Chapter 5:

Project Scope, Time & Cost

Management.

(The Triple Constraint of

Project Management.)
Information Technology Project Management,
Fourth Edition
 Learning Objectives
 Understand the elements that make good project scope
management important.
 Explain the scope planning process and describe the
contents of a scope management plan.
 Describe the process for developing a project scope
statement using the project charter and preliminary scope
statement.
 Discuss the scope definition process and work involved in
constructing a work breakdown structure using the analogy,
top-down, bottom-up, and mind-mapping approaches.

Information Technology Project Management, Fourth Edition 2

Project Scope
Management
Information Technology Project Management,
Fourth Edition
 Learning Objectives
 Explain the importance of scope verification and how
it relates to scope definition and control.

 Understand the importance of scope control and

approaches for preventing scope-related problems on
information technology projects.

 Describe how software can assist in project scope

management.

Information Technology Project Management, Fourth Edition 4

 What is Project Scope Management?
 Scope refers to all the work involved in creating the
products of the project and the processes used to
create them.

 A deliverable is a product produced as part of a

project, such as hardware or software, planning
documents, or meeting minutes.

 Project scope management includes the processes

involved in defining and controlling what is or is
not included in a project.

Information Technology Project Management, Fourth Edition 5

 Project Scope Management
Processes
 Scope planning: Deciding how the scope will be
defined, verified, and controlled.
 Scope definition: Reviewing the project charter and
preliminary scope statement and adding more
information as requirements are developed and change
requests are approved.
 Creating the WBS: Subdividing the major project
deliverables into smaller, more manageable components.
 Scope verification: Formalizing acceptance of the
project scope.
 Scope control: Controlling changes to project scope.

Information Technology Project Management, Fourth Edition 6

 Scope Planning and the Scope
Management Plan
 The scope management plan is a document that
includes descriptions of how the team will prepare the
project scope statement, create the WBS, verify
completion of the project deliverables, and control
requests for changes to the project scope.

 Key inputs include the project charter, preliminary

scope statement, and project management plan.

Information Technology Project Management, Fourth Edition 7

 Table 5.1. Sample Project
Charter

Information Technology Project Management, Fourth Edition 8

 Table 5.1. Sample Project
Charter (cont’d)

Information Technology Project Management, Fourth Edition 9

 Scope Definition and the
Project Scope Statement
 Project scope statements should include
 A description of the project
 Overall objectives and justification
 Detailed description of all project deliverables
 The characteristics and requirements of products and
services

Information Technology Project Management, Fourth Edition 10

 Creating the Work Breakdown
Structure (WBS)
 A WBS is a deliverable-oriented grouping of the work involved
in a project that defines the total scope of the project.

 A WBS is a foundation document that provides the basis for

planning and managing project schedules, costs, resources, and
changes.

 Decomposition is subdividing project deliverables into smaller

pieces.

 Work package is a task at the lowest level of the WBS that the
project manager is using to monitor and control the project

Information Technology Project Management, Fourth Edition 11

 Figure 5-1. Sample Intranet WBS
Organized by Product

Information Technology Project Management, Fourth Edition 12

 Figure 5-2. Sample Intranet WBS
Organized by Phase

Work package
Information Technology Project Management, Fourth Edition 13
Table 5-3. Intranet WBS in Tabular Form
1.0 Concept
1.1 Evaluate current systems
1.2 Define requirements
1.2.1 Define user requirements
1.2.2 Define content requirements
1.2.3 Define system requirements
1.2.4 Define server owner requirements
1.3 Define specific functionality
1.4 Define risks and risk management
approach
1.5 Develop project plan
1.6 Brief Web development team
2.0 Web Site Design
3.0 Web Site Development
4.0 Roll Out
5.0 Support
Information Technology Project Management, Fourth Edition 14
 Figure 5-3. Intranet WBS and Gantt
Chart in Project 2000

Project 98 file

Information Technology Project Management, Fourth Edition 15

Figure 5-4. Intranet Gantt Chart Organized
by Project Management Process Groups

Information Technology Project Management, Fourth Edition 16

 Figure 5-6. Resulting WBS in Chart
Form

Information Technology Project Management, Fourth Edition 17

 Scope Verification
 Scope verification involves formal acceptance of the
completed project scope by the stakeholder.
 Careful procedures must be developed to ensure the
customer is getting what they want and the project
team has enough time and money to produce the
desired products and services
 Scope creep is scope keep getting bigger and bigger

Information Technology Project Management, Fourth Edition 18

 Scope Control
 Scope control involves controlling changes to the
project scope.
 Goals of scope control are to:
 Influence the factors that cause scope changes.
 Ensure changes are processed according to procedures
developed as part of integrated change control.
 Manage changes when they occur.

 Variance is the difference between planned and actual

performance.

Information Technology Project Management, Fourth Edition 19

Project Time
Management
Information Technology Project Management,
Fourth Edition
 Learning Objectives
 Understand the importance of project schedules and good
project time management.
 Define activities as the basis for developing project schedules.
 Describe how project managers use network diagrams and
dependencies to assist in activity sequencing.
 Understand the relationship between estimating resources and
project schedules.
 Explain how various tools and techniques help project
managers perform activity duration estimating.

21
 Learning Objectives
 Use a Gantt chart for planning and tracking schedule
information, find the critical path for a project, and
describe how critical chain scheduling and the Program
Evaluation and Review Technique (PERT) affect
schedule development.
 Discuss how reality checks and people issues are
involved in controlling and managing changes to the
project schedule.
 Describe how project management software can assist in
project time management and review words of caution
before using this software.

22
 Project Time Management
Processes
 Activity definition: Identifying the specific activities that the project
team members and stakeholders must perform to produce the project
deliverables.
 Activity sequencing: Identifying and documenting the relationships
between project activities.
 Activity resource estimating: Estimating how many resources a
project team should use to perform project activities.
 Activity duration estimating: Estimating the number of work periods
that are needed to complete individual activities.
 Schedule development: Analyzing activity sequences, activity resource
estimates, and activity duration estimates to create the project schedule.
 Schedule control: Controlling and managing changes to the project
schedule.

23
 Activity Definition
 An activity or task is an element of work normally found
on the WBS that has an expected duration, a cost, and
resource requirements.
 Project schedules grow out of the basic documents that
initiate a project.
 The project charter includes start and end dates and budget
information.
 The scope statement and WBS help define what will be done.
 Activity definition involves developing a more detailed
WBS and supporting explanations to understand all the
work to be done, so you can develop realistic cost and
duration estimates.

24
 Activity Lists and Attributes
 An activity list is a tabulation of activities to be included on
a project schedule. The list should include:
 The activity name
 An activity identifier or number
 A brief description of the activity
 Activity attributes provide more information about each
activity, such as predecessors, successors, logical
relationships, leads and lags, resource requirements,
constraints, imposed dates, and assumptions related to the
activity.

25
 Milestones
 A milestone is a significant event that normally has no
duration.

 It often takes several activities and a lot of work to

complete a milestone.

 Milestones are useful tools for setting schedule goals and

monitoring progress.

 Examples include completion and customer sign-off on

key documents and completion of specific products.

26
 Activity Sequencing
 Involves reviewing activities and determining
dependencies.

 A dependency or relationship relates to the

sequencing of project activities or tasks.

 You must determine dependencies in order to use

critical path analysis.

27
 Network Diagrams
 Network diagrams are the preferred technique for
showing activity sequencing.

 A network diagram is a schematic display of the

logical relationships among, or sequencing of, project
activities.

 Two main formats are the arrow and precedence

diagramming methods.

28
 Figure 6-2. Sample Activity-on-Arrow
(AOA) Network Diagram for Project X

29
 Arrow Diagramming Method
(ADM)
 Also called activity-on-arrow (AOA) network diagram.

 Activities are represented by arrows.

 Nodes or circles are the starting and ending points of

activities.

 Can only show finish-to-start dependencies.

30
 Activity Duration Estimating
 Duration includes the actual amount of time worked
on an activity plus the elapsed time.

 Effort is the number of workdays or work hours

required to complete a task.

 Effort does not normally equal duration.

 People doing the work should help create estimates,

and an expert should review them.

31
 Schedule Development
 Uses results of the other time management processes
to determine the start and end dates of the project.

 Ultimate goal is to create a realistic project schedule

that provides a basis for monitoring project progress
for the time dimension of the project.

 Important tools and techniques include Gantt charts,

critical path analysis, critical chain scheduling, and
PERT analysis.

32
 Gantt Charts
 Gantt charts provide a standard format for displaying
project schedule information by listing project
activities and their corresponding start and finish dates
in a calendar format.
 Symbols include:
 Black diamonds: Milestones
 Thick black bars: Summary tasks
 Lighter horizontal bars: Durations of tasks
 Arrows: Dependencies between tasks

33
 Figure 6-5. Gantt Chart for Project
X

Note: In Project 2003 darker bars are red to represent critical tasks.

34
Gantt Chart for Software Launch
Project

35
 Critical Path Method (CPM)
 CPM is a network diagramming technique used to
predict total project duration.
 A critical path for a project is the series of activities that
determines the earliest time by which the project can be
completed.
 The critical path is the longest path through the network
diagram and has the least amount of slack or float.
 Slack or float is the amount of time an activity can be
delayed without delaying a succeeding activity or the
project finish date.

36
 Calculating the Critical Path
 Develop a good network diagram.

 Add the duration estimates for all activities on each

path through the network diagram.

 The longest path is the critical path.

 If one or more of the activities on the critical path takes

longer than planned, the whole project schedule will
slip unless the project manager takes corrective action.

37
Figure 6-8. Determining the Critical
Path for Project X

38
Activities and Predecessors
Activity Immediate Duration (week)
Predecessors
A - 2
B - 3
C A 2
D A, B 4
E C 4
F C 3
G D, E 5
H F, G 2

39
 Program Evaluation and Review
Technique (PERT)
 PERT is a network analysis technique used to estimate
project duration when there is a high degree of
uncertainty about the individual activity duration
estimates.

 PERT uses probabilistic time estimates:

 Duration estimates based on using optimistic, most

likely, and pessimistic estimates of activity durations, or
a three-point estimate.

40
 PERT Formula and Example
 PERT weighted average =
optimistic time + 4X most likely time + pessimistic time
6
 Example:
PERT weighted average =
8 workdays + 4 X 10 workdays + 24 workdays = 12 days
6
where:
optimistic time= 8 days
most likely time = 10 days
pessimistic time = 24 days
Therefore, you’d use 12 days on the network diagram instead of 10 when
using PERT for the above example.

41
 Example
Activities Predecessor Duration Estimation (weeks) Expected Varian-
sors Optimistic Likely Pessimistic Duration ce

A - 2 6 14 3.67 4.00
B A 4 7 12 7.33 1.78
C A 2 8 13 7.83 3.36
D A 12 14 18 14.33 1.00
E B, C 3 5 7 5.00 0.44
F E 3 4 7 4.33 0.44

42
 Example : Network
B E F
7.33 5.00 4.33

A C
Start 3.67 7.83
End

D
14.33

43
 Example : Critical Path
ESB = 0 ESE = 11.5 ESF = 16.5
LFB = 11.5 LFE = 16.5 LFF = 20.83
B E F
7.33 5.00 4.33

ESStart = 0 ESA = 0
ESC = 3.67
LFStart = 0 LFA = 3.67 ESEnd = 20.83
LFC = 11.5
A C LFEnd = 20.83
Start 3.67 7.83
End

D
14.33
ESD = 0
LFD = 20.83

44
Project Cost
Management

Information Technology Project Management,

Fourth Edition
 Learning Objectives
 Understand the importance of project cost
management.

 Explain basic project cost management principles,

concepts, and terms.

 Discuss different types of cost estimates and methods

for preparing them.

Information Technology Project Management, Fourth Edition 46

 Learning Objectives
 Understand the processes involved in cost budgeting
and preparing a cost estimate and budget for an
information technology project.

 Understand the benefits of earned value management

and project portfolio management to assist in cost
control.

 Describe how project management software can assist

in project cost management.

Information Technology Project Management, Fourth Edition 47

 What is Cost and Project Cost
Management?
 Cost is a resource sacrificed or foregone to achieve a
specific objective, or something given up in exchange.

 Costs are usually measured in monetary units, such as

dollars.

 Project cost management includes the processes

required to ensure that the project is completed within
an approved budget.

Information Technology Project Management, Fourth Edition 48

 Project Cost Management Processes
 Cost estimating: Developing an approximation or
estimate of the costs of the resources needed to
complete a project.

 Cost budgeting: Allocating the overall cost estimate

to individual work items to establish a baseline for
measuring performance.

 Cost control: Controlling changes to the project

budget.

Information Technology Project Management, Fourth Edition 49

 Basic Principles of Cost
Management
 Most members of an executive board have a better
understanding and are more interested in financial terms
than IT terms, so IT project managers must speak their
language.
 Profits are revenues minus expenses.
 Life cycle costing considers the total cost of ownership,
or development plus support costs, for a project.
 Cash flow analysis determines the estimated annual
costs and benefits for a project and the resulting annual
cash flow.
Information Technology Project Management, Fourth Edition 50
 Basic Principles of Cost
Management cont’d…
 Tangible costs or benefits are those costs or benefits that an
organization can easily measure in dollars.
 Intangible costs or benefits are costs or benefits that are
difficult to measure in monetary terms.
 Direct costs are costs that can be directly related to producing
the products and services of the project.
 Indirect costs are costs that are not directly related to the
products or services of the project, but are indirectly related to
performing the project.
 Sunk cost is money that has been spent in the past; when
deciding what projects to invest in or continue, you should not
include sunk costs.
Information Technology Project Management, Fourth Edition 51
 Basic Principles of Cost
Management cont’d…
 Learning curve theory states that when many items are
produced repetitively, the unit cost of those items decreases
in a regular pattern as more units are produced.
 Reserves are dollars included in a cost estimate to mitigate
cost risk by allowing for future situations that are difficult
to predict.
 Contingency reserves allow for future situations that may be
partially planned for (sometimes called known unknowns)
and are included in the project cost baseline.
 Management reserves allow for future situations that are
unpredictable (sometimes called unknown unknowns).

Information Technology Project Management, Fourth Edition 52

 Cost Estimating
 Project managers must take cost estimates seriously if
they want to complete projects within budget
constraints.

 It’s important to know the types of cost estimates,

how to prepare cost estimates, and typical problems
associated with IT cost estimates.

Information Technology Project Management, Fourth Edition 53

 Cost Management Plan
 A cost management plan is a document that describes
how the organization will manage cost variances on the
project.

 A large percentage of total project costs are often labor

costs, so project managers must develop and track
estimates for labor.

Information Technology Project Management, Fourth Edition 54

 Cost Estimation Tools & Techniques
 Basic tools and techniques for cost estimates:
 Analogous or top-down estimates: Use the actual cost of a
previous, similar project as the basis for estimating the cost of
the current project.
 Bottom-up estimates: Involve estimating individual work
items or activities and summing them to get a project total.
 Parametric modeling: Uses project characteristics
(parameters) in a mathematical model to estimate project
costs.
 Computerized tools: Tools, such as spreadsheets and project
management software, that can make working with different
cost estimates and cost estimation tools easier.

Information Technology Project Management, Fourth Edition 55

 Constructive Cost Model
(COCOMO)
 Barry Boehm helped develop the COCOMO models for
estimating software development costs.

 Parameters include:
 Function points: Technology-independent assessments of
the functions involved in developing a system.

 Source Lines of Code (SLOC): A human-written line of

code that is not a blank line or comment.

 Boehm suggests that only parametric models do not suffer

from the limits of human decision-making.
Information Technology Project Management, Fourth Edition 56
 Typical Problems with IT
Cost Estimates
 Developing an estimate for a large software project is a
complex task that requires a significant amount of effort.

 People who develop estimates often do not have much

experience.

 Human beings are biased toward underestimation.

 Management might ask for an estimate, but really desire a

bid to win a major contract or get internal funding.

Information Technology Project Management, Fourth Edition 57

 Cost Budgeting
 Cost budgeting involves allocating the project cost
estimate to individual work items over time.

 The WBS is a required input for the cost budgeting

process because it defines the work items.

 Important goal is to produce a cost baseline:

 A time-phased budget that project managers use to

measure and monitor cost performance.

Information Technology Project Management, Fourth Edition 58

 Cost Control
 Project cost control includes:

 Monitoring cost performance.

 Ensuring that only appropriate project changes are included in a

revised cost baseline.

 Informing project stakeholders of authorized changes to the

project that will affect costs.

 Many organizations around the globe have problems with cost

control.

Information Technology Project Management, Fourth Edition 59

 Earned Value Management (EVM)
 EVM is a project performance measurement technique
that integrates scope, time, and cost data.
 Given a baseline (original plan plus approved
changes), you can determine how well the project is
meeting its goals.
 You must enter actual information periodically to use
EVM.
 More and more organizations around the world are
using EVM to help control project costs.

Information Technology Project Management, Fourth Edition 60

 Earned Value Management Terms
 The planned value (PV), formerly called the budgeted cost of work
scheduled (BCWS), also called the budget, is that portion of the
approved total cost estimate planned to be spent on an activity
during a given period.
 Actual cost (AC), formerly called actual cost of work performed
(ACWP), is the total of direct and indirect costs incurred in
accomplishing work on an activity during a given period.
 The earned value (EV), formerly called the budgeted cost of work
performed (BCWP), is an estimate of the value of the physical work
actually completed.
 EV is based on the original planned costs for the project or activity
and the rate at which the team is completing work on the project or
activity to date.

Information Technology Project Management, Fourth Edition 61

 Project Portfolio Management
 Many organizations collect and control an entire suite of
projects or investments as one set of interrelated activities in
a portfolio.
 Project portfolio management has five levels:
1. Put all your projects in one database.
2. Prioritize the projects in your database.
3. Divide your projects into two or three budgets based on type
of investment.
4. Automate the repository.
5. Apply modern portfolio theory, including risk-return tools that
map project risk on a curve.

Information Technology Project Management, Fourth Edition 62

 Using Software to Assist in Cost
Management
 Spreadsheets are a common tool for resource planning,
cost estimating, cost budgeting, and cost control.

 Many companies use more sophisticated and

centralized financial applications software for cost
information.

 Project management software has many cost-related

features, especially enterprise PM software.

Information Technology Project Management, Fourth Edition 63