PM101

Sam realized early on the urgency of this project. It must be completed before the river freezes this winter so they will have time to plant crops. Analysis of the history of the family clearly indicates that the later the project is completed the larger the job as all the species multiplied. Thus, Sam worried about how long it would take to perform the project. The first step was to estimate the resources and time required for each activity. Sam quickly realized that here was something else to learn about projects.

Everybody has made estimates of time, resources and costs. It is inescapable in modern life. We estimate the time it will take to fix a meal, to perform chores around the house, and to travel to work or on a vacation. We estimate the resources required to throw a party, to move into a new facility (whether it be a residence, office, or manufacturing building), or to take a vacation. We estimate the costs to remodel a room, build a cabin, or take a vacation. And yet most people probably have not thought carefully about what it is they are doing when making these estimates.

Two popular methods employed for estimating are WAG and SWAG. One difference between these is the oft-repeated admonition to make a WAG estimate, double it, and then double it again. Clearly these often lead to errors in estimating and unfavorable performance on projects.

What are the relevant variables affecting an activity's estimates? The Guide to the Project Management Body of Knowledge (PMBOK) [1] identifies three inputs for duration estimating and two additional inputs for cost estimating. The inputs for duration estimating are the activity list, resource requirements, and resource capabilities. The duration estimates and resource requirements are the inputs to cost estimating. The modeling of these processes is presented in Figure 1.

This model is appropriate for the Guide to the PMBOK at this time but it does not really provide insight into the problems of estimating activities in a project. Figure 2 provides a more detailed model, including some suggestions as to the relationship between planned variables of the activity and the actual values of these variables. The following discussion will serve to introduce this model. A more comprehensive discussion will be presented in a later article.

Before exploring the model, however, there are some essential characteristics about a project activity that must be understood.

Characteristics of the Activity

Activities in a project vary in the degree to which they are understood. Some are very familiar and can be estimated quite accurately. Others are truly unique and defy accurate estimating. Most are somewhere in between.

Unlike their counterpart in the repetitive manufacturing environment, many project activities are performed only once or a few times. There is no opportunity to apply time study techniques to determine an accurate estimate of the time required to perform the activity. Furthermore, synthesizing a time estimate using micro predetermined time standards is not cost effective.

Figure 1. Model of Duration and Cost Inputs

Thus, there is likely to be a greater difference between the estimates and actuals for project activities than for work performed repetitively. This can be frustrating to those more accustomed to the manufacturing environment.

Since this is an introductory discussion of estimating, it will be assumed that activities can be estimated with certainty. This will aid in understanding the concepts involved. In a later discussion, there will be an examination of uncertainty and how it can be considered both in estimating and in calculating project characteristics using the resulting probability distributions.

The Essential Variables of an Activity

It has been customary in project management literature to focus on the three variables of an activity: time, quality, cost. An alternative paradigm may be more useful in understanding the problems of estimating and managing activities. This paradigm views cost as a dependent variable that is a function of time, resource application, and project objectives [2]. Consider these variables one at a time, all other things being equal.

Project Objectives. The whole purpose of a project is to achieve some outcomes as represented by technical and/or other objectives for the product(s) of the project, i.e., the deliverables. These objectives are allocated to various components of the product and transformed into objectives for the activities of the project. As the project progresses, that is, the activities are performed, the objectives are achieved to one degree or another. There may also be objectives for the project itself, such as minimizing rework.

During the design phase, the objectives are translated into specifications for each component of the product of the project. These specifications define the desired outcomes in operational terms as required by other participants on the project.

The difference between the planned and achieved objectives for the product of the project, i.e., deliverables, can be defined as quality in the sense of conformance to specifications. For purposes of this discussion, quality is 100 times the quantity, one (1) minus the difference between desired outcomes and achieved outcomes. Thus, perfect quality is represented by 100 percent achievement of desired outcomes.

This difference between the planned and achieved objectives, i.e., the measure of quality achieved, typically drives all other aspects of the project. Ideally, an activity is completed when this difference reaches zero for that activity. Sometimes, as the project progresses, objectives may have to be revised and an activity previously considered complete may require additional work.

To be consistent with current concepts of TQM, the desired outcomes must be continually updated to reflect the best understanding of the client's desires. Failure to update these outcomes will result in an imprecise definition of scope and, perforce, poor scope management. It will also lead to failure to fully satisfy the needs of the client, an outcome that can lead to all sorts of dysfunctional results including legal claims in the short-run and loss of future business in the long-run.

Project costs typically increase exponentially with increasing technical objectives. For example, with existing technologies today, a radio can be produced that receives FM radio signals and produces a sound that is intelligible. As the desired excellence of sound is increased, the cost to produce the radio increases faster than the excellence of the sound. Thus, the higher the technical objectives for the product of the project, the higher the cost of the project.

Figure 2. Detailed Model of Duration and Cost Inputs

It is often assumed that project costs always behave in this manner. This may not be true, especially for objectives for the project such as minimizing rework or disputes.

Time. All activities require some amount of time for their performance. In general, the time required is equal to the work content divided by the resource application rate. That is, an activity with a work content of 40 labor hours with one person assigned should have a duration of 40 hours. If a person is assigned to work halftime on the activity the duration should be 80 hours. It may take more time. Theoretically, if two persons are assigned, the activity should have a duration of 20 hours. It may take more time or, if it is a “team” activity, such as making a bed, it could take less than 20 hours.

The work content will be different depending on the technology or methodology that is used. For example, the activity might involve cutting some wooden boards. This could be performed by at least three technologies—a hand saw, an electric hand saw, or a table saw—with progressively less work content as measured by labor hours. There are other costs (i.e., resources) that are relevant to consider in determining the appropriate technology. Similarly, there are at least three methodologies—measure each piece and saw separately, make a fixture that guides the saw, and cut several boards at a time. The technology and methodology must be stated explicitly for the work content estimate to be meaningful. Often the technology and methodology are stated in standard procedures describing how an activity of this type is to be performed.

In general, the appropriate technology and methodology are determined by economic analysis. For the typical activity, given a specific combination of technology and methodology, the cost as a function of duration is a U-shaped curve. There is an optimum duration. Attempting to perform the activity in less time may cost more than is implied by the ratio of time reduction. For example, if overtime is used to reduce the duration, the cost increases by at least the overtime premium. It may increase even more due to rework caused by errors produced due to haste. Similarly, stretching the activity duration will lead to less efficiency, resulting in higher costs.

Resource Application. For any specific activity there is a most appropriate type and amount of resource(s). For example, on a construction project there will likely be a mix of craft persons and laborers, each with different cost rates. Care must be exercised to ensure that each activity is performed by the appropriate resource to avoid paying premium rates for work that can be done by a less costly resource. For example, a skilled carpenter should not be used to shovel dirt if it can be done by an unskilled laborer. On the other hand, the skilled carpenter should not stand idle waiting for an unskilled laborer to become available to move the dirt.

The complication in assigning resources stems from the fact that the activity and the preferred resource often do not become available at the same time. The time at which the activity becomes available to work on is dependent upon the completion of its predecessors. The time at which the resource becomes available is dependent on the completion of the activities on which that resource is required. These times often do not coincide. Thus, tradeoffs must be made between assigning a less than optimum resource, allowing work on the activity to proceed, or delaying the start of an activity until the optimum resource is available. Computer routines for assigning resources can be helpful in resolving such conflicts, although few project scheduling software packages really consider the tradeoff between alternative resources.

The Model

With the above background, it is appropriate to examine the model shown in Figure 2. The model details the many facets involved in estimating in order to make clear what must be considered. As a practical matter, most estimators probably do not explicitly consider all these facets all of the time. Estimating practices and data implicitly consider many of these facets.

Project Objectives. The first step in estimating is to establish a clear understanding of the project objectives for the project and each element of its WBS. Each activity should contribute to the ultimate achievement of one or more of those objectives. To the extent that an organization has routinized the performance of certain activities, this contribution can be implicit. To the extent that the activity is unique or varies substantially from normal practice, the objectives should be explicitly identified.

An example of the need for explicitly identifying project objectives is the construction of a plant for producing a pharmaceutical for which there is expected to be a market for only five years. Because the facility cannot be used for another product after the original product becomes obsolete, it too should have a five-year design life. It follows then that the equipment should be designed for a shorter life than would be normal practice. If this objective is not related down to the specific design activities, designs could be chosen that were excessive for the application. Similarly, a book publishing project should make explicit the desired life of the book so that the appropriate paper (regular or acid neutral) will be selected.

Technologies and Methodologies. Technologies and methodologies must be selected for elements of the project to ensure the activities are estimated accordingly. For example, it is more efficient to lay a brick wall using elevator type scaffolding than frame type scaffolding, both in adjusting the scaffold to the appropriate work height and in actual bricklaying. The choice between these would be an important input in estimating the duration of the bricklaying activity. Similarly, a choice between cast-in-place and precast concrete construction would impact the project network plan and the manner in which other activities are performed. In publishing a book, a critical technology decision would be the choice between in-house desktop publishing and relying on the services of an outside firm.

Theoretical Work Content. Given these decisions, it is reasonable to estimate the work content of an activity. Work content is expressed in measures such as labor-hours or machine hours. As a standard procedure, it is probably best to estimate the work content based on the preferred resource for that activity on that project. In general, it is best to assume the most economical approach. Later, after time calculations have been performed, analysis may suggest that an alternative resource should be used that could get the activity done in less time albeit at an increase in cost. If the more expensive alternative is selected to start with, it is not likely that the opportunity to use the less expensive resource will be recognized.

Resource Capability. The estimator must know the capabilities of the resources to be used on the project. This not only applies to the preferred resource but also to the alternative resources that might be used to perform the activity. For example, while a 20-ton crane might be the best choice normally (having adequate capacity), there may be some constraints that would make it desirable to use a 100-ton crane (due to its reach). Similarly, it might normally be desirable to print a book on a web press but, due to low volume, a xerographic copier might be selected. Writing a module of computer code in C++ might best be done by a senior programmer but it is known that this person will be unavailable at the time the activity will have to be done.

Practical Work Content. If an explicit resource assignment can be made at this time, it is feasible to consider the impact of that assignment in the determination of the practical work content. For example, if the computer program is to be written in C++, and the programmers who will be writing it are not experienced in C++, they will inevitably take longer than the more experienced persons. They will refer to the programming manual more often, try more alternative approaches, and make more errors.

Actual Work Content. Separate from considerations of capability are considerations of productivity. People in a given organization are affected by administrative procedures, accepted practice and norms, expectations for excellence versus output, and a host of other impacts. For example, one organization may have extensive time reporting requirements that take time out of each day while another requires minimal administrative time each day. Peer pressure may tend to limit the output generated per day. Thus, resources, and especially human resources, tend toward a normal productivity level. An estimator familiar with the organization will estimate in accordance with that productivity level. Thus, the actual work content would be lower in the organization with higher productivity.

Planned Duration. Finally, consideration must be given to resource availability. In many organizations, a person is assigned to an activity full time. In other organizations, each person is assigned more than one activity at a time and expected to perform some work on each of them on a continual basis. For example, a person might be assigned to work afternoons on an activity. This will determine the planned duration for the activity.

Beyond the obvious considerations of availability are the seemingly random perturbations that further reduce availability. People get ill, have emergencies, take vacation, go to school, attend meetings, have to respond to unexpected correspondence or write special reports, and occasionally take a long lunch, perhaps with the client. A corollary to Murphy's Law says that these perturbations always occur at the least convenient times. Some consideration must be given for these perturbations or the organization will consistently complete activities, and therefore projects, late and over budget.

Planned Resources and Cost

Given the planned duration and the resource assignments, the planned resource usage can be determined and costs estimated. Planned resource usage is the resources assigned to the activity (the application rate) for the duration of the activity. This is the data that will be used later to analyze total resource requirements on the project. These are inputs to the determination of the planned cost of the project. When combined with the resource cost rates and the chart of accounts, the project budget is developed at the work package level. This is then rolled up through the WBS to obtain the planned total project cost.

Thus project cost is clearly a dependent variable derived from the project plan (activity list), resource applications, and durations, driven by the technological objectives.

Actuals

The model presented in Figure 2 includes the actual duration, actual resource usage, and actual cost. The actual duration is driven by the delta that determines quality. Some projects are most severely constrained by total project duration and others by total cost. In such cases, compromise is inevitable. It may be done by explicitly relaxing client requirements or by accepting less than perfect quality.

Aids to Estimating

The importance yet inadequacy of estimates has been recognized for some time. As a result techniques have been developed to improve estimating. The December PM Network included a listing of several computer software packages to aid in estimating software development projects. Several products exist for construction projects. Some of these can accept data for other types of projects. Thus, if the improvement of estimating is determined to be desirable, there are alternatives available.

Sam proceeded to develop the estimates for each activity in the WBS by stating the technical objectives (TO), the technology/methodology (T/M), resources required (Res), and the duration of the activity (Dur). Sam carefully considered the productivity expected and the actual time available by the workers in addition to the problems of finding the necessary animals and grape vines.

Having completed this chore, Sam was ready for a day of rest.