Chapter 6-10 Planning, Budgeting And Risk Management Flashcards
What are activity-on-node diagrams?
A planning method, combines the WBS to identify all the constituent activities, the sequence in which they need to be performed and the estimated duration for each activity, are made to highlight dependencies, there are four basic types of dependencies:
Finish to start: second activity cannot start until the first has finished
Start to start: second activity cannot start until the first has started
Finish to finish: second activity cannot start until the first has finished
Start to finish: second activity cannot finish until the first has started
What is the critical path analysis?
The longest series of dependent events in a project, if one activity moves that are in the critical path, this moves the whole projects and risk being late in the schedule. The network can be analyzed by the forward pass (find the EST) and the reverse pass (find the LST).
What is a Gantt Chart? Name some good points and limitations to this.
It is a time-scaled graphical planning tool, it gives a fixed representation of the relationship between activities and their duration. The purpose is to illustrate the relationship between the activities and time.
Good points: communicates a time plan, simple to draw and read, widely used, useful for providing overview of activities
Limitations: do not make a link between time and cost, does not help in optimizing resource allocation, can lead to false sense of certainty
What is Parkinson’s law and the student syndrome? What are some problems with time and cost estimates?
Parkinson’s law: an activity will expand to fill the time available
The student syndrome: leave project until the last possible minute
Problems: are as likely to happen in the beginning as in the end where there is no slack left, if there is slack it will be used, and task is likely to be late
What is the theory of constraints? Explain!
Ideas transferred from operations management, managing systems by focusing on the constraint, the 5 focusing steps applied to projects are:
- Identify the constraint: whatever is stopping the project being carried out faster, can be the critical path, availability of resources, fixed dates that cannot be moved, policies
- Exploit the constraint: remove anything that prevents the constraint from performing better
- Subordinate everything to the constraint: make the constraint the point around which schedules are based and ignore local efficiencies
- Elevate the constraint: increase the flow through that part of the system, removing it as a constraint
- Go back to step 1: repetitive operation, find the new constraint, probably it will now be elsewhere in the system
What are some guidelines for estimates?
All estimates should be based on the activity times only, no safety added
Safety should be included at the end of a critical path, not before.
Time plans should be treated as overviews only
Progress should be monitored along the critical path
What are the two basic approaches to the preparation of costing information?
Ground-up costing: reimbursable contracts, estimates of each levels in the WBS are compiled and added together
Top-down costing: you are allocated a certain amount of money to complete the project activities
What are some major elements of cost?
Time, materials, capital equipment, indirect expenses, overhead, contingency margins etc.
What are some ways in which the return/payback can be analyzed to determine the feasibility or net benefit of completing the project?
Payback analysis/period: considers the cash flow of costs and benefits, compare the income that will be generated with the initial investment, from this payback period can be determined = the time it takes before a project is paid back
Initial investment/annual net cash flow
Discounted cash flows: considers the time value of cash flows, considers the opportunity cost of the project, ex:
NPV: present value of benefits - present value of costs
Internal rate of return: the discount rate for which the NPV is 0.
What is quality function deployment?
Allows the customer requirement to be expressed in the customers’ own language and to correlate this to the language of the project team. The purpose is to minimize the gaps between the expectations of a stakeholder and the project delivery.
What are some quality cost categories?
Prevention (cost of ensuring that the required level of quality of service is met), appraisal (measuring what level of quality of service is provided) and failure (costs of getting it wrong and putting it right).
What are some categories of risk, explain?
Known knows - the things we know we know
Known unknowns - those things we know are uncertain
Unknown unknowns - things that come from out of the blue and we could not have known about
What is a risk?
The possibility of suffering harm or loss, an uncertain event that if it occurs will have a positive or negative affect on the objective of the project.
What are the areas of risk management?
Risk identification: predicting key risk outcomes, one way is to start with potential problem areas another way is to consider how it could be done to go wrong, aspects to considers are time, cost, quality, Heath and safety and legal.
Quantification: there are qualitative approaches (gathering people’s perceptions of the levels of risk involved in a particular activity, can be done through failure mode effect analysis) and quantitative (expected value, sensitivity analysis, Monte Carlo simulation, PERT)
Response control/mitigation: procedures to ensure that either the likelihood is reduced of that event occurring or the effects managed or mitigated in some way. Some form of contingency plan may be put in place.
Describe PERT
Takes uncertainty about time estimates into consideration, three times estimates for each activity are required optimistic time, most probable time and pessimistic time. One can use the information from PERT to determine the approximate likelihood of finishing before a certain time.
Good points: help mangers identify riskiest paths, efficient for very large scale projects with many tasks
Limitations: complex, encourages less accurate forecasting of estimates
