
This list of Variances, (called a Variance Report) can then be re-sequenced to determine their severity (positive OR negative), allowing a simple method to determine priorities for investigations. (Note: Excel commonly sorts from most extreme negative, through zero, to the most extreme positive.)
Corrected data can then be recalculated to show the revised Variances (the goal is to work the Variance Report until there is minimal variances (variances so small, they are not worth investigating).
Assessment
Refer to the course schedule for graded assignments you are responsible for submitting. All graded assignments, and their due dates, can be found on the “Assessment” tab.
In addition to any graded assignments you are responsible for submitting, be sure to complete all the Learning Activities that have been provided throughout the content - these are intended to support your understanding of the content.
Checking your Learning
Before you move on to the next unit, you may want to check to make sure that you are able to:
- Outline the actions that build a schedule
- Determine what qualifies as an activity to be included within a given project and to create a list of the applicable activities
- Sequence a project activity list in proper order; then estimate durations for each activity
- Develop the basics of a ‘dynamic’ budget (a dynamic budget is used throughout a project)
- Review a budget and integrate other data (columns in a spreadsheet) can be used to add strength to a project’s budget
- Assess the value of using formatting tools to improve a budget’s readability