[MUSIC] This module is about estimation of times, costs and resources for activities. In order to arrive at a schedule for the activities, we need to estimate the activity durations and the resources required for each activity. The resources required maybe men, material, equipment and funds, and men are be in uniformed throughout the duration of an activity. While we would like accurate estimate should be noted there will be some uncertainty as how long that the activity would actually take to complete, especially if the activity is being undertaken for the first time which is often the case in projects. One should note that there's a trade off between getting more accurate estimates and the cost of obtaining increased accuracy. Time estimates would be better after then doing the work packages are identified. And for task that are to be done soon. Long duration projects increase uncertainty and may have only approximate time and cost estimates for activities that are to be done much later. Organization structure can also play a role in estimating the duration of activities. A dedicated team may take less time for an activity because of focused attention but the cost of resources or the dedicated team may be more. Organization culture plays an important role in more may be refer to as estimating gamesmanship. If an organization, the project manager has the tendency to cut the estimates made by say, the person who has to do the task. The next day I'm around that person may increase his or her estimate more than normally done so that after the accepted duration is still high. If the sums of cost or duration are often padded, we would expect most of the products to be completed in budget and on time, but this always is not the case. As pointed out by Elijah Goldrat, this may be due to one of several reasons. We'll briefly summarize these reasons next. One possibility is Murphy's Law which says that the work expands to fill the available time may be operating. Another possibility is the problems that may be refered to as student syndrome, which is to postpone starting activity until the last minute. This, of course, would mean that the buffer implied by the inflated estimates may disappear quickly and any unforeseen events happening may trigger a delay in the completion time of an activity. And our inclusion cost, thereby affecting the completion time and the cost of the project. Another possibility is that a person completing the task early may not want to report the early completion of the task, possibly fearing that his or her colleagues may not approve of such actions, given their own tardiness in completing the tasks assigned to them. Even if an early completion of activities is reported. The person who is responsible for the succeeding activity may not be ready to start that activity early, due to the other prior commitments made, concerning the planned start date for the activity. It's also possible that persons responsible for performing an activity may be doing excessive multitasking. Finally, the required resources may not be available as per scheduled. At the end of the spectrum is the time and cost estimates may be deliberately made low so as to win the contract in a competitive bidding for the project. At a later date but month before the completion date of the project the person of the organization that guard the contract may start negotiating for additional budget and or delay in completing the project. All those men already taught of has been analytical. It is the dark side of competition. The person of the organization sponsoring the project may stipulate a fixed price contract which, with penalties for the delay in the completion of the project. But unfortunately, at least in India, legally enforcing the contract is a time consuming effort which is often better avoided, resulting in an out-of-court settlement. Next we will look at some important factors that need to be considered while making the estimates. Clearly person's family of the activities should make the estimates. The estimates should be based on normal conditions and normal user resources and it is better to avoid including contingencies while making the estimates. The estimates should be made independently for each task and aggregation of all packages for estimation should be avoided. Some of the other factors that should be taken into account are holidays and vacation pays, if any price and wage increases, wastage and spoilage, if appropriate. Maintenance cost of resources such as machinery and equipment, and etc., should also be taken into account. Risk assessment may lead to different estimates for the same activity. This may sometimes bring out the inherent contradictions and assumptions made while making the estimates. Reconciliation of the different assumptions and contradictions may lead to better estimates. Estimates made by top or senior management is often referred to as top down estimates. While those made by the persons responsible for work packages are refered to as bottom of estimates. Presumably, top down estimates are for the project and may be included in the project chapter. Top down estimates are typically arrived at by a consensus approach involving senior and/or middle level managers. If there are managers who have experience with similar projects, top down estimates can be reasonably accurate. Bottom up estimates may form the basis for inclusion in the project scope after some reconciliation between the top down and bottom up estimates. Bottom up estimates are presumably more accurate since they are made by persons responsible for the work packages, and they may have some experience with similar, if not identical, activities. Three popular estimating procedures are the ratio or parametric method, as it is referred to the template method and the apportion method. The ratio, or the parametric approach is to first identify the different parameters and their respective impacts on the total cost and/or the duration of the project. The next step is to estimate the value of these different parameters for the project under consideration. Depending upon the values of this parameters and the respective impacts. The total cost and time are estimated assuming essentially a linear relationship. For instance, the project is to build a factory. The cost may be estimated considering the plant size, the type of the plant, etc. For a software development project that first required a base method by parameters such as lines of code, function points, object points, test points, use case points, etc. The template method, as the name suggests, uses templates that have been prepared based on the past data obtained from experience with similar projects. Differences in the new project is compared to the projects is equal than the past are noted and adjustments in cost estimates are made depending upon the differences. Clearly, this method is useful only if the project under consideration is similar to the projects executed in the past. The apportion method can give good estimates if the features and costs of the project that is being undertaken are similar to projects executed in the past. First, the total cost of the project is estimated based on past experience are some knowledge of the cost of similar projects done in the past by other organizations. Then the estimated total cost of the project is apportioned to various deliverables, sub-deliverables, etc., using the work break down structure. Finally, adjustments in some of the costs including possibly the total cost of the project are made If any of the allocated costs are viewed as unreasonable. For instance in the diagram which is adopted from figure 5.1 in Project Management: The Managerial Process by Clifford Gray, Erik Larson and Galton Desai, 4th Edition Special Indian Edition Tata McGraw-Hill Education Pvt Ltd in 2010. The total software development cost is first estimated to be, let us say $200,000.00. That’s design verification, software development, testing, and documentation have an estimated cost $60,000.00, $80,000.00 $50,000 and $10,000 respectively. The design specifications are further broken down into three work packages denoted as D1, D2, and D3 respectively. Typically work packages D1, D2, and D3 cost 30%, 40%, and 30% respectively of the total cost of design specifications. D1 is estimated to cost 30% of $60,000, that is $18,000, while D2 and D3 are estimated to cost $24,000 and $18,000 respectively. Software development is further broken down into two work packages denoted as S1 and S2 respectively. Typically, work packages S1 and S2 cost 40% and 60% respectively of the total cost of software development. The S1 is estimated to cost 40% of $80,000. That is, $32,000 by last two is estimated of course $48,000. Testing is further broken down into two packages denoted as T1 and T2 respectively. Typically, work packages T1 and T2 cost an equal amount which in this case would be $25,000 each. Documenting the state of a single work package costing $10,000. After these estimates are made, an assessment is made as to whether the cost of any of the work packages is unreasonably high or low. If so, adjustments are made in the cost of some of the work packages, which in turn will necessitate a change in one or more of the cost of the four deliverables, which in turn, may change the estimated total cost of the project. For software development projects, some models suggest COCOMO, which stands for constructive cost models. Neural networks, etc., have been attempted, but these models have been found to be of limited use, because of the difficulty of not only getting the appropriate data. But also getting good estimates of the necessary parameters which can affect the accuracy of the estimated cost and of the times. Resources that are required for an activity maybe people, material, equipment and working capital. Material and equipment requirements depends on the type of activity and estimated from experience. Requirements of people within a set of skills is estimated based on a type of activity and therefore, it's required. The working capture requirements are determined from the estimated total cost and time for the activity. The total cost for completing an activity is broken into working capture requirements. For each unit of time, which may be a day, a week, or a month, as the case may be, for the duration of the activity. The working capital requirements when incorporated into the schedule, that is the start time and date for each activity of the project, gives that so-called time phased budget for the project. The time phased budget is used for monitoring the project while it is in progress. The monitoring and control of a project uncovered in a subsequent module. This completes the module on Estimation of Costs, Times and Resources Required. [MUSIC]
