Background it is meant by a Budget (BCWS); in

Background

This paper
is part of an assignment project to install an Emergency Power Plant at a Tidal
Barrier. With some of the information related to an Excel and MS Project work
assignment; this word document includes the definition or meaning of “project”,
some examples and also explains what it is meant by a Budget (BCWS); in
relations to the other part of the assignment and some examples. It also
explains how Earned Value System (EV) works, and a research backed on why it is
more appropriate for projects than a simple Actual vs Budget system. The paper
also talks about Gantt chart, its benefits and limitations.

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Introduction

Project
Definition

Project
Management Book of Knowledge says “A project is a temporary endeavor undertaken
to create a unique product, service, or result” (PMBOK, 2017).

Unique Product

Can be either a part of another
item, an augmentation or improvement to an item, or a new end item. A unique
service or capability to perform a service.

Unique Result,

An outcome or document like a research
project that improves knowledge that can be used to establish whether new
process will benefit a company or society.

Unique Combination

One or more products, services or
results like a software application, its associated documentation, and help desk
service
(Watt, 2017).

Projects
are started to accomplish an objective by generating deliverables. A deliverable can be tangible or
intangible good or service produced because of a project that is planned to be
sent to an internal customer or external (Investopedia, 2017)

An
objective is an outcome toward which work is to be directed, a strategy
position to be attained, a purpose to be achieved, a result to be obtained, a
product to be produced, or a service to be performed (PMBOK, 2017).

 

The
temporary nature of projects shows that a project has a definite beginning and
an end. Temporary does not necessary mean a project has a short duration. The
end of a project is reached when one or more of the following is true:

·        
The project’s objective have been achieved;

·        
The objective will not or cannot be met;

·        
Funding is exhausted

·        
The need for the project no longer exists

·        
The human or physical resources are no longer available

·        
The project is terminated for legal cause or
convenience

·        
Their deliverables may exists beyond the end of the
project. Example build of the Golden Gate bridge in San Francisco will create deliverables
expected to last for centuries (Watts, 2017)

 

Types
of projects

 

From the
above definition, there are several types of projects including research,
administrative, process improvement.

 

Research Projects

A
research project is done to have a clear definition of an outcome. The results from
the project may lead to an understudying, improvement of a service or
production. An example could be a research project that may find a plan in a
company unfeasible. This type of projects is done to obtain new knowledge.

 

Administrative
Project

This
types of project is done to support the administrative systems. It could be to
design and develop the technology goals and find solutions to issues in running
sections of the company for employees and stakeholders smoothly.

 

Process Improvement
Project

This is
a strategic planning methodology aimed at identifying the operations
or employee skills that could be improved to encourage smoother procedures,
more efficient workflow and overall business growth. This process can
also be referred to as functional
process improvement (Rouse, 2017). The purpose is to meet customer
demands and business goals more effectively.

Project
Management Definition

Project
Management is the planning, delegation, monitoring and controlling of all
aspects of the project, and the motivation of those involved, to achieve the
projects within the expected performance targets (Bentley, 2009).

PMbok
defines Project management as the application of knowledge, skills, tools and
techniques to project activities to meet the project requirements. (PMBOK, 2017).
These skills are needed to help assist the project manager to complete project
on time and on budget or below budget. A project manager learns these skills
through experience and some common sense. There are different methodologies in
project management as it is a very broad subject.

Project Management (PM) Methodologies

Methodologies
are guidelines and a body of knowledge used in Projects. These guidelines when
used, can help projects run smoothly and identify any risks or slacks in the
project. Examples are Agile, PRINCE2 and Six Sigma just to list a few out of
the many Appendix
1 explains a few of the methodologies.

Gantt chart

History of Gantt chart

The first chart of this form was
devised in the mid 1890s by Karol Adamiecki, a Polish engineer who ran a
steelwork in southern Poland and had become interested in management ideas and techniques
(Gantt.com, 2017). Fifteen years after Adamiecki, Henry Gantt, an
American Project Management expert, formulated his own rendition of the chart
and it was this that turned out to be generally known in western nations. Henry
Gantt name ended up attached with graphs of this sort.

Initially Gantt charts were made
relentlessly by hand; each time a task is transformed, the diagram is redrawn
and this restricted their helpfulness. Constant change being a component of
projects made it difficult. These days, with advance technology
and project management software, Gantt charts are used effectively and
printed effortlessly.

Gantt chart

A Gantt chart
is a graphical depiction of a project schedule that shows the start and finish
dates of several elements of a project that include resources, milestones,
tasks and dependencies. (Investopedia, 2017)

How It Works

Gantt charts
are the most used charts in project management. They are useful in planning a project
and defining the sequence of tasks that require completion. The chart is
depicted as a horizontal bar chart, bars of different lengths represent the
project timeline that includes task sequences, duration, start and end dates
for each task. The horizontal bar also shows how much of a task requires
completion. The horizontal bar length is proportional to the time necessary for
a task’s completion. In addition, the project tasks are visible on the vertical
bar (Investopedia, 2017).

Gantt chart
aids project managers in communicating project status or plans and helps ensure
the project remains on track.

The chart
identifies tasks that may be executed in parallel and identifies tasks that
cannot be started or finished until other tasks are complete. It aids in
detecting potential bottlenecks and helps to identify tasks that may have been
excluded from the project timeline.

The chart
depicts task slack time or additional time for completion of a task that should
not delay the project, non-critical activities that may be delayed and critical
activities that must executed on time (Investopedia, 2017). With the help of
Microsoft Project software, the timing throughout the project is monitored and
can be updated at any time. For example,

For instance, the figure below which shows how the
Gantt chart was used to set strategy to Design, build and install an emergency
power plant at a Tidal barrier. The duration undertaken for this plan is 78
days, with the main actions are shown in red which are the critical path of the
project. The other tasks are events that bounce over periods of time

Insert picture……………………………………. Of
project Gantt Chart

 

In Gantt
charts, there are three main relationships between sequential tasks:

·        
Finish to
Start (FS) – FS tasks cannot start before a
previous (and related) task is finished. However, they can start later.

·        
Start to
Start (SS) – SS tasks cannot start until a
preceding task starts. However, they can start later.

·        
Finish to
Finish (FF) – FF tasks cannot end before a preceding
task ends. However, they can end later.

·        
Start to
Finish (SF), SF is very rarely used.

 

If the project
was required to be completed in two months (60 days) instead of the 78 days,
some additional steps needs to be considered. These 6 steps by Ron Holohan
(Appendix 2) will help with the task.

Benefits & Limitations of Gantt chart

The table
lists a few benefits and limitations of Gantt Chart.

 

Benefits

Limitations

Clarity
One of the
biggest benefits of a Gantt chart is the tool’s ability to
combine multiple tasks and timelines into a single document. Stakeholders can
easily understand where teams are in a process while grasping the ways in
which independent elements come together toward project completion. (Brighthub Project Management, 2017)
 
 

They need to be constantly updated
As you
get into a project, things will change. If you are going to use a Gantt chart
you must be able to change the chart easily and frequently. If you don’t do
this, it will be ignored. Again, you will probably need software to do this
unless you’re keeping your project management at a high level. (PROJECT-MANAGEMENT.COM, 2017)
 
 

Time Management
The scheduling
capability of a Gantt chart serves as a major benefit in a creative
environment. Helping teams understand the overall impact of project delays which
can foster stronger collaboration while encouraging better task organization. (Brighthub Project Management, 2017)
 
 

Difficult to see on one sheet of paper
The software
products that produce these charts need to be viewed on a computer screen,
usually in segments, to be able to see the whole project. It then becomes
difficult to show the details of the plan to an audience. Further, you can
print out the chart, but this will normally entail quite a large “cut and
paste” exercise. If you are going to do this frequently, it can be very
time-consuming. (PROJECT-MANAGEMENT.COM, 2017)
 
 

Communication
Teams can
use Gantt charts to replace meetings and enhance other status updates. Simply
clarifying chart positions offers an easy, visual method to help team members
understand task progress.
(Brighthub
Project Management, 2017)
 
 

The size of the bar does not indicate the amount of work
Each bar on
the chart indicates the time-period over which a set of tasks will be
completed. However, by looking at the bar for a set of tasks, you cannot tell
what level of resources are required to achieve those tasks. So, a short bar
might take 500 man hours while a longer bar may only take 20 man hours. The
longer bar may indicate to the uninformed that it is a bigger task, when in
fact it is not. (PROJECT-MANAGEMENT.COM, 2017)
 
 

Float calculation and the critical path

Using the Gantt chart
from Microsoft project as it is shown from figure 1, has helped to draw each
activity and calculate the Early Start day to determine the earliest completion
time as it is shown in the figure 2 below. At the end, the latest times of each
activity has been calculated to show the float and the critical path.

 

Budgeted Cost of Work
Scheduled (BCWS)

Budgeted
Cost of Work Scheduled (BCWS) is the sum of the budgets for all work scheduled
to be accomplished with a given time. It also includes the cost of previous
work completed and can address a specific period of performance or a date in
time. (AcqNotes, 2017)

 

 

 

 

The sheet also shows the cumulative
cost of the activities according to the finishing time against the cost of each
activity as it is shown from the figure below.

 

 

è Budgeted Cost of
Work Performed (BCWP) is the budgeted cost of the value of work that has
actually been accomplished or completed to date. It can be used to address the
entire project, individual task or work packages. It’s compared against Actual Cost of Work
Performed (ACWP).  BCWP
is a tool used in Earn Value Management and is also called Earned Value. (AcqNotes, 2017).
During the project process the BCWP is compared to the BCWS to determine if the
project is ahead or behind the projected time. If the BCWP is less than the BCWS
then the scheduled work package was not completed on time.

 

Actual Vs Budget
System

Example by (Keenan, 2017): if you go over budget by $1,000, and your budget is $500,
that’s a very significant change. However, if you budgeted $50,000, the
difference is far less significant.

Subtract the budgeted amount from
the actual amount to find the increase or decrease from the budgeted amount.
For example, if you budgeted $1,200 for broker fees and you spent $1,340,
subtract $1,200 from $1,340 to find you went over budget by $140.

Divide the amount by which the
actual differed from the budget to find the rate of change. In this example,
divide $140 by $1,200 to get 0.1167.

Multiply the rate by 100 to find
the percentage change from the budget to the actual. Completing this example,
multiply 0.1167 by 100 to find you went over budget by 11.67 percent.

Budget verses actual costs does
not give a clear picture. Earned value puts a dollar value on status and
provides indices that tell you your project’s ‘health’ at a glance. Evaluating your project’s health is
more than just the status of major milestones
and budget verses actual costs, it is the evaluation of the true condition of
the project. In addition, using management by exception and evaluation of
indices to predict your project’s outcome is an
efficient way to manage a project. (Schulte, Ruthanne, 2000)

 

Earned Value
Management explained By Umesh Dwivedi

Earned Value calculations require the
following:

·        
Planned Value (PV) = The budgeted amount through the
current reporting period.

·        
Actual Cost (AC) = Actual costs to date.

·        
Earned Value (EV) = Total project budget multiplied by the
% complete of the project.

 

Earned Value Management (EVM)
helps project managers to measure project performance. It is a systematic
project management process used to find variances in projects based on the
comparison of worked performed and work planned. EVM is used on the cost and
schedule control and can be very useful in project forecasting. The project
baseline is an essential component of EVM and serves as a reference point for
all EVM related activities. EVM provides quantitative data for project decision
making.

EVM Measures

EVM consists of the following
primary and derived data elements. Each data point value is based on the time
or date an EVM measure is performed on the project.

Primary Data Points

Budget at Completion (BAC)

Total cost of the project

Budgeted Cost for Work Scheduled (BCWS) / Planned Value (PV)

The amount expressed in Pounds (or hours) of work to be
performed as per the schedule plan

PV = BAC * % of planned work.

Budgeted Cost for Work Performed (BCWP) / Earned Value (EV)

The amount expressed in Pounds (or hours) on the actual worked
performed

EV = BAC * % of Actual work

Actual Cost of Work Performed (ACWP) / Actual Cost (AC)

The sum of all costs (in Pounds) actually accrued for a task to
date

For example, say we should have
completed £800 pounds of work by today. We completed £600 worth of work. The
BCWP is £600. The BCWS is £800. And if we actually paid £700 then (ACWP) =
£700.

Derived Data Points

Cost Forecasting:

Estimate at Completion (EAC)

The expected TOTAL cost required to finish complete work

EAC = BAC / CPI

= AC + ETC

= AC + ((BAC – EV) / CPI) (typical case)

= AC + (BAC – EV) (atypical case)

Here atypical means it is
assumed that similar variances will not occur in the future.

Estimate to complete (ETC)

The expected cost required to finish all the REMAINING work

ETC = EAC – AC

= (BAC / CPI) – (EV/CPI)

= (BAC – EV) / CPI

Variances:

Cost Variances (CV)

How much under or over budget

CV = EV-AC

NEGATIVE is over budget, POSITIVE is under budget

Schedule Variances (SV)

How much ahead or behind schedule

SV = EV-PV

NEGATIVE is behind schedule, POSITIVE is ahead of schedule

Variance at Completion (VAC)

Variance of TOTAL cost of the work and expected cost

VAC = BAC – EAC

Performance Indices:

Cost Performance Index

CPI = EV / AC

Over ( 1) budget

Schedule Performance Index

SPI = EV / PV

Ahead (> 1) or behind (

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