EBUS614: Project and Portfolio Management in OrganisationsLecture 6 – Budgeting and SchedulingDr Fotios Misopoulos and Dr Matthew Tickle
What we will discuss today1.Budgeting–Budget Estimation–Top Down vs. Bottom Up Budgeting–Work Element Costing–Category Budgeting vs. Project Budgeting2.Scheduling– Techniques & Terminology– Network Diagrams (Activity on Node)– Expected Time of Activities– Critical Path– Slack2
Budgeting•A budget is a plan for allocating resources to a project•Once signed off by senior management, the project manager can begin spending resources•Managers must work within budget constraints– Senior management must be careful not to over / under-fund projects– Projects with higher budgets usually get more support from senior management•The budget is also a monitoring and control mechanism– Allows resource use to be monitored carefully through comparisons between actual and planned use of resources3
Budgeting•When developing a budget, we must:1.Forecast what resources the project will require2.Calculate the required quantity of each3.Decide when they will be needed4.Understand how much they will cost•An easy way to develop a budget is to cost the Work Breakdown Structure (WBS)•We use either Top-Down or Bottom-Up Budgeting to calculate the cost of each activity within the WBS4
Top-Down Budgeting• High level cost estimate for entire project is created based on opinions and experiences of middle and senior managers• Lower managers then breakdown this overall cost estimate into estimates for specific tasks• Process continues to lowest level5
Top-Down BudgetingAdvantagesDisadvantagesOverall budget is very accurateSenior managers tend to underestimate costsEnsures budget is highly predictableMore difficult to get buy-inNo aspect of the project is overlookedCan lead to competition between managersExperience of senior management ensures “hidden” activities are included in overall estimate6
Bottom-Up Budgeting• Tasks, schedules and initial budgets are constructed based on WBS to create Work Packages• Lower managers are then asked about the time and resources required to complete their work packages• Discussions between senior and lower managers are used to resolve differences of opinion• Overheads and profits are added, alongside a project reserve for contingencies• This forms the final project budget7
Bottom-Up BudgetingAdvantagesDisadvantagesMore accurateMore difficultGreater buy-in from lower managersRisk that not all elements of the project will be includedIncreases Junior management experienceIndividuals more likely to overestimate resource requirementsMore likely to include “unusual” expensesSenior managers more likely to cut the estimated budgets8
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Budget, Schedule and Resources for Project Management - MGT5PMTlg...