Managing Project Cost and Time

Project Management

The objective of the study is to carry out the analysis on chapter 8 and 9 of the book titled "Project Management, the Managerial Process." (Larson, & Gray, 2010 p.iv). The chapter 8 of the book discusses the strategy the project manager could schedule resources and costs. On the other hand, the chapter 9 carries out analysis on the strategy to reduce project duration.

Larson, & Gray, (2010) discusses in their book that the project manager often faces challenges in developing an appropriate project scheduling and the chapter discusses the strategy that the project manager could employ to develop a project's resource schedule. Within an organization, there are often more projects than available resources, thus, the priority is to select projects that could contribute to organizational efficiencies. Faced with the project's constraints, it is critical to schedule resources to make a realistic judgment from the available resources and tight project durations.

Larson, & Gray, (2010) identify type of resources constraints as:

Technical constraints which are the "constraints related to the networked sequence in which project activities must occur." (Larson, & Gray, 2010, p 255) .

Physical constraints are related to the environmental conditions, and Resource constraints are related to shortage of resources used to sequence project activities. Resources constraints include materials, people, and equipment.

Larson, et al. (2010) classify people as human resources who bring skills to the success of a project and the human resources include mechanical engineer, programmers, inspector and welder. The combination of the skills of human resources could add to the complexity of project's scheduling. Materials and equipment are also resources that need to be used to complete a project and shortage of these resources may delay a timely completion of a project. Most mistakes those stakeholders make is to assume that resources will be adequate for the project, however, recognition of these constraints before starting a project can assist the project manager to avoid a costly delay.

Larson & Gray (2010) classify scheduling problems as:

"Time-constrained project" (p 257) imposed to ensure that projects are to be completed at due date.

"Resource-constrained project" (p 257) shows that resources are fixed and cannot exceed available resources and inadequate resources is likely to delay the project.

Resource allocation methods include limiting assumptions, where the project manager cannot change the level of resources to be used for an activity and "splitting activities is not allowed-once an activity is starts, it is carried to completion." (Larson, & Gray 2010 p 257).On the hand, smoothing resource demand involves resources level technique to smooth resources to minimize fluctuation in resources demand. Botanic Garden is another resource allocation method where backhoes are required during project lifecycle. The fig 1 reveals the examples where the backhoes are required for the resources allocation methods. The figure 1 shows the use of 4 backhoes from 4 to 10 activities periods.

Fig 1: Example of Botanic Garden

Source: Larson, & Gray, (2010).

As being revealed in the Fig 2, the project manager can focus on the activity with the least risks of project delay. For example, the project manager can start from the period 10 instead of period 4; the project manager will be able to reduce the number of backhoes by 25% from 4 to 3.

Fig 2: Example of Botanic Garden

Source: Larson, & Gray, (2010).

Benefits of resources allocation are that it minimizes the fluctuation in resources demand. Moreover, it reduces resources allocated to the project lifecycle. However, the shortcoming of resources allocation method is that "it increases the criticality of more activities." (Larson, & Gray, 2010, p 260) .

Larson, & Gray, (2010) identify splitting activities as scheduling techniques to obtain a better project schedule because it assists in better utilization of scarce resources by achieving resource-constrained schedule.

"Resource scheduling also provides information for time-phased work package budgets in order to assess the impact of unforeseen events as well as the amount of flexibility in available resources." ( Larson,. & Gray, 2010 p 272).

However, its shortcoming is that it can increase resource utilization.

Chapter 9

Larson, & Gray, (2010) demonstrates the strategy to reduce project duration by focusing on reducing critical path activities. Important reasons to impose dates for the project duration are:

Pressures on time-to-market,

Unforeseen delays

Bonuses for project's early completion.

Public goodwill costs.

Overhead,

Contract commitments as well as imposed deadlines.

Pressure from stakeholders to move project's resources to other projects.

Larson, & Gray, (2010) differentiate between projects that are not resources constrained and resources constrained in the table 1 below:

Table 1

Not Resources Constrained

Resources Constrained

Adding resources

Critical-chain

Scheduling overtime

Fast-tracking

Outsourcing work project

Compromise quality

"Establishing a core project team" (Larson, & Gray, 2010, p 305).

Reducing project scope

Do project twice- fast and correctly

Larson, & Gray, (2010) also identify project costs as direct and indirect costs. The project indirect costs are the costs that cannot be associated with any project activity or work package. These costs include administration, interest, consultants, and supervision. Since indirect costs increase with increase in project duration, the strategy to reduce indirect costs is to reduce the project duration.

On the other hand, the project direct costs are assigned directly to specific project activity and work package. Examples of direct costs are equipment, labor, materials, and subcontractors. Since crashing activities normally increase direct costs, the strategy to reduce direct costs is to reduce the crashing activities. Larson, & Gray, (2010) point out that the strategy to reduce the project costs is to collect information about specific project direct and indirect costs that are critical to project duration. The next step is to search for activities to reduce direct costs, and shorten project duration. Thus, the project manager should compute total costs and compare benefits to be derived from reducing project time.

Fig 3: "Project Cost -- Duration Graph" (Larson, & Gray, 2010, p 313).

Source: Larson, & Gray, (2010).

As being revealed in the fig 3, the total direct costs and total indirect costs are the total costs for the selected project durations. To reduce total costs, it is critical to shorten the project activities. Moreover, the project manager can cut costs by:

Reducing the project scope, and Outsourcing some project activities.

c) Description of Application of Key Concepts to a Real World Situation

Scheduling resources is very important in the application of project management. With the scarcity of resources to complete a project, project managers are forced to schedules resources to complete a project on time and costs. For example, Technip, a global organization in oil & gas always use scheduling technique to reduce project duration and costs.