Tracking And Reporting Costs And Profitability In Project Management

Approaches to Cost Estimation

Discuss about the Tracking and Reporting Costs and Profitability.

Accurate estimates are very important in project management. It is very critical that in a successful project, the financial estimates associated with that project are as accurate as it is possible in order to ensure that the objectives of the project are attained as planned (Callahan, Stetz & Brooks,2011). Estimates for the project should be created from bottom-up so as to ensure that they are as accurate as possible. Cost estimation is at the core of the success of a project since the cost part of the project is very crucial. Lack of proper estimates of the cost of a project can lead to delays in the project or complete halt of the project. Over-allocating resources can also lead to wastage of important resources. Brian needs to estimates the cost of implementing the project accurately in order to ensure optimum utilization of resources. Accurate estimation of costs will ensure that the project is completed on time (Lock, 2013). This is because, if all the resources are availed on time, every activity will take place as planned and hence ensure that the project is completed within the planned four months.

The top-down approach of cost estimation in project management means that the project manager starts with analyzing the goals and final deliverable of the project. The project manager then breaks down the deliverable into smaller tasks and objectives that need to be fulfilled in order to achieve the final goals of the project. ( Schwalbe, 2009). When this is done, the resources required to perform each task are identified and the cost of carrying out every activity is determined. The main advantage of this approach is that the major tasks are quickly identified. Brian can estimate costs that are needed in this project using this approach by starting with the top goals and objectives of the project. In the bottom-up approach, the project team defines the tasks and accurately estimates the cost involved in implementing the project (Fox& Van, 2007). One of the major advantages of this approach is that it involves all the project team members at the beginning of the project and hence the costs are more accurately estimated. The tasks and activities identified at the lower level are then refined and reviewed as you move up the management hierarchy of the project (Chemuturi & Cagley, 2010). I would prefer using bottom up approach in situations where project budgets are required and monthly financial forecast need to be done. I would use the top-bottom approach in a situation where a project portfolio needs to be prepared where the project time line is very limited and hence a full scope of the project budget is not required.

Categorization of Costs

Costs can be grouped into various categories. Costs can be grouped as direct cost or indirect costs. Direct costs are the cost that can be traced directly to a particular product required in the project and they include the direct labor and materials (Ducros& Fernet, 2010) The other category of costs is the indirect cost which can be defined as the costs that are incurred in the project but cannot be traced directly to a particular object that is identifiable in the project. An example is the cost of insurance for the project and overhead costs. Cost can also be categorized as variable costs, semi-variable costs or fixed costs. Variable costs are the costs that vary in proportion from time to time and depending on changes in activities. Fixed costs are the costs that remain constant irrespective of the level of activity (Pitagorsky, 2007). Semi-variable costs change in total but not depending on proportion of change of activities in the project. The project manager has control of fixed costs but not variable costs.

A white elephant is a project that cannot be disposed off by the owner and whose costs including those of maintenance and continuation of the project are not economical and do not match the usefulness of the project (Bruce& Langdon, 2009). It is a project whose cost is way above its expected usefulness and hence it is better to abandon the project rather than go ahead and incur more losses. An example of a renowned white elephant is the Russky Island Bridge which cost more than $1billion and it failed to meet basic threshold. The Empire State building in New York is another good example of a white elephant.

Work Breakdown Structure (WBS) is a key project deliverable that organizes the work of a project team into small manageable tasks. For a successful project, the WBS has to be well linked with project networks. These are linked by including the tasks in the project plan after which the WBS structure is created. This is then followed by analyzing and evaluating the relationship between the tasks after which risk scheduling is done depending on estimation of duration of each task and the inter dependencies which determine the series of occurrence of tasks in a project (Heldman, 2011). The linking of the WBS and the networks ensures that the performance of tasks flows systematically and some tasks cannot precede others.

Importance of Work Breakdown Structure (WBS)

The WBS cannot be ignored by Brian in the project because, it enables the project manager and the project team to form the project networks and hence networks cannot be developed without breakdown of work structure( Lock, 2014). The WBS defines the scope of the project in a manageable manner at each and every level. There breakdown of the project into small structures helps the project team to identify the relationship between the various tasks and identify the tasks that can be merged and the ones that are independent since they are not closely related. The WBS shows the relations of tasks “part-whole”(McCarthy, 2010) . This means that it shows the relations from the point where the tasks are incomplete to the point where the whole project is completed. By going directly to the project networks, it means that the dependencies between the various project deliverable is not explained.

Slack can be defined as the amount of time that a task or activity in the project schedule can be delayed without causing “free float” or “total float”. Free float is where the tasks that depend on the task that has delayed gets delayed as well (Kloppenborg, 2015). Total float is the delay in final completion date due to the delay in completion of one or more tasks in the project network (Meredith& Mantel, 2012) For example delay in procurement of ventilation systems and rank will delay the installation of the same and hence the city inspector cannot approve the project. If the supply is delayed by 10 hours, the slack in this case is ten hours given that the next activity will not be delayed. Slack is therefore very important to project managers since it provides flexibility to the project managers. They can be able to adjust the project schedule without delaying some tasks or project completion date once they slack has been determined. This is crucial in ensuring that the project is completed on time and within the estimated project budget.

Free slack is the amount of time that a scheduled activity can be delayed without delaying the next activity whose implementation depended on the the other task while total slack is the amount of time that a scheduled task can be delayed without delaying the scheduled project completion data. It is calculated using the critical path method.

For a project manager to execute the project plan and schedule effectively, it is important to understand the lead time and lag time of the project. In a project situation, when the first activity is complete, there is a period of time that is taken before the next task in the schedule begins (Australia& Blanton, 2015). This is referred to as lag and its very common in many projects. For example there will be a time period taken between the arrival of the new power cables and supplies and the beginning of installation of the cables. Lags is important in project network since it enables the project managers to allow for an allowance of time required to prepare for the next activity in the schedule. This ensures that the project plan takes into consideration the time required to transition to the next activity and hence ensure that the project schedule is well prepared and the project is completed in accordance to the time lines (Mir & Pinnington, 2014).

Slack in Project Scheduling

Hammock activity is a schedule used for grouping tasks that are between two end dates and it depends on those end dates. It helps in grouping unrelated tasks in hierarchical structure where there is not inter dependency (Mehta, 2007). Hammock activities are used in project management to group smaller sub tasks that are in between major tasks. The sub-tasks have no fixed sequence of accomplishment and can be done at any time. Hammock activities enable the project team to breakdown tasks into sub-tasks which can be allocated to different people for execution. The sub-tasks can be carried out simultaneously since they are not dependent on one another. Hammock activities help the project manager to allocate small tasks to team members so that the major tasks can be completed effectively and efficiently (Ponnappa, 2014) This eventually results to reduction of free slack.

This section outlines the steps to be followed in order to achieve the goals and objectives of the project.

Task name	Task No.	Task predecessor	Duration	Status	Start date	Planned completion date
Conducting of initial meeting	01	N/A	1 day		Match 1st	1/3/2018
Hiring of contractor	02	01	7 days		2/3/2018	8/3/2018
Network design	03	02	14 days		9/3/2018	22/3/2018
Procuring new servers ,switches ,racks and network devices	04	03	14 days		23/3/2018	5/4/2018
Procurement of power supplies and data cables	05	04	7 days		6/4/2018	12/4/2018
Installation of ventilation system	06	05	7 days		13/4/2018	19/4/2028
Installation of racks	07	06	21 days		20/4/2018	10/5/2018
Renovation of data center	08	07	20 days		11/5/2018	30/5/2018
Inspection of the project by city inspector	09	08	2 days		31/5/2018	1/6/2018
Installation of data cables	10	09	5 days		2/6/2018	6/6/2018
Running of data cables	11	10	7days		7/6/2018	13/6/2018
Meetings with functional units	12	Simultaneous	21 days		14/6/2018	4/7/2018
Power check	13	Simultaneous	1 day		4/7/2018	4/7/2018
Installation of test servers	14	13 &12	7 days		5/7/2018	11/7/2018
Charging batteries and review of systems and network	15	14	2 days		12/7/2018	13/7/2018
Checking off primary systems  and meetings	16	15	1 day		14/7/2018	14/7/2018
Moving network components to new data server	17	16	2 days		15/7/2018	16/7/2018

The recommendation on how the goals and objectives of the project can be met is merging of related tasks to ensure that time is saved. Tasks such as procurement of power cables as well as racks and ventilation system can be merged and performed as other activities continue to be carried out(IT Project Management, 2011). This will result to reduction of time required to complete the project by 3 weeks. The duration of meeting functional teams is also too long and it results to wastage of time. This duration needs to be reduced to 2 days for each functional team.

The project budget estimates the costs required to implement all the tasks identified when preparing the project schedule. The budget is presented in form of a table for better understanding and interpretation.

Budget description	Amount ($)
Salary for project team members	8,800
Hiring contractor	12,000
Purchase of servers, switches and other network devices	14,500
Purchase of racks and installation	9,200
Procurement of power supplies and data cables	10,750
Cost of installing test servers	5,150
Transportation cost	4,100
Ventilation system cost	13,100
Purchase of materials required to repair the data center	9,400
Total	87,000

The team members will be performing extra duties apart from what they are employed to do and this warrants an allowance of $367 per month for each of the six team members. The total cost for this is $8,800. The contractor who will repair the facility will be paid $12,000 which is mainly the cost of labor that the contractor will incur in constructing the center. The servers, switches and other network devices will be purchased at a cost of $14,500. The racks required to hold the ventilation will be $9,200 since several racks are required and the installation cost is also catered for in this estimate. Procurement of power supply and data cables will cost a significant amount since its one of the main materials required in this project (Project Management Journal., 2013). The cost of purchase and installation of ventilation system are also accounted for in the budget, the transport cost and the cost of repairing the data center. The total cost for the project is estimated to be $87,000.

Lead Time and Lag Time in Projects

The activities and tasks in this project are prioritized depending on four different criteria which include organizational benefits of the project, complexity of the task and risk value of the task. All the tasks are allocated equal maximum weight of 5.

Task name	Complexity	Risk value	Benefits to organization	Total score
Hiring contractor	3	2	4	9
Purchase of servers and network devices	3	3	3	9
Installation of ventilation	2	2	3	7
Repair of the building	4	4	3	11
Installation of power and data cables	4	3	3	10

The project begins with the identification of a contractor who then is tasked with repairing the building in which the severs are to be located. At the same time as the repair work is being carried out, Brian will be busy designing the network an activity that will take at least three weeks. The ventilation system is then purchased which leads the event of installing the system as indicated the diagram. Once these events are completed, the event of inspection of the systems begins and it takes two days to carry out the inspection. After inspection,  the activity of installing and running the data cables. This leads to the final event of moving the network to the new severs which marks the last event in the project.

During the undertaking of the project, there are various estimations that need to be done. Some of the estimation techniques used include the parametic estimating method. This is used to make quantitative estimates of cost. The cost of repairing the ceiling per square meter was estimated using this method. The bottom up estimation criteria was also depended on when estimating various costs of the project. It also enabled in accurate estimation of duration of activities. PERT method was also used to evaluate and analyze the tasks that are involved in the project. It helps in identifying the minimum time required to complete each task and the time required to complete the entire project.

The following is the project time line for AET migration project:

Task definition	Duration	Start date	Planned completion date
Conducting of initial meeting	1 day	Match 1st	1/3/2018
Hiring of contractor	7 days	2/3/2018	8/3/2018
Network design	14 days	9/3/2018	22/3/2018
Installation of ventilation system	7 days	23/3/2018	29/3/2028
Installation of racks	21 days	30/3/2018	19/4/2018
Renovation of data center	20 days	20/4/2018	9/5/2018
Inspection of the project by city inspector	2 days	10/5/2018	11/5/2018
Installation of data cables	5 days	12/5/2018	16/5/2018
Running of data cables	7days	17/5/2018	23/5/2018
Meetings with functional units	21 days	24/5/2018	15/6/2018
Power check	1 day	16/6/2018	16/6/2018
Installation of test servers	7 days	17/6/2018	23/6/2018
Charging batteries and review of systems and network	2 days	24/6/2018	25/6/2018
Checking off primary systems  and meetings	1 day	26/6/2018	26/6/2018
Moving network components to new data server	2 days	27/6/2018	28/6/2018

The network will be ready to be transferred to the new servers by 29/6/2018 after all the scheduled activities have taken place.

Conclusion

The paper begins with estimation of costs required to implement the project successfully. The report elaborates the importance of accurate cost estimation. The report also discusses types of costs and the importance of WBS and networks in a project. The paper also contains a detailed implementation plan which gives details on the activities that need to be carried out in order to achieve the objective of the project. The order in which these activities need to be carried out  their dependencies is also determined. A project budget totaling $87,000 is prepared with a detailed justification of each and every budgetary allocation. The report ends with designing of the project time schedule that indicates the time it will take to complete each task and the time the whole project will be completed.

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