EXCRSK Wk5 LectureNotes
EXCRSK Wk5 LectureNotes
Project Management
Module 3: Execution and Control with Risk
• Managing costs
• Reporting the project status
• Tracking and analysing project data
• Adjusting the assignment of resources
Introduction
This week, you will examine how to use project management software tools
for managing project costs, reporting the project status, tracking and
analysing project data, and adjusting the assignment of resources in a project.
The PowerPoint slides at the end of the week provide useful diagrams and
summaries to help you review the main points that you have covered during
the week.
For the Assessment, you will discuss a question online and also complete a
Hand-in Assignment demonstrating that you can apply the techniques that
you have studied.
Reading
Textbook
Bucki, L.A. & Chefetz, G. (2002) Managing with Microsoft Project 2002.
Roseville: Premier Press.
Bucki, L.A. (2009) OpenProj: the open source solution for managing your
projects. Boston: Course Technology/Cengage Learning.
(Please note that the references to these readings can be found in the Lecture
Notes text under the headings of the topics to which they relate.)
• Managing costs
Week 5 introduction
The most popular and widely used off-the-shelf software for creating a project
schedule is Microsoft® Project. Free open-source project-scheduling tools,
such as OpenProj™, are also available for most operating systems. In the
Planning and Budgeting with Risk module, you were introduced to the use
of Microsoft Project and OpenProj for planning a project. This week introduces
the use of these software tools for managing project costs, reporting project
status, tracking and analysing project data, and adjusting the assignment of
resources.
Managing costs
Online reading (Bucki and Chefetz, pp. 336–340 and pp. 374–375)
Online reading (Bucki, pp. 242–244)
A project manager must manage costs to ensure that a project remains within
the budget. Budget miscalculation or mismanagement can have severe
consequences. The Dulhasti power project represents one example where the
result of incorrect cost estimates resulted in the project far exceeding the
planned budget. The Dulhasti power plant was to provide uninterrupted power
supply to nine states in North India. When the project began in 1983, its
estimated cost was about US $50 million. Its final cost, when the project was
completed in 2008, was in excess of US $1.6 billion.
Therefore, a project manager must control both variable and fixed costs and
direct and indirect costs. Variable costs are likely to change over time based
on project requirements. For example, the cost of nails for a building
contractor and the cost of paper for a printing company will vary based on the
amount used. Fixed costs are predetermined and not dependent on project
activities. For example, the cost of rented computers will remain the same
regardless of how much the computers are used. Direct costs are associated
with a project, such as the cost of resources acquired specifically for the
project. For example, the cost of equipment to produce paper is a direct cost
for a project involving the publication of a book. Indirect costs are costs not
associated with a project. These costs may be termed ‘overheads’, or the cost
of doing business, which include taxes and administration. Indirect costs may
be either fixed or variable.
Since fixed costs are predetermined, project costs are usually controlled by
focusing on variable costs.
For example, consider a clothing company in France that imports fabric from
Asia to manufacture garments. The cost of fabric is variable. The clothing
company signs a contract with a fabric supplier based in Shanghai. If the
supplier raises the price of the fabric, the clothing company’s variable costs
will increase. Similarly, if the supplier delivers the fabric later than planned,
the clothing company could experience a production delay, causing some of
the workers to sit idle. This will also increase the company’s variable costs.
However, if a company in Sri Lanka offers to supply similar fabric at a lower
price and the clothing company switches to this supplier, its variable costs will
decrease.
A project manager must also control fixed costs. For example, suppose that
the clothing company receives an unexpected order from a long-term client
who has indicated that if the company meets the new order, it will consider
making similar bulk orders in future. The clothing company needs to deliver
the new order within the next two months. To meet the new order, the clothing
company’s project manager sets a production schedule to calculate the total
production at 100 percent capacity. The project manager finds that at 100
percent capacity, the total production will fall short by 10 percent. In
anticipation of the possible bulk orders, the project manager can plan to
purchase additional equipment and hire new workers. The purchase of
additional equipment would, however, increase the company’s fixed costs. To
avoid this and control the fixed costs, the project manager can consider
A project manager can consider various methods to reduce costs but must
keep in mind that reducing costs may affect the schedule or scope of the
project. Some methods that may be used to reduce costs are:
In OpenProj, view the cost information for each task by right-clicking the
select all button in the Gantt view and selecting cost. Bucki (2009, pp. 242–
244) provides information on using OpenProj to view and adjust cost
information.
A project manager uses status reports to track project progress and document
any action taken to address project risks and the ensuing challenges. Status
reports provide a snapshot of the project at the time the report is generated
and may provide valuable information on the source of the challenges.
In Microsoft Project 2002, the different types of standard reports available are
Overview (Project Summary, Top-level Tasks, Critical Tasks, Milestones, and
Working Days), Current Activities (Unstarted Tasks, Tasks Starting Soon,
Tasks in Progress, Completed Tasks, Should Have Started Tasks, and
Slipping Tasks), Costs (Cash Flow, Budget, Overbudget Tasks, Overbudget
Resources, and Earned Value), Assignments (Who Does What, Who Does
What When, To-do List, and Overallocated Resources), and Workload (Task
Usage and Resource Usage). In addition to the standard reports, a large
number of custom report types can be generated. Bucki and Chefetz (2002,
pp. 472–491) describe the pre-designed reports available in Microsoft Project
and how to fine-tune a report.
Project managers track and analyse project data to ensure that a project stays
on schedule and within its planned budget and scope.
In the Planning and Budgeting with Risk module, you examined how to create
a project plan, including a project schedule, using Microsoft Project and
OpenProj. In this topic, you will explore how to use the project management
software to monitor project progress.
• The person responsible for updating the plan. In most cases, project
managers handle updates; sometimes, they may delegate the task to a
team member.
• The frequency of updating the project plan. This depends on the
duration of the project as well as stakeholder requirements.
• The level of detail to be updated. For example, will dates be updated
for individual tasks or groups of tasks? This typically depends on
stakeholder requirements.
• The method for collecting project status data. This is usually defined in
the communication plan.
Microsoft Project and OpenProj provide options to save the entire project or
selected tasks as a baseline. Bucki and Chefetz (2002, pp. 312–313) provide
the steps to save a baseline for both options. Whenever a project is saved in
Microsoft Project, it offers the option of saving a baseline, which enables a
project manager to save a baseline at any time.
Tracking progress
Both Microsoft Project and OpenProj show project completion status (even
partial) by graphically drawing a dark bar, known as the progress line, through
the middle of the horizontal bars in the Gantt view. These progress lines
provide a quick and highly visual indication of project status, task by task. In
Microsoft Project, the Gantt view itself shows the progress lines. In OpenProj,
the progress lines are visible in the Tracking Gantt view. To display this view,
click on the Tracking Gantt view on the left of the screen. If a progress line for
a task bends to the left, the task is behind schedule, and if the progress line
bends to the right, the task is ahead of schedule.
After updating the plan with task completion information, a project manager
can plot the value of tasks completed (that is, the earned value, or the EV)
and the actual cost (AC) against the planned value (PV) on a graph to
measure and analyse project data. Based on these three data points (PV, AC,
and EV), a project manager can also perform all the earned value technique
(EVT) calculations covered in Week 2.
It is often the case that a project manager may need to add or adjust the
allocation and assignment of resources to different tasks as a result of a
number of factors, such as:
Assume that the project manager needs to ensure that 240 juice-vending
machines are installed in a city in 30 days. If the client determines that in fact
400 machines must be installed, this is a change in the project scope.
Let’s say that the same project manager planned to install the machines at the
rate of eight per day and later finds that the machines are instead being
installed at the rate of five per day. This is an example of divergence from
planned productivity. In this case, the project manager has several choices:
double the resources so as to complete the task in the allotted 30 days,
extend the project time by 18 days to compensate for the slower-than-planned
installation rate, or take one day to conduct a training programme to show the
staff how to install 10 machines per day. Each of these alternatives will affect
the project parameters. If resources are added, the project resource sheet will
need to be adjusted and costs will increase. If the project completion time is
extended, the schedule will need to be adjusted and costs will be affected to
cover the additional time required by existing resources. If training is given,
the cost of the project will be increased by the cost of the training, but the
schedule will be maintained.
Week 5 summary
This week, you examined the importance of managing costs in a project and
the different situations in which cost management becomes necessary. You
also explored how to use project management software tools for managing
costs.
You reviewed the necessity of reporting the project status to various project
stakeholders and the types of reports that you can create using project
management software tools—Microsoft Project and OpenProj.
Next, you explored the process of saving project baselines and tracking and
analysing project data using project management software tools. You can use
the original baseline to analyse potential problems in the schedule and the
budget as a project progresses.
References
Bucki, L.A. & Chefetz, G. (2002) Managing with Microsoft Project 2002,
University of Liverpool [Online]. Available from:
http://www.liv.ac.uk/library/ohecampus/search/ebooks.htm (Accessed: 9
December 2009).
Bucki, L.A. (2009) OpenProj: the open source solution for managing your
projects, University of Liverpool [Online]. Available from:
http://www.liv.ac.uk/library/ohecampus/search/ebooks.htm (Accessed: 9
December 2009)
Week 5
Reference: Bucki, L.A. & Chefetz, G. (2002) Managing with Microsoft Project 2002. Roseville: Premier Press.
Reference: Bucki, L.A. (2009) OpenProj: the open source solution for managing your projects. Boston: Course
Technology/Cengage Learning.
Reference: Bucki, L.A. & Chefetz, G. (2002) Managing with Microsoft Project 2002. Roseville: Premier Press.
Reference: Bucki, L.A. (2009) OpenProj: the open source solution for managing your projects. Boston: Course
Technology/Cengage Learning.
Reference: Bucki, L.A. (2009) OpenProj: the open source solution for managing your projects. Boston: Course
Technology/Cengage Learning.
Reference: Bucki, L.A. (2009) OpenProj: the open source solution for managing your projects. Boston: Course
Technology/Cengage Learning.
Reference: Bucki, L.A. & Chefetz, G. (2002) Managing with Microsoft Project 2002. Roseville: Premier Press.
The work on this task is running behind The work on this task is ahead of schedule
Reference: Bucki, L.A. & Chefetz, G. (2002) Managing with Microsoft Project 2002. Roseville: Premier Press.
Reference: Bucki, L.A. & Chefetz, G. (2002) Managing with Microsoft Project 2002. Roseville: Premier Press.
Reference: Bucki, L.A. (2009) OpenProj: the open source solution for managing your projects. Boston: Course
Technology/Cengage Learning.