According to a worldwide study, conducted by E&Y on 365 megaprojects, 64% are facing cost overruns and 73% are reporting schedule delays. The study showed that most of the projects were delayed and faced cost overruns when measured against the initial baseline.
Main factors identified during the project development phase were:
- Inadequate planning — overly aggressive forecast;
- Aggressive estimates and optimism bias.
I was involved in many projects on both sides, Beneficiary or General Contractor. Additional factors are: poor scope definition, unrealistic time and cost estimates, missing schedule network diagram relationships and poor risk management.
Based on the project management processes defined by PMI, I recommend ten steps to prepare the project baseline in terms of scope, time and cost:
Know your project objectives and scope;
Breakdown the scope into manageable pieces (Work Breakdown Structure);
Detail each work package into activities/tasks;
Estimate the activities durations, considering the available resources;
Establish the schedule network logic with the project team;
Understand the Critical Path and Near Critical path;
Estimate the costs;
Perform a Project Risk Assessment;
Define the Progress Measurement Procedure
Get project baseline approval.
Project planning & reporting best practices #1
Principles of planning the project scope, time and cost
By: Virgil ANDREI
PMP, Senior Project Planning and Risk Management Consultant
1. Know your project objectives and scope
After the project is initiated, you need to understand fully what is in and out of your scope, especially in the lump sum contracts, where there is a fixed work to be done within an agreed time and cost. The Scope of Work, Scope Statement or Tendering Technical Specifications are example of such documents to be carefully established.
Don’t make confusion between scope and objective! (e.g.: Project Scope-engineering, procurement, construction & commissioning of a gas processing facility; Project/Company Objective: make profit/ safe operation…)
2. Breakdown the scope into manageable pieces (Work Breakdown Structure)
Based on the principle How to you eat an elephant? Piece by piece. Managing smaller work packages is always easier for contracting, planning and reporting.
Be careful not to break it down too much. This needs to be done according to the Contracting strategy and company’s requirements.
3. Detail each work package into activities/tasks
[Image result for detail the wbs]
Each work package is usually defined as a list of required activities/tasks to be performed. It is recommended to use verbs when naming them and use sufficient activities to be able to measure the progress, according to the contract type. Each of these activities will represent parts of the project scope and will have an estimated time and cost.
4. Estimate the activities durations, considering the available resources
After you’ve ensured the list of all activities has been defined according to the project WBS, you can start with the time estimates, preparing to build the schedule. Each estimate should be performed objectively together with the project team and documented, as future progress will be measured against these estimates. Despite the most used technique is the expert judgement, different other techniques can be used: analogues projects, parametric, three point, group decision making and reserve analysis. Avoid padding by including additional reserves when doing the estimate. This might lead to a longer schedule!
5. Establish the schedule network logic with the project team
A good project schedule is obtained with the project team involvement. It is not sufficient that only the project manager or planner to make the initial scheduling, because the rest of the team will not have the project buy in to complete their tasks within the given time. Ensure all the project constraints and interfaces between different contractors are considered! Check that all activities are linked, except the start and finish milestones.
6. Understand the Critical Path and Near Critical paths
The project finish date is represented by the Critical Path or the sequence of activities with float zero. Depending the project constraints, you might have negative or positive total float; in this case the Critical Path is defined by the longest path. It is advisable to analyze also the activities with small float, or near critical, as schedule can always change. How many critical paths does a project have? One or several. (e.g.: 2 or several activities planned in parallel)
7. Estimate the costs
Project estimation is maybe the most important step for the project managers, as the cost performance is measured against the initial estimate. The most used technique for cost estimation is the bottom up, from the lowest detail to the project level, by adding the required project resources (human, equipment, material). Other techniques are: expert judgement, analogues projects, parametric, bid analysis, group decision techniques. By adding the costs on the project activities, you can generate the project cash flow and ensure the company has the required money to sustain the project, according to the Payments Plan.
8. Perform a Project Risk Assessment
Initial estimates of your project in terms of time and cost represents the deterministic plan. As mentioned in the beginning, 64% of the worldwide projects are facing cost overruns and 73% are reporting schedule delays. Considering additional risks or uncertainties before signing the contract, will help you prepare reserves and expect for the unexpected. With a chosen probability of 50%, you have good chances to complete the project within the given constraints.
9. Define the Progress Measurement Procedure
You’ve finalized your project estimates, now think to the future. How will you measure your performance? What will it mean that the project progress is 35%? How will you collect data? Are your activities measurable?
Setting up a progress measurement procedure will make sure you know what the progress means. A project weighting will enable you to compare progress against cost and measure project performance.
10. Get project baseline approval
Before starting the work, be sure your project baseline is approved by all required parties (project manager, contractor, project owner, project team…). The project baseline represents the initial agreement at the project start date, in terms of scope, time and cost. Getting the formal approval will help you in the future to support claims, or to explain project deviations. Be careful as the approval might come against you if you are signing an overoptimistic plan.
In order to ensure project success, project planning is a key element, as the initial plan will be the source for future comparison in terms of scope, time and cost. Make sure your project plan is realistic and achievable before starting the work.
Plan your work and work your plan!