Chapter 3 - Project Planning

Cost Estimation –
Cost estimation That's a crucial step in project management, budgeting, and decision-making.
Cost estimation involves predicting the expenses required to complete a project, program, or
activity. Here's a comprehensive overview:

Types of Cost Estimation:

1. Rough Order of Magnitude (ROM) Estimate: A high-level estimate, usually -25% to +75%
accurate, used for initial planning.
2. Detailed Estimate: A precise estimate, typically -10% to +10% accurate, used for project
execution.
3. Parametric Estimate: Based on historical data and statistical relationships.
4. Bottom-Up Estimate: Breaking down the project into smaller tasks and estimating each
task's cost.
5. Analogous Estimate: Using similar projects as a reference point.

Cost Estimation Techniques:

1. Expert Judgment: Relying on experienced professionals' opinions.

2. Historical Data: Analysing past projects' costs.
3. Cost-Benefit Analysis: Weighing costs against potential benefits.
4. Break-Even Analysis: Determining the point where costs equal benefits.
5. Three-Point Estimation: Using optimistic, pessimistic, and most likely estimates.

Key Components of Cost Estimation:

1. Labor Costs: Salaries, wages, benefits, and training. the cost of project team members
working on the project, both in terms of wages and time.
2. Material Costs: Equipment, supplies, and raw materials. The cost of resources required for
the project, from physical tools to software to legal permits.
3. Equipment Costs: Purchase, rental, or leasing.
4. Overhead Costs: Indirect expenses, such as utilities, insurance, and administrative costs.
5. Contingency Funds: Reserve for unexpected expenses.

Challenges in Cost Estimation:

1. Uncertainty: Difficulty predicting future expenses.

2. Complexity: Large projects with multiple variables.
3. Inaccurate Data: Insufficient or unreliable historical data.
4. Changing Requirements: Scope creep or shifting project goals.
5. Stakeholder Expectations: Managing expectations and communication.

There are two key types of costs addressed by the cost estimation process:
 1. Direct costs: These are the costs associated with a single area, such as a department or
this particular project itself. Examples of direct costs include fixed labor, materials and
equipment.

2. Indirect costs: These are costs incurred by the organization at large, such as utilities and
quality control.

What is Feasibility Study?

 As the name implies, a feasibility analysis is used to determine the viability of an idea,
such as ensuring a project is legally and technically feasible as well as economically
justifiable.

 It tells us whether a project is worth the investment—in some cases, a project may not
be double.

 There can be many reasons for this, including requiring too many resources, which not
only prevents those resources from performing other tasks but also may cost more than
an organization would earn back by taking on a project that isn’t profitable

 As the name suggests, feasibility study is a study to reveal whether a project is feasible
or not.

 It tells us whether a project is worth the investment.

 After the feasibility study, the project may be accepted, accepted with modification or
rejected.

 There are Five Types of Feasibility Study –

1) Technical Feasibility
2) Economical Feasibility
3) Legal Feasibility
4) Operational Feasibility
5) Scheduling Feasibility

Technical Feasibility –

 In Technical Feasibility, we check whether we have required technical resources (Like

hardware and software) to develop the project.

 This feasibility study also analyzes technical skills and capabilities of technical team,
existing technology can be used or not, maintenance and up-gradation is easy or not
for chosen technology.
  The analyst determine whether current technical resources be upgraded or added it
that fulfil the new requirements.
 It ensures that the candidate system provides appropriate responses to what extent
it can supports the technical enhancement.

Economical Feasibility –

 In Economic Feasibility study, cost and benefit of the project is analyzed.

 In this feasibility study, a detail analysis is carried out to know what be cost of the
project including hardware and software resource required, design and development
cost and so on.

 It is also analyzed whether project will be beneficial for organization or not.

 The main aim of Economic Feasibility Analysis (EFS) is to estimate the economic
requirements of candidate system before investments funds art committed to proposal.

Legal Feasibility –

 In Legal Feasibility study we investigate whether the project is legal or not.

Operational Feasibility –

 In Operational Feasibility study, we examine whether the project satisfies thw

requirements identified in the requirement analysis phase.
 It determines whether the system is operating effectively once it is developed and
implemented.
 It ensures that the management should support the proposed system and its working
feasible in the current organizational environment.
 It analyses whether the users will be affected and they accept the modified or new
business methods that affect the possible system benefits.
 It also ensures that the computer resources and network architecture of candidate
system are workable.
Behavioural Feasibility: -
 It evaluates and estimates the user attitude or behaviour towards the development of
new system.
 It helps in determining if the system requires special effort to educate, retrain, transfer,
and changes in employee's job status on new ways of conducting business.
 Scheduling Feasibility –

 In Scheduling Feasibility study, we estimate the time necessary to complete the project.
 We also consider the organization’s capabilities and determine whether that amount of
time is available or not.
 It ensures that the project should be completed within given time constraint or
schedule.
 It also verifies and validates whether the deadlines of project are reasonable or not.

Importance of Feasibility Study –

 Get a clear-cut idea of whether the project is likely to be successful, before allocating
budget, manpower and time.
 Improves project teams focus
 Provides valuable information for a “go/no-go” decision
 Identifies a valid reason to undertake the project
 Diagnoses errors and aids in troubleshooting them
 Enhances the success rate by evaluating multiple parameters

Steps Involved in Feasibility Analysis:

The following steps are to be followed while performing feasibility analysis.
1. From a project team and appoint a project leader.
2. Develop system flowcharts.
3. Determine Economic feasibility.
4. List the alternative solution to achieve goals.
5. Decide the feasibility of each alternative such as technical feasibility, operational
feasibility etc.
6. Weight the performance and cost effectiveness of each alternatives.
7. Rank the other alternatives and select the best system.
8. Prepare a system proposal of final project and review to management for approval.

Organising the project, staffing

Successful project management, regardless of the organizational structure, is only as good as

the individuals and leaders who are managing the key functions. Project management is not a
one-person operation; it requires a group of individuals dedicated to the achievement of a
specific goal. Project management includes:

 A project manager
 An assistant project manager
 A project (home) office
 A project team
Generally, project office personnel are assigned full-time to the project and work out of the
project office, whereas the project team members work out of the functional units and may
spend only a small percentage of their time on the project. Normally, project office personnel
report directly to the project manager, but they may still be solid to their line function just for
administrative control. A project office usually is not required on small projects, and
sometimes the project can be accomplished by just one person who may fill all of the project
office positions.

Project scheduling

Project Scheduling is the process of creating and managing a project timeline, including setting
milestones, deadlines, and resource allocation.

Project schedule
Simply means a mechanism that is used to communicate and know about that tasks are needed
and has to be done or performed and which organizational resources will be given or allocated
to these tasks and in what time duration or time frame work is needed to be performed.
Effective project scheduling leads to success of project, reduced cost, and increased customer
satisfaction. Scheduling in project management means to list out activities, deliverables, and
milestones within a project that are delivered. It contains more notes than your average weekly
planner notes. The most common and important form of project schedule is Gantt chart.

Process :
o The manager needs to estimate time and resources of project while scheduling project.
o All activities in project must be arranged in a coherent sequence that means activities
should be arranged in a logical and well-organized manner for easy to understand.
o Initial estimates of project can be made optimistically which means estimates can be
made when all favorable things will happen and no threats or problems take place.
o The total work is separated or divided into various small activities or tasks during project
schedule. Then, Project manager will decide time required for each activity or task to get
completed.
 o Even some activities are conducted and performed in parallel for efficient performance.
The project manager should be aware of fact that each stage of project is not problem-
free.

Project Scheduling Techniques:

1. Gantt Charts: Visual representation of tasks and timelines.
2. Critical Path Method (CPM): Identifies critical tasks impacting project duration.
3. Program Evaluation and Review Technique (PERT): Analyzes tasks and dependencies.
4. Agile Methodologies: Iterative approach with flexible scheduling.
5. Resource Leveling: Allocates resources efficiently.
6. Dependency Management: Identifies and manages task dependencies.
7. Scheduling Algorithms: Mathematical models for optimizing schedules.

Project Scheduling Steps:

1. Define Project Scope
2. Break down tasks (Work Breakdown Structure)
3. Estimate Task Durations
4. Identify Dependencies
5. Create Gantt Chart or Schedule
6. Assign Resources
7. Set Milestones and Deadlines
8. Monitor and Update Schedule

Benefits of Project Scheduling:

1. Improved Time Management
2. Enhanced Team Collaboration
3. Increased Productivity
4. Better Resource Allocation
5. Reduced Delays
6. Increased Customer Satisfaction
7. Improved Risk Management

Project Scheduling Challenges:

1. Underestimating Task Durations
2. Inadequate Resource Allocation
3. Poor Communication
6. Inaccurate Estimations
7. Insufficient Contingency Planning