Project Portfolio Management : Assignment

Added on - Nov 2020

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EBUS614: Project and PortfolioManagement in OrganisationsLecture 6 – Budgeting and SchedulingDr Fotios Misopoulos and Dr Matthew Tickle
What we will discuss today1.BudgetingBudget EstimationTop Down vs. Bottom Up BudgetingWork Element CostingCategory Budgeting vs. Project Budgeting2.SchedulingTechniques & TerminologyNetwork Diagrams (Activity on Node)Expected Time of ActivitiesCritical PathSlack2
BudgetingA budget is a plan for allocating resources to a projectOnce signed off by senior management, the project manager can beginspending resourcesManagers must work within budget constraintsSenior management must be careful not to over / under-fund projectsProjects with higher budgets usually get more support from seniormanagementThe budget is also a monitoring and control mechanismAllows resource use to be monitored carefully through comparisonsbetween actual and planned use of resources3
BudgetingWhen 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 costAn easy way to develop a budget is to cost the Work BreakdownStructure (WBS)We use either Top-Down or Bottom-Up Budgeting to calculate thecost of each activity within the WBS4
Top-Down BudgetingHigh level cost estimate for entire project is createdbased on opinions and experiences of middle and seniormanagersLower managers then breakdown this overall costestimate into estimates for specific tasksProcess continues to lowest level5
Top-Down BudgetingAdvantagesDisadvantagesOverall budget is very accurateSenior managers tend tounderestimate costsEnsures budget is highly predictableMore difficult to get buy-inNo aspect of the project is overlookedCan lead to competition betweenmanagersExperience of senior managementensures “hidden” activities are includedin overall estimate6
Bottom-Up BudgetingTasks, schedules and initial budgets are constructed based onWBS to create Work PackagesLower managers are then asked about the time and resourcesrequired to complete their work packagesDiscussions between senior and lower managers are used toresolve differences of opinionOverheads and profits are added, alongside aproject reservefor contingenciesThis forms the final project budget7
Bottom-Up BudgetingAdvantagesDisadvantagesMore accurateMore difficultGreater buy-in from lower managersRisk that not all elements of the projectwill be includedIncreases Junior managementexperienceIndividuals more likely to overestimateresource requirementsMore likely to include “unusual”expensesSenior managers more likely to cut theestimated budgets8
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