This article is a follow up to our series on the PMBOK Guide and is for a colleague that we have met many years ago at a PMI Congress. Mr. Crispin (“Kik”) Piney. His bio is at the end of this post. We are honored to have Mr. Piney as a guest author on our blog. We publish it without any editing and as provided by Mr. Piney.
The Guide to the Project Management Body of Knowledge (PMBOK® Guide) has been built around the same set of Knowledge Areas for most of its existence. Given the current advances in project management concepts and techniques, it is time to review whether the set of Knowledge Areas is still well-suited to modern practice.
One area in which there appears to be a mismatch is for the Time Management and Cost Management Knowledge Areas, since a number of concepts and techniques need to address the two areas simultaneously. The starting point is to realize that the PMBOK® Guide entirely overlooks the fact that the starting-point for most valid project estimates is the estimate of effort. This has probably been overlooked or omitted because the authors could not decide in which knowledge area to put it! The creation of a Performance Management Knowledge Area will provide the basis for correcting this omission.
The definition of “performance management” in this context is developed as follows:
- Project Performance: a measure of the efficiency of the creation and provision of the project and product deliverables from a point of view integrating time, cost and scope.
- Project Performance Management: the planning and delivery, along with the monitoring and related control of project performance across the full project life cycle.
The way in which these ideas should be applied in planning as well as for monitoring, is explained below.
The Scope Management Knowledge Area delivers a key artefact for project management: the Work Breakdown Structure. Once this is available, it is applied by most of the other Knowledge Areas – in particular Resource Management, Time Management and Cost Management. However, the initial step of estimating the effort involved in each of the WBS components is required by Resource Management, Time Management and Cost Management. Once the effort is known, the resources for the activities need to be assigned (by category of resource, or by named resources). This then provides the basis for: evaluating the corresponding durations, followed by the related cost. This information will then be used in the development of the schedule which, after optimization (progressive elaboration is the order of the day!), will lead to fixing the performance management baseline showing the evolution of time and cost over time, which will be used for tracking performance (time, cost and scope). Each of these steps is described below.
3.1 Estimating Effort
The units to be used for measuring effort depend on the type of component – e.g. man-days, CPU cycles, etc. For some components, the estimate of effort is irrelevant or impossible – e.g. hardware purchases.
Where effort can be estimated, this should be carried out as the first step, prior to determining the resource, time and cost implications, since quantifying these amounts depends directly on the total effort required. Unless the calculations are carried out in this way, there is a risk that the link between resource loading, time and cost for each component will be lost, leading to faulty plans and making change management untrustworthy. More details on estimating are given in another entry that is dedicated to the subject.
3.2 Allocating Resources
Once the effort has been estimated, the resources to be allocated to the work should be decided: this requires deciding on:
- The category of resource
- The number of each category
- The performance characteristics (e.g. capability relative to the effort estimating assumptions)
- The availability of the resources
- The unit cost of each category
The planning processes within this knowledge area therefore need to provide the following:
- The effort estimates for each work package
- The resource details to be applied for each work package
There will of course be iterations between these processes and the resource, time and cost planning processes in order to develop or adjust the plans to satisfy time, cost and resource objectives and constraints.
The following paragraphs explain how the output of the effort planning process is used for planning in the Time Management and Cost Management Knowledge Areas.
3.3 Determining Durations
Once the output of the estimations of effort and resource are available, the corresponding duration for each category of resource for each work package can be determined as follows:
Di = Ei / (Ni * Pi * Ai)
- Di: duration for resource from category i
- Ei: effort for the resource
- Ni: number of those resources
- Pi: average productivity of the resource (as a percentage) relative to estimating assumptions
- Ai: average availability (as a percentage) relative to estimating assumptions
The estimated duration for a work package is therefore the maximum of the duration values (relative to the different resources) for that work package. Under-used resources will either need to be shared with other activities or paid for even if not fully occupied. The cost estimates will depend on these decisions.
3.4 Determining costs
The cost per work package is simply the sum, for each resource category, of
Ci = Ni * Ui * Di
Which, using the duration equation above, can also be written as
Ci = (Ui * Ei) / (Pi * Ai)
- Ci: total cost of all resources in category i
- Ui: unit cost per unit time of resources in category i
Once the iterations between resource loadings, time and cost planning are complete (and, of course, all of the risk assessment and corresponding planned actions integrated), the plan can be baselined. Tools are then required in order to track the project performance accordingly.
4.1 Tracking Performance
The PMBOK® Guide mentions the Earned Value tool in both the Time Management and the Cost Management chapters. This is confusing to the reader and technically unsound, since one major strength of Earned Value is that it provides an integrated view of progress with respect to both time and cost – i.e. with respect to the baselined performance target. There should therefore be a Monitoring process in the Project Performance Management Knowledge Area that implements at least the Earned Value technique for tracking and forecasting progress.
This process will take inputs from time and cost monitoring processes – and possibly others – and provide performance information (status, forecasts, etc.) back at least to processes in the Time, Cost, Human Resources and Communication Knowledge Areas.
There is a clear role for a Performance Management Knowledge Area within the PMBOK® Guide, in order to ensure coordinated planning, monitoring and change management of scope, resources, time and cost. There may be a case for extending this idea to Program and to Portfolio Management if integrated time and cost tracking tools are available in these domains.