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Resources considerations in Projects

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Topics to study

Resource Allocation

Scheduling Project Cost Estimate and Budgets

Cost Forecasts

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Resource allocation :

- It refers to fixing the available resources to the prioritised project activities.

- In PM it is defined as the allotment of activities to the resources required whileconsidering both the resource availability and the project time.

Resource levelling :

- The resources are adjusted / compromised so that they are applied uniformly

without any delays on the scheduled time.

- A project manager often encounters an imbalance between the availability ofresources and the requirement of resources. As the requirement of people variesfrom day to day, the project manager plans accordingly so that available manpower isoptimally utilised.

- There are multiple techniques available for handling such problems.

- There are different heuristics existing for resource smoothing, devised by differentexperts in the field.

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Scheduling

Scheduling the scarce resource is a method for developing the shortest schedulewhen the number or quantity available is fixed.

It is the process of deciding how to arrange resources between a variety of possibleactivities and tasks.

It drives the manufacturing and engineering activities and has a impact on theoverall productivity.

The purpose of scheduling is to minimise the production time and reduce the costs. It aims to maximise the efficiency of the operation.

The tools provide the project scheduler with graphical interfaces which can be usedto optimise real-time workloads in various stages of project.

There are 2 types of scheduling 1) backward & 2) forward.

In backward scheduling planning of tasks is done from the due date or required bydate to determine the start date and or any changes in capacity required.

In forward scheduling the planning of tasks from the date resources becomeavailable to determine the shipping date or the due date.

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Benefits of Scheduling Predictability -A scheduling system makes everyones job easier by

adding predictability to the environment.

Process change-over reduction

Inventory reduction, levelling

Reduced scheduling effort Increased production efficiency

Labour load levelling

Accurate delivery date quotes

Real-time information

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Project Cost Estimate and Budgets

Cost estimating is the process of identifying and considering different costingalternatives.

It help to refine the course of the project to reflect the additional details.

The costs for schedule activities are estimated for all resources which charged to

the project like labor, materials, equipment, services, and facilities, with inf lationadjustment or a contingency cost.

A schedule activity cost estimate is a quantitative evaluation of the expected costsof the resources required to complete the scheduled activity.

If the performing organisations do not have formally trained project costestimators, then the project team will require supplying both the resources andthe knowledge to perform project cost estimating activities.

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Cost estimating: inputsEnterprise Environmental Factors

Marketplace conditions Type of products, services, and results that are available in the

marketplace with terms and conditions of their availability. Commercial databases They track skills and HR costs and provide standard costs for material

and equipment.

Organisational process assets In developing the cost management plan existing formal andinformal cost estimating-related policies, procedures, and guidelines are considered, in which costestimating tools, examining and reporting methods are used.

Cost estimating policies

Organisations have predefined approaches to cost estimating. Cost estimating templates organisations have developed templates (or a pro forma standard)

for the use of the project team.

Historical information Information that pertains to the projects product or service which isobtained from various sources.

Project files Stakeholders involved in the project will maintain records of previous project

performance which is useful in developing cost estimates. Project team knowledge members of the project team may recall previous actual costs or cost

estimates & gain knowledge.

Lessons learned It includes cost estimates obtained from previous projects that are similar inscope and size

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Project scope statement It describes the business need, justification, requirements, and current boundaries for

the project.

It provides important information about project requirements i.e. cost estimates,constraints, assumptions, and requirements.

Constraints are specific factors that can limit cost estimating options. For ex. a limitedproject budget, delivery dates, available skilled resources, org. policies.

Assumptions are factors that will be considered to be true, real, or certain.

Requirements with contractual and legal implications can include health, safety,security, performance, environment, insurance, intellectual property rights, equal

employment opportunity, licences, and permits.

The project scope statement also provides the list of deliverables and acceptance criteriafor the project and its products, services, and results.

All factors are considered when developing the project cost estimate.

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Work Breakdown Structure

The projects WBS provides the relationship among all the components of the project andthe project deliverables.

WBS dictionary

It provides an identification of the deliverables and description of the work in each WBScomponent required to produce each deliverable.

Project management plan It gives the overall plan for executing, monitoring, and controlling the project, and

comprises of subsidiary plans that offer guidance and direction for cost managementplanning and control.

Schedule management plan

A major part of the project cost consists of type and quantity of resources & the time thoseresources are applied to complete the project.

Activity resource estimating involves availability and quantities required of staff,equipment & material needed to perform schedule activities.

Activity duration estimating will affect cost estimates on any project where the projectbudget includes an allowance for the cost of financing, including interest charges .

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Staffing management plan

Project staffing attributes and personnel rates are necessary components for developingthe schedule cost estimates.

Risk register

The cost estimator considers information on risk responses when producing costestimates.

Risks can be either threats or opportunities that have an impact on both schedule activityand project costs.

Because of risk the cost of the project will increase, & there is likelihood of delay in thescheduled project.

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Cost estimating: tools and techniquesAnalogous estimating

It uses the actual cost of previous, similar projects as the basis for estimating the cost of thecurrent project.

It is used to estimate costs when there is a limited amount of detailed information about theproject (e.g., in the early phases).

It uses expert judgment & less costly than other techniques, but it is less accurate.

It is most reliable when previous projects are similar in fact and not just in appearance, & the

groups preparing the estimates have the needed expertise.

Determine resource cost rates

The person or the group preparing the estimates must know the unit cost rates like staff costper hour, bulk material cost per cubic yard estimate schedule activity costs.

Gathering quotes is one method of obtaining rates.

For products, services, or results to be obtained under contract, standard rates with escalationfactors can be included in the contract.

Obtaining data from commercial databases and seller-published price lists is another source ofcost rates.

If the actual rates are not known, then the rates themselves will have to be estimated.

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Bottom-up estimating

It involves estimating the cost of individual work packages or individual schedule activities with

the lowest level of detail.

This detailed cost is then summarised or rolled up higher for reporting and trackingpurposes.

The cost and accuracy of motivated by the size and complexity of the individual scheduleactivity or work package.

Activities with smaller associated effort increase the accuracy of the schedule activity costestimates.

Parametric estimating

It uses statistical relationship between historical data and other variables (e.g., square footage

in construction, lines of code in software development, requisite labour hours) to compute acost estimate for a schedule activity resource.

It can generate higher levels of accuracy depending upon the sophistication, the underlyingresource quantity & cost data build into the model.

A cost-related example consists of multiplying the planned quantity of work to be executed by

the historical cost per unit to obtain the estimated cost.

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Project management software It includes cost estimating software applications, computerised spreadsheets, and simulation and

statistical tools, that are extensively used to assist with cost estimating. Such tools make it simpler toestimate cost and thus facilitate the consideration of various cost estimate alternatives.

Vendor bid analysis Vendor bid analysis is the analysis of what the project should cost. In problems where projects are

won unde competitive processes. Additional cost estimating may be required from the project team toscan the price of individual deliverables, and derive a cost that supports the total project cost.

Reserve analysis Various cost estimators include reserves (contingency allowances) as costs in many schedule activity

cost estimates. This may lead to potentially overstating the cost estimate for the schedule activity.Contingency reserves are estimated costs to be employed at the discretion of the project manager to

deal with probable, but not certain, events. These events are known unknowns and are a element of the project scope and cost baselines. One alternative to manage cost contingency reserves is to aggregate each scheduled activitys cost

contingency reserve for a group of correlated activities into a single contingency. This scheduled activity may be a zero period/duration activity that is placed in the entire network

path for that group of scheduled activities, and is employed to hold the cost contingency reserve. An example of this solution to manage cost contingency reserves is

Project Management Unit 6 Sikkim Manipal University Page No. 147 to assign them at the work package level to a zero duration activity which spans from the start to the end of the work package sub-network. As the schedule activities progress, the contingency reserve, as measured by resource consumption of the non-zero duration schedule activities, can be adjusted. As a result, the activity cost variances for the related group of schedule activities are more accurate because they are based on cost estimates that are not pessimistic. Alternatively, the schedule activity may be a buffer activity in the critical chain method and is intentionally placed