Felix Sanchez

Estimating the Estimating the Budget and Cost Budget and Cost

(Part 1)(Part 1)

Project Management for ARA Engineers and Scientists

Developing a Developing a Bottoms Up EstimateBottoms Up Estimate

2

Desired Learning ObjectivesDesired Learning Objectives Be able to develop a “bottoms up” cost estimate and budget

for a project Recognize that a Responsibility Assignment Matrix identifies

who is responsible for work and budgets for each WBS Be able to represent what it will cost to do the work and who

will do the work with a Resource Loaded Network (RLN) in order to estimate costs

Identify challenges in staffing a project at ARA Know all the elements required to

make up an ARA project budget

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Designing the Program StructureDesigning the Program Structure

Define the Scope• SOW Review

• Design the WBS – driven by SOW

Design the Team Organization• Driven by WBS

• Driven by customer (IPT, contract requirements, etc.)

• Driven by size of project or cost

Design the Plan and Schedule• Integrated Master Plan

• Integrated Master Schedule

Identify the staff and allocate the resources (Resource Loaded Network)

Do a pre-cost proposal – ROM – within customer’s bogey

Planning and Scheduling and Pre-Cost Proposal EstimatePlanning and Scheduling and Pre-Cost Proposal Estimate

4

Five Elements for Program ManagementFive Elements for Program Management1. Organization: Define contractual effort and assign responsibility for work.

2. Planning and Budgeting: Plan, schedule, budget and authorize work.

3. Cost Reporting: Accumulate cost of work and material.

4. Analysis: Compare planned and actual costs to performance and analyze variances. Develop estimates of final cost.

5. Close Out: Ensure within cost and schedule and market follow-on efforts.

Work Breakdown Structure (WBS)

Program Organization

Task Definition

SchedulesBudget (Resource Loaded Network)

Cost Reporting

Performance Measurement

Variance Analysis Reports (VAR)

Estimate at Completion (EAC)

Close Out

Performance Measurement

Close Out

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Resource AllocationResource Allocation

Schedules usually drive the cost• An integrated master schedule provides the foundation for

developing the cost plan

• Need to reconcile with customer’s funding profile

WBS is used to segregate budgets and identify costs based on who is performing the tasks

Who is assigned to work tasks provides the first cut for the cost of staff based on the WBS

Schedule

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Who’s Responsible for Work and Budgets for Who’s Responsible for Work and Budgets for Each WBS?Each WBS?

Results in a Responsibility Assignment MatrixResults in a Responsibility Assignment Matrix

Element

I.M.

X = Denotes Control Account Level

D.

Pu

ty

Thguy

$66.5

NumberElement

Title

0001

1000

1100

1110

1120

2100

Total HEL TSTM System

TEL TSTM Item

Subsystem 1

Hardware Design

Program Management

$89.8

$501.5 $702.9 $253.8

X

X

X

X $1873.3

X

X $325.3

Jones

Control Account

HEL TSTM SystemProgramManager

TeamLeader

Manager (or Task Leader) E

.Seg

oin

g

G.

Wiz

z

B.

Cu

z

B.

Go

ne

M.

To

o

T.

Jon

es

TotalValue

T.B. Gone

L. Anderson

WBS Level

2 3 4 51

Budget at completion for Mr. E. Segoing’s task

Software $415.1

$1458.2

$1873.3

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Who’s Responsible for Work and Who’s Responsible for Work and Budgets for Each WBS?Budgets for Each WBS?

RAM: a communication device providing a summary level picture of• Where work and budgets are assigned

• From which cost build up is developed

• Identifies the tasks or products to an organization (or other Division) by WBS elements

• All WBS’s identified are assigned to an individual (Task Leader or Control Account Manager) who is responsible for managing the completion of that task

Budget at Completion (BAC) is associated with the reporting account level and is reflected at the intersection of WBS and Task Leader or CAM (as shown on previous slide)

Responsibility Assignment Matrix (RAM)Responsibility Assignment Matrix (RAM)

$ Task1

hrs

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What Will the Work Cost?What Will the Work Cost?Who Will do It?Who Will do It?

RLN = IMS + (Who and # of Hours +ODCs) for each task For each task

• Who is going to do that work? determines staffing

• How many hours by each staff member/rate? labor cost

• What materials and procurements needed? ODCs

• What travel needed? ODCs

• What subs needed? ODCs plus M&S fee

• Details of understanding cost elements,

loading and escalation of rates in Part 2

Create a Resource Loaded Network (RLN)Create a Resource Loaded Network (RLN)

Summation of each Task equals ROM program costSummation of each Task equals ROM program cost

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Sample RLN in MS ProjectSample RLN in MS Project

ID Task Name Duration Start Finish Resource Names

1 Aerojet Project 55.88 days Mon 5/7/07 Mon 7/23/07

2 Phase I (Sub-Scale Modeling) 50 days Mon 5/7/07 Mon 7/16/07

3 Project Maintainance 31.98 days Wed 5/16/07 Fri 6/29/07

4 Project Administration 233.33 hrs Wed 5/16/07 Tue 6/26/07 Barb Dolly[6%]

5 Review 50% 2 hrs Tue 6/5/07 Tue 6/5/07 Ben There

6 Review 100% 2 hrs Fri 6/29/07 Fri 6/29/07 Ben There

7 Model Development 36.94 days Mon 5/7/07 Tue 6/26/07

8 Design of Experiments 8 hrs Mon 5/7/07 Mon 5/7/07 Joe Moma,Dennis Menance

9 2D Annular Model Development 234.42 hrs Tue 5/8/07 Mon 6/18/07 Joe Moma[53%]

10 Forcing Function Mapper 40 hrs Tue 5/8/07 Mon 5/14/07 Joe Moma[25%]

11 2D Axial Model Development 287.5 hrs Tue 5/8/07 Tue 6/26/07 Dennis Menance[64%]

12 Deliverables 31 days Fri 6/1/07 Mon 7/16/07

13 Status Reports 176 hrs Fri 6/1/07 Mon 7/2/07 Joe Moma[7%]

14 Briefing Materials 16 hrs Mon 7/9/07 Tue 7/10/07 Joe Moma,Dennis Menance

15 Final Report Writing 23.5 hrs Wed 7/11/07 Fri 7/13/07 Joe Moma,Dennis Menance

16 Final Report 0 hrs Mon 7/16/07 Mon 7/16/07

17 Phase II (Full-Scale Modeling) 0 hrs Mon 7/23/07 Mon 7/23/07

Barb Dolly[6%]

Ben There

Joe Moma,Dennis Menance

Joe Moma[53%]

Joe Moma[25%]

Dennis Menance[64%]

Joe Moma[7%]

M T W T F S S M T W T F S S M T W T F S S M TMay 6, '07 May 13, '07 May 20, '07 May 27, '07

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Sample RLN Template in ExcelSample RLN Template in ExcelRLN Template in Excel

ID WBS No. Name Duration Start Date Finish Date Who # of Hrs Rate/Hr Labor Cost ODCs (Mtrl, Subs, Travel ) Total Cost0 Event 1 d1 Accomplishment 1.1 d2 Criteria 1.1.1 d3 Task 1.1.1.1 d4 Task 1.1.1.2 d5 Task 1.1.1.3 d6 Criteria 1.1.2 d7 Task 1.1.2.1 d8 Task 1.1.2.2 d9 Task 1.1.2.3 d

10 Task 1.1.2.4 d11 Accomplishment 1.2 d12 Criteria 1.2.1 d13 Task 1.2.1.1 d

Note: Sample electronic Excel template in handouts

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S/W Development Project:S/W Development Project:RLN = IMS + Who + # Hours (or $)RLN = IMS + Who + # Hours (or $)

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S/W Project Sample RLN (cont.)S/W Project Sample RLN (cont.)

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Challenges in StaffingChallenges in Staffing What expertise is available in your Division? What SME available in other Divisions? Do they have the time to dedicate to your project? What happens when they get pulled for higher priority

projects? How do you manage remotely to staff in other

Divisions?

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Typical Staffing Challenges Typical Staffing Challenges

CC24253287.ppt

Headcount Analysis

Months

Sta

ffin

g

Planned

Actual

Jul Sep Nov

10

8

6

4

2

0Aug Oct Dec

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Other Elements of An ARA BudgetOther Elements of An ARA Budget What expertise is not available in your Division? Include all loading factors (more detail in part 2):

• Labor – load with overhead (x%), G&A (y%) and profit (7.5-20%)• ODCs – load with G&A and profit• Materials and Subcontracts – load with G&A (x%) and profit• Travel – load with G&A and profit (if acceptable to client)

Include management reserve • Equal to approximately 10+ percent of the value of the project• Be careful on T&M and CPFF projects to spend the

management reserve prior to completing the project

Include budget for technical computer usage

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SummarySummary

A “bottoms up” cost estimate for a project is most accurate and provides most insight in your planning

Resources Loaded network (RLN) = IMS + (Who and # of Hours (or $) + ODCs) for each task

Must account for all the elements required to make up an ARA project budget • Or else it comes out of your management reserve

• Or worse, your profit!

Budget