Project Management for Engineers

CHAPTER 4:

DEFINING A PROJECT

CONTENTS

1. Defining a project

2. Estimating project times and costs

Dr. Nguyen Thi Duc Nguyen 1

Project Management for Engineers

DEFINING A PROJECT

Defining the Project

Step 1: Defining the Project Scope
Step 2: Establishing Project Priorities
Step 3: Creating the Work Breakdown Structure (WBS)
Step 4: Integrating the WBS with the Organization
Step 5: Coding the WBS for the Information System

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Project Management for Engineers

Why we need to define the project scope?

Step 1: Defining the Project Scope

1. Project Scope
A definition of the end result or mission of the
project—a product or service for the client/customer—
in specific, tangible, and measurable terms.
2. Purpose of the Scope Statement
To clearly define the deliverable(s) for the end user.
To focus the project on successful completion of its
goals.
To be used by the project owner and participants as a
planning tool and for measuring project success.

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Project Management for Engineers

Project Scope Checklist

1. Project objective
2. Deliverables
3. Milestones
4. Technical requirements
5. Limits and exclusions
6. Reviews with customer

Step 2: Establishing Project Priorities

1. Causes of Project Trade-offs

Shifts in the relative importance of criterions related to
cost, time, and performance parameters
• Budget–Cost
• Schedule–Time
• Performance–Scope
2. Managing the Priorities of Project Trade-offs
Constrain: a parameter is a fixed requirement.
Enhance: optimizing a parameter over others.
Accept: reducing (or not meeting) a parameter
requirement.

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Project Management for Engineers

Project Management Trade-offs

FIGURE 4.1
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Project Priority Matrix

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Project Management for Engineers

Step 3: Creating the Work Breakdown Structure

1. Work Breakdown Structure (WBS)

An hierarchical outline (map) that identifies the products and work
elements involved in a project.
Defines the relationship of the final deliverable (the project) to its
subdeliverables, and in turn, their relationships to work packages.
Best suited for design and build projects that have tangible outcomes
rather than process-oriented projects.

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Hierarchical
Breakdown of
the WBS

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Project Management for Engineers

How WBS Helps the Project Manager?

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How WBS Helps the Project Manager

1. WBS
Helps manage plan, schedule, and budget.
Facilitates evaluation of cost, time, and technical
performance of the organization on a project.
Provides management with information appropriate to
each organizational level.
Helps in the development of the organization
breakdown structure (OBS). which assigns project
responsibilities to organizational units and individuals
Defines communication channels and assists in
coordinating the various project elements.

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Project Management for Engineers

Work Breakdown Structure

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Work Packages
1. A work package is the lowest level of the WBS.
It is output-oriented in that it:
• Defines work (what).
• Identifies time to complete a work package (how long)
• Identifies a time-phased budget to complete a work package
(cost)
• Identifies resources needed to complete a work package
(how much)
• Identifies a single person responsible for units of work (who)
• Identifies monitoring points (milestones) for measuring
success.

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Project Management for Engineers

Step 4: Integrating the WBS with the Organization

1. Organizational Breakdown Structure (OBS)

Depicts how the firm is organized to discharge its work responsibility for
a project.
• Provides a framework to summarize organization work unit performance.
• Identifies organization units responsible for work packages.
• Ties the organizational units to cost control accounts.

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Integration of WBS and OBS

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Project Management for Engineers

Project Roll-up
1. Cost Account
The intersection of the WBS and the OBS that is a budgetary control
point for work packages.
Used to provide a roll-up (summation) of costs incurred over time by a
work package across organization units and levels, and by deliverables.

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Direct Labor Budget

Rollup (000)

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Project Management for Engineers

Direct Labor Budget Sorted By WBS

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Direct Labor Budget Sorted by OBS

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Project Management for Engineers

Step 5: Coding the WBS for the Information System

1. WBS Coding System

Defines:
• Levels and elements of the WBS
• Organization elements
• Work packages
• Budget and cost information
Allows reports to be consolidated at any
level in the organization structure

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WBS
Coding

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Project Management for Engineers

Responsibility Matrices
1. Responsibility Matrix (RM)
Also called a linear responsibility chart.
Summarizes the tasks to be accomplished and who is
responsible for what on the project.
• Lists project activities and participants.
• Clarifies critical interfaces between units and individuals that
need coordination.
• Provide an means for all participants to view their
responsibilities and agree on their assignments.
• Clarifies the extent or type of authority that can be exercised
by each participant.

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Responsibility Matrix for a Market Research Project

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Project Management for Engineers

Responsibility Matrix for the

Conveyor Belt Project

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ESTIMATING PROJECT TIMES

AND COSTS

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Project Management for Engineers

Estimating Projects
1. Estimating
The process of forecasting or approximating the time
and cost of completing project deliverables.
The task of balancing the expectations of
stakeholders and the need for control while the
project is implemented
2. Types of Estimates
Top-down (macro) estimates: analogy, group
consensus, or mathematical relationships
Bottom-up (micro) estimates: estimates of elements of
the work breakdown structure

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Why Estimating Time and Cost Are

Important
• Estimates are needed to support good decisions.
• Estimates are needed to schedule work.
• Estimates are needed to determine how long the project
should take and its cost.
• Estimates are needed to determine whether the project
is worth doing.
• Estimates are needed to develop cash flow needs.
• Estimates are needed to determine how well the project
is progressing.
• Estimates are needed to develop time-phased budgets
and establish the project baseline.

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Project Management for Engineers

Estimating Guidelines for Times, Costs, and

Resources
1. Have people familiar with the tasks make the estimate.
2. Use several people to make estimates.
3. Base estimates on normal conditions, efficient methods,
and a normal level of resources.
4. Use consistent time units in estimating task times.
5. Treat each task as independent, don’t aggregate.
6. Don’t make allowances for contingencies.
7. Adding a risk assessment helps avoid surprises to
stakeholders.

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Macro versus Micro Estimating

Conditions for Preferring Top-Down or Bottom-up
Time and Cost Estimates

Condition Macro Estimates Micro Estimates

Strategic decision making X
Cost and time important X
High uncertainty X
Internal, small project X
Fixed-price contract X
Customer wants details X
Unstable scope X

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Project Management for Engineers

Estimating Projects: Preferred Approach

1. Make rough top-down estimates.

2. Develop the WBS/OBS.
3. Make bottom-up estimates.
4. Develop schedules and budgets.
5. Reconcile differences between top-down and
bottom-up estimates

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Methods for Estimating Project Times and Costs

1. Macro (Top-down)
Approaches
Consensus methods
Project Estimate
Times
Ratio methods Costs

Apportion method
Function point methods for
software and system projects

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Project Management for Engineers

Apportion Method of Allocating Project Costs

Using the Work Breakdown Structure

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Simplified Basic Function Point Count Process

for a Prospective Project or Deliverable

TABLE 5.2
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Project Management for Engineers

Example: Function Point Count Method

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Methods for Estimating Project Times and Costs

1. Micro (Bottom-up)
Approaches
Template method
Parametric Procedures
Applied to Specific Tasks
Detailed Estimates for the
WBS Work Packages
Phase Estimating: A Hybrid

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Project Management for Engineers

SB45 Support Cost Estimate Worksheet

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Phase Estimating over Product Life Cycle

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Project Management for Engineers

Types of Costs

1. Direct Costs
Costs that are clearly chargeable to a specific work
package.
• Labor, materials, equipment, and other
2. Direct (Project) Overhead Costs
Costs incurred that are directly tied to an identifiable
project deliverable or work package.
• Salary, rents, supplies, specialized machinery
3. General and Administrative Overhead Costs
Organization costs indirectly linked to a specific
package that are apportioned to the project
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Contract Bid Summary Costs

Direct costs $80,000

Direct overhead $20,000
G&A overhead (20%) $20,000
Profit (20%) $24,000
Total bid $144,000

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