BUS4017

Introduction to Project Management

Class 9

Project Management
@ George Brown College
Some Key Dates
Date Topic Grades

Class 1 (Jul 4) Orientation Participation 2%

Class 2 (Jul 8) Project Selection Participation 3%

Class 3 (Jul 11) Project Definition Participation 2%

Class 4 (Jul 15) Project Planning Participation 2%

Class 5 (Jul 18) Project Planning (cont’d) Participation 2%

Class 6 (Jul 22) Midterm Exam Review & Team Project Health Check  
Class 7 (Jul 25) Midterm Exam 25%

Class 8 (Jul 29) Project Monitoring & Controlling Risk Participation 2%

Class 9 (Aug 1) Project Quality / Close  

Participation 2%
Class 10 (Aug 5) Team Project Health Checks - Meeting with Professor
*Attendance Mandatory

Class 11 (Aug 8) Team Project: Written Reports Due 25%

Class 12 (Aug 12) Team Project: Video Presentation 15%

Class 13 (Aug 15) Final Exam Review – no class  

Class 14 (Aug 19) Final Exam 20%
Week 9 Objectives
In this class, we aim to achieve the following;

1. Examine various approaches used to calculate

budgets
2. Walkthrough an example of how to create a budget
for your group project
3. Discuss monitoring and control functions of the
project
4. Review a project status template
5. Understand a framework for assessing and
managing risk
6. Apply reporting status and risk concepts to the
group projects
Reminder: The Project Plan
Elements
The process of developing the project plan varies among organizations,
but any project plan must contain the following elements:

• Tasks (WBS)– Step by step instructions for what needs to get done
• Deliverables – Tangible items of scope being produced (outcome)
• Time – How long each of these tasks will take (difference between
task duration and calendar time)
• Budget – How much will each task (and the total project) cost
• Resources and Personnel – Resources required for each task
• Dependencies – Relationships that exist between tasks (the order)
• Milestones – The interim due dates used to benchmark progress
• Gantt Chart – Visually, how are the tasks organized throughout the
project over a calendar
Budget and Cost Estimation

What is a Project Budget?

 A plan for allocating resources
 A standard for comparison

 A baseline from which to measure the difference between the actual and planned

use of resources
 A project plan (or work breakdown structure) with detailed cost information

The Basis for Estimating a Project Budget

 Forecast what resources the project will require
 Determine how many of each resource is needed

 Decide when they will be needed

 Understand how much they will cost - including the effects of potential price inflation

 Include any overhead costs specifically attributed to the project

Budget Expectations
 A project will never have enough money
 And when it does, someone is trying to take it away
 The Link: WBS & Budget
An accurate budget can be built by leveraging a well-thought out WBS

https://www.linkedin.com/learning/project-management-foundations-budgets-3/what-is-a-project-budget?u=2155426

https://www.linkedin.com/learning/project-management-foundations-budgets-3/budgets-with-wbs-and-project-tools?
u=2155426 17
 The Budget
Reminder: What is a Project Budget?
 Some Background on Estimating Budgets
Definitions:
 Budget Estimate – By Project or By Phase
 Contingency – If things “go wrong”, built-in factor to keep within budget

 Actual – What really happened

 Forecast – What you think will happen based on current project state

 Baseline- The starting planned budget for which activities will be measured

 Cost vs. Price – Project cost is different from what is charged to the customer

Estimate Uncertainty:
 As the project progresses, the probability of a difference in actual to estimate decreases

4x

2x

x-Baseline
Define Plan Build Close
0.5x

0.25x
Approaches to Budget Estimation
1. The Top-Down Strategy
 Top & middle management use their judgment & experiences to estimate an overall total
project cost
These cost estimates are then allocated to line managers for each sub-project who allocate the
budget to each of the required tasks and units

2. The Bottom-Up Strategy

 In this method, tasks, their schedules, and their individual budgets are constructed following the
WBS or project action plan
 The people doing the work are consulted regarding times and budgets for the tasks to ensure
the best level of accuracy
3. Parametric Estimating
 Project characteristics (parameters) are expressed in a mathematical model/database
 E.g (cost per square foot)

 Considered to be a form of top-down estimating

4. Analogous Estimating
 Uses a previous similar project as the baseline

5. Three-Point Estimating
 Manages estimate uncertainty and risk by defining most likely, optimistic, and pessimistic
scenarios (take the average of all 3…more weight to likely scenario)
6. Vendor Bid Analysis
 Analysis of what the project should cost based on responsive bids from qualified vendors
Comparing Budget Approaches
Top-Down Budgeting Bottom-Up Budgeting
Advantages Advantages
 Aggregate budgets can often be  Participative Management
developed quite accurately  Individuals closer to the work are

 Budgets are stable as a percent of apt to have a more accurate idea

of resource requirements
total allocation
 The direct involvement of low-
 The statistical distribution is also
level managers in budget
stable, making for high predictability preparation increases the
 Small yet costly tasks do not need to likelihood that they will accept
be individually identified the plans
 Involvement is a good
 The experience and judgment of the
executive accounts for small but managerial training technique,
important tasks to be factored into giving junior managers valuable
experience
the overall estimate

So which Approach is more Common?

Typically a Hybrid of Top-Down and Bottom-Up
 Senior managers provide a framework and direction before engaging staff
 People closest to the work participate and estimate within these guidelines
 Senior management then consolidates, streamlines, removes duplication, etc
 The Budget Estimation Process
Estimation is an “art” and a “science”.

It is a valuable skill as estimates are often put together without perfect or complete information

Cost Drivers
• Vague Requirements

Estimation Outputs
• Less Vague &
Modified
Constraints
Requirements
• Financial Constraints
Estimation • Effort
• Resource Constraints
Process • Duration
• Loading
• Contingency
• Tentative WBS
Other Inputs • Skills Required
• Risk Factors
• Delivery Process
• Learning Curve
A Budget Example
Example: Building an eCommerce Website
 Below is an example of how the WBS is transformed into a budget
 Note that revenue is an important consideration in justifying the budget
WBS Cost/hr Total Work Hours Total Cost

Define Requirements 100 16 1600

Write Copy 75 8 600
Create Creative Mockups 120 16 1920
Get Client Approval 75 4 300
Get Legal Approval 100 4 400

Build website front end 120 24 2880

Build website back end 130 24 3120
Test for Quality 80 4 320
Get final Client Signoff 75 4 300
Setup Tracking & Reporting 75 4 300
Launch 100 2 200
$ 11,940 Total Cost

  Price Forecast Unit Sales

Revenue $25 2,000 $50,000 Total Revenue

$38,060 Total Profit

Using MS Project to Create Your Budget
Step 1 – Complete Task Durations

Step 2 – Populate Resource Rates in

“Resource View”

Step 3 – Insert “Cost” Column &

Assign Resources to Tasks
Estimating is usually an iterative process
Why?
Estimates made by senior managers are rarely the same as estimates made by
those carrying out the work
 The farther one moves up the organizational chart, the easier, faster and
cheaper the job looks
 Wishful thinking leads the superior to underestimate cost (and time) - have a
stake in representing the project as a profitable venture
 Subordinates are led to build-in some level of protection against failure by
adding an allowance for “Murphy’s Law”

The Iterative Process Begins

Step 1 – The manager will reduce some of the difference between the 2 estimates
Step 2 - The manager agrees to be “educated” by the staff as to the jobs realties
Step 3 - Encouraged by the managers positive response, the staff then surrenders
some of the protection of the budgetary “slop” / “cushion”
Step 4 – this continues until a mutually-agreed upon number is reached
Improving the Process of Cost Estimation
Professional Estimators
 It takes the input of many people to prepare an estimate for a
project
 Some organizations may setup an actual department whose
specific purpose is to prepare estimates
 It is the job of the PM to generate a description of the work to be
done on the project and feed this info into the estimator
 Even with the most accurate info – problems / changes will arise
which can =  money

Managing the Risks in Estimates

 There are two ways to manage the risks that occur on every
project:
1. The most common is to make an allowance for contingencies
 Use a fixed percentage such as 5 or 10%
2. Another is to forecast the “most likely, optimistic, and
pessimistic” estimates
Meeting Budget Estimates
The Probability of Hitting Initial Budget Estimates is Low
 60 – 80% of projects fail to meet their time, cost, and/or
specification objectives
 There are several common causes:
1. Arbitrary and impossible goals
2. Scope creep
3. “Priced to Win”
4. Changes in resource prices
5. Failure to include an allowance for waste and spoilage
6. Bad luck

What Can Project Managers Do

• Exercise strong project tracking & reporting
• Manage the change process
• Adjust other factors (timeline, scope) if necessary
• Be accountable and exert project control
• Keep communication lines open
 Monitor and Control
What is It?
MONITORING: CONTROL:
Collecting, recording, and reporting of The process of acting on the variances
information concerning any and all uncovered by the monitoring process
aspects of project performance

• The monitoring-controlling cycle is continuously in process until the project is complete

• The control process should be perceived as a closed loop system, where revised plans and
schedules follow corrective actions

Benefits
• Significant reduction in the extent and cost of poor performance and time/cost overruns
• Mutual understanding of the goals of the project
• Awareness of the progress of parallel activities
• More realistic planning for the needs of all groups
• Understanding the relationships of individual tasks to one another and the overall project
• Early warning signals of potential problems and delays
• Faster management action in response to unacceptable or inappropriate work
• Higher visibility to top management
 Project Milestones
What are they?
– Key Performance Indicators
• A milestone is an event during the life of a project that signifies a new stage.
• Often a milestone is reached when a key task or deliverable has been
achieved.
• Milestones are set along the critical path of your project plan.
• Milestones represent “Key Performance Indicators” as to whether the actual
project is progressing in reasonably close congruence with the planned
schedule, budget, and deliverables
• They also could represent the tangible progress against a success criteria

E.g. Milestones for Building a House

Month 1 – Blue Prints Complete
Month 4 – Hole dug in Land
Month 5 – Foundation, Walls, Roof Complete
Month 6 – Electricity & Plumbing
Month 8 – Inside Decorated
Month 10 – Move-In Date

http://www.pmhut.com/what-is-a-project-milestone
 The Monitoring System
The Purpose of A Monitoring System
• The purpose of the monitoring system is to gather and report data
• The purpose of the control system is to act on the data

How to Setup a Monitoring System

Step #1 – Identify the key factors to be controlled
• The project manager must define precisely which specific characteristics of performance, cost, and
time should be controlled

Step #2 – Determine the reporting needs of the organization and the client
• The reporting needs of the organization and the client need to be identified

Step #3 – Establish exact boundaries for each of these factors

• A key performance indicator (KPI) should be set for each factor

Step #4 – Introduce a regular process for collecting data that meets these needs
• Determine who will find info, where will they get it from, when will they retrieve the info
• Information must be honest and non-biased.

Step #5 – Prepare reports

• Could include project status reports, time/cost reports, variance reports, cause and effects
7
Scope Creep
What is It
• Coping with changes and changing priorities is perceived as the most important single
problem facing the project manager
• The most common changes are due to the natural tendency of the client and project
team members to try to improve the product or service
• The later these changes are made in the project, the more difficult and costly they are
to complete
• Without control, a continuing accumulation of little changes can have a major negative
impact on the project’s schedule and cost

How to Control It
This can be done with a formal change control system that is able to:
• Review all requested changes and identify all task impacts
• Translate those impacts into project performance, cost, and schedule
• Evaluate the benefits and costs of the requested changes
• Accept or reject the changes and communicate to all concerned parties
• Ensure that changes are implemented properly
Managing Change
The Change Request Form
In case the original agreements or assumptions change during the course of a project, all
stakeholders must be kept up to date, agree to these changes, and the project manager
must write them into the project charter.
Risk
What is it?
• Risk is a situation that if materializes, will adversely affect the project…..a potential
problem
• ALL PROJECTS HAVE RISKS
• Some will disappear
• Some materialize and become problems that demand attention
• Some become crisis and destroy projects

“Risk is a bit like playing space invaders”

(Hugh Lake)

• Threats of different size get closer & closer

• Aim is to defend, but have limited “ammo”
• Which boulder will you target?
The Risk Management Process
The 4 Risk Management Steps
• Risk Identification
• Risk Assessment
• Risk = impact of hazard occurring * likelihood of hazard occurring
• Risk Response
• Risk Response Control

A PM Cannot Respond to all Risk.

Circle the Quadrants which you would
Categorize as follows:
-Unlikely Events
-Urgent Attention
-Irritations
-Under Control
Controlling Risk
Risk Controlling Techniques
• Risk Avoidance: Modify your approach or objectives
• Risk Mitigation: Reduce likelihood or impact
• Risk Transfer: Proactively transferring risk to another partner
• Risk Retention: Crisis management & contingency planning

Example: Protecting Your House from a Burglary

Controlling Risk
Risk Controlling Techniques
• Risk Avoidance: Modify your approach or objectives
• Risk Mitigation: Reduce likelihood or impact
• Risk Transfer: Proactively transferring risk to another partner
• Risk Retention: Crisis management & contingency planning

Example: Protecting Your House from a Burglary

 Risk Avoidance:  Risk Transfer:

- Move away to safer location - Get house contents insurance
- Become a minimalist

 Risk Mitigation:  Risk Retention:

- Install extra security - Just “deal with it”, repair window/door damage

- Buy a big, noisy dog

 Monitoring Risk
The Risk Assessment Form
• Monitoring tool used by PM to keep track of risks identified with the project
• Unique Risk Number & Name
• Risk Description
• Likelihood of Risk Occurring
• Risk Impact if Occurs
• Risk Mitigation Plan
• Owner (Assigned To)
Risk Risk Description Probability Impact Description of Action
Item (H/M/L) (H/M/L) (avoid/mitigate/transfer/accept)
Number
Subcontractor does not use Project M H
Management

Customer changed the audit process M M

Hardware delivery is on the critical path M M

Team lacks "C" programming L M

experience

TIP: Keep it current, update your risk register after every status meeting 
Participation Assignment Part 1 (2%)
Complete a Risk Assessment Form with 5 Risks
Risk Risk Description Probability Impact Description of Action
Item (H/M/L) (H/M/L) (avoid/mitigate/transfer/accept)
Number

Your project team has been assigned to refresh and renovate the outdoor
patio at St. James Campus (SJA). Complete the risk assessment form for
this project, indicating 5 risks

Requirements
-Expand the outdoor seating area with to accommodate up to100 users with tables
for eating/studying
-Add more plants
-Provide shaded spots

Budget/Timeline: $10,000 must be completed in 6 weeks

For Today – Participation Part 2 (2%)

Prepare a Project Status Report for your Group Project Assignment

This brief one-page report will contain

1. A summary of what report sections have been drafted
2. A list of what still needs to be done, whose doing it, and by when
3. What are the 3 top risks that could impact your team getting an “A”
on this assignment and what management plans are you putting in
place to address

This will be handed in when sitting down to discuss your projects status
with the course instructor.

Assign tasks to members from the entire team

Only include team members present today to receive participation
bonus.
 Example Detail
Completed Not Who When
Completed
Executive One Page Summary
Overview A brief overview of your project
5% Highlight why this is an important project
Give an overview of your project approach, time & budget
Introduction and  Describe your event or project in detail (Paint a picture)
Value Proposition  Provide the reasoning and business case for your project
10% (Quantify the benefit, and use project selection models to justify
why your project is being pursued). Sell it!
Define  Identify all the stakeholders involved in this project
Requirements  List out the requirements for each stakeholder group according
20% to the “must”, “should”, “must not” requirments framework.
 Complete the Project Definition Document (Template: Week 3)
Design the Plan  Work Breakdown Structure (Detailed, Logical & Organized -
40% Appears as the first column in project plan)
 A Project Plan – For each activity, associate who is doing it,
how long it will take, how much it will cost, and whether it
depends on another task being completed (use Microsoft
Project)
 A Project Budget – Estimate detailed project costs using project
plan. Ensure variable and fixed costs are represented.
Summarize, state assumptions, re-iterate value within the
report.
Build & Execute  Discuss how you would monitor and control the project while it
15% is underway (eg. How will you manage the project while
underway? How will you manage communication? What are the
specific KPI milestones from your plan you will measure
progress against? )
 Complete a Project Risk Assessment Form (10 risks)
Close the Project  How will you test/ensure that the quality of the project meets
10% stakeholder expectations and success metrics?
 What is the long term vision for your project, and what steps can
be taken now in order to help with the next phase?
 What are the real-life lessons learned about project
management that each team member observed from
participating in this assignment (A paragraph from each team
member)

&Risk Matrix – Top 3 Assignment Risks

18
Team Project: Instructions & Marking
POSTED TO Brightspace UNDER “TEAM PROJECT”
Executive Overview One Page
5% A brief overview of your project
Highlight why this is an important project
Give an overview of your project approach, time & budget
Introduction and  Describe your event or project in detail
Value Proposition  Provide the reasoning and business case for your project (Try to quantify the
10% benefit, or use project selection models to justify why your project is being
pursued)
Define Requirements  Identify all the stakeholders involved in this project
20%  List out the goals and objectives for each of these stakeholders
 Complete the Project Definition Document
Design the Plan  Detailed and Organized Work Breakdown Structure (handed in as the first
40% column in project plan)
 A Project Plan – For each activity, associate who is doing it, how long it will
take, how much it will cost, and whether it depends on another task being
completed (use Microsoft Project)
 A Project Budget – Detailed project costs and expected revenue
Build & Execute  Discuss how you would monitor and control the project while it is underway
15% (Highlight your specific KPI’s, and monitoring system)
 Complete a Project Risk Assessment Form
Close the Project  How will you test/ensure that the quality of the project meets stakeholder
10% expectations and success metrics?
 What is the long term vision for your project, and what steps can be taken
now in order to help with the next phase.?
 What are the real-life lessons learned about project management that each 38
team member observed from participating in this assignment.