Lecture 6, 8: Project Networks & Estimating Project Times & Cost

Question 1

What is Total Slack?

Answer 1

Amount of time an activity is delayed and not delay project

Also the amount of time an activity can exceed its EF without changing project end date.

Question 2

What is Free Slack?

Answer 2

amount of time an activity can be delayed without delaying any immediate following(successor) activity.

Question 3

What is the importance for estimating project times and costs? 6 Points

Answer 3

1. To support good decisions (e.g order new ship or charter ships or buy 2nd hand vessels)
2. To schedule work ( allocate resources/workload)
3. To determine the duration of the project and its cost( accounting for inflation)
4. To determine whether the project is worthwhile to do
5. To determine cashflow needs( interest rates? Credit history?)
6. To determine the progress of the project (correct mistakes on the way)

Question 4

What are the factors affecting quality of estimates?

Answer 4

1. Padding estimates – when asked for time and cost estimates, most will be included to add a little padding to reduce the risk of being late or going over budget.
2. Organizational culture – shapes every dimension of project management. E.g., accuracy vs padding.
3. Other factors – E.g., national holidays, equipment down-time, legal limits, project priority can alter time estimates.
4. Planning horizon – estimates for current events close to 100 percent but are reduced for more distant events.
5. Project complexity – time to implement new technology.
6. People – estimates depends on skills of people making them

Question 5

What are the five topdown approaches?

Answer 5

1. Consensus Method
   - projects use pooled experience of senior and/or middle level manages to estimate total project duration and cost.
   - Involves a meeting of experts, discussions leading to a decision to their best guesstimate
   Projects seeking greater rigour will use the Delphi method.
2. Ratio Method
   is often used in the concept phase of a project to get an initial duration and cost estimate.
3. Apportion Method
   Extension of ratio method
   If a current project is similar to past projects, then can be used as a starting point.
4. Function Point Method for software and system projects
   Weighted variables used in estimating labour effort and costs
5. Learning curves
   some tasks in projects are repeated several times to improve the way those tasks are carried out.

Question 6

What are the 3 bottom-up approaches? Offically 3 can be 4

Answer 6

1) Template Method
If a current project is similar to past projects, then can be used as a starting point.

2) Parametric procedures
Similar to the ratio method in the top-down method

3) Range estimating
works best when work packages have significant uncertainty associated with time or cost to complete.

4)* Hybrid approach
Used when an unusual amount of uncertainty surrounds project and impractical to estimate times and costs and entire project

Question 7

What are the Five points of comparison between bottom up and top down approaches?

Answer 7

1. Level
2. Proportion of Cost of project
3. Intended use
4. Accuracy
5. Methods employed

Question 8

What consists of top-down estimates?

Answer 8

1. someone who uses experiences and/or information to determine project duration and total cost.
2. usually by down by senior management who have very little knowledge of the component activities used to complete project.
3. estimates derive from analogy, group consensus or mathematical relationships.

Question 9

What consists of bottom-up estimates?

Answer 9

1. Conducted by individuals most knowledgeable about the work.
2. Validates cost elements in the Work Breakdown Structure (WBS).
3. Aggregates work packages and costs into major deliverables.
4. Enables comparison of efficient methods against imposed restrictions.

Question 10

What are the different kinds of costs associated with a project?

Answer 10

1. Direct costs relate to labour, materials and equipment.
   - Chargeable to specific work package

• Can be influenced by project manager, project team and individual implementing package
• Represents real cash outflows and must be paid as the project progresses

2. Direct Project Overhead Costs
   –> usually tied to project deliverables or work packages.

–> Closely pinpoint which resources of the organisation being used in the project

–> Rates are usually a ratio of the dollar value of resources used

3. General & Administration Overhead Costs
   –> not directly linked to a specific project.
   - Carried for the duration of project
   -Usually allocated as a percent of total direct costs