Budgeting for Accuracy, Business Proposal Example

Abstract

Building a project plan incorporates all three key areas of a project including, schedule, cost and quality. All three of the constraints play pivotal roles in the successful completion of the project (Dobson 2004). In budgeting the focus is to accurately estimate the resources required to complete the tasks along the plan. There is also the allotment of resources during specific times throughout the project to release the resources. The formulation of the budget for the project will be completed early in the project’s lifecycle but will need to have a level of accountability assigned for the proper management of those resources. The project manager’s role is to ensure the successful implementation of the project and a part of that role is to utilize the appropriate tools and techniques to manage and lead project management activities. The development of the scope, estimation of the budget and monitoring and controlling of the schedule and resources are all key activities. Tools such as project scheduling tools and earned value management can add the needed level of information so that the project manager can fully understand what level of resources are providing the results needed to launch the project.

Project Plan

The project needs to have a foundation built on scope and the amount of resources required to deliver the items outlined in the scope statement. With the scope of this project outlined and defined in the planning phase of the project in which all of the requirements were collected, the scope was defined, a work breakdown structure was create and all the assigned tasks were defined, sequenced and placed into a model for scheduling. With this information the next activities includes estimating the activity of the resources as well as their duration. This will help provide a clearer picture regarding the costs associated with the project as well as the budget. Once the budget is calculated and has incorporated all aspects of the project we will use the earned value management tool to ensure we are tracking the progress of the project and monitor the allocation and usage of resources for each task. In order to properly utilize the EVM tool there will need to have a synergistic approach between the budget, scope and the EVM tool to properly monitor the project’s progress and performance.

The project’s estimation for the amount of activity resources and duration needs both inputs and outputs. The estimation of the activities resources needs two main areas for calculation which include the activity list and the resource calendar/availability. These areas encapsulate the type and amount of people, supplies, material, tools or other assets needed to perform each activity. For example, a task may include establishing the budget for the project. To identify the activity resources we would include the project manager and office tools. If the budget was increasingly more difficult the resources would grow to include the subject matter experts in each area as well as a cost estimator to help provide a clear and precise cost estimate to certain activities. The estimation of duration will also need to be coupled with the activity resources to provide a schedule for the project. The duration requires the activity list, resource requirements, resource calendar and scope of the project. This allows a better understanding of what each activity will need in order to accomplish the scope of the project. With these key areas understood or at least more clearly defined the schedule of the project is falling into place with the sequencing of events, durations and resources assigned.

Estimating Costs

The project is now at the point where we need to understand specifically how the resources will provide the progress needed to complete the project. As we developed the estimation of resources and durations we need to take those estimates one step further and create a work breakdown structure. The processes for implementing an effective and accurate cost estimate will include estimating costs, determining budget and controlling the costs (Bloucher, Stout & Cokins, 2009). All three areas are imperative to project execution and cost management.

Selecting the tools to monitor and control the project was not based on new trends or up and coming models and methodologies of project management.

To create a budget the project must be understood through a scope statement, requirements and schedule. As part of the budgeting process a breakdown of costs are shown below:

The cost to complete this project is estimated at $5.8 million dollars. Considering the complexity and multiple integration points the benefits of removing the old systems and implementing a new way of conducting business far outweighs the costs associated with implementation of the new system and integration of the new business processes. Each of the costs are calculated through prior experience with implementation of projects, current software and hardware costs, the market rate for experienced software implementation contractors and a budgetary risk mitigation allotment of approximately thirty percent of the total implementation cost to help alleviate the burden of potential cost overruns.

The project will require the software suite that was deemed necessary through the vendor selection process. This process utilized the source selection of multiple vendors and the decision was based on meeting the requirements of the business, totality of the package, support and sustainment provisions by the vendor. The hardware meets or exceeds the requirements for implementing the new project requirements. In order to fully take advantage of the software the business needs a software integration and configuration expert. The specific skill sets needed was deemed necessary and could not be provided from within the company. The plan is to grow the talent from the inside of the company once the project is implemented. There are also costs associated with bringing the project onboard and that includes the cost of the project team as well as the assimilation of the new system into the business. This is a critical area of concern and subject matter experts on the usage of the system will be required for launch and sustainment.

These tools are based on the needs, complexity and composition of the program which is going to be implemented. With a project that involves a software development project which includes implementing new user interfaces, system requirements, security needs, training, awareness, hardware implementation, legacy system retirement as well as continually making improvements to effectiveness and efficiency. All this is to be accomplished while making minimal impact to the business operations. A work breakdown structure will allow a clear vision into what is being accomplished and how resources are assigned. The tentative schedule or assignment of tasks along the sequence is depicted below:

This sequence can help develop the work breakdown structure needed to fully establish costs and resources for the project. Through sequencing the activities the resource allocation and distribution will have a greater solidity for the project team to work from.

With the utilization of the Work Breakdown Structure (WBS) and the Critical Path Model (CPM) the project and program teams can develop a schedule with a high confidence level. The WBS is a decomposition of a project into multiple pieces. The project is broken down into deliverables and those deliverables are broken down into what is known as work packages. These work packages could also feed into the sprints as areas that would be implemented within each sprint timeframe. The work packages are then assigned all of the steps that would be required to complete that package and a level of effort is assigned to that package. One of the governing rules around creating a WBS is that no task should take longer than two weeks of effort to complete (Miller, 2009). The rationale behind this is that if the task lasts over eighty work hours than the effort could be broken down into more manageable pieces. This allows a greater understanding of what exactly needs to be accomplished for that task and allows better insight into the resources assigned to that task.

WBS and EVM

As we have already developed a project there are specific aspects needed to visually depict the schedule and WBS. The work break down structure will be based upon work packages. A work package would consist of the project manager, subject matter experts, vendor, programmer and center of excellence. A work break down structure this project is depicted below:

Below is a schedule built from the WBS. The tool to help facilitate the utilization of the EVM tool includes Gantt Charts. Gantt charts will be utilized to visually depict the work to be completed, the timing, and what will be accomplished. A further breakdown of each task will be accomplished to show eight (8) hour increments and who is performing the work (Budd and Budd, 2009). Each person will be assigned two week assignments based upon their percentage of availability to the implementation project. The amount of timing associated with each task is key when garnering support from leadership because a total of eighty (80) hours of work per two (2) week work assignments is optimal from each team member. The task breakdown is

To monitor and control this project we must understand how utilizing EVM will provide that insight and information. Earned value management used the project plan to determine what needs to be accomplished and associates the metrics for a calculated and quantifiable amount of effort and tasks with the planned amount of work that should be completed. This provides a gauge for the project manager to understand where accomplishments are taking place and areas that may need more effort placed in order to meet the schedule of the project. The key interactions between the budget and scope are monitored and ultimately provide the information needed to control these two key factors of the project. The corollary integrity of the scope and budget determine the success of the project. EVM places a real metric of accomplished tasks to a project. The Earned Value of a project is the actual cost of the project with what has actually been accomplished. The key areas of focus for EVM are the planned value, earned value and actual cost over the schedule. In order to control the budget the Earned Value Management tool will be utilized to track and monitor the budget, planned value and earned value of the project.

Resources

The resource estimates are based on industry standards. Through the utilization of the vendor selection process the requirements were vetted among competing vendors and an assessment was accomplished on their varying attributes. From that the costs associated with implementation were assigned. Each area of the project lifecycle requires varying amounts of resources and interactions from multiple functions in the business. The costs associated with implementing the project included hardware, software and expertise. Other areas of cost assignment for budgetary purposes included the project team as well as a risk mitigation fund to ensure cost overruns or the unknown implementation factors were covered. The project is expected to last 13-15 months at a cost of $5.8 million. The earned value management tool will be utilized to monitor and control the project budget and detailed work breakdown structures will provide the insight into the varying areas of the project launch.

References

Bloucher, E., Stout, D., & Cokins , G. (2009). Cost management: a strategic emphasis. (5 ed.). McGraw-Hill.

Budd, C. I., & Budd, C. S. (2009). Earned value project management. (2nd ed.). Vienna, VA: Management Concepts.

Cooper, D. F., Grey, S., Raymond, G., & Walker, P. (2005). Project risk management guidelines, managing risk in large projects and complex procurements. John Wiley & Sons

Dobson, M. (2004). The triple constraints in project management. Vienna, VA: Management Concepts.

Fleming, Q. W., & Koffleman, J. M. (2010). Earned value project management. Project Management Institute.

Miller, D. (2009). Building a project work breakdown structure: visualizing objectives, deliverables, activities, and schedules (esi international project management series). Boca Raton, Fl: Auerbach Publications

Project Management Institute, P. M. (2008). A guide to the project management body of knowledge. (4th ed.). Newtown Square: Project Management Inst.